UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
Commission File No. 000-22490
LANDAIR SERVICES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1120025
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
430 AIRPORT ROAD
GREENEVILLE, TENNESSEE 37745
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 639-7196
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- ------
The number of shares outstanding of the registrant's common stock, $.01 par
value, as of April 30, 1996 was 5,943,250.
TABLE OF CONTENTS
LANDAIR SERVICES, INC.
Page
Number
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Income -
Three month periods ended March 31, 1996
and March 31, 1995 4
Condensed Consolidated Statements of Cash Flows -
Three month periods ended March 31, 1996 and
March 31, 1995 5
Notes to Condensed Consolidated Financial Statements -
March 31, 1996 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 9
ITEM 2. Changes in Securities 9
ITEM 3. Defaults Upon Senior Securities 9
ITEM 4. Submission of Matters to a Vote of Security Holders 9
ITEM 5. Other Information 9
ITEM 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
EXHIBIT INDEX 11
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
LANDAIR SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
-----------------------------------
(Unaudited) (Note)
(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents $ 26 $ 3,834
Accounts receivable, less allowance of $206 in 1996
and $292 in 1995 20,954 17,788
Other current assets 4,814 4,136
--------- -----------
Total current assets 25,794 25,758
Property and equipment 90,927 89,699
Less accumulated depreciation and amortization (20,164) (17,577)
--------- -----------
70,763 72,122
Other assets 400 399
--------- -----------
Total assets $ 96,957 $ 98,279
========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,267 $ 5,074
Accrued expenses 5,761 5,637
Current portion of long-term debt 7,621 8,158
Current portion of capital lease obligations 1,095 1,089
--------- -----------
Total current liabilities 21,744 19,958
Long-term debt, less current portion 23,051 27,030
Capital lease obligations, less current portion 8,548 8,825
Deferred income taxes 6,026 5,822
Shareholders' equity:
Preferred stock -- --
Common stock, $.01 par value;
Authorized shares - 20,000,000
Issued and outstanding shares - 5,928,850 in 1996 and
5,864,200 in 1995 59 59
Additional paid-in capital 25,975 25,562
Retained earnings 11,554 11,023
--------- -----------
Total shareholders' equity 37,588 36,644
--------- -----------
Total liabilities and shareholders' equity $ 96,957 $ 98,279
========= ===========
NOTE: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date, but does not include all of the financial
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to condensed consolidated financial statements.
3
LANDAIR SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three month periods ended
-------------------------------------
March 31, 1996 March 31, 1995
-------------------------------------
(In thousands, except per share data)
Operating revenue $ 36,979 $ 35,744
Operating expenses:
Purchased transportation 12,298 14,237
Salaries, wages, and employee benefits 10,375 8,974
Fuel and fuel taxes 2,765 2,066
Operating leases 1,298 1,611
Depreciation and amortization 2,612 2,042
Insurance and claims 1,797 1,616
Other operating expenses 4,168 3,357
--------- ---------
35,313 33,903
Income from operations 1,666 1,841
Other income (expense):
Interest expense (806) (688)
Other, net 10 33
--------- ---------
(796) (655)
Income before income taxes 870 1,186
Income taxes 339 510
--------- ---------
Net income $ 531 $ 676
========= =========
Net income per share:
Primary $ .09 $ .11
========= =========
Fully diluted $ .09 $ .11
========= =========
Dividends declared per share -- --
========= =========
See notes to condensed consolidated financial statements.
4
LANDAIR SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three month periods ended
--------------------------
March 31, March 31,
1996 1995
--------------------------
(In thousands)
Cash from operations $ 1,752 $ 2,752
Investing activities:
Proceeds from disposal of property and equipment 520 1,124
Purchases of property and equipment (1,705) (2,476)
Decrease in restricted capital lease funds -- 18
Other (1) (24)
--------- ---------
(1,186) (1,358)
Financing activities:
Proceeds from long-term debt 1,479 2,299
Payments of long-term debt (5,995) (1,458)
Payments of capital lease obligations (271) (173)
Proceeds from exercise of stock options 413 146
---------- ---------
(4,374) 814
---------- ---------
Increase (decrease) in cash and cash equivalents $ (3,808) $ 2,208
========== =========
See notes to condensed consolidated financial statements.
5
LANDAIR SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Landair Services, Inc. annual report on Form 10-K for
the year ended December 31, 1995.
NOTE 2 - NET INCOME PER SHARE
Net income per share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during the period.
Common stock equivalents consist of outstanding stock options and have been
included in the calculation of net income per share using the treasury stock
method.
NOTE 3 - INCOME TAXES
For the three month periods ended March 31, 1996 and March 31, 1995, the
effective income tax rate varied from the statutory federal income tax rate of
34% primarily due to the effect of state income taxes, net of the federal
benefit, and permanent differences (principally meals and entertainment).
NOTE 4 - CONTINGENCIES
The Company is, from time to time, a party to litigation arising in the normal
course of its business, most of which involve claims for personal injury and
property damage incurred in connection with the transportation of freight.
Management believes none of these actions, individually or in the aggregate,
will have a material adverse effect on the financial condition or results of
operations of the Company.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth expenses as a percentage of operating revenue
for the periods indicated.
Three month periods ended
------------------------------
March 31, 1996 March 31, 1995
------------------------------
Operating revenue 100.0% 100.0%
Operating expenses:
Purchased transportation 33.2 39.8
Salaries, wages, and employee benefits 28.1 25.1
Fuel and fuel taxes 7.5 5.8
Operating leases 3.5 4.5
Depreciation and amortization 7.1 5.7
Insurance and claims 4.9 4.5
Other operating expenses 11.2 9.4
--------- ---------
95.5 94.8
Income from operations 4.5 5.2
Other income (expense):
Interest expense (2.2) (1.9)
Other, net 0.0 0.0
--------- ---------
(2.2) (1.9)
--------- ---------
Income before income taxes 2.3% 3.3%
========= =========
Results of Operations
Operating revenue increased by $1.2 million, or 3%, to $37.0 million in 1996
from $35.7 million in 1995. The Company's increased operating revenue reflects
additional volume from its Forward Air operations, which increased 18% during
the first quarter of 1996 compared to the prior year. This was offset by a
decrease in Truckload and Dedicated operating revenue of 7%, caused by severe
winter storms in January and February 1996, which idled a significant portion
of the Company's fleet, negatively impacting equipment utilization.
The operating ratio (operating expenses as a percent of operating revenue) for
the first quarter of 1996 was 95.5% compared to 94.8% in the prior year
quarter. The components of operating expenses fluctuate between periods
primarily because of the ratio of owner-operators to Company-operated
equipment. Except as explained below, operating expenses in the aggregate
generally reflect increases proportionate to the increased level of operations.
Effective February 1996, the Company no longer pays per diem to line-haul
drivers as reimbursement for expenses incurred for out-of-town travel.
Instead, these drivers now receive
7
a higher pay rate per mile. The effect of this change caused a slight
increase in the Company's salaries, wages and employee benefits expense during
the first quarter of 1996.
Operating leases decreased from 4.5% of operating revenue during the first
quarter of 1995 to 3.5% during the same period of 1996, while depreciation and
amortization increased from 5.7% of operating revenue during the first quarter
of 1995 to 7.1% in the same period of 1996. These changes from the prior year
resulted from increased ownership, rather than leasing, of revenue equipment
along with an increase in the ratio of Company-operated equipment to
owner-operators.
During the first quarter of 1996, fuel prices increased by approximately 10%
over the prior year which increased fuel and fuel taxes by approximately
$265,000. Included in income from operations for the first quarter of 1995
were gains on the sale of revenue equipment in the amount of $320,000 compared
to $68,000 for the same period in 1996.
Interest expense as a percentage of revenue increased from 1.9% in the first
quarter of 1995 to 2.2% in 1996. The increase is attributable to higher net
borrowing primarily for revenue equipment purchases which were required to
finance the continued growth of the Company.
The effective tax rates for the first quarter of 1996 and 1995 were 39% and
43%, respectively. The decrease in 1996 is primarily due to a significant
reduction in the Company's nondeductible meals and entertainment expense, which
were only partially deductible by the Company for federal income tax purposes,
resulting from discontinuance of the per diem pay to line-haul drivers.
Liquidity and Sources of Capital
Cash flows from operations were $1.8 million for the first quarter of 1996
compared with $2.8 million in the same period of 1995. The $1.0 million
decrease was a result of increases in working capital accounts. Management
believes available borrowing under existing lines of credit, future borrowing
under installment notes for revenue equipment, and cash generated by operations
will be sufficient to fund its cash needs and anticipated capital expenditures
through 1996.
8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation arising in the normal
course of its business, most of which involve claims for personal injury and
property damage incurred in connection with the transportation of freight.
Management believes that none of these actions, individually or in the
aggregate, will have a material adverse effect on the financial condition or
results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
(a) Exhibits - The response to this portion of Item 6 is submitted as a
separate section of this report.
(b) Reports on Form 8-K - The Company did not file any reports on Form 8-K
during the three months ended March 31, 1996.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Landair Services, Inc.
Date: May 13, 1996 By: /s/ Edward W. Cook
-------------------------
Edward W. Cook
Chief Financial Officer
and Senior Vice President
10
EXHIBIT INDEX
Exhibit
Number Exhibit
------- -------
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule (for SEC use only)
11