10-Q 1 a2048907z10-q.txt FORM 10-Q =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission file number 000-23341 MOTOR CARGO INDUSTRIES, INC. (Exact name of registrant as specified in its charter) UTAH 87-0406479 ------------------------------- --------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 845 West Center Street North Salt Lake, Utah 84054 (801) 936-1111 (Address of principal executive offices and telephone number) 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 --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. On April 30, 2001, there were 6,473,140 outstanding shares of the Registrant's Common Stock, no par value. =============================================================================== PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 2001 (unaudited) and December 31, 2000 (audited) ASSETS

The accompanying notes are an integral part of these statements. 2 MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED March 31, 2001 (unaudited) and December 31, 2000 (audited) LIABILITIES AND STOCKHOLDERS' EQUITY

The accompanying notes are an integral part of these statements. 3 MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Three months ended March 31, (Unaudited)

The accompanying notes are an integral part of these statements. 4 MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended March 31, (Unaudited)

(Continued) 5 MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED Three months ended March 31, (Unaudited)

NONCASH INVESTING AND FINANCING ACTIVITIES During the first quarter of 2001, purchases of property and equipment were $2,360,542, of which $600,238 was a noncash application of advances made in 2000 for the purchase of real property. During the first quarter of 2001, in connection with the issuance of 5,000 shares pursuant to a restricted stock agreement, the Company recognized compensation expense of $33,750. During the first quarter of 2000, in connection with the issuance of 5,000 shares pursuant to a restricted stock agreement, the Company recognized compensation expense of $23,750. The accompanying notes are an integral part of these statements. 6 MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS The interim consolidated financial information included herein is unaudited; however, the information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to the fair presentation of the consolidated financial position, results of operations, and cash flows for the interim periods. The consolidated financial statements should be read in conjunction with the Notes to consolidated financial statements included in the audited consolidated financial statements for Motor Cargo Industries, Inc. (the "Company") for the year ended December 31, 2000, which are included in the Company's Annual Report on Form 10-K for such year (the "2000 10-K"). Results of operations for interim periods are not necessarily indicative of annual results of operations. The consolidated balance sheet at December 31, 2000, was extracted from the Company's audited consolidated financial statements contained in the 2000 10-K, and does not include all disclosures required by generally accepted accounting principles for annual consolidated financial statements. EARNINGS PER SHARE Basic earnings per common share are based on the weighted average number of common shares outstanding during each such period. Diluted earnings per common share are based on shares outstanding (computed under basic EPS) and dilutive potential common shares. Potential common shares included in dilutive earnings per share calculations include stock options granted but not exercised.

CHANGES IN STOCKHOLDERS EQUITY During the quarter ended March 31, 2001, the Company repurchased 1,000 shares of Common Stock for $7,504. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The purpose of this section is to discuss and analyze the Company's consolidated financial condition, liquidity and capital resources and results of operations. This analysis should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2000 (the "2000 10-K"). This section contains certain forward-looking statements that involve risks and uncertainties, including statements regarding the Company's plans, objectives, goals, strategies and financial performance. The Company's actual results could differ materially from the results anticipated in these forward-looking statements as a result of factors set forth under "Cautionary Statement for Forward-Looking Information" below and elsewhere in this report. OVERVIEW Motor Cargo Industries, Inc. (the "Company") is a regional less-than-truckload ("LTL") carrier that provides transportation and logistics services to shippers within the western United States, including Arizona, California, Colorado, Idaho, New Mexico, Oregon, Texas, Utah and Washington. The Company transports general commodities, including consumer goods, packaged foodstuffs, electronics, computer equipment, apparel, hardware, industrial goods and auto parts for a diversified customer base. The Company offers a broad range of services, including expedited scheduling and full temperature-controlled service. Through its wholly-owned subsidiary, MC Distribution Services, Inc. ("MCDS"), the Company also provides customized logistics, warehousing and distribution management services. RESULTS OF OPERATIONS The following table sets forth for the periods indicated the percentage of operating revenues represented by certain items in the Company's consolidated statements of earnings:

8 THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000 Operating revenues increased 8.3% to $32.9 million for the three months ended March 31, 2001, compared to $30.4 million for the first three months of 2000. The increase was primarily attributable to increased tonnage, as well as an improved yield due to increased rates and a reduction in lower yield freight as a percentage of total tonnage. The number of shipments during the first quarter of 2001 increased by 0.6% to 233,643, compared to 232,332 for the first quarter of 2000. Tonnage increased by 7.7% to 137,626, compared to 127,823 for the first quarter of 2000. Of the $32.9 million in operating revenues for the three months ended March 31, 2001, $1.4 million was attributable to the Company's warehousing and distribution company, MCDS. This represents a 27.0% increase in revenues for MCDS from $1.1 million during the first quarter of 2000. This increase was attributable to growth in the volume of services provided to existing customers. As a percentage of operating revenues, salaries, wages and benefits increased to 52.9%, for the first quarter of 2001, from 50.9% for the first quarter of 2000. This 2 percentage point increase was due primarily to an increase in linehaul driver wages and benefits associated with shifting to the use of more Company drivers and less use of purchased transportation. The use of more Company drivers resulted in a reduction in the expense incurred by the Company for purchased transportation. In addition, approximately one-half of the 2 percentage point increase in salaries, wages and benefits was the result of increased medical insurance costs. Purchased transportation decreased to 8.1% of operating revenues for the quarter ended March 31, 2001, compared to 9.5% for the same period of 2000. This 1.4 percentage point reduction was the result of replacing a portion of purchased transportation with Company drivers and equipment. Corresponding increases were incurred in expense categories related to drivers and equipment such as wages, benefits, operating supplies and expenses, depreciation, licenses and taxes. Operating supplies and expenses decreased to 16.1% of operating revenues for the quarter ended March 31, 2001, compared to 16.7% for the same period in 2000. Expenses were reduced in various categories, the most significant of which was the reduction of agent commissions due to the conversion of two independent agent facilities to company-owned facilities in the latter part of 2000. These reductions were offset partially by the increased expenses associated with the operation and maintenance of company-owned equipment used instead of purchased transportation. Building rents decreased to 2.4% of revenue for the first quarter of 2001, compared to 2.9% for the first quarter of 2000. Higher building rents in the first quarter of 2000 were due primarily to lease payments for additional facilities in Fremont, California and Boise, Idaho, as well as continuing lease payments on unused facilities in Chicago, Illinois, Benicia, California and Boise, Idaho. All leases on unused facilities expired prior to the end of the year 2000. Total operating expenses decreased to 94.1% of operating revenues for the three months ended March 31, 2001 from 96.4% for the same period in 2000. As a percentage of revenue, net earnings increased 74.0% to $1,169,000 for the three months ended March 31, 2001, compared to $672,000 for the same period in 2000. Net earnings per weighted average share outstanding increased to $0.18 for the first quarter of 2001 compared to $0.10 for the same period of 2000. Weighted average shares outstanding were 6,473,251 during the first quarter of 2001, compared to 6,888,525 for the first quarter of 2000, due to the repurchase of shares by the Company pursuant to its share repurchase program. 9 LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity are funds provided by operations and bank borrowings. Net cash provided by operating activities was approximately $2.6 million for the first three months of 2001, compared to $3.7 million for the corresponding period in 2000. Net cash provided by operating activities is primarily attributable to the Company's earnings before depreciation and amortization expense. Capital expenditures totaled approximately $2.4 million during the first three months of 2001. Capital expenditures during this period included approximately $1.3 million for revenue equipment, including tractors and trailers, and $0.9 million for terminal construction and facilities. During the first quarter of 2000, capital expenditures totaled $2.3 million, consisting of approximately $1.6 million for revenue equipment and $0.7 million for terminal construction and facilities. Net cash used in financing activities was $3.9 million for the three months ended March 31, 2001, compared to $1.3 million for the comparable period of 2000. At March 31, 2001, borrowings under long-term obligations totaled approximately $4.3 million, compared to $7.4 million as of March 31, 2000. The Company is a party to a loan agreement with a bank that provides for a revolving line of credit in an amount not exceeding $5 million. The loan agreement provides for the issuance of letters of credit and may be used for this purpose, as well as to fund the working capital needs of the Company. As of March 31, 2001 and 2000, there was no outstanding balance under this revolving line of credit. The same bank has also provided a second revolving line of credit to the Company in an amount not to exceed $20 million. The Company intends to use amounts available under this credit facility, if necessary, primarily to purchase equipment used in operations and terminal facilities. As of March 31, 2001 and 2000, there was $3.0 million and $6.0 million, respectively, outstanding under this facility. All amounts outstanding under the two loan facilities described above accrue interest at a variable rate established from time to time by the bank. The Company does have the option, however, to request that specific advances accrue interest at a fixed rate quoted by the bank subject to certain prepayment restrictions. All amounts outstanding under the two loan facilities are collateralized by the Company's inventory, chattel paper, accounts receivable and equipment now owned or hereafter acquired by the Company. During the first quarter of 1999, the Company announced a share repurchase program. The Board of Directors of the Company authorized the repurchase of up to 700,000 shares. As of March 31, 2001, a total of 512,500 shares had been repurchased by the Company for approximately $2.9 million. SEASONALITY The Company experiences some seasonal fluctuations in freight volume. Historically, the Company's shipments decrease during the winter months. In addition, the Company's operating expenses historically have been higher in the winter months due to decreased fuel efficiency and increased maintenance costs for revenue equipment in colder weather. CAUTIONARY STATEMENT FOR FORWARD LOOKING INFORMATION Certain information set forth in this report contains "forward-looking statements" within the meaning of federal securities laws. Forward looking statements include statements concerning plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions by the Company and other information that is not historical information. When used in this report, the words "estimates," "expects," "anticipates," "forecasts," "plans," "intends," "believes" and variations of such words or similar expressions are intended to identify forward-looking statements. Additional forward-looking statements may be made by the Company from time to time. All such subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are also expressly qualified by these cautionary statements. 10 The Company's forward-looking statements are based upon the Company's current expectations and various assumptions. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties, but there can be no assurance that management's expectations, beliefs and projections will result or be achieved or accomplished. The Company's forward-looking statements apply only as of the date made. The Company undertakes no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events. There are a number of risks and uncertainties that could cause actual results to differ materially from those set forth in, contemplated by or underlying the forward-looking statements contained in this report. These risks include, but are not limited to, economic factors and fuel price fluctuations, the availability of employee drivers and independent contractors, risks associated with geographic expansion, capital requirements, claims exposure and insurance costs, competition and environmental hazards. Each of these risks and certain other uncertainties are discussed in more detail in the 2000 10-K. There may also be other factors, including those discussed elsewhere in this report, that may cause the Company's actual results to differ from the forward-looking statements. Any forward-looking statements made by or on behalf of the Company should be considered in light of these factors. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company does not use financial instruments for trading purposes and is not a party to any derivative financial instruments or derivative commodity instruments. The Company is exposed to a variety of market risks, including the effects of changes in interest rates and fuel prices. The Company's short-term and long-term financing is generally at variable rates; however, these obligations may be repaid or converted to a fixed rate at the Company's option. 11 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed with this report. None (b) No report on Form 8-K was filed during the quarter for which this report is filed. 12 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. MOTOR CARGO INDUSTRIES, INC. /S/ LYNN H. WHEELER ----------------------------------------------------- LYNN H. WHEELER Vice President of Finance and Chief Financial Officer (Authorized Signatory and Principal Financial and Accounting Officer) Date: May 14, 2001

MOTOR CARGO INDUSTRIES INC 10-Q