10-K 1 msc10k.txt M.S. CARRIERS United States Securities and Exchange Commission Washington, D.C. 20549 -------------- Form 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2000 Commission file number 0-14781 M.S. Carriers, Inc. (Exact name of registrant as specified in its charter) Tennessee 62-1014070 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3171 Directors Row, Memphis, TN 38131 (Address of principal executive offices) (Zip Code) (901) 332-2500 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 Par Value Nasdaq National Market 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 periods that the registrant was required to filed such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the registrant's $.01 par value common stock held by non-affiliates of the registrant as of March 15, 2000 was $213,166,460 (based on the closing sale price of $25.234 per share on that date, as reported by NASDAQ). As of March 15, 2000, 11,339,101 shares of the registrant's common stock were outstanding. Table of Contents PART I Item 1. Business. . . . . . . . . . . . . . . . . . . . . . 3 Item 2. Properties . . . . . . . . . . . . . . . . . . 7 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . 8 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . 8 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters . . . . . . . . . . . . 9 Item 6. Selected Financial Data . . . . . . . . . . . . . .10 Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition . . . . . . .11 Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . .16 Item 8. Financial Statements and Supplementary Data . . . .16 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures . . . . . .17 PART III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . 17 Item 11. Executive Compensation . . . . . . . . . . . . . . 17 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . 17 Item 13. Certain Relationships and Related Transactions . . 17 PART IV Item 14. Exhibits, Financial Statements and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . 17 2 PART I ITEM 1. BUSINESS GENERAL M.S. Carriers, Inc. (with its subsidiaries, the "Company" or "M.S. Carriers") is a transportation company primarily engaged in the hauling of truckload shipments of general commodities throughout the United States and the provinces of Quebec and Ontario in Canada. M.S. Carriers is a Tennessee corporation headquartered in Memphis, Tennessee. The Company's principal executive offices are located at 3171 Directors Row, Memphis, Tennessee 38131, and its telephone number is (901) 332-2500. M.S. Carriers has both common and contract authority to transport any type of freight (except certain types of explosives, household goods and commodities in bulk) from any point in the continental United States to any other point in any state over any route selected by the Company. The Company has authority in Canada granted by the Quebec Transport Commission and the Ontario Highway Transport Board to haul general commodities from points in the United States to points in Quebec and Ontario and from points in Quebec and Ontario into the United States. The Company also provides interline service to and from Mexico. The Company's primary line-haul traffic flows are between the Middle South and the Southwest, Midwest, Central States, Southeast and Northeast. In addition, the Company operates regional networks which serve the West, Southeast, Southwest, Middle South, Central States and Northeast. The average length of a trip (one-way) was approximately 701 miles in 2000 and 729 miles in 1999. The principal types of freight transported are packages, retail goods, nonperishable foodstuffs, paper and paper products, household appliances, furniture and packaged petroleum products. BUSINESS STRATEGY M.S. Carriers has targeted the service-sensitive segment of the transportation market rather than that segment which uses price as its primary consideration. The Company has chosen to provide premium services and charge compensating rates rather than to compete solely on the basis of price. The principal elements of the Company's premium service are on-time deliveries, dependable late-model equipment, fully integrated computer systems to monitor shipment status and variations from schedules, on-board communications systems, multiple and appointment pickups and deliveries, assistance in loading and unloading, the availability of extra trailers which can be placed for the convenience of customers and sufficient equipment to respond promptly to customers' varying requirements. OPERATIONS The Company's operations are designed to maximize efficiency while maintaining the emphasis placed on providing premium service to customers. Through the use of the Company's information and satellite tracking systems, the location of all shipments and equipment is continuously monitored to coordinate routes and increase equipment utilization. The Company's usual hauling method requires the unit carrying the shipment to proceed directly from origin to destination with no delay enroute occasioned by a change of drivers, relays or circuitous routing. The Company's customer service department maintains constant customer contact regarding overall service requirements and specific freight movements and also attempts to produce backhauls for each unit. Because the average trip has been approximately 701 miles, most of the Company's shipments are hauled by one driver rather than two. The relatively short trips 3 ordinarily run by the Company make this method of operation preferable to team operations. Each of the Company's over-the-road tractors is equipped with a sleeper cab so that the driver can comply with the Department of Transportation's hours of service guidelines. MARKETING The Company's individualized service requires a strong commitment to marketing. The Company's marketing efforts concentrate on attracting customers that ship multiple loads from numerous locations that complement the Company's existing traffic flows. As shipping patterns of existing customers expand or change, the Company attempts to obtain additional customers to complement the new traffic flows. Thus, the effort to attract new customers varies from time to time depending upon growth or changes in the shipping patterns of existing customers. The Company's major revenue source is the irregular route dry van truckload market. In this market, the Company focuses on customers who value the broad geographic coverage, premium services and flexibility available from a larger carrier. These customers generally prefer to have their freight handled by a few carriers with whom they can establish long-term relationships. The Company also provides dedicated fleet services. These services supplement the Company's strengths in its traditional market and position the Company to meet the anticipated needs of its customers. The Company had revenues of $144.6 million in 2000 and $129.7 million in 1999 from freight shipments having either a point of origin or a point of destination in Mexico. These shipments represented approximately 20.7% and 20.9%, respectively, of total revenues for 2000 and 1999. The largest 25, 10 and 5 customers accounted for approximately 50%, 31% and 22%, respectively, of the Company's revenues during 2000. Most of these customers are large, publicly-held companies. One customer, Sears, accounted for approximately 10% of the Company's revenues during 2000 and 11% in 1999. No other customer accounted for more than 10% of the Company's revenues during 2000 or 1999. DRIVERS AND EMPLOYEES The Company recognizes the importance of maintaining a professional driver work force. The Company has established several programs to increase driver loyalty and to give drivers a stake in the Company. The drivers are compensated on the basis of miles driven and other services such as loading and unloading and number of deliveries. Base pay for miles driven increases with a driver's length of employment with the Company. Drivers are selected in accordance with specific Company guidelines relating primarily to safety records, driving experience and personal evaluations. Once selected, a driver is trained in all phases of Company policies and operations as well as safety techniques and fuel efficient operation of equipment. In addition, all new drivers must pass a road test prior to assignment to a vehicle. Recognizing the importance of driver contact while on the road for extended periods, the Company maintains an electronic mailbox system which allows the drivers to transmit and receive messages 24 hours a day, equips each of its tractors with a mobile two-way satellite communication system and maintains regular telephonic contact between dispatchers and drivers. The Company also recognizes that owner-operators provide the Company with another source of drivers to support its operations. Traditional owner-operators are independent contractors who supply their own tractors and drivers, and are responsible for their operating expenses in return for a negotiated fee based upon number of miles driven and accessorial services provided. While the Company's primary benefit from traditional owner-operators is the acquisition of 4 the services of a qualified driver, an additional benefit is the Company requires less capital for growth as owner-operators provide their own tractors. In late 1997, the Company began utilizing leased owner-operators. A leased owner-operator is an independent contractor who enters into an agreement with the Company or one of its subsidiaries to lease, with the option to purchase, a tractor and supplies that tractor and a driver to the Company. The Company has determined that there are many drivers who desire to own a tractor but who are unable to acquire a tractor without financial accommodations from the Company. The Company intends to continue its emphasis on recruiting and retaining owner-operators. Since competition for qualified drivers is intense, the Company emphasizes the importance of attracting and retaining qualified drivers. The Company employs driver recruiters and owner-operator recruiters. The competitive compensation programs, together with the Company's late-model equipment, relatively short trips and get-home policies provide important incentives to attract and retain qualified drivers. In addition, the Company operates a professional driving academy to train new drivers and employs full-time recruiters in connection therewith. Despite these incentives and programs, the Company experiences difficulty from time to time in attracting and retaining qualified drivers. At December 31, 2000, the Company employed 5,708 persons, of whom 4,373 were drivers, 274 were mechanics and other equipment maintenance personnel, and 1061 were support personnel including management and administration. The Company also leased 678 tractors with qualified drivers from traditional owner-operators and had 718 tractors in its leased owner-operator program. None of the Company's employees are represented by a collective bargaining unit, and management considers the Company's relationship with its employees to be excellent. ACQUISITIONS The trucking industry has historically been a fragmented industry which management of the Company believes will experience substantial consolidation in the near future. In 1997, the Company adopted a strategy of seeking to acquire small-to-medium trucking companies throughout the United States. Management of the Company believed any acquisition should be accretive to earnings within six months and should place the Company in new markets for customers and drivers or provide additional capacity for other new business opportunities. In March 1998, the Company concluded the purchase of certain assets of the U.S. operations of Challenger Motor Freight (U.S.), Inc., adding 195 tractors and 481 trailers to its fleet. In November 1998, the Company hired 280 drivers and added 803 trailers to its fleet in connection with a transaction with Interstate Trucking Corporation of America. Although several opportunities were reviewed during 1999, management was unable to identify a candidate which met the Company's acquisition criteria. The Company did not pursue any acquisition candidates during 2000. LOGISTICS SERVICES AND TRANSPLACE.COM In addition to its trucking operations, the Company provided third party logistics services to its customers. The logistics operations arranged freight transportation for customers using various carriers, including the Company, through agency relationships with the customers. In April 2000, the Company entered into an Operating Agreement with five other trucking companies to form Transplace.com, an internet-based global transportation venture that would create a marketplace for shippers and carriers. Pursuant to the agreement, each of the six companies agreed to contribute their respective existing logistics operations and cash of up to $5 million to fund 5 working capital. Transplace.com commenced operations effective July 1, 2000. The Company contributed all of its logistics operations, plus $5 million of cash, in exchange for an approximate 13% ownership interest in Transplace.com. The Company accounts for its investment in Transplace.com by the equity method and its investment in Transplace.com is classified as other long-term assets on its balance sheet. The Company's logistics operations generated approximately $35.4 million of operating revenues and $1.1 million of operating income for the six-month period ended June 30, 2000. During the six-month period ended December 31, 2000, the Company reported $1.6 million of operating revenues and $0.3 million of operating income from its logistics operations. These amounts are related to logistics services that were in process at the time of the Company's transfer of its logistics operations to Transplace.com. PROPOSED MERGER WITH SWIFT TRANSPORTATION CO., INC. On December 11, 2000, the Company entered into a merger agreement with Swift Transportation Co., Inc. (Swift). Under the agreement, the Company will become a wholly-owned subsidiary of Swift. In the merger, 1.7 shares of Swift common stock will be exchanged for each share of M.S. Carriers common stock. The merger is expected to be accounted for as a pooling-of-interests. Prior to the merger, the Company expects to offer approximately 300,000 shares of its common stock. The merger is expected to close in the second quarter of 2001. COMPETITION The entire transportation industry, including the trucking industry, is highly competitive. The Company competes primarily with other truckload carriers. Competition for the freight transported by the Company is based, in the long-term, primarily on service and efficiency and, to a lesser degree, on freight rates. However, in recent years the Company has experienced an increased focus on freight rates in certain of the markets served by the Company. Several other truckload carriers have substantially greater financial resources, own more equipment or carry a larger volume of freight than the Company. REGULATION The Company is a motor carrier regulated by the United States Department of Transportation. Additionally, such matters as weight and dimensions of equipment are subject to federal, state and international regulations. The Company believes that it is in substantial compliance with all licensing and regulatory requirements in each jurisdiction in which it operates. SEASONALITY In the trucking industry generally, results of operations tend to show a seasonal pattern as some customers reduce shipments during and after the winter holiday season and during the summer months due to temporary plant closings for vacations. Revenues can also be affected by bad weather and holidays, since revenue is directly related to available working days. Furthermore, operating expenses historically have been higher in the winter months due primarily to decreased fuel efficiency and increased maintenance costs of revenue equipment in cold weather. FUEL During the latter part of 1999 and continuing throughout 2000, fuel prices were significantly higher than those in recent years. The Company implemented a fuel surcharge program in response to these higher fuel prices which only partially 6 passed these higher costs to customers. Accordingly, the profitability of the Company was negatively impacted by high fuel costs in 2000. Fuel prices remain high at the beginning of 2001. Shortages of fuel or further increases in fuel prices could have an adverse effect on the operations and profitability of the Company. The Company maintains fuel storage tanks at certain of its terminals. Leakage or damage to these tanks could subject the Company to environmental clean-up costs. The Company believes it is in substantial compliance with all environmental laws and regulations. ITEM 2. PROPERTIES OFFICE AND TERMINAL FACILITIES The Company's executive offices and principal terminal are located in Memphis, Tennessee on 3-acre and 48-acre tracts of land, respectively, both of which are owned by the Company. The executive offices have 57,000 square feet of office space. The principal terminal consists of 52,000 square feet of office space and 41,000 square feet of maintenance facilities. The Company owns office and maintenance facilities of 34,500 square feet in Columbus, Ohio, 16,500 square feet in Laredo, Texas, 16,500 square feet in Martinsburg, West Virginia and 45,500 square feet in Atlanta, Georgia. Additionally, the Company owns a 3,000 square foot office and terminal on a 4-acre tract of land in Tupelo, Mississippi. The Company leases several small offices and/or trailer parking yards throughout the country. REVENUE EQUIPMENT The Company has a policy of utilizing standardized tractors and trailers manufactured to the Company's specifications. At December 31, 2000, the Company had 3,733 Company-operated tractors; leased 678 tractors owned by traditional owner-operators; and had 718 tractors in its leased owner-operator program. The Company has 14,939 van trailers which are 102 inches wide with a minimum of 109.5 inches of inside height and 132 specialty trailers for a dedicated account. Most of the tractors are manufactured by Freightliner and most of the trailers are manufactured by Lufkin or Trailmobile. Standardization enables the Company to simplify driver training, control the cost of spare parts inventory and enhance its preventive maintenance program. The Company adheres to a comprehensive maintenance program, based on the amount of use of the tractor, designed to minimize equipment down-time and enhance the resale value of all of its equipment. The Company constantly monitors the fuel efficiency of its power equipment. 7 The following table shows the age of Company-operated tractors and trailers at December 31, 2000: Model Year Tractors Trailers 2001 418 855 2000 1,466 2,391 1999 787 3,234 1998 791 3,081 1997 265 1,317 1996 6 1,204 1995 - 2,285 1994 - 600 1993 - 76 1992 - 28 ----- ----- 3,733 15,071 ===== ====== ITEM 3. LEGAL PROCEEDINGS The Company is a party to routine litigation incidental to its business, primarily involving claims for personal injuries and property damage incurred in the transportation of freight. The Company believes adverse results in one or more of these cases would not have a material adverse effect on its financial position or its results of operations. Effective January 1, 1999, the Company self-insures the first $500,000 of liability for each occurrence involving bodily injury and property damage during the policy year. The Company also self-insures the second $500,000 of liability for each occurrence until an aggregate of $1,000,000 of liability has been paid by the Company on claims exceeding $500,000. The Company maintains insurance which covers liability in excess of the self-insured amounts at coverage levels that management considers adequate. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 2000. 8 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS PRICE RANGE OF COMMON STOCK The Company's Common Stock is traded in the Nasdaq National Market ("Nasdaq") under the symbol "MSCA". The following table sets forth, for the calendar periods indicated, the high and low sales prices for the Company's Common Stock as reported by Nasdaq for the periods indicated. High Low ----------------------------------- 2000 1st Quarter $25.6875 $19.5000 2nd Quarter 25.8750 16.1250 3rd Quarter 20.3750 14.5625 4th Quarter 34.3125 13.6250 1999 1st Quarter $32.9375 $24.8438 2nd Quarter 33.2500 26.6250 3rd Quarter 32.1563 24.3125 4th Quarter 29.0313 22.8125 On March 15, 2001, the last reported sales price of the Company's common stock was $25.234 per share. At that date, the number of shareholders of record was 161. The Company estimates that there are approximately 3,000 beneficial owners of the Company's outstanding shares of Common Stock. DIVIDEND POLICY The Company has never paid a cash dividend on its Common Stock. It is the current intention of the Company's Board of Directors to continue to retain earnings to finance the growth of the Company's business rather than to pay dividends. The merger agreement with Swift contains restrictions on the payment of cash dividends pending the consummation of the merger which is expected to occur in the second quarter of 2001. 9 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein. For the year ended December 31 2000 1999 1998 1997 1996 ------------------------------------------------------------------------------ [In Thousands, except per share amounts] Statement of income data: Operating revenues $697,522 $620,414 $528,841 $415,933 $340,236 Operating expenses: Salaries, wages and benefits 236,726 184,676 163,225 133,517 127,237 Operations and maintenance 128,975 97,947 84,260 71,381 66,224 Taxes and licenses 14,690 12,664 11,425 10,708 8,973 Insurance and claims 23,213 21,987 20,833 18,462 18,777 Communications and utilities 9,307 7,908 6,914 5,711 5,209 Depreciation and amortization 70,666 62,401 49,794 40,094 37,010 Gains on disposals of revenue equipment (1,108) (941) (1,200) (490) (2,397) Rent and purchased transportation 166,982 171,572 142,766 99,584 53,014 Other 6,116 5,407 3,901 2,077 2,362 ------------------------------------------------------------------------------ Total operating expenses 655,567 563,621 481,918 381,044 316,409 ------------------------------------------------------------------------------ Operating income 41,955 56,793 46,923 34,889 23,827 Other expense (income): Interest expense 18,244 12,592 8,484 5,775 4,844 Other income (1,447) (3,221) (1,353) (320) (487) ------------------------------------------------------------------------------ Income before income taxes 25,158 47,422 39,792 29,434 19,470 Income taxes 8,816 16,835 14,524 10,472 7,031 ------------------------------------------------------------------------------ Net income $16,342 $30,587 $25,268 $18,962 $12,439 ------------------------------------------------------------------------------ Basic earnings per share $1.43 $2.49 $2.06 $1.57 $1.03 ------------------------------------------------------------------------------ Diluted earnings per share $1.42 $2.39 $1.99 $1.54 $1.02 ------------------------------------------------------------------------------ At December 31 2000 1999 1998 1997 1996 As As As As Restated* Restated* Restated* Restated* ------------------------------------------------------------------------------ [In thousands] Balance sheet data: Total assets $620,452 $595,533 $488,009 $366,246 $294,662 Long-term obligations, less current maturities 207,816 202,405 146,595 79,977 45,373 Stockholders' equity 218,155 228,310 196,853 170,491 147,311 *See Note 17 to the Notes to Consolidated Financial Statements. 10 The following tables set forth data regarding the freight revenues, operations, revenue equipment and employees of the Company. 2000 1999 1998 1997 1996 ------------------------------------------------------------------------------ For the year ended December 31: Operating ratio(1) 94.0% 90.9% 91.1% 91.6% 93.0% Average number of truckloads per week(2) 12,717 10,964 9,839 9,385 9,277 Average revenues per tractor per week(2) $ 2,590 $2,721 $2,702 $2,652 $2,575 Average miles per trip(2) 701 729 689 633 534 Average revenue per mile(2) $ 1.23 $ 1.20 $ 1.20 $ 1.19 $ 1.23 At December 31: Total tractors operated: Company owned 3,733 3,283 2,750 2,370 2,046 Owner-Operator owned 678 743 739 711 419 Owner-Operator leased 718 562 264 60 - ------------------------------------------------------------------------------ Total tractors 5,129 4,588 3,753 3,141 2,465 Total trailers 15,071 14,369 12,164 8,981 7,156 Number of employees 5,708 4,667 3,336 3,112 2,886 (1) Operating expenses as a percentage of operating revenues. (2) Excludes logistics services. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following table sets forth the percentage relationship of revenue and expense items to operating revenues for the periods indicated. Percentage of Operating Revenues -------------------------------- Year ended December 31 2000 1999 1998 ----------------------------------------------------------------------------- Operating revenues 100.0% 100.0% 100.0% Operating expenses: Salaries, wages and benefits 33.9 29.8 30.9 Operations and maintenance 18.5 15.8 15.9 Taxes and licenses 2.1 2.0 2.2 Insurance and claims 3.3 3.5 3.9 Communications and utilities 1.3 1.3 1.3 Depreciation and amortization 10.1 10.1 9.4 Gains on disposals of revenue equipment (0.2) (0.2) (0.2) Rent and purchased transportation 23.9 27.7 27.0 Other 1.1 0.9 0.7 ----------------------------------------------------------------------------- Total operating expenses 94.0 90.9 91.1 ------------------------------------------------------------------------------ Operating income 6.0 9.1 8.9 Other expense (income): Interest expense 2.6 2.0 1.6 Other income (0.2) (0.5) (0.2) ------------------------------------------------------------------------------ Income before income taxes 3.6 7.6 7.5 Income taxes 1.3 2.7 2.7 ------------------------------------------------------------------------------ Net income 2.3% 4.9% 4.8% ------------------------------------------------------------------------------ 11 The sources of the Company's operating revenues were as follows: For the year ended December 31 2000 1999 1998 ----------------------------------------------------------------------------- [in Thousands] Trucking Revenues: Domestic Irregular Route $410,264 $355,083 $316,236 International Irregular Route(1) 144,589 129,704 112,211 Dedicated Route 107,609 83,978 53,203 ------------------------------------------------------------------------------ Total Trucking Revenues 662,462 568,765 481,650 Logistics Revenues 36,952 68,214 60,939 Intersegment Eliminations and Other (1,892) (16,565) (13,748) ----------------------------------------------------------------------------- Total Operating Revenues $697,522 $620,414 $528,841 ============================================================================= (1) International Irregular Route includes loads originating or terminating in Laredo, TX, Brownsville, TX, El Paso, TX, Nogales, AZ, San Diego, CA and Calexico, CA. The operating ratios (operating expenses as a percentage of operating revenues) for the trucking and logistics segments and the Company's total business were as follows: For the year ended December 31 2000 1999 1998 ------------------------------------------------------------------------------ Trucking Segment 93.9% 90.4% 90.8% Logistics Segment 96.2% 97.0% 96.1% Total Company 94.0% 90.9% 91.1% 2000 COMPARED TO 1999 Operating revenues grew 12.4% to $698 million in 2000 from $620 million in 1999. The Company's increase in revenues was due primarily to increased capacity and increased trucking revenues. Total trucking revenues during 2000 increased 16.5% compared to 1999. The Company's fleet, including owner- operators, increased to 5,129 tractors at December 31, 2000 from 4,588 at December 31, 1999, an increase of 541 tractors. Logistics revenues during 2000 decreased 45.8% compared to 1999 as a result of the contribution of the Company's logistics operations to Transplace.com in July 2000 in exchange for an ownership interest in Transplace.com. The Company accounts for its investment in Transplace.com by the equity method and its investment in Transplace.com is classified as other long-term assets on the Company's balance sheet. Revenues per mile increased to $1.23 in 2000 from $1.20 in 1999 as a result of rate increases implemented in 2000. Average length of haul decreased to 701 miles in 2000 from 729 miles in 1999. Average revenue per tractor per week decreased to $2,590 in 2000 from $2,721 in 1999. During 2000, there was a decline in the general truckload freight market and a lower demand for the Company's services in some of the markets which it serves. 12 The operating ratio (operating expenses as a percentage of operating revenues) for 2000 was 94.0% compared to 90.9% for 1999. For the trucking segment of the Company's business, the operating ratio for 2000 was 93.9% compared to 90.4% in 1999. For the logistics segment of the Company's business, the operating ratio for 2000 was 96.2% compared to 97.0% for 1999. The Company's logistics operations were contributed to Transplace.com in July 2000 and the Company is restricted from engaging in logistics operations in the future. Salaries, wages and benefits increased to 33.9% of revenues in 2000 compared to 29.8% in 1999. This increase was due primarily to (i) a significant driver pay increase implemented in March 2000; and (ii) lower logistics revenues as a result of the Company's contribution of its logistics operations to Transplace.com. Operations and maintenance increased to 18.5% of revenues in 2000 from 15.8% of revenues in 1999. This increase was due primarily to higher fuel costs and lower logistics revenues during 2000. Fuel price swaps which the Company utilized to convert floating fuel prices to fixed fuel prices on a portion of the Company's monthly fuel requirements throughout 1999 and the first five months of 2000 expired in May 2000. These swaps had lessened the impact of higher fuel prices. Further increases in fuel costs, to the extent not offset by rate increases or fuel surcharges, could have an adverse effect on the operations and profitability of the Company. Insurance and claims expense was 3.3% of revenues in 2000 compared to 3.5% of revenues in 1999. During 2000, the Company modified its method of estimating and accruing its ultimate cost related to accident, workers' compensation, cargo and physical damage claims. The Company began applying loss development factors to its accident and workers' compensation claims history. This new method results in a more accurate estimate of the Company's ultimate loss from claims than its prior method. Expenses for workers' compensation claims are classified as salaries, wages and benefits and expenses for all other claims are classified as insurance and claims on the Company's income statement. The new method resulted in a $1.6 million increase to workers' compensation claims expense during 2000 and restatement of the following balances at December 31, 1997: a decrease in retained earnings of $6.9 million, an increase in claims payable of $10.9 million, and an increase in deferred tax assets of $4.0 million. Depreciation and amortization was 10.1% of revenues in 2000 and in 1999. Increases in depreciation and amortization expenses as a percentage of revenues attributable to lower logistics revenues in 2000 were offset by the Company's implementation of a change from a three-year trade cycle to a four-year trade cycle with respect to Company-owned tractors and the utilization of operating leases in 2000 to expand the Company's fleet. Expenses relating to operating leases are recorded as rent and purchased transportation. Rent and purchased transportation decreased to 23.9% of revenues in 2000 from 27.7% of revenues in 1999. This decrease was due primarily to the contribution of the Company's logistics operations to Transplace.com in July 2000 as expenses related to logistics operations were recorded as rent and purchased transportation. Interest expense was $18,244,136 in 2000 compared to $12,591,491 in 1999. This increase was due to (i) an increase in average outstanding debt during 2000 as compared to 1999; and (ii) higher interest rates during 2000 as compared to 1999. The Company incurred additional debt during 2000 to finance its expanded operations and the repurchase of 1,270,100 shares of its common stock. The effective income tax rate decreased to 35.0% in 2000 compared to 35.5% in 1999, as described in Note 7 to the Notes to Consolidated Financial Statements. 13 1999 COMPARED TO 1998 Operating revenues grew 17.3% to $620 million in 1999 from $529 million in 1998. The Company's increase in revenues was due primarily to increased demand from customers, expansion of the Company's fleet and increased logistics revenues. Total trucking revenues during 1999 increased 18.1% compared to 1998, and logistics revenues during 1999 increased 11.9% compared to 1998. The Company's fleet, including owner-operators, increased to 4,588 tractors at December 31, 1999, from 3,753 at December 31, 1998, an increase of 835 tractors. Revenues per mile were $1.20 in 1999 and in 1998. Average length of haul increased to 729 miles in 1999 up from 689 miles in 1998. The operating ratio (operating expenses as a percentage of operating revenues) for 1999 was 90.9% compared to 91.1% for 1998. For the trucking segment of the Company's business, the operating ratio for 1999 was 90.4% compared to 90.8% for 1998. For the logistics segment of the Company's business, the operating ratio for 1999 was 97.0% compared to 96.1% for 1998. Salaries, wages and benefits decreased to 29.8% of revenues in 1999 compared to 30.9% of revenues in 1998. This decrease was due primarily to the owner-operator tractors representing a larger percentage of the average number of total tractors in service during 1999 compared to 1998, which caused a shift in operating expenses as amounts paid to owner-operators are recorded as purchased transportation. The Company had 1,305 owner-operators at December 31, 1999, compared to 1,003 at December 31, 1998. Operations and maintenance expenses decreased to 15.8% of revenues in 1999 from 15.9% of revenues in 1998. This slight decrease resulted from the expanded use of owner-operators. Higher fuel costs experienced by the Company during the latter part of 1999 kept the decrease from being larger. Insurance and claims expense was 3.5% of revenues in 1999 compared to 3.9% of revenues in 1998. This decrease was due primarily to an improved accident and health claims experience in 1999. Depreciation and amortization increased to 10.1% of revenues in 1999 compared to 9.4% of revenues in 1998. This increase resulted primarily from the expansion of the leased owner-operator program. Rent and purchased transportation increased to 27.7% of revenues in 1999 from 27.0% of revenues in 1998. This increase was attributable primarily to the expanded use of owner-operators by the Company and increased expenses related to logistics services. Interest expense was $12,591,491 in 1999 compared to $8,483,852 in 1998. This increase in interest expense was due to an increase in average outstanding debt during 1999 as compared to 1998 as the Company incurred debt to finance its expanded operations. Other income increased to .5% of revenues in 1999 from .2% of revenues in 1998 primarily as a result of the recognition of income relating to the Company's investment in Transportes EASO S.A. de C.V. increasing to $2,905,000 in 1999 from $955,000 in 1998. The effective income tax rate decreased to 35.5% in 1999 compared to 36.5% in 1998, as described in Note 7 to the Notes to Consolidated Financial Statements. 14 LIQUIDITY AND CAPITAL RESOURCES The Company's business continues to require significant investments in new revenue equipment and office and terminal facilities. The Company has historically financed these investments largely from cash provided by operating activities, secured borrowings, and secured and unsecured credit facilities. During 2000, the Company began leasing various revenue equipment under operating leases. Net cash provided by operating activities was approximately $75.9 million in 2000, $73.1 million in 1999 and $74.3 million in 1998. At December 31, 2000, the Company has outstanding long-term obligations, including current maturities, of $273.4 million and future minimum lease payments under noncancelable operating leases of $71.8 million. In December 1999, the Company's Board of Directors authorized the repurchase of up to 1 million shares of the Company's common stock. In June 2000, the Company's Board of Directors authorized the repurchase of up to an additional 2 million shares of the Company's common stock. The Company purchased 1,270,100 shares of its common stock for approximately $26.9 million during 2000. In July 2000, Transplace.com commenced operations. The Company contributed all of its logistics operations and $5 million of cash to Transplace.com in exchange for an approximate 13% ownership interest in Transplace.com. In addition, the Company provided various services to Transplace.com under a shared service agreement, the terms of which expired on December 31, 2000. The Company had a receivable from Transplace.com of approximately $11 million at December 31, 2000 for freight, fees related to the shared service agreement and funding of a portion of Transplace.com's working capital requirements. Transplace.com established its own credit facilities during the first quarter of 2001 and paid the $11 million receivable in full. Additional funding of Transplace.com activities by the Company is not anticipated. In October 2000, the Company restructured its credit facility with its primary bank to provide for a $55 million reducing revolving note and a $30 million revolving note, with interest based on a leverage ratio defined therein and ranging from the 30-LIBOR rate plus .50% to 1.90% (7.16% at December 31, 2000). There was approximately $63.5 million outstanding under this credit facility at December 31, 2000. Management expects to retire the reducing revolving note through cash provided by operating activities or secured borrowings and expects to maintain the revolving note for an indefinite period. In December 2000, the Company entered into a merger agreement with Swift pursuant to which the Company would become a wholly owned subsidiary of Swift. The merger is expected to close in the second quarter of 2001. The Company anticipates that planned revenue equipment purchases and the financing thereof will be coordinated through Swift following the merger. RECENTLY ISSUED ACCOUNTING STANDARDS During 1998, the Financial Accounting Standards Board (FASB) issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). This statement requires companies to record derivative instruments on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the value of a derivative would be accounted for depending on the use of a derivative and whether it qualifies for hedge accounting. In June 1999, the FASB issued Statement No. 137, which delayed the effective date of SFAS No. 133 to the Company's fiscal year 2001. In June 2000, the FASB issued SFAS No. 138 which amends certain provisions of SFAS No. 133 and must be adopted concurrently with the Company's adoption of SFAS No. 133. The Company recorded a $1.4 million liability upon adoption of SFAS No. 133 to reflect the fair market 15 value of interest rate swaps. The adoption of SFAS No. 133 has not had a significant effect on the results from operations or on the financial position of the Company. FORWARD-LOOKING STATEMENTS Certain statements and information included herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This information is in accordance with the Company's current expectations and is subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. With respect to the Company's financial results these uncertainties include, without limitation, the following: the Company will have reasonable success recruiting and retaining experienced drivers and owner operators at the Company's current compensation level; demand and pricing for the markets served by the Company will remain at historical levels; fuel will remain available and without rapid price fluctuations; the Company's accident experience will remain at historical levels; the Company will be able to develop and implement operational and financial systems to manage growing operations; and the Company will be able to obtain financing on acceptable terms to finance the Company's growth and operations. With respect to the proposed merger transaction with Swift these uncertainties include, without limitation, the following: the inability to obtain governmental approvals of the merger on the proposed terms and schedule; the failure of M.S. Carriers and Swift stockholders to approve the merger; the risk that the businesses will not be integrated successfully; the risk that the revenue synergies and costs savings anticipated from the merger may not be fully realized or may take longer to realize than expected; disruptions from the merger making it more difficult to maintain relationships with customers, employees or suppliers; and increased competition and its effect on pricing, spending, third-party relationships and revenues. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK The Company has market risk exposure to changing interest rates. The Company's policy is to manage interest rates through the use of a combination of fixed and floating rate debt. Interest rate swaps may be used to adjust interest rate exposure based on market conditions. These swaps are entered into with a group of financial institutions with investment grade credit ratings, thereby minimizing the risk of credit loss. At December 31, 2000 and 1999, the fair value of the Company's total long-term debt is approximately $273 million and $242 million, respectively, using yields obtained for similar types of borrowing arrangements and taking into consideration the underlying terms of the debt. Market risk is estimated as the potential change in fair value resulting from a hypothetical ten percent decrease in interest rates and amounts to $446,000 and $351,000 at December 31, 2000 and 1999, respectively. At December 31, 2000, the Company had $210 million of variable-rate debt. The Company has entered into interest rate swaps which convert floating rates to fixed rates for a total notional amount of $70 million. If interest rates on the Company's variable-rate debt, after considering interest rate swaps, were to increase by ten percent from their 2000 year-end rates for the whole of 2001, the increase in interest expense for 2001 would be approximately $929,000. The potential change in fair value of the Company's interest rate swaps resulting from a hypothetical ten percent decrease in interest rates would not be material to the Company's financial position at December 31, 2000. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company's Consolidated Financial Statements and Financial Statement Schedule are included on pages 21 to 39. 16 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT To be provided by amendment. ITEM 11. EXECUTIVE COMPENSATION To be provided by amendment. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT To be provided by amendment. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS To be provided by amendment. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K (a) Financial Statements and Financial Statement Schedules. (1) Financial Statements. Report of Independent Auditors . . . . . . . . . . . . . 21 Consolidated Balance Sheets. . . . . . . . . . . . . . . 22 Consolidated Statements of Income. . . . . . . . . . . . 24 Consolidated Statements of Stockholders' Equity. . . . . 25 Consolidated Statements of Cash Flows. . . . . . . . . . 26 Notes to Consolidated Financial Statements . . . . . . . 27 (2) Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts for the Company is included herein on page 39. No other financial statement schedules are required. (b) Reports on Form 8-K. The Company did not file any report on Form 8-K during the last quarter of 2000. (c) Exhibits. An Exhibit Index of the exhibits required by Item 601 of Regulation S-K is included on page 19. 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. M.S. Carriers, Inc. By: s/ Michael S. Starnes Michael S. Starnes Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. s/ Michael S. Starnes Chairman of the Board, President, March 30, 2001 Michael S. Starnes Chief Executive Officer and Date Director s/ James W. Welch Senior Vice President - March 30, 2001 James W. Welch Marketing and Director Date s/ M.J. Barrow Senior Vice President - March 30, 2001 M.J. Barrow Finance and Administration, Date Secretary-Treasurer and Director s/ Pierce Crockett Controller March 30, 2001 Pierce Crockett Date s/ Jack H. Morris, III Director March 30, 2001 Jack H. Morris, III Date s/ Morris H. Fair Director March 30, 2001 Morris H. Fair Date s/ Edward A. Labry, III Director March 30, 2001 Edward A. Labry, III Date 18 EXHIBIT INDEX Exhibit Number Description 3(i).1 Restated Charter of M.S. Carriers, Inc. filed as an exhibit to Registrant's Registration Statement on Form S-1 (Registration Number 33-12070). 3(i).2 Articles of Amendment to Charter of M.S. Carriers, Inc. filed as an exhibit to Registrant's Registration Statement on Form S-3 (Registration Number 33-63280). 3(ii) Amended and Restated By-Laws of M.S. Carriers, Inc. filed as an exhibit to Registrant's Registration Statement on Form S-3 (Registration Number 33-63280). 10.1 Incentive Stock Option Plan of M.S. Carriers, Inc. filed as an exhibit to Registrant's Registration Statement on Form S-1 (Registration Number 33-12070).* 10.2 Amendment to Incentive Stock Option Plan of M.S. Carriers, Inc. filed as an exhibit to Registrant's Registration Statement on Form S-1 (Registration Number 33-12070).* 10.3 1993 Stock Option Plan of M.S. Carriers, Inc. filed as an exhibit to Registrant's Registration Statement on Form S-3 (Registration Number 33-63280).* 10.4 Non-Employee Directors Stock Option Plan of M.S. Carriers, Inc. filed as an exhibit to Registrant's Proxy Statement dated March 31, 1995.* 10.5 Employment Agreements with James W. Welch and M.J. Barrow of M.S. Carriers, Inc. filed as an exhibit to Registrant's Statement on Form S-1 (Registration Number 33-12070).* 10.6 Employment Agreement with Michael S. Starnes of M.S. Carriers, Inc. filed as an exhibit to Registrant's Form 10-Q for the quarter ended June 30, 1995.* 10.7 M.S. Carriers, Inc. 1996 Stock Option Plan filed as an exhibit to Registrant's Proxy Statement dated April 4, 1996.* 10.8 Operating Agreement of Transplace.com, LLC filed as an exhibit to Registrant's Form 10-Q for the quarter ended June 30, 2000. 10.9 Initial Subscription Agreement of Transplace.com, LLC filed as an exhibit to Registrant's Form 10-Q for the quarter ended June 30, 2000. 10.10 Ninth Amended and Restated Loan Agreement with Bank of America, N.A. filed as an exhibit to Registrant's Form 10-Q for the quarter ended September 30, 2000. 10.11 Merger Agreement dated December 11, 2000, among Swift Transportation Co., Inc., Sun Merger, Inc. and M.S. Carriers, Inc. filed herewith. 10.12 Voting Agreement dated December 11,2000, among M.S. Carriers, Inc., Jerry and Vicki Moyes Family Trust dated 12/11/87 and Jerry Moyes filed herewith. 19 10.13 Voting Agreement dated December 11, 2000, among Swift Transportation Co., Inc., Sun Merger, Inc. and Michael S. Starnes filed herewith. 10.14 First Amendment to Ninth Amended and Restated Loan Agreement with Bank of America, N.A. filed herewith. 21. Subsidiaries of M.S. Carriers, Inc. filed herewith. ____________ * Indicates a compensation plan. 20 Report of Independent Auditors Board of Directors M.S. Carriers, Inc. We have audited the accompanying consolidated balance sheets of M.S. Carriers, Inc. as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of M.S. Carriers, Inc. at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As more fully described in Note 17, retained earnings and deferred income taxes at December 31, 1997, have been restated to reflect an increase in claims payable. s/ Ernst & Young LLP Memphis, Tennessee February 1, 2001 21 M.S. Carriers, Inc. Consolidated Balance Sheets December 31 2000 1999 (As Restated) --------------------------------- Assets Current assets: Cash and cash equivalents $ 442,188 $ 242,606 Receivables: Trade accounts, less allowance for doubtful accounts of $9,954,000 in 2000 and $7,987,000 in 1999 84,547,281 74,235,169 Affiliate - Transplace.com 11,007,081 - Officers and employees 1,657,217 1,372,312 --------------------------------- 97,211,579 75,607,481 Recoverable income taxes 3,080,972 4,391,692 Deferred income taxes 14,113,152 13,558,000 Prepaid expenses and other 8,590,836 6,627,602 --------------------------------- Total current assets 123,438,727 100,427,381 Property and equipment: Land and land improvements 13,469,040 8,563,092 Buildings 39,987,066 33,853,177 Revenue equipment 567,967,605 538,170,367 Service equipment and other 56,118,261 50,764,814 Construction in progress 2,895,443 7,051,494 --------------------------------- 680,437,415 638,402,944 Accumulated depreciation and amortization 204,637,683 157,129,859 --------------------------------- 475,799,732 481,273,085 Other assets 21,213,310 13,832,915 --------------------------------- Total assets $620,451,769 $595,533,381 ================================= 22 M.S. Carriers, Inc. Consolidated Balance Sheets (continued) December 31 2000 1999 (As Restated) ------------------------------ Liabilities and stockholders' equity Current liabilities: Trade accounts payable $ 7,398,017 $ 7,300,275 Accrued compensation and related costs 4,611,314 5,625,679 Other accrued expenses 13,139,878 16,562,822 Claims payable 33,842,957 30,814,990 Current maturities of long-term obligations 65,558,795 39,189,255 ------------------------------ Total current liabilities 124,550,961 99,493,021 Long-term obligations, less current maturities 207,816,118 202,404,874 Deferred income taxes 69,929,823 65,325,276 Commitments and contingencies Stockholders' equity: Common stock, $.01 par value: Authorized shares - 20,000,000 Issued and outstanding shares - 11,168,501 in 2000 and 12,301,601 in 1999 111,685 123,016 Additional paid-in capital 60,567,768 66,222,158 Retained earnings 160,321,332 164,052,739 Notes receivable from officers (851,719) - Cumulative other comprehensive loss (1,994,199) (2,087,703) ------------------------------ Total stockholders' equity 218,154,867 228,310,210 ------------------------------ Total liabilities and stockholders' equity $ 620,451,769 $595,533,381 ============================== See accompanying notes. 23 M.S. Carriers, Inc. Consolidated Statements of Income Year ended December 31 2000 1999 1998 --------------------------------------------- Operating revenues $697,521,957 $620,414,137 $528,841,314 Operating expenses: Salaries, wages and benefits 236,726,123 184,676,598 163,224,933 Operations and maintenance 128,975,476 97,946,624 84,260,614 Taxes and licenses 14,690,488 12,663,778 11,425,054 Insurance and claims 23,212,634 21,986,637 20,832,807 Communications and utilities 9,306,977 7,907,923 6,913,782 Depreciation and amortization 70,665,611 62,400,797 49,794,229 Gains on disposals of revenue equipment (1,108,415) (940,944) (1,199,851) Rent and purchased transportation 166,982,436 171,572,280 142,765,753 Other 6,115,739 5,407,423 3,901,274 --------------------------------------------- 655,567,069 563,621,116 481,918,595 --------------------------------------------- Operating income 41,954,888 56,793,021 46,922,719 Other expense (income): Interest expense 18,244,136 12,591,491 8,483,852 Other (1,447,566) (3,220,837) (1,353,558) --------------------------------------------- 16,796,570 9,370,654 7,130,294 --------------------------------------------- Income before income taxes 25,158,318 47,422,367 39,792,425 Income taxes 8,816,069 16,834,942 14,524,236 --------------------------------------------- Net income $ 16,342,249 $30,587,425 $ 25,268,189 ============================================= Basic earnings per share $1.43 $2.49 $2.06 ============================================= Diluted earnings per share $1.42 $2.39 $1.99 ============================================= See accompanying notes. 24

See accompanying notes. 25

26 M.S. Carriers, Inc. Notes to Consolidated Financial Statements December 31, 2000 1. Nature of Business M.S. Carriers, Inc. (the Company) is an irregular route, truckload carrier transporting a wide range of commodities throughout the United States and between the United States and the provinces of Ontario and Quebec, Canada. The Company also provides interline service to and from Mexico. The Company's primary traffic flows are between the Middle South and the Southwest, Midwest, Central States, Southeast and Northeast. The principal types of freight transported are packages, retail goods, non-perishable foodstuffs, paper and paper products, household appliances, furniture and packaged petroleum products. 2. Significant Accounting Policies Organization and Principles of Consolidation The consolidated financial statements include the accounts of M.S. Carriers, Inc. and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. The Company accounts for its 50% investment in Transportes EASO S.A. de C.V. (EASO), a Mexican trucking company, by the equity method. This investment is classified as other long-term assets in the consolidated balance sheets and is approximately $6,140,000 and $5,279,000 at December 31, 2000 and 1999, respectively. The Company recognized other income of approximately $1,084,000 in 2000, $2,905,000 in 1999 and $955,000 in 1998 from its investment in EASO. The Company accounts for its approximate 13% investment in Transplace.com (see Note 16) by the equity method. This investment is classified as other long-term assets in the consolidated balance sheets and was $5,000,000 at December 31, 2000. The Company recognized other income of approximately $250,000 in 2000 from its investment in Transplace.com. At December 31, 2000, approximately $5.25 million of the Company's retained earnings relate to undistributed earnings of EASO. Revenue Recognition Operating revenues are recognized on the date freight is delivered. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Property and Equipment Property and equipment are stated at cost. Depreciation, which includes amortization of assets held under capital leases, is computed on the straight- line method over the estimated useful lives as follows: Buildings 15-30 years Revenue equipment 3-8 years Service equipment and other 3-5 years Tires and tubes purchased as part of revenue equipment are capitalized as a cost of the equipment. Replacement tires and tubes are expensed when placed in service. 27 Goodwill and Other Intangible Assets Goodwill and other intangible assets of $5,413,211 and $5,373,211 are included in other long-term assets at December 31, 2000 and 1999, respectively. Goodwill represents the excess of the cost of businesses acquired over fair value of net tangible and identifiable intangible assets at the date of acquisition. Goodwill and other intangible assets, which are net of accumulated amortization of $1,401,684 and $715,831 at December 31, 2000 and 1999, respectively, are being amortized using the straight-line method over periods of up to 10 years. Foreign Currency Translation Prior to January 1, 1999, the functional currency of the Company's foreign subsidiary and equity investee was the reporting currency because Mexico was designated as a highly inflationary economy. Translation gains and losses prior to January 1, 1999, were recorded in the statement of income rather than as a separate component of stockholders' equity. Effective January 1, 1999, Mexico is no longer designated as a highly inflationary economy. Therefore, translation gains and losses subsequent to that date are recorded as other comprehensive income and presented as a separate component of stockholders' equity. Foreign currency translation is the only component of the Company's other comprehensive income (loss). Income Taxes The Company accounts for income taxes using the liability method. Earnings Per Share Basic earnings per share has been computed based on the weighted-average number of common shares outstanding. Diluted earnings per share reflects the increase in weighted-average common shares outstanding that would result from the assumed exercise of dilutive outstanding stock options, calculated using the treasury stock method. Risks and Uncertainties The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. Valuation of Long-Lived Assets Management periodically evaluates carrying values of long-lived assets, including property and equipment, strategic investments, goodwill and other intangible assets, to determine whether events and circumstances indicate that these assets have been impaired. An asset is considered impaired when undiscounted cash flows to be realized from such asset are less than its carrying value. In that event, a loss is determined based on the amount that the carrying value exceeds the fair market value of such asset. Stock-Based Compensation The Company accounts for employee stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25) and related interpretations as permitted by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123). 28 Interest Rate Swaps The Company enters into interest rate swap agreements to modify the interest characteristics of its outstanding debt. These agreements involve the exchange of amounts based on a fixed interest rate for amounts based on variable interest rates over the life of the agreement without an exchange of the notional amount upon which the payments are based. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment of interest expense related to the debt. The related amount payable to or receivable from counterparties is included in accrued expenses or other current assets. The fair value of the swap agreements and changes in the fair value as a result of changes in market interest rates are not recognized in the financial statements. Concentrations of Credit and Market Risks Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company's customer base and their dispersion across many different industries. The Company performs ongoing credit evaluations and generally does not require collateral. The Company's sales are principally denominated and collected in the U.S. dollar. Recently Issued Accounting Pronouncements During 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). This statement requires companies to record derivative instruments on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the value of a derivative would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. In June 1999, the FASB issued SFAS No. 137, which delayed the effective date of SFAS No. 133 to the Company's fiscal year 2001. In June 2000, the FASB issued SFAS No. 138 which amends certain provisions of SFAS No. 133 and must be adopted concurrently with the Company's adoption of SFAS No. 133. The Company recorded a $1.4 million liability upon adoption of SFAS No. 133 to reflect the fair market value of interest rate swaps. The adoption of SFAS No. 133 has not had a significant effect on the results of operations or financial position of the Company. Reclassifications Certain amounts in the 1999 financial statements have been reclassified to conform with the 2000 financial statement presentation. 3. Business Acquisitions In March 1998, the Company acquired substantially all of the assets, consisting primarily of revenue equipment, and assumed certain liabilities of a truckload carrier located in Ohio. In connection with this acquisition, the Company paid cash of approximately $7,556,000 and recorded a holdback liability of $700,000. In November 1998, the Company acquired substantially all of the assets, consisting primarily of revenue equipment, and assumed certain liabilities of a truckload carrier located in Wisconsin. In connection with this acquisition, the Company paid cash of approximately $9,477,000 and recorded a holdback liability of $250,000. Each of the acquisitions was accounted for using the purchase method of accounting. Therefore, the results of operations of the acquired businesses are included in the consolidated financial statements of the Company from their respective acquisition dates. The pro-forma results of operations as if the 29 acquisitions had occurred at the beginning of 1998 would not differ materially from the reported results. 4. Long-Term Obligations Long-term obligations consist of the following: December 31 2000 1999 -------------------------------------- Capitalized lease obligations $206,331,296 $179,349,058 Equipment loan 3,498,617 3,498,617 Revolving notes 63,545,000 - Revolving lines of credit - 58,746,454 -------------------------------------- 273,374,913 241,594,129 Less current maturities (65,558,795) (39,189,255) -------------------------------------- $207,816,118 $202,404,874 ====================================== In October, 2000, the Company amended and restated its line of credit agreements to form two separate notes. These notes consist of a $55,000,000 reducing revolving note and a $30,000,000 revolving note. Interest is charged under both notes based on the total leverage ratio of the Company, as defined in the loan agreement, and ranges from 30-day LIBOR plus .50% - 1.90% (7.16% at December 31, 2000). The reducing revolving note is reduced by $5,000,000 each quarter beginning on December 31, 2000, until its maturity on October 15, 2003. The revolving note matures on June 1, 2002. Both notes are secured by Company trailers with a net book value of $92,963,000 at December 31, 2000. The balance of these notes as of December 31, 2000, is $63,545,000. At December 31, 1999, the Company had an unsecured line of credit available for borrowings of up to $80,000,000 with interest at the lower of the bank's prime rate or the 30-day LIBOR rate plus .45%. The balance outstanding under this line of credit was $38,746,454 at December 31, 1999. At December 31, 1999, the Company also maintained two separate agreements with banks that each provided for borrowings of up to $10,000,000 under unsecured lines of credit. The lines of credit bore interest at varying rates based upon the lower of the bank's prime rate or the 30-day LIBOR rate plus .45%. The balance outstanding under both lines of credit was an aggregate of $20,000,000 at December 31, 1999. The Company issued a promissory note to a bank in the amount of $3,498,617. This note is secured by related equipment and bears interest at a varying rate based on the 90-day LIBOR rate plus 1% (7.76% at December 31, 2000). Interest payments are to be made quarterly for the term of the note, with a single principal payment being due in November, 2004. The Company entered into capital lease agreements to lease revenue equipment with a fair value of approximately $59,859,000 in 2000, $94,952,000 in 1999 and $86,802,000 in 1998. Additionally, in connection with the 1998 acquisitions described in Note 3, the Company assumed approximately $3,174,000 in capitalized lease obligations related to acquired revenue equipment with a fair value of approximately $10,330,000 at the time of acquisition. The Company's capital leases have remaining lease terms of 1 to 5 years and contain guarantees of residual value at the end of the lease terms. Certain of the leases contain renewal or fixed-price purchase options. The leases are secured by revenue equipment with a net book value at December 31, 2000 and 1999, of approximately $202,270,000 and $156,922,000, respectively, which is net of accumulated amortization of $53,661,000 and $52,286,000, respectively, and bear interest at fixed and variable rates ranging from 3.1% to 7.8%. The weighted average interest rate on the Company's fixed-rate capital leases is approximately 5.56% at December 31, 2000. 30 At December 31, 2000, the Company has entered into interest rate swaps which convert floating interest rates to fixed interest rates ranging from 5.63% to 6.50% for a total notional amount of $70 million. Certain of the Company's debt agreements contain covenants including required ratios of funded debt to earnings before interest, taxes, depreciation and amortization, and earnings before interest, taxes, depreciation and amortization to total debt service. The future maturities of long-term debt and future minimum lease payments under capitalized lease obligations, by year and in the aggregate, consist of the following at December 31, 2000: Capitalized Long-Term Lease Debt Obligations --------------------------------- 2001 $14,805,000 $ 60,988,170 2002 38,740,000 71,981,029 2003 10,000,000 57,752,340 2004 3,498,617 23,894,385 2005 17,089,138 --------------------------------- 67,043,617 231,705,062 Amounts representing interest 25,373,766 --------------------------------- Total long-term obligations $67,043,617 $ 206,331,296 ================================= The Company paid interest of approximately $17,067,000 in 2000, $12,422,000 in 1999, and $8,344,000 in 1998. The Company has outstanding letters of credit primarily for workers' compensation and accident liability self-insurance of $11,300,000 at December 31, 2000. 5. Operating Leases The Company began leasing various revenue equipment under operating leases in 2000. Rental expense was approximately $4,569,000 for 2000. At December 31, 2000, the future minimum lease payments under noncancelable operating leases are as follows: 2001 $12,358,608 2002 12,358,608 2003 18,800,514 2004 23,323,946 2005 4,914,079 -------------- $ 71,755,755 ============== 6. Claims Payable Claims payable represent accruals for the uninsured portion of pending accident liability, workers' compensation, physical damage, cargo damage and employee health claims. These accruals are estimated based on management's evaluation of the nature and severity of individual claims and an estimate of future claims development based on the Company's past claims experience. Claims payable were restated as of December 31, 1997 (See Note 17). Under an agreement with its insurance underwriters through December 31, 1998, the Company was self-insured for accident liabilities of $1,500,000 for the initial occurrence per policy year, $1,250,000 for the second occurrence per policy year, and $1,000,000 for each occurrence thereafter involving bodily injury and property damage. Effective January 1, 1999, the Company entered into a new agreement to reduce its self-insured retention limit for accident claims. Under this new agreement, the Company self-insures the first $500,000 of liability for 31 each occurrence involving bodily injury and property damage. The Company also self-insures the second $500,000 of liability for each occurrence until an aggregate of $1,000,000 of liability has been paid by the Company on claims exceeding $500,000 of liability. Excess liability is assumed by the insurance underwriters. The Company self-insures employee health claims up to $175,000 per employee per policy year and workers' compensation claims up to $300,000 per employee per policy year. 7. Income Taxes The liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Income tax expense (benefit) consists of the following: Year ended December 31 2000 1999 1998 --------------------------------------------- Current: Federal $ 11,820,590 $ 6,571,326 $ 17,616,578 State 1,044,874 1,131,079 2,929,438 --------------------------------------------- 12,865,464 7,702,405 20,546,016 Deferred: Federal (3,521,421) 8,404,084 (5,163,198) State (527,974) 728,453 (858,582) --------------------------------------------- (4,049,395) 9,132,537 (6,021,780) --------------------------------------------- $ 8,816,069 $16,834,942 $14,524,236 ============================================= The effective tax rate varied from the statutory federal income tax rate of 35% as follows: Year ended December 31 2000 1999 1998 ------------------------------------------- Taxes at statutory rate $ 8,805,411 $16,597,828 $ 13,927,349 State income taxes, net of federal tax benefits 332,780 1,208,695 1,346,056 Other (322,122) (971,581) (749,169) ------------------------------------------- $ 8,816,069 $16,834,942 $ 14,524,236 =========================================== Income tax payments (net of refunds) were approximately $3,391,000 in 2000, $14,832,000 in 1999, and $13,078,000 in 1998. Significant components of the Company's deferred tax liabilities and assets as of December 31 are as follows: 2000 1999 (As Restated) ---------------------------------- Deferred tax liabilities: Property and equipment $71,084,091 $65,325,337 Deferred tax assets: Claims payable 12,871,830 11,720,173 Other-net 2,395,590 1,837,888 ---------------------------------- Total deferred tax assets 15,267,420 13,558,061 ---------------------------------- Net deferred tax liabilities $ 55,816,671 $51,767,276 ================================== 32 8. Employee Benefit Plans The M.S. Carriers, Inc. Retirement Savings Plan (the Plan) is a defined contribution plan under Section 401(k) of the Internal Revenue Code (IRC) and provides for voluntary contributions by employees and matching contributions by the Company. All employees who are 19 years of age or older and have completed six months of service are eligible for the Plan. The Plan provides each participant with the option of contributing from 1% to 15% of the employee's annual compensation subject to IRC limitations. The Company matches the employee contribution up to 50% of the participant's contribution, but limited to a maximum of 3% of the participant's compensation. The Company's contribution to the Plan, net of forfeitures, was approximately $1,590,000 in 2000, $1,571,000 in 1999, and $1,318,000 in 1998. 9. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: Year Ended December 31 2000 1999 1998 ------------------------------------------- Numerator: Net income available to common stockholders $ 16,342,249 $ 30,587,425 $ 25,268,189 =========================================== Denominator: Weighted-average shares for basic earnings per share 11,425,063 12,291,349 12,254,067 Dilutive employee stock options 113,594 524,266 475,339 ------------------------------------------- Adjusted weighted-average shares for diluted earnings per share 11,538,657 12,815,615 12,729,406 =========================================== Basic earnings per share $ 1.43 $ 2.49 $ 2.06 =========================================== Diluted earnings per share $ 1.42 $ 2.39 $ 1.99 =========================================== Stock options that could potentially dilute basic earnings per share in the future, which were not included in the fully diluted computation because they would have been anti-dilutive, were 861,103 at December 31, 2000. 10. Stock Options The Company has elected to follow APB No. 25 and related Interpretations in accounting for its employee stock options because the alternative fair value accounting provided for under SFAS No. 123 requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB No. 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The Company's Stock Option Plans (the Option Plans) provide for the granting of either qualified or nonqualified stock options. Options are subject to terms and conditions determined by the Compensation Committee of the Board of Directors. Options granted under the 1986 Incentive Stock Option Plan generally are exercisable in increments of one-third per year beginning two years from the date of grant. Options granted under the 1993 and 1996 Stock Option Plans are 33 exercisable five years from the date of grant. All options expire ten years from the date of grant. Under the Option Plans, the Company may grant options to purchase up to a total of 2,600,000 shares of common stock at the prevailing market price at the date of grant. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value for the Company's options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for 2000, 1999, and 1998, respectively: risk-free interest rates of 7.2% in 2000, 6.9% in 1999, and 5.7% in 1998, a volatility factor of the expected market price of the Company's common stock of .36 in 2000, .37 in 1999, and .30 in 1998, a weighted-average expected life of the options of 7 years, and no dividend payments. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the respective options' vesting periods. The Company's SFAS No. 123 pro forma information follows: Year ended December 31 2000 1999 1998 -------------------------------------------- Net income $ 16,342,249 $ 30,587,425 $ 25,268,189 Pro forma compensation expense (2,138,266) (1,925,059) (1,308,983) -------------------------------------------- Pro forma net income $ 14,203,983 $ 28,662,366 $ 23,959,206 ============================================ Pro forma basic earnings per share $ 1.31 $ 2.39 $ 1.98 ============================================ Pro forma diluted earnings per share $ 1.30 $ 2.29 $ 1.90 ============================================ Because SFAS No. 123 applies only to stock-based compensation awards for 1995 and future years, the pro forma disclosures under SFAS No. 123 are not likely to be indicative of future disclosures until the disclosures reflect all outstanding, nonvested awards. 34 A summary of the Company's stock option plan activity is as follows: Number of Shares Under Weighted-Average Option Exercise Price ----------------------------------- Balance at January 1, 1998 1,736,000 $19.01 Granted 758,000 28.85 Exercised (49,500) 22.11 Canceled (476,500) 23.92 ----------------------------------- Balance at December 31, 1998 1,968,000 21.53 Granted 757,000 28.23 Exercised (41,500) 18.28 Canceled (644,000) 25.97 ----------------------------------- Balance at December 31, 1999 2,039,500 21.64 Granted 171,000 20.06 Exercised (137,000) 8.63 Canceled (317,000) 24.82 ----------------------------------- Balance at December 31, 2000 1,756,500 $21.86 =================================== Options exercisable were 486,726, 513,526, and 315,500 at December 31, 2000, 1999, and 1998, respectively. The weighted-average fair value of options granted during 2000, 1999, and 1998 was $10.50, $14.67, and $11.43, respectively. Exercise prices for options outstanding as of December 31, 2000, ranged from $15.44 to $34.25. At December 31, 2000, the Company had reserved 438,667 shares of its common stock for issuance pursuant to stock option plans. The following table segregates option information between ranges of exercise prices as of December 31, 2000: Exercise Price ------------------------------- Less Than Greater Than $25 $25 Total --------------------------------------- Number of shares under option 1,401,000 355,000 1,756,500 Weighted-average exercise price $19.95 $29.38 $21.86 Weighted-average years of remaining contractual life 5.89 7.88 6.29 Exercisable options 481,226 5,500 486,726 Weighted-average exercise price of exercisable options $19.89 $25.59 $19.96 11. Commitments and Contingencies The Company is involved in certain legal actions and claims arising in the ordinary course of business. It is the opinion of management that such litigation and claims will be resolved without material effect to the Company's financial position or results of operations. The Company guarantees certain debt obligations of EASO for revenue equipment. At December 31, 2000, the amount guaranteed was approximately $20.8 million. The guaranteed obligations have maturity dates from June 1, 2001, to September 1, 2006. 12. Stock Repurchase Program On December 16, 1999, the Company's Board of Directors authorized the repurchase of up to one million shares of the Company's common stock from time- to-time 35 through open market transactions. The stock repurchase program was authorized through December 31, 2000. On June 7, 2000, the Board of Directors authorized an additional two million shares for repurchase. This stock repurchase program is authorized through December 31, 2001. The Company will have no obligation to purchase any shares and may cancel, suspend or extend the time period for the purchase of shares at any time. Through December 31, 2000, the Company had repurchased 1,270,100 shares under this program. 13. Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value. The book value of long-term obligations, including current portion, approximates fair value based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The fair value of the Company's interest rate swap agreements is a liability of approximately $1.4 million and $2.2 million at December 31, 2000 and 1999, respectively. 14. Industry Segments The Company's two reportable segments are trucking operations and logistics. These segments are classified primarily by the type of services they provide. Performance of the segments is generally evaluated by their operating income. The trucking operations provide irregular route freight transport services to customers. The logistics operations arrange freight transportation for customers using various carriers, including the trucking segment of the Company, through agency relationships with its customers. Customers of both the trucking operations and logistics operations primarily include manufacturing, retail, wholesale and courier service companies. Effective July 1, 2000, the Company contributed its logistics operations to Transplace.com as described in Note 16. Summarized segment information is shown in the following table: Year ended December 31 2000 1999 1998 ----------------------------------------- (in thousands) Operating revenues: Trucking (including trucking revenues received from logistics) $ 662,462 $ 568,765 $ 481,650 Logistics 36,952 68,214 60,939 Elimination of trucking revenues received from logistics (1,892) (16,565) (13,748) ----------------------------------------- $ 697,522 $ 620,414 $ 528,841 ========================================= Operating income: Trucking $ 40,567 $ 54,771 $ 44,546 Logistics 1,388 2,022 2,377 ----------------------------------------- $ 41,955 $ 56,793 $ 46,923 ========================================= Due to the minimal amount of long-lived assets required by the logistics operations, the Company does not separately report such assets and related depreciation and amortization expense in its financial records used for 36 allocating Company resources and evaluating operating performance. The Company allocated operating overhead costs of approximately $3,312,000, $3,942,000, and $2,930,000 in 2000, 1999, and 1998, respectively, to the logistics operations for purposes of determining operating income and evaluating performance. Cost allocations to the logistics operations are based primarily on payroll costs. A trucking customer, Sears, accounted for 10% or more of revenues in 2000, 1999, and 1998 with revenues of $70,264,000 and $69,594,000, and $66,428,000, respectively. 15. Selected Quarterly Data (Unaudited) Summarized quarterly data for 2000 and 1999 follows:

16. Investment in Affiliated Company In March 2000, the Company, along with five other motor carriers, announced the intent to contribute its logistics operations into a joint venture, Transplace.com (TPC). TPC is an internet-based global transportation logistics company. TPC commenced operations effective July 1, 2000. The Company contributed all of its logistics operations, plus $5 million of cash, in exchange for an approximate 13% initial membership interest in TPC. The Company accounts for its approximate 13% interest in TPC utilizing the equity method of accounting. The Company's investment in TPC is classified as other assets on its consolidated 37 balance sheet. No gain or loss was recognized upon formation and contribution of the logistics operations to TPC. The excess of the Company's share of TPC's net assets over its cost basis is being amortized over 20 years on a straight- line basis. Equity in earnings of TPC was not significant in 2000. The Company's logistics operations generated approximately $35.4 million of operating revenues and $1.1 million of operating income for the six-month period ended June 30, 2000. During the six-month period ended December 31, 2000, the Company reported $1.6 million of operating revenues and $0.3 million of operating income from its logistics operations. These amounts are related to logistics services that were in process at the time of the Company's transfer of its logistics operations to TPC. The Company provided various services to TPC under a shared service agreement, the terms of which expired on December 31, 2000. The services included the following: payroll and benefits; accounting; computer system maintenance; office facilities; and telecommunications. The fees from these services approximated $2,634,000 in 2000 and were recorded in the consolidated statement of income as reimbursements of salaries, wages and benefits and other operating expenses. The Company has a receivable from TPC of $11.0 million at December 31, 2000, for freight, fees related to the shared service agreement and funding of a portion of TPC's working capital requirements. An additional $309,000 due from TPC is included in trade accounts receivable for freight services provided by the Company. The Company earned revenues of $8,615,000 from TPC in providing transportation services in the last six months of 2000. 17. Restatement In 2000, the Company modified its method of estimating and accruing its ultimate cost related to accident, workers' compensation, cargo and physical damage claims in accordance with accounting principles generally accepted in the United States. The Company began applying loss development factors to its accident and workers' compensation claims history. This new method results in a more accurate estimate of the Company's ultimate loss from claims than its prior method. This new method resulted in a restatement of the following balances at December 31, 1997: a decrease in retained earnings of $6.9 million, an increase in claims payable of $10.9 million, and an increase in deferred tax assets of $4.0 million. This restatement had no material impact on the 1999 and 1998 consolidated statements of income. 18. Proposed Merger with Swift Transportation Co., Inc. On December 11, 2000, the Company entered into a merger agreement with Swift Transportation Co., Inc. (Swift). Under the agreement, the Company will become a wholly-owned subsidiary of Swift. The merger is expected to be accounted for as a pooling-of-interests. Prior to the merger, the Company expects to offer approximately 300,000 shares of its common stock. 38

MS CARRIERS INC 10-K