SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarter ended Commission file number
September 30, 1997 0-22837
TRAILER BRIDGE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3617986
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
10405 New Berlin Road E.
Jacksonville, FL 32226 (904) 724-4400
(address of principal (Zip Code) (Registrant's telephone number)
executive offices)
_________________________
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 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 [ ]
As of September 30, 1997, 9,777,500 shares of the registrant's common
stock, par value $.01 per share, were outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The interim financial statements contained herein reflect all
adjustments which, in the opinion of management, are necessary for a fair
statement of the financial condition and results of operations for the
periods presented. They have been prepared in accordance with the
instructions to Form 10-Q and do not include all the information and
footnotes required by generally accepted accounting principles for
complete financial statements.
Operating results for the three-month period ended September 30, 1997
are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997. In the opinion of management, the
information set forth in the accompanying balance sheet is fairly stated
in all material respects.
These interim financial statements should be read in conjunction with
the Company's audited financial statements for the three years ended
December 31, 1996 that appear in the final prospectus for its initial
public offering which constitutes part of its registration statement on
Form S-1 (SEC file number 333-28221).
Statements of Operations for the
Three and Nine Month Periods Ended September 30, 1997
and 1996 (unaudited) Page 3
Balance Sheets as of
September 30, 1997 and December 31, 1996 (unaudited) Page 4
Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996 (unaudited) Page 5
Notes to Financial Statements as of
September 30, 1997 Page 6
<PAGE>
TRAILER BRIDGE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
OPERATING REVENUES ......................... $ 16,676,100 $ 16,288,019 $ 49,292,853 $ 45,130,004
OPERATING EXPENSES:
Salaries wages, and benefits (Note 4).... 3,692,541 3,215,902 19,185,975 9,863,421
Rent and purchased transportation:
Related Party........................... 1,870,170 1,833,000 5,671,170 3,939,000
Other................................... 2,611,011 2,550,365 7,302,299 7,887,462
Fuel..................................... 1,333,504 1,406,282 4,266,258 4,262,631
Operating and maintenance (exclusive of
Depreciation shown separately below).. 3,409,886 3,620,489 9,637,780 10,334,251
Taxes and licenses....................... 106,620 119,796 338,547 369,879
Insurance and claims..................... 488,042 586,975 1,422,621 1,564,223
Communications and utilities............. 161,639 162,365 432,086 469,028
Depreciation and amortization............ 612,950 755,590 1,961,517 2,170,324
Other operating expenses................. 873,235 706,385 2,543,629 2,160,506
---------- ---------- ---------- ----------
15,159,598 14,957,149 52,761,882 43,020,725
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS)..................... 1,516,502 1,330,870 (3,469,029) 2,109,279
NONOPERATING INCOME (EXPENSE):
Interest expense, net:
Related Party........................... (63,886) (93,414) (249,552) (359,115)
Other................................. (4,183) (196,107) (341,498) (422,807)
Gain (loss) on sale of equipment, net..... (83,577) 3,237 (81,901) 113,782
---------- ---------- ---------- ----------
(151,646) (286,284) (672,951) (668,140)
INCOME (LOSS) BEFORE BENEFIT
(PROVISION) AND PRO FORMA BENEFIT
(PROVISION) FOR INCOME TAXES.............. 1,364,856 1,044,586 (4,141,980) 1,441,139
BENEFIT (PROVISION) FOR INCOME TAXES ....... 1,081,107 (10,427) 1,020,172 (28,204)
---------- ---------- ---------- ----------
NET INCOME (LOSS) BEFORE PRO FORMA
BENEFIT (PROVISION) FOR INCOME TAXES...... 2,445,963 1,034,159 (3,121,808) 1,412,935
PRO FORMA BENEFIT (PROVISION)
FOR INCOME TAXES (Note 2)................. - (398,255) (358,389) (533,678)
PRO FORMA NET INCOME (LOSS) (Note 2)
---------- ---------- ---------- ----------
$ 2,445,963 $ 635,904 $ (3,480,167) $ 879,257
========== ========== ========== ==========
PRO FORMA NET INCOME (LOSS) PER
SHARE (Note 2)........................... $ 0.28 $ 0.10 $ (0.47) $ 0.13
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING.............................. 8,713,641 6,672,500 7,360,357 6,672,500
========== ========== ========== ==========
</TABLE>
(See notes to financial statements)
<PAGE>
TRAILER BRIDGE, INC.
BALANCE SHEETS
(Unaudited)
September December
1997 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............. $ 16,863,996 $ 1,658,921
Trade receivables, less allowance for
doubtful accounts of $1,028,925 and
$905,581............................. 8,125,354 8,305,872
Prepaid expenses....................... 904,538 964,971
---------- ----------
Total current assets................ 25,893,888 10,929,764
---------- ----------
PROPERTY AND EQUIPMENT, net.............. 22,266,258 12,512,130
GOODWILL, less accumulated
amortization of $252,848 and $217,763.. 916,094 951,179
OTHER ASSETS (Note 3).................... 7,729,630 370,592
---------- ----------
TOTAL ASSETS........................ $ 56,805,870 $ 24,763,665
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable....................... $ 2,392,589 $ 1,981,421
Other accrued liabilities.............. 2,696,304 2,635,099
Current portion of notes payable....... 2,326,127 3,117,069
Current portion of capital lease
obligation........................... 37,866 38,197
Unearned revenue....................... 83,084 223,627
Due to affiliate....................... 60,200 4,653,192
---------- ----------
Total current liabilities........... 7,596,170 12,648,605
NOTES PAYABLE, less current portion...... 16,319,329 5,909,072
CAPITAL LEASE OBLIGATIONS, less
current portion........................ 129,741 161,444
---------- ----------
TOTAL LIABILITIES................... 24,045,240 18,719,121
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
authorized 1,000,000 shares; no
shares issued or outstanding.........
Common stock, $.01 par value,
authorized 20,000,000 shares;
9,777,500 shares issued and out-
standing in 1997 and 6,672,500
in 1996.............................. 97,775 66,725
Additional paid-in capital............. 36,926,294 (66,300)
Retained earnings...................... (4,263,439) 6,044,119
---------- ----------
Total stockholders' equity.......... 32,760,630 6,044,544
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY.............. $ 56,805,870 $ 24,763,665
========== ==========
(See notes to financial statements)
<PAGE>
TRAILER BRIDGE, INC.
STATEMENTS OF CASHFLOWS
(Unaudited)
Nine Months Ended,
September 30,
1997 1996
Operating Activities:
Net Income (Loss)........................ $ (3,121,808) $ 1,412,934
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization.......... 1,961,517 2,170,325
Provision for uncollectible accounts... 305,334 341,625
(Gain) loss on sale of equipment....... 81,901 (110,482)
Compensation expense recognized for
stock option......................... 8,528,670 0
Deferred income taxes.................. (1,107,967) 0
Change in assets and liabilities:
Decrease (increase) in trade
receivables........................ (124,816) 785,297
Decrease (increase) in prepaid
expenses........................... 60,433 (508,402)
Increase (decrease) in accounts
payable............................ 411,168 832,056
Increase (decrease) in accrued
liabilities........................ 61,205 (8,188)
Increase (decrease) in unearned
revenue............................ (140,543) (27,927)
---------- ----------
Net cash provided by operating
activities....................... 6,915,094 4,887,238
Investing Activities:
Increase (decrease) in due to affiliate.. (4,592,992) (3,284,446)
Purchases and construction of fixed
assets................................. (11,793,175) (6,411,349)
Proceeds from sale of equipment.......... 30,714 423,162
(Increase) decrease in other assets...... (6,251,071) 2,726
---------- ----------
Net cash used in investing
activities..................... (22,606,524) (9,269,907)
Financing Activities:
Proceeds from borrowings on notes payable 12,523,622 6,433,193
Proceeds from sale of common stock....... 28,494,974 0
Payments on notes payable................ (2,904,307) (2,383,836)
Payments of dividends.................... (7,185,750) 0
Payments on capital lease obligations.... (32,034) 91,209
---------- ----------
Net cash provided by financing
activities..................... 30,896,505 4,140,566
Net Increase (Decrease) in Cash and Cash
Equivalents.............................. 15,205,075 (242,103)
Cash and Cash Equivalents at Beginning
of Period................................ 1,658,921 498,328
---------- ----------
Cash and Cash Equivalents at End of Period. 16,863,996 256,225
========== ==========
(See notes to financial statements)
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO THE FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements include all adjustments,
consisting of normal recurring accruals, which the Company considers
necessary for a fair presentation of the results of operations for the
periods shown. The financial statements have been prepared in accordance
with the instructions to Form 10-Q and, therefore, do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with
generally accepted accounting principles. The results of operations for
any interim period are not necessarily indicative of the results to be
expected for the full year. For further information, refer to the
Company's audited financial statements for the three years ended December
31, 1996 that appear in the final prospectus for its initial public
offering which constitutes part of its registration statement on Form S-1.
2. PRO FORMA INFORMATION
Pro Forma Adjustments. Upon closing of the Company's initial public
offering, the Company's status as an S Corporation terminated. The pro
forma adjustments reflect a provision for income taxes that would have
been incurred had the Company not been organized under Subchapter S of the
Internal Revenue Code. The effective rate differs from the statutory rate
of 34% due to state income taxes (net of Federal income tax benefits),
amortization of goodwill and other nondeductible expenses and due to the
utilization of the net operating loss carryforwards of a corporation
acquired in 1992.
Pro Forma Net Income Per Share. Pro forma net income per share
reflects a 15,700-for-1 stock split that became effective with the
Company's stock offering.
3. RESTRICTED ASSETS
Other assets as of September 30, 1997 includes $5.7 million in an escrow
account for the construction of two vessels known as Triplestack Box
Carriers.
4. NON-RECURRING NON-CASH CHARGE
On May 21, 1997, the majority stockholder of the Company granted to the
Company's Chairman and Chief Executive Officer, an option to purchase
942,000 shares of Common Stock (adjusted for the 15,700-for-1 stock split)
owned by him at $.95 per share or an aggregate price of $891,330 for all
shares. These options are immediately exercisable and have a term of 10
years. In connection with this option, the Company recorded a non-
recurring, non-cash charge for compensation expense and a credit to paid-
in capital of approximately $8.5 million in the second quarter of 1997,
representing the difference between the exercise price and the initial
public offering price of the Common Stock of $10.00 per share. This
option does not involve the issuance of additional shares of Common Stock
by the Company and therefore, any subsequent purchase of shares under the
option will not have a dilutive effect on the Company's book value or
earnings per share amounts.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS:
Three Months Ended September 30, 1997 and 1996
Operating revenues increased $388,081, or 2.4%, to $16.7 million during
the three months ended September 30, 1997 from $16.3 million during the
year earlier period. This increase was due to a $731,052 (5.0%) increase
in Puerto Rico revenue to $15.4 million, partially offset by a $342,971
(20.6%) decrease in non-Puerto Rico revenue as available tractor capacity
was targeted further towards Puerto Rico revenue. Core trailer revenue to
Puerto Rico increased $2.4 million (28.4%) compared to the year earlier
period but was partially offset by a $1.4 million (35.9%) decrease in car
and other vehicle revenue and a decrease of $240,329 (11.3%) in trailer
revenue from Puerto Rico.
Operating expenses increased $202,449 for the three months ended
September 30, 1997, from the year earlier period primarily as a result of
an increase of $476,639 in salaries, wages and benefits partially offset
by a decrease in operations and maintenance of $210,603. This decrease in
operations and maintenance consists primarily of a decrease of $220,091 in
ramp repair expenses as a result of fully amortized prepaid ramp costs and
a decrease of $55,169 in revenue equipment maintenance expenses, partially
offset by an increase of $64,657 in marine freight handling charges caused
by an increase in freight volumes.
The Company's operating ratio improved slightly to 90.9% during the
three months ended September 30, 1997 from 91.8% during the year earlier
period.
The Company's operating income increased $185,632 (13.9%) to $1.5
million compared to the same period last year. Net interest expense
decreased $221,452 compared to the year earlier period as a result of
reduced debt and increased interest income resulting from the Company's
initial public offering. The Company recorded a $83,577 loss on sale of
equipment related to the sale of telephone equipment and other leasehold
improvements resulting from the consolidation of office facilities in a
new office building adjacent to the Jacksonville truck terminal.
Income before taxes for the three months ended September 30, 1997
increased $320,270 (30.7%) to $1.4 million from the year earlier period.
After a net credit for federal and state income taxes of $1.1 million
related to a non-recurring, non-cash compensation charge during the
quarter ended June 30, 1997, net income was $2.4 million or $.28 per share
compared to pro forma net income of $635,904 or $.10 per share for the
year earlier period.
Nine Months Ended September 30, 1997 and 1996
Operating revenues increased $4.2 million, or 9.2%, to $49.3 million
during the nine months ended September 30, 1997 from $45.1 million during
the year earlier period. This increase was due to a $5.8 million
(14.8%) increase in Puerto Rico revenue to $45.3 million through the
utilization of a portion of the additional capacity resulting from the
mid-body project, partially offset by a (29.3%) decrease in non-Puerto
Rico revenue as available tractor capacity was targeted further towards
Puerto Rico revenue. Vessel capacity utilization on the core continental
U.S. to Puerto Rico traffic lane was 82.43% during the nine months ended
September 30, 1997, compared to 89.81% during the year earlier period
during which a smaller substitute vessel was utilized.
In connection with the grant of an option by the Company's principal
stockholder to its Chairman and CEO, the Company recorded a nonrecurring,
non-cash charge for compensation and a credit to paid-in capital of $8.5
million during the nine months ended September 30, 1997. This charge
represented the difference between the exercise price of the option and
the initial public offering price of $10.00 per share. The option does
not involve the issuance of additional shares of Common Stock by the
Company and therefore, any subsequent purchase of shares under the option
will not have a dilutive effect on the Company's book value or earnings
per share amounts. As a result of this option the Company sustained a pro
forma net loss of $3.5 million or $.47 per share, for the nine month
period ending September 30, 1997.
Excluding the charge for compensation discussed above, the Company's
operating ratio improved to 89.7% during the nine months ended September
30, 1997 from 95.3% during the year earlier period primarily as a result
of the increased Puerto Rico revenue that resulted from the Company's 1996
mid-body expansion program, as well as a related increase in the Company's
ability to use available trucking capacity for its more profitable core
Puerto Rico traffic.
Excluding the charge for compensation discussed above, operating
expenses for the nine month period ended September 30, 1997 increased $1.2
million from the year earlier period. This increase was primarily due to an
increase of $1.7 million in charter hire on the modified vessels, an
increase of $793,884 in salaries, wages and benefits and an increase of
$383,123 in other operating expenses. These increases were offset by a
decrease in operations and maintenance expense of $696,471 from the
increased handling costs in the year earlier period related to the
complexity of loading substitute vessels during the mid-body expansion
project, a decrease of $585,163 in equipment leasing costs as the Company
purchased revenue equipment, a decrease of $208,807 in depreciation and
amortization expense and a decrease of $141,602 in insurance and claims
expense.
Interest expense (net) was $591,050 for the nine months ended September
30, 1997, a decrease of $190,872 from the year earlier period due to
reduced debt and increased interest income resulting from the Company's
initial public offering and the acquisition of revenue equipment that was
added in the third and fourth quarters of 1996.
Excluding the noncash, nonrecurring charge for compensation related to
the option from the Company's principal stockholder to the Company's
Chairman and CEO, the Company's operating income improved by $3.0 million
to $5.1 million during the nine month period ending September 30, 1997
compared to operating income of $2.1 during the year earlier period.
LIQUIDITY AND CAPITAL RESOURCES.
On July 29, 1997 the Company closed the sale of Common Stock of the
Company in its initial public offering. After expenses, including legal,
printing and distributing expenses, the Company received proceeds of the
offering of approximately $24.7 million. On August 25, 1997 the Company
completed sale of additional common stock pursuant to the initial public
offering and received proceeds of approximately $3.8 million.
The Company's financial condition improved as a result of the company's
initial public offering. At September 30, 1997 cash amounted to $16.9
million, working capital was $18.3 million, and stockholders' equity
amounted to $32.8 million.
Net cash provided by operating activities was $6.9 million for the nine
months ended September 30, 1997 compared to $4.9 million in the year
earlier period. The Company's operating cash flow reflects an increase of
$8.5 million in additional paid in capital related to the non-cash, non-
recurring charge associated with the option discussed above, partially
offset by a net loss of $3.1million, and an increase in deferred income
taxes of $1.1 million.
Net cash used in investing activities of $22.6 million in the nine month
period ending September 30, 1997 reflects $11.8 million of capital
expenditures, which was primarily attributable to payments for the
construction of the Company's two new Triplestack Box Carriers, the
purchase of over the road tractors, and the construction of the
administrative office in Jacksonville, Florida. Also reflected at
September 30, 1997 , is an escrow account of approximately $5.7 million
established with the Maritime Administration to hold the unused proceeds
of the Company's Title XI bond issuance and the repayment of $4.6 million
repayment to an affiliate.
Net cash provided by financing activities of $30.9 million in the nine
months ended September 30, 1997 reflects the net proceeds of the initial
public offering of $28.5 million, $10.5 million in Title XI bonds issued,
$2.0 million in debt to finance over the road tractors, reduced by $2.9
million in payments on notes payable and $7.2 million in dividends paid.
Forward Looking Information
Statements by the Company in reports to its stockholders and public
filings, as well as oral public statements by Company representatives may
contain certain forward looking information that is subject to certain
risks and uncertainties that could cause actual results to differ
materially from those projected. Without limitation, these risks and
uncertainties include economic recessions or downturns in customers'
business cycles, excessive increases in capacity within ocean going and
truckload markets, decreased demand for transportation services offered by
the Company, rapid inflation and fuel price increases, increases in
interest rates, and the availability and compensation of qualified drivers
and owner-operators.
PART II
OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Prior to the period covered by this report, the Company effected an
initial public offering (the "Offering") of its Common Stock, par value
$.01 per share, pursuant to a Registration Statement on Form S-1 (File No.
333-28221) that was declared effective by the Securities and Exchange
Commission on July 23, 1997. The Offering commenced on July 24, 1997. The
closing of the Offering occurred on July 29, 1997 with respect to
2,700,000 shares of Common Stock offered by the Company. An over-
allotment option was exercised by the Company's underwriters on August 25,
1997 with respect to 405,000 shares. The managing underwriter of the
Offering was BT Alex Brown Incorporated.
The following table summarizes the number of shares of Common Stock and
aggregate offering price of the shares registered for the account of the
Company and the amount and aggregate offering price sold:
<TABLE>
For the account of the Company
<CAPTION>
Aggregate Offering Price Aggregate Offering Price
Amount registered of amount registered Amount Sold of amount sold
<C> <C> <C> <C>
3,105,000 $31,050,000 3,105,000 $31,050,000
</TABLE>
The following table summarizes the gross proceeds to the Company, the
expenses incurred for the Company's account, and the net proceeds to the
Company in connection with the issuance and distribution of Common Stock
by the Company in the Offering:
Gross proceeds: $31,050,000
Underwriting discounts and commissions: $ 2,173,500
Finders' fees: $ 0
Expenses paid to or for underwriters: $ 0
Other expenses: $ 381,525
Total expenses: $ 2,555,025
The following table summarizes the amounts of net Offering proceeds to
the Company used for the purposes listed through the date of this report:
Use of Proceeds Amount
Funding S Corporation Dividend: $ 6,000,000
Purchase of machinery and equipment: $ 940,653
Repayment of indebtedness: $ 4,825,227
Working Capital/Temporary investments: $16,729,095
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Page Number or Incorporated
Number Description by Reference to
27 Financial Data Schedule Page 14 of sequentially
numbered pages
(b) Reports on Form 8-K - None
<PAGE>
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 thereto duly authorized.
TRAILER BRIDGE, INC.
Date: November 14, 1997 By: /s/ John D. McCown
John D. McCown
Chairman and Chief
Executive Officer
Date: November 14, 1997 By: /s/ Mark A. Tanner
Mark A. Tanner
Vice President of
Administration and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF TRAILER BRIDGE, INC. AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 16,863,996
<SECURITIES> 0
<RECEIVABLES> 9,154,279
<ALLOWANCES> (1,028,925)
<INVENTORY> 0
<CURRENT-ASSETS> 25,893,888
<PP&E> 30,081,128
<DEPRECIATION> (7,814,871)
<TOTAL-ASSETS> 56,805,870
<CURRENT-LIABILITIES> 7,596,170
<BONDS> 18,873,263
0
0
<COMMON> 97,775
<OTHER-SE> 32,662,855
<TOTAL-LIABILITY-AND-EQUITY> 56,805,870
<SALES> 0
<TOTAL-REVENUES> 49,292,853
<CGS> 0
<TOTAL-COSTS> 52,501,055
<OTHER-EXPENSES> 81,901
<LOSS-PROVISION> 260,828
<INTEREST-EXPENSE> 591,049
<INCOME-PRETAX> (4,141,980)
<INCOME-TAX> 1,020,172
<INCOME-CONTINUING> (3,121,808)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,121,808)
<EPS-PRIMARY> (.42)
<EPS-DILUTED> (.42)
</TABLE>
