SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
Commission file number 0-15087
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 and telephone number of Principal executive offices)
_________________________
Securities Registered Pursuant to section 12(b) of the Act: None
Securities Registered Pursuant to section 12(g) of the Act:
$0.01 Par Value
Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
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 the registrant's definitive
proxy statement incorporated by reference in Part III of this Form 10-K.
[X]
The aggregate market value of the shares of the registrant's $0.01 par
value common stock held by non-affiliates of the registrant as of March
20, 1998 was $22,479,350 (based upon $7.25 per share being the average of
the closing bid and asked price on that date as reported by NASDAQ). In
making this calculation the issuer has assumed, without admitting for any
purpose, that all executive officers and directors of the registrant are
affiliates.
As of March 31, 1998, 9,777,500 shares of the registrant's common stock,
par value $.01 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: The information set forth under Part
III, Items 10, 11, 12, and 13 of this Report is incorporated by reference
from the registrant's definitive proxy statement for the 1998 annual
meeting of stockholders that will be filed no later than 120 days after
the end of the year to which this report relates.
<PAGE>
Part 1
Item 1. Business
BUSINESS OVERVIEW
Trailer Bridge, headquartered in Jacksonville, Florida, is an
integrated trucking and marine freight carrier that provides truckload
freight transportation primarily between the continental U.S. and Puerto
Rico. Founded in 1991 by transportation pioneer Malcom P. McLean, the
Company combines an efficient and dedicated motor carrier with a low cost
barge and tug marine transportation system. Trailer Bridge is the only
company serving markets governed by the Jones Act which exclusively
operates marine vessels fully configured to carry 48' and 53' long, 102"
wide, "high-cube" equipment. This configuration enables the Company to
achieve equipment utilization rates and other operating efficiencies not
readily available to traditional ocean carriers that primarily use smaller
capacity equipment, such as 40' containers.
Trailer Bridge's differentiated service quickly gained the acceptance
of U.S. to Puerto Rico shippers, leading to rapid growth and high
equipment utilization. In 1993, the Company's first full year of
operation, Trailer Bridge achieved a 93% outbound (continental U.S. to
Puerto Rico) vessel utilization rate and captured 5% of the continental
U.S. to Puerto Rico marine freight market. In response to the rapid market
share gains experienced by Trailer Bridge, in 1996 the Company increased
its vessel capacity by 56% by inserting midsections ("mid-bodies") into
its two existing barges, increasing the capacity of each barge from 266 to
416 48' equivalent truckload units.
Trailer Bridge will have increased its vessel capacity by an additional
56% in the second quarter of 1998 when it takes delivery of the second
403' long container carrying barge designed specifically for the Company's
integrated truckload marine transportation system and bearing the
Company's Triplestack Box Carrier/TM/ trade name. The first Triplestack
Box Carrier/TM/ was delivered to the Company in January 1998. The
Triplestack Box Carriers/TM/ are versatile, low-draft vessels that have a
capacity of 213 53' containers, stacked three-high on a single deck. The
first two vessels will be deployed in the Company's existing Puerto Rico
freight operation. Trailer Bridge has contracted for the construction of
three additional Triplestack Box Carriers/TM/ which it intends to deploy
in coastwise service between New York and Florida.
OPERATIONS
At December 31, 1997, Trailer Bridge operated a fleet of 157 tractors,
1,937 high-cube trailers, 665 53' high cube containers and 526 53' chassis
which transport truckload freight between the Company's Jacksonville port
facility and inland points in the U.S. The Company also provides full
truckload service between interior points within the continental U.S.,
primarily to increase equipment utilization, minimize empty miles and
maximize revenue while repositioning equipment to carry Puerto Rico bound
freight. The Company maintains a centralized dispatch and customer service
operation at its Jacksonville headquarters to schedule pickup and delivery
of customer freight. The operations center features a fully integrated
computerized dispatch and customer service network. Customer service
representatives solicit and accept freight, quote freight rates and serve
as the primary contact with customers. Dispatch and customer service
personnel work together to coordinate Puerto Rico and non-Puerto Rico
freight to achieve the most optimum load balance and minimize empty miles
within the Company's truckload operation.
At December 31, 1997, Trailer Bridge operated two 736' triple-deck,
roll-on/roll-off ocean-going barges. Loading of the barges is performed
with small maneuverable yard tractors operated by stevedores hired by an
outside contractor. Once per week, the Company's two barge vessels sail
between San Juan and Jacksonville, one in each direction. Each barge is
towed at approximately 9 knots by one 8,000 horsepower diesel-powered tug.
The tugs are time-chartered and are manned by employees of the
unaffiliated tug owner. Compared to a self-propelled vessel, a towed barge
has reduced Coast Guard manning requirements and higher fuel efficiency.
Similarly, the large number of U.S. tugs available for charter provides
the Company with a reliable source for towing services. The first
Triplestack Box Carrier/TM/ was delivered to the Company in January 1998
and added to the Company's Puerto Rico service.
MARKETING AND CUSTOMERS
The Company's sales and marketing function is led by senior management
and sales professionals based in Jacksonville, San Juan and other key
strategic U.S. cities. These sales personnel aggressively market Trailer
Bridge to shippers as a customer-oriented provider of value-priced and
dependable service. The Company targets major shippers with high volume,
repetitive shipments whose freight lends itself to integrated trucking and
marine service.
The Company believes that price is the primary determinant in the
freight lanes in which it is involved. Nonetheless, the Company also
believes that it provides enhanced service that results from its single
company control of the entire freight movement over land and water. This
service frees the customer from the operational complexities of
coordinating the interface between over-the-road and marine service. The
Company's customer service philosophy has generated increased demand from
existing customers for additional equipment and sailings and has led to
ongoing relationships with customers such as Chrysler, General Motors, K
Mart, General Electric and DuPont.
The Company has a diversified customer base. Typical shipments to
Puerto Rico include furniture, consumer goods, toys, new and used cars and
apparel. Typical shipments from Puerto Rico include health products,
electronics, shoes and scrap aluminum. Management intends to continue the
Company's efforts both to increase business with existing customers and
add new core carrier relationships.
The Company has written contracts with the majority of its customers.
These contracts generally specify service standards and rates, eliminating
the need for negotiating the rate for individual shipments. Although a
contract typically runs for a specified term of at least one year, it
generally may be terminated by either party upon 30 days' notice. The
penalties for a shipper for breach of contract are minimal.
EXISTING AND PLANNED VESSELS
At December 31, 1997, the Company operated two 736' by 104' triple-deck
roll-on/roll-off barges. Each deck has ten lanes which are accessed from
the stern of the vessel via ramp structures in Jacksonville and San Juan
that have been built specifically for the Company. Four lanes on each
vessel have been converted to carry new and used automobiles on car decks
that allow approximately 11 cars to fit in the space previously used for
one 48' trailer. The trailers are secured on the vessel by attachment to
pullman stands which are engaged and disengaged with specially configured
yard tractors used to pull the trailers into position on the vessel. These
vessels can be fully discharged and re-loaded within one eight hour shift,
although the Company generally makes use of additional available slack
time in Jacksonville to schedule cargo activity over periods that will
minimize total cost.
The two Triplestack Box Carriers/TM/ to be used in the Puerto Rico
traffic lane are single deck barges. The Company contracted for the
building of these 403' by 100' vessels at Halter Marine Group, Inc.'s
Pearlington, Mississippi shipyard under fixed-priced contracts. The first
of the Triplestack Box Carriers was delivered to the Company in January
1998 and added to the Company's Puerto Rico service. These vessels will
utilize the same port facilities as the existing barge vessels. Wheeled
vehicles known as reacher-stackers carry and load the containers. These
highly maneuverable vehicles are also used by railroads to load containers
on rail cars for intermodal transportation. The reacher-stackers are
significantly less expensive than the cranes typically required for
loading and unloading containers from the holds of large cargo ships and
instead directly access the deck of the vessel via simple and movable
linear planks. The Company intends to acquire three additional Triplestack
Box Carriers/TM/ in 1998 to use in the coastwise traffic lanes as a cost-
efficient alternative to truckload and rail intermodal.
REVENUE EQUIPMENT
Trailer Bridge's equipment strategy is to operate modern tractors and
trailers in order to (i) reduce fuel, maintenance and parts costs, (ii)
increase reliability, and (iii) help attract and retain drivers. At
December 31, 1997, the Company had 157 tractors. The Company's practice is
to trade or replace its tractors on a 450,000-mile cycle which generally
occurs during the fourth year.
Trailer Bridge has scheduled deliveries of approximately 41 new
tractors during 1998. At December 31, 1997, the Company had a fleet of
approximately 139 owned tractors with an average age of approximately one
year. All new power units are conventional tractors (engine-forward) that
are preferred by drivers. These units include, among other amenities, a
large "condo" sleeper compartment with full standing room.
At December 31, 1997, the Company operated 1,937 dry van trailers,
1,772 of which were 48' x 102" models and 165 of which were 53' x 102"
models. At December 31, 1997 the Company owned or operated 665 53'
containers and 526 chassis. The Company's current practice is to trade or
replace owned trailers on a seven-year cycle and replace leased trailers
with owned trailers as leases expire.
The Company performs preventative maintenance on equipment at its
Jacksonville operations center, with major maintenance and repairs handled
by outside contractors.
DRIVER RECRUITING AND RETENTION
The Company offers competitive compensation and full health care
benefits differentiating it from many truckload operators. Management also
promotes driver retention by assigning drivers to a single dispatcher,
regardless of geographic area, awarding dedicated routes and offering more
predictable home time resulting from a central hub of operations. The
Company believes its driver turnover of 28.4% in 1997 is well below that
typically reported by other truckload carriers despite an industry-wide
driver shortage and vigorous competition for drivers.
In recent periods the Company has significantly reduced the number of
owner-operators in connection with its decision to decrease domestic
truckload business not related to Puerto Rico movements. At December 31,
1997, the Company had only 10 owner-operators. Nevertheless, the Company
intends to utilize the flexibility of adding and removing owner-operators
from its driver work force to address driver and equipment needs in the
future. The Company compensates owner- operators as employees, affording
them the same benefits as regular Company drivers. Owner-operators receive
a flat rate per mile to cover equipment costs, fuel and maintenance.
FUEL AVAILABILITY AND COST
The Company actively manages its fuel costs by requiring drivers to
fuel in Jacksonville at an offsite fuel facility where the Company has
established a bulk purchasing arrangement. Whenever possible in route,
drivers are required to fuel at truck stops and service centers with which
the Company has established volume purchasing arrangements. The Company
offers fuel-conservation bonuses to its drivers based on achieving miles
per gallon goals.
Although the Company pays for the marine fuel used by the large tugs it
charters, the actual fuel loading is controlled by tug crew personnel
employed by the tug owner. The fuel is purchased and loaded in
Jacksonville at a nearby fuel facility during cargo loading operations. By
negotiating directly with fuel vendors and offering volume contracts for
its marine fuel needs, the Company has obtained better prices than it
would have otherwise been able to attain.
Trailer Bridge does not engage in any fuel hedging activities.
SAFETY AND INSURANCE
Trailer Bridge emphasizes safety in all aspects of its operations. The
Company maintains its own strict standards for recruiting drivers,
including a minimum of five years of verifiable commercial driving
experience, a safe driving history and a successful physical examination,
including drug and alcohol testing. Its ongoing driver safety program
includes an initial orientation for all new drivers, 100% log monitoring
and strong adherence to all speed and weight regulations.
The Company bids annually for both marine and land insurance policies.
Major coverages include hull and protection indemnity, pollution, excess
liability, marine cargo, truckers liability, workers' compensation and
commercial property.
TECHNOLOGY
The Company utilizes an IBM AS-400 computer system to handle its
accounting and operations requirements. The computer system links Company
headquarters, the truck operations center, the San Juan office and the
marine terminals in Jacksonville and San Juan. The system enhances the
Company's operating efficiency by providing cost effective access to
detailed information concerning available equipment, loads, shipment
status and specific customer requirements, and permits the Company to
respond promptly and accurately to customer requests.
The Company's electronic data interchange ("EDI") capability allows
customers to tender loads, receive load confirmation, check load status
and receive billing information via computer. The Company's EDI system
also is designed to accelerate receivables collection. The Company's
largest customers require EDI service from their core carriers. Management
believes that advanced technology will be required by an increasing number
of large shippers as they reduce the number of carriers they use in favor
of core carriers.
The Company has identified all significant computer applications that
will require modifications to operate in the year 2000. Internal and
external resources will be used to make the required modifications which
are scheduled to begin in the second quarter of 1998. The cost of such
modifications is not expected to be material to the Company's financial
condition or results of operations. In addition, the Company is
communicating with significant third parties to determine if the Company
is vulnerable to their failure to properly address the year 2000 problem.
COMPETITION
The Company currently competes with four carriers for freight moving
between the U.S. and Puerto Rico where its market share at December 31,
1997 was approximately 8%. The current operators in the Puerto Rico trade
are Navieras de Puerto Rico ("NPR"), Sea-Land Service, Inc., Crowley
American Transport, Sea-Barge Marine and Trailer Bridge. Based on
available industry data for 1997, NPR, has approximately 32% of the market
and operates five container vessels configured to carry primarily 40'
marine containers. Sea-Land Service, Inc., a subsidiary of CSX
Corporation, has approximately 26% of the market and operates five
container vessels that also carry mainly 40' containers. Crowley American
Transport, a subsidiary of privately held Crowley Maritime Corp., has
approximately 28% of the market and operates nine roll-on/roll-off barges
in various services between the U.S. and Puerto Rico. Although Crowley now
uses some 48' and 53' trailers, its main equipment size is 45' by 96" wide
trailers. Sea Barge Marine has approximately 6% of the market with four
container barges that primarily carry 40' marine containers.
Puerto Rico shippers select carriers based primarily upon price. To a
lesser extent, criteria such as frequency, transit time, consistency,
billing accuracy and claims experience are considered. The Company faces
vigorous price competition from competitors in the Puerto Rico market, two
of which are part of larger transportation organizations that possess
greater financial resources than the Company. While the Company believes
it is the lowest cost per unit operator in the Puerto Rico traffic lane,
it does not always offer the lowest effective price as certain operators
at times engage in a practice of freight rate discounting.
The Company's planned coastwise service is expected to compete
primarily with large railroads that move intermodal freight and, to a
lesser extent, trucking companies. Intermodal freight service competes
primarily on the basis of price. Although trucking companies serving the
same routes as the Company's contemplated coastwise service typically
target a customer base that requires faster delivery times, such trucking
companies also compete primarily on the basis of price. Many of the
Company's potential competitors are significantly larger and possess
substantially greater financial resources than the Company. The Company
intends to compete by offering customers value-based pricing derived from
its lower linehaul cost per unit. The Company will target customers with
less time sensitive-freight whose priority is reducing freight costs
rather than obtaining the shortest possible transit times.
The truckload segment of the trucking industry is highly competitive
and fragmented, and no carrier or group of carriers dominates the market.
The Company's non-Puerto Rico domestic truckload operations, which are
used primarily to balance its core Puerto Rico service, compete with a
number of trucking companies as well as private truck fleets used by
shippers to transport their own products. Truckload carriers compete
primarily on the basis of price. The Company's truck freight service also
competes to a limited extent with rail and rail-truck intermodal service,
but the Company attempts to limit this competition by seeking more time
and service-sensitive freight. There are other trucking companies,
including diversified carriers with larger fleets, possessing
substantially greater financial resources and operating more equipment
than the Company.
REGULATION
As a common and contract motor carrier, the Company is regulated by the
Surface Transportation Board (the successor federal agency to the
Interstate Commerce Commission) and various state agencies. The Company's
drivers, including owner-operators, also must comply with the safety and
fitness regulations promulgated by the Department of Transportation,
including those relating to drug testing and hours of service. For routes
in Canadian provinces, the Company must comply with certain customs and
border crossing requirements and other Canadian regulations, none of which
have a material effect on the Company.
The Company's operations are subject to various federal, state and
local environmental laws and regulations, implemented principally by the
Environmental Protection Agency and similar state regulatory agencies.
These regulations govern the management of hazardous wastes, discharge of
pollutants into the air, surface and underground waters, and the disposal
of certain substances. Management is not aware of any water or land fuel
spills or hazardous substance contamination on its properties and believes
that its operations are in material compliance with current environmental
laws and regulations.
The Company's marine operations are conducted in the U.S. domestic
trade. A set of federal laws known as the Jones Act requires that only
U.S. built, owned and crewed vessels move freight between ports in the
U.S., including the noncontiguous areas of Puerto Rico, Alaska, Hawaii and
Guam. These marine operations are subject to regulation by various federal
agencies, including the Surface Transportation Board, the U.S. Maritime
Administration and the U.S. Coast Guard. These regulatory authorities have
broad powers governing activities such as operational safety, tariff
filings of freight rates, certain mergers, contraband, environmental
contamination and financial reporting. Management believes that its
operations are in material compliance with current marine laws and
regulations, but there can be no assurance that current regulatory
requirements will not change.
The Maritime Security Act of 1996 implemented the Maritime Security
Program (the "MSP") under which vessel operators can receive subsidy
payments from the United States government relating to their operation of
vessels in foreign service. Payments under the MSP are not made in
relation to service between the mainland of the United States and Puerto
Rico. As a condition of participation in the MSP, recipients of subsidy
must agree to limit their service in the noncontiguous domestic trades,
including Puerto Rico, to historical levels. The Company does not
receive payments under the MSP and is not under any restriction. Two of
the Company's competitors in the Puerto Rico trade receive MSP payments
and are constrained in increasing their service between the mainland
United States and Puerto Rico.
EMPLOYEES
At December 31, 1997, Trailer Bridge had 262 employees, 144 of whom
were drivers.
This 10-K contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995. The matters discussed in this Report include statements
regarding the intent, belief or current expectations of the Company, its
directors or its officers with respect to the future operating performance
of the Company. Investors are cautioned that any such forward looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those in
the forward looking statements as a result of various factors. Without
limitation, these risks and uncertainties include newbuilding risks, the
risks of starting a new service and adding additional sailings, 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 and the availability and compensation of qualified drivers
and owner-operators.
Item 2. Properties
Trailer Bridge is headquartered in Jacksonville, Florida, where it
recently completed construction of a 16,000 square foot office building
adjacent to its owned truck operations center. This facility allowed 75
Jacksonville personnel to be centralized in one location. The new office
building has also been designed so that additions can be constructed to
serve the Company's future needs. The truck operations center property
consists of 17.8 acres near Interstate 95, approximately 2 miles from the
Company's marine terminal on Blount Island. In addition to the new office
building, the property includes a 11,400 square foot tractor maintenance
shop where oil changes and light preventative maintenance are performed, a
trailer washing facility, a drivers lounge and parking space for tractors
and trailers.
The Company maintains small sales office facilities in Georgia, North
Carolina, Illinois, Ohio and New Jersey which are utilized by sales
personnel. The Company also rents a 2,600 square foot office in San Juan
where 11 Puerto Rico administrative and sales personnel are based.
PORT FACILITIES
The Company utilizes port facilities in Jacksonville and San Juan where
its vessels are loaded and freight is stored awaiting further movement by
either vessel or truck. Trailer Bridge's terminal in Jacksonville is
located on Blount Island and consists of a berthing area and 17 acres
leased from the Jacksonville Port Authority. The lease, which expires in
2002, allows the Company to use the berthing area on a preferential,
although non-exclusive, basis and the land area on an exclusive basis. The
Company pays the Jacksonville Port Authority a monthly rental payment plus
a wharfage payment based upon total cargo volume. The Company's marine
terminal in San Juan consists of berthing areas and 31 acres that the
Company utilizes on a preferential basis under a stevedoring services
agreement with the contractor who provides cargo handing services. This
agreement, which expires in 2006, calls for the Company to make fixed
payments as well as payments based upon total cargo volume and the
prevailing wharfage rates of the Puerto Rico Ports Authority.
Both of the present port facilities have been improved with triple-deck
floating ramp structures under the control of the Company. The new
Triplestack Box Carriers/TM/ will not need to utilize the existing ramps
but will instead be accessed from simple, movable planks which will be
substantially smaller than the existing ramps used by the Company.
Item 3. Legal Proceedings
The Company from time to time is a party to litigation arising in the
ordinary course of its business, substantially all of which involves
claims for personal injury and property damage incurred in the
transportation of freight. The Company presently is not a party to any
legal proceeding other than litigation arising from vehicle accidents or
cargo damage, and management is not aware of any claims or threatened
claims that reasonably would be expected to exceed insurance limits or
have a material adverse effect upon the Company's operations or financial
position.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 1997.
PART II
Item 5. Market For Registrant's Common Equity and Related Stockholder
Matters
The Company's Common Stock began trading on the Nasdaq National Market
tier of The Nasdaq Stock Market on July 29, 1997 under the symbol: TRBR.
The following table represents the high and low sales price since its
initial trading date.
1997 High Low
Third Quarter (from July 29) 14 10 1/4
Fourth Quarter 13 3/4 8 1/4
The Company has never paid cash dividends on its Common Stock and does not
anticipate doing so in the foreseeable future.
As of March 20, 1998 there were 25 stockholders of record in addition to
approximately 1,500 stockholders whose shares were held in nominee name.
Changes In Securities And Use Of Proceeds
In July 1997, 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>
<CAPTION>
For the account of the Company
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: $ 385,214
Total expenses: $ 2,558,714
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: $ 6,104,335
Repayment of indebtedness: $ 4,825,227
Down payment on new vessels $ 2,416,984
Working Capital/Temporary investments: $ 9,144,740
Item 6. Selected Financial Data
The selected financial data set forth below has been derived from the
financial statements of the Company. The selected financial information
set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and the Financial Statements and notes thereto appearing elsewhere in this
report.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.................. $ 67,613 $ 72,192 $ 62,531 $63,148 $66,389
Operating income (loss)............. 5,094 6,175 8,778 4,425 (1,816)
Pro forma net income (loss)(1)...... $ 2,526 $ 2,343 $ 4,360 $ 2,073 $(2,416)
Pro forma net income (loss) per
common Share ..................... $ .32 $ .30 $ .65 $ .31 $ (.30)
BALANCE SHEET DATA:
Working capital (deficit)........... $(13,174) $(10,188) $ (4,697) $(1,719) $13,980
Total assets........................ 20,688 23,521 20,226 24,764 76,894
Long-term debt, capitalized leases
and due to affiliate(2)........... 22,771 20,776 13,461 13,879 37,335
Stockholders' equity (deficit)...... (7,214) (2,856) 2,673 6,045 33,860
</TABLE>
__________________________
(1) Until the Company's initial public offering the Company operated as an
S Corporation under the Internal Revenue Code and the laws of the
states that recognize S Corporation status. As a result, the Company's
taxable earnings were taxed directly to the Company's then-existing
stockholders. Pro forma net income assumes that the Company was
subject to federal and state income taxes and was taxed as a C
Corporation at the effective tax rates that would have applied for all
periods. See Notes to the Financial Statements. Effective July 29,
1997, the Company became subject to federal and state income taxes.
(2) Includes current maturities.
Item 7. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
RESULTS OF OPERATIONS
Year ended December 31, 1997 Compared to Year ended December 31, 1996
Operating revenues increased $3.2 million, or 5.1%, to $66.4 million
during 1997 from $63.1 million during 1996. This increase was due to a
$5.0 million (8.9%) increase in Puerto Rico revenue to $61.3 million
through the utilization of a portion of the additional capacity resulting
from the mid-body project, offset by a 25.8% decrease in non-Puerto Rico
revenue as available tractor capacity was targeted further towards Puerto
Rico revenue. While core trailer volume to Puerto Rico increased 27.3% in
1997 compared to 1996, total car volume was down 8.8% compared to 1996. As
a result, core trailer revenue to Puerto Rico increased $6.4 million or
22.8% and car revenue decreased $1.7 million or 9.5% compared to 1996.
This reduction in car volume was most pronounced in used car shipments
during the second half of the year as sales of used cars in Puerto Rico
were soft due to several factors, including attractive new car and
repossessed car pricing. Presently, approximately two-thirds of Trailer
Bridge's car volume is represented by new cars. Revenue from shipper
owned equipment and other vehicles increased $.8 million or 13.7% in 1997
compared to 1996. While trailer volume from Puerto Rico increased 3.0% in
1997, related revenue decreased $.4 million or 4.6% compared to 1996 due
to rate pressure on the limited volumes moving inbound from Puerto Rico.
Vessel capacity utilization on the core continental U.S. to Puerto Rico
traffic lane was 84.1% during 1997, compared to 87.9% during 1996 when 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 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 $2.4 million or $.30
per share, for 1997.
Excluding the charge for compensation discussed above, operating
expenses for 1997 increased $1.0 million from 1996. This increase was due
to an increase in expenses associated with an overall 17.3% increase in
Puerto Rico volume, offset by a decrease in handling costs from 1996
related to the complexity and inefficiency of loading substitute vessels
during the mid-body expansion project. As a result, excluding the charge
for compensation the Company's operating ratio improved to 89.9% during
1997 from 93.0% during 1996.
Interest expense (net) decreased $532,444 (49.3%) to $548,631 in 1997
from $1.1 million in 1996 due to reductions in amounts owed to an
affiliate, the capitalization of interest related to new vessel
construction and increased interest income resulting from the unused
proceeds of the Company's initial public offering.
As a result of the factors described above including the charge for
compensation and after application of pro forma income taxes, the Company
reported a pro forma net loss of $2.4 million for 1997 compared to pro
forma net income of $2.1 million in 1996.
Year ended December 31, 1996 Compared to Year ended December 31, 1995
During 1996, the Company implemented an expansion program that
increased the capacity of its vessels by 56% through the insertion of a
mid-body in both of its vessels. Throughout the six-month construction
period, only one of the Company's vessels was in service along with,
first, a substitute vessel one-third smaller, followed by a substitute
vessel more than two-thirds smaller than the Company's pre-modified
vessels. One of the Company's vessels was out of service from mid-February
to mid-May, while the other was out of service from mid-May to mid-July
1996. Although weekly service was maintained, the resulting fluctuations
in vessel capacity led to inefficiencies, temporary loss of business and
increased costs in all cost categories, most notably in the marine cargo
handling area.
Operating revenues increased $617,000 (1.0%) to $63.1 million during
1996 from $62.5 million during 1995. This reflects a $3.2 million (6.0%)
increase in Puerto Rico revenue, substantially offset by a $2.6 million
(27.4%) decrease in non-Puerto Rico revenue. The decrease in non-Puerto
Rico revenue resulted from a shift in the Company's business away from
domestic traffic lanes which were not complementary to Puerto Rico traffic
lanes and a decrease in the average length of domestic hauls.
Operating expenses for 1996 increased $5.0 million from 1995 primarily
as a result of the midbody expansion project and inefficiencies related to
the substitute vessels, including increased labor and cargo handling fees
and use of specialized equipment, temporary loss of business and increased
charter fees for the expanded vessels. As a result the Company's
operating ratio increased to 93.0% during 1996 from 86.0% during 1995.
Interest expense (net) decreased to $1.1 million during 1996 from $1.4
million during 1995 due to reductions in average outstanding balances
(primarily amounts owed to an affiliate).
As a result of the factors described above, pro forma net income
decreased 52.5% to $2.1 million (3.3% of revenue) during 1996 from $4.4
million (7.0% of revenue) during 1995.
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 the sale of additional common stock pursuant to the initial
public offering and received proceeds of approximately $3.8 million.
Net cash provided by operations of $10.0 million in 1997 represented an
increase of $2.8 million from 1996. Net cash used in investing activities
of $45.8 million in 1997 reflects $20.4 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 December 31, 1997 is restricted
cash and investments of approximately $20.3 million representing the
unused proceeds of the Company's Title XI bond issuances. The restricted
cash and investments are held in trust with the Maritime Administration.
The Company's financial condition improved as a result of the Company's
initial public offering. At December 31, 1997 cash amounted to $14.3
million, working capital was $14.0 million, and stockholders' equity
amounted to $33.9 million. Management believes that available borrowings
under lines of credit, equipment financings, cash flow generated from
operations and the net proceeds of the initial public offering will allow
the Company to meet its working capital requirements, anticipated capital
expenditures and other obligations at least through calendar 1998.
INFLATION
Inflation has had a minimal effect upon the Company's profitability in
recent years. Most of the Company's operating expenses are inflation-
sensitive, with inflation generally producing increased costs of
operation. The Company expects that inflation will affect its costs no
more than it affects those of other truckload and marine carriers.
SEASONALITY
The Company's marine operations are subject to the seasonality of the
Puerto Rico freight market where shipments are generally reduced during
the first calendar quarter and increased during the fourth calendar
quarter of each year in anticipation of Christmas. This seasonality is
expected to have a greater impact on the Company when it increases its
capacity with the addition of two new Triplestack Box Carriers.
The following table sets forth certain unaudited financial information
for the Company for each of the last eight quarters (in thousands except
per share amounts):
<TABLE>
<CAPTION>
1996 1997
---- ----
By Quarter
First Second Third Fourth First Second Third Fourth
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues............ $14,568 $14,274 $16,288 $18,018 $16,446 $16,171 $16,676 $17,096
Operating income (loss)....... 966 (187) 1,331 2,315 1,748 (6,733) 1,517 1,653
Pro forma net income (loss)(1) 443 (199) 636 1,193 909 (5,254) 2,446 1,103
(1) See Note 2 to the Financial Statements.
Item 8. Financial Statements and Supplementary Data
TRAILER BRIDGE, INC.
Financial Statements for the Three Years
in the Period Ended December 31, 1997
and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Trailer Bridge, Inc.
Jacksonville, Florida
We have audited the accompanying balance sheets of Trailer Bridge, Inc.
(the "Company") as of December 31, 1997 and 1996, and the related
statements of operations, changes in stockholders' equity (deficit), and
cash flows for the three years in the period ended December 31, 1997. Our
audits also included the financial statement schedules of the Company
listed in the Index at Item 14. These financial statements and financial
statement schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements
and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, such financial statements present fairly, in all material
respects, the financial position of Trailer Bridge, Inc. as of December
31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Jacksonville, Florida
February 10, 1998
<PAGE>
TRAILER BRIDGE, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
--------------------------
</TABLE>
<TABLE>
<CAPTION>
1997 1996
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $14,277,445 $ 1,658,921
Trade receivables, less allowance for doubtful
accounts of $1,165,874 and $905,581 7,888,939 8,305,872
Prepaid expenses 764,975 964,971
---------- ----------
Total current assets 22,931,359 10,929,764
---------- ----------
PROPERTY AND EQUIPMENT, net 30,282,611 12,512,130
GOODWILL, less accumulated amortization of
$264,543 and $217,763 904,399 951,179
RESTRICTED CASH AND INVESTMENTS 20,283,047
OTHER ASSETS 2,493,041 370,592
---------- ----------
TOTAL ASSETS $76,894,457 $24,763,665
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,137,251 $ 1,981,421
Other accrued liabilities 3,398,858 2,635,099
Current portion of notes payable 3,156,142 3,117,069
Current portion of capital lease obligations 35,908 38,197
Unearned revenue 163,084 223,627
Due to affiliate 60,300 4,653,192
---------- ----------
Total current liabilities 8,951,543 12,648,605
NOTES PAYABLE, less current portion 33,960,518 5,909,072
CAPITAL LEASE OBLIGATIONS, less current portion 122,439 161,444
---------- ----------
TOTAL LIABILITIES 43,034,500 18,719,121
---------- ----------
COMMITMENTS (Notes 4, 7 and 9)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares
authorized; no shares issued or outstanding
Common stock, $.01 par value, authorized
20,000,000 shares; outstanding 9,777,500
shares in 1997 and 6,672,500 shares in 1996 97,775 66,725
Additional paid-in capital 37,982,818 (66,300)
Retained earnings (4,220,636) 6,044,119
---------- ----------
Total stockholders' equity 33,859,957 6,044,544
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $76,894,457 $24,763,665
========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
TRAILER BRIDGE, INC.
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
--------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
OPERATING REVENUES $66,388,577 $63,148,218 $62,531,365
OPERATING EXPENSES:
Salaries, wages, and benefits 14,722,568 13,288,633 14,591,795
Compensation expense recognized
for stock option 8,528,670 - -
Rent and purchase transportations:
Related party 7,500,000 5,900,000 3,650,000
Other 10,019,705 10,331,461 10,847,200
Fuel 5,617,199 5,883,378 5,255,979
Operating and maintenance (exclusive of
depreciation shown separately below) 12,869,034 14,210,787 10,553,364
Taxes and licenses 452,275 455,407 588,565
Insurance and claims 1,900,334 2,121,039 1,860,997
Communications and utilities 587,655 607,833 620,815
Depreciation and amortization 2,597,887 2,944,069 2,761,139
Other operating expenses 3,409,127 2,981,104 3,023,161
---------- ---------- ----------
68,204,454 58,723,711 53,753,015
---------- ---------- ----------
OPERATING (LOSS) INCOME (1,815,877) 4,424,507 8,778,350
NONOPERATING INCOME (EXPENSE):
Interest expense, net:
Related party (278,641) (457,743) (822,558)
Other (269,990) (623,332) (539,554)
(Loss) gain on sale of equipment, net (80,851) 66,523 47,834
---------- ---------- ----------
(629,482) (1,014,552) (1,314,278)
---------- ---------- ----------
(LOSS) INCOME BEFORE PROVISION AND PRO
FORMA PROVISION FOR INCOME TAXES (2,445,359) 3,409,955 7,464,072
BENEFIT (PROVISION) FOR INCOME TAXES 426,566 (38,581) (67,316)
---------- ---------- ----------
NET (LOSS) INCOME BEFORE PRO FORMA
PROVISION FOR INCOME TAXES (2,018,793) 3,371,374 7,396,756
PRO FORMA PROVISION FOR INCOME
TAXES (NOTE 2) (397,329) (1,298,442) (3,037,048)
---------- ---------- ----------
PRO FORMA NET (LOSS) INCOME (NOTE 2) $(2,416,122) $ 2,072,932 $ 4,359,708
========== ========== ==========
PRO FORMA NET (LOSS) INCOME
PER COMMON SHARE $ (0.30) $ 0.31 $ 0.65
========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
TRAILER BRIDGE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
-------------------------------------------------------
<TABLE>
<CAPTION>
Retained
Additional Earnings
Common Stock Paid-in (Accumulated
Share Amounts Capital Deficit) Total
---------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 7,850,000 $ 78,500 $ (78,000) $(2,856,514) $(2,856,014)
Repurchase and retirement of
1,177,500 shares of common
stock (1,177,500) (11,775) 11,700 (517,195) (517,270)
Distributions to stockholders (1,350,302) (1,350,302)
Net Income 7,396,756 7,396,756
---------- -------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1995 6,672,500 66,725 (66,300) 2,672,745 2,673,170
Net income 3,371,374 3,371,374
---------- -------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1996 6,672,500 66,725 (66,300) 6,044,119 6,044,544
Compensation expense recognized
for stock options 8,528,670 8,528,670
Distributions to stockholders 1,060,212 (8,245,962) (7,185,750)
Net proceeds from Initial Public
Offering of Common Stock 3,105,000 31,050 28,460,236 28,491,286
Net loss (2,018,793) (2,018,793)
---------- -------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1997 9,777,500 $ 97,775 $37,982,818 $(4,220,636) $33,859,957
========== ======== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
TRAILER BRIDGE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
--------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (2,018,793) $ 3,371,374 $ 7,396,756
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization 2,597,887 2,944,069 2,761,139
Provision for uncollectible accounts 381,691 673,699 158,995
Loss (gain) on sale of equipment 80,851 (66,523) (47,834)
Compensation expense recognized for stock option 8,528,670
Deferred income taxes (652,876)
Change in assets and liabilities:
Decrease (increase) in:
Trade receivables 35,242 (70,153) (1,282,693)
Prepaid expenses 199,996 (353,742) 649,459
Increase (decrease) in:
Accounts payable 155,830 659,377 (289,355)
Accrued liabilities 763,759 145,544 (1,125,571)
Unearned revenue (60,543) (55,271) (95,288)
----------- ---------- ----------
Net cash provided by operating activities 10,011,714 7,248,374 8,125,608
----------- ---------- ----------
INVESTING ACTIVITIES:
Decrease in due to affiliate (4,592,892) (3,171,944) (4,617,442)
Purchases and construction of property and equipment (20,434,204) (6,707,075) (1,430,179)
Proceeds from the sale of equipment 31,764 426,462 1,031,000
(Increase) decrease other assets (559,843) (13,217) 7,080
Increase in restricted cash and investments (20,283,047)
----------- ---------- ----------
Net cash used in investing activities (45,838,222) (9,465,774) (5,009,541)
----------- ---------- ----------
FINANCING ACTIVITIES:
Proceeds from borrowings on notes payables 31,740,797 6,637,469 1,032,500
Proceeds from sale of common stock 28,491,286
Payments on notes payable (3,650,278) (3,125,722) (3,410,552)
Payments of dividends (7,185,750) (1,350,302)
Repurchase of stock (517,270)
Debt issue costs (909,729)
Payments on capital lease obligations (41,294) (133,854) (318,484)
----------- ---------- ----------
Net cash provided by (used in) financing activities 48,445,032 3,377,993 (4,564,108)
----------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 12,618,524 1,160,593 (1,448,041)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,658,921 498,328 1,946,369
----------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 14,277,445 $ 1,658,921 $ 498,328
=========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH
INVESTING AND FINANCING ACTIVITIES:
Cash paid for state income taxes $ 46,145 $ 68,035 $ 10,425
=========== ========== ==========
Cash paid for interest, net of amount capitalized:
Related party $ 283,653 $ 457,151 $ 824,538
Other 419,739 652,554 632,549
----------- ---------- ----------
$ 703,392 $ 1,109,705 $ 1,457,087
=========== ========== ==========
Equipment acquired under capital lease agreements $ 211,060
==========
</TABLE>
See notes to financial statements.
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
--------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Trailer Bridge, Inc. (the "Company") is a domestic
trucking and marine transportation company with contract and common
carrier authority. Highway transportation services are offered
primarily in the continental United States, while marine transporta-
tion is offered between Jacksonville, Florida and San Juan, Puerto
Rico.
Cash and Cash Equivalents - The Company considers cash on hand and
amounts on deposit with financial institutions with original
maturities of three months or less to be cash equivalents.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Allowance for Doubtful Accounts - The Company provides an allowance
for doubtful accounts on trade receivables based upon estimated
collectibility and collection experience.
Property and Equipment - Property and equipment are stated at cost and
the capitalized interest costs associated with significant capital
additions less accumulated depreciation. Property and equipment are
depreciated on a straight-line method based on the following estimated
useful lives:
Years
Buildings and structures 40
Office furniture and equipment 6-10
Freight equipment 4-12
Leasehold improvements 2-5
Equipment under capital leases 5
Tires on revenue equipment purchased are capitalized as part of the
equipment cost and depreciated over the life of the vehicle. Replace-
ment tires are expensed when placed in service.
Leasehold improvements and equipment under capital leases are
amortized over the lesser of the estimated lives of the asset or the
lease terms. Maintenance and repairs which do not materially extend
useful life and minor replacements are charged to earnings as
incurred.
The Company periodically reviews property and equipment for potential
impairment. If this review indicates that the carrying amount of
these assets may not be recoverable, the Company estimates the future
cash flows expected with regards to the asset and its eventual
disposition. If the sum of these future cash flows (undiscounted and
without interest charges) is less than the carrying amounts of the
assets, the Company records an impairment loss based on the fair value
of the asset.
Goodwill - Goodwill is being amortized on a straight-line basis over
twenty-five years.
Restricted Cash and Investments - Restricted cash and investments
consist of cash and investments held in trust and committed for the
construction of the Company's Triplestack Box Carrier/TM/ vessels.
These funds have been invested in highly liquid interest bearing
deposits and U.S. Treasury bills, in compliance with the Company's
bond indenture, and are carried at cost which approximates market.
Insurance - The Company is self-insured for employee medical coverage
above deductible amounts. Reinsurance is obtained to cover losses in
excess of certain limits. Provisions for losses are determined on the
basis of claims reported and an estimate of claims incurred but not
reported.
Revenue Recognition - Common carrier operations revenue is recorded on
the percentage-of-completion basis and direct costs are expensed as
incurred.
Income Taxes - Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of
the Company's assets and liabilities.
The Company was organized under Subchapter S of the Internal Revenue
Code until this election was terminated effective with the Company's
initial public offering (Note 10). Under Subchapter S, the Company
was not subject to federal income taxes.
Reclassification - Certain reclassifications have been made to the
1995 and 1996 financial statement amounts to conform with the
presentation for 1997.
New Accounting Standards - For the year ended December 31, 1997, the
Company adopted SFAS No. 128, "Earnings per Share" ("SFAS 128"). This
Statement establishes standards for computing and presenting earnings
per share ("EPS") and applies to all entities with publicly held
common stock or potential common stock. This Statement replaces the
presentation of primary EPS and fully diluted EPS with a presentation
of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common
stockholders by the weighted-average number of common shares out-
standing for the period. Similar to fully diluted EPS, diluted EPS
reflects the potential dilution of securities that could share in the
earnings. All EPS data presented has been restated to conform with
the requirements of SFAS 128. A reconciliation of the number of
common shares used in calculation of basic EPS is presented in Note
10.
In June, 1997 the Financial Accounting Standards Board issued State-
ment of Financial Accounting Standards No. 130, "Reporting Compre-
hensive Income" ("SFAS No. 130") effective for fiscal years beginning
after December 15, 1997. This statement establishes standards for
reporting and display of comprehensive income and its components
(revenues, expenses, gains, and losses) in a full set of general-
purpose financial statements. SFAS 130 requires that all items that
are required to be recognized under accounting standards as components
of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
SFAS 130 does not require a specific format for that financial state-
ment but requires that an enterprise display an amount representing
total comprehensive income for the period in that financial statement.
Additionally, SFAS 130 requires that an enterprise (a) classify items
of other comprehensive income by their nature in a financial statement
and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in
the equity section of a statement of financial position. Reclassifi-
cation of financial statements for earlier periods provided for
comparative purposes is required. Management has not determined the
effect of this statement on its financial statement disclosure.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Informa-
tion "("SFAS No. 131") effective for fiscal years beginning after
December 15, 1997. SFAS No. 131 establishes standards for reporting
information about operating segments in annual financial statements
and requires selected information about operating segments in interim
financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined
as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in
assessing performance. SFAS No. 131 requires reporting of segment
profit or loss, certain specific revenue and expense items and segment
assets. it also requires reconciliations of total segment revenues,
total segment profit or loss, total segment assets, and other amounts
disclosed for segments to corresponding amounts reported in the
financial statements. Restatement of comparative information for
earlier periods presented is required in the initial year of applica-
tion. Interim information is not required until the second year of
application, at which time comparative information is required. The
Company is in the process of determining the impact that the adoption
of SFAS No. 131 will have on its financial statement disclosures.
2. PRO FORMA INCOME TAXES
For informational purposes, the statement of operations contains a pro
forma adjustment for income tax expense which would have been recorded
if the Company had not been an S Corporation and had been subject to
corporate income taxes based on the tax laws in effect during those
periods.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 and 1996 consist of the
following:
1997 1996
---- ----
Land $ 504,703 $ 504,703
Construction in progress 11,673,923 90,512
Buildings and structures 2,377,131 1,137,127
Office furniture and equipment 1,710,120 1,058,381
Freight equipment 18,621,149 16,726,428
Leasehold improvements 672,909 712,798
Equipment under capital leases 263,105 536,495
Less accumulated depreciation
and amortization (5,540,429) (8,254,314)
---------- ----------
Fixed assets, net $30,282,611 $12,512,130
========== ==========
Depreciation and amortization expense on property and equipment and
equipment under capital leases was $2,551,108, $2,897,290 and
$2,714,360 in 1997, 1996 and 1995, respectively. Interest cost of
$296,771 was capitalized during 1997.
4. TRANSACTIONS WITH AFFILIATED COMPANY
Due to Affiliate - Amounts due to affiliate include cash advanced to
the Company from an affiliated company to fund various construction
projects, general and administrative expenses, interest payable on
such cash advances and barge rent. Cash advances due to affiliate
were paid back during 1997 from the proceeds of equity offerings.
Amount remaining in due to affiliate is related to barge rent.
Lease Agreements - The Company leases two roll-on/roll-off barge
vessels and a ramp system from an affiliate under operating lease
agreements. For the period from January 1, 1995 through May 10, 1996
for one vessel and through July 19, 1996, as to the other vessel, the
lease payment was $5,000 per day for each vessel. Upon completion of
the renovations to the vessels during 1996 which extended the barges
from a length of approximately 500 feet to a length of approximately
750 feet, the lease payments were increased to $10,500 per day for
each vessel. Effective July 23, 1997, the lease payments were
adjusted to $10,050 per day for each vessel. The leases expire at
the later of September 1, 2010 or the repayment of all obligations
under an affiliate's construction loan related to the vessel renova-
tions. Such construction loan is scheduled to be repaid in quarterly
installments ending June 30, 2003. The leases provide the Company
the option to extend the leases through September 1, 2018 for total
payments of $11,000 per vessel per day or, alternatively, the Company
may purchase the vessels at their then fair market values. Total
lease expense under these leases from affiliate totaled $7,500,000,
$5,900,000 and $3,650,000 in 1997, 1996 and 1995, respectively.
While the vessels were undergoing renovations, the Company leased
barges from a third party. In recognition of the $1,160,000 of
additional barge rent and $509,000 of other transitional expenses
incurred in 1996, during the renovation period, the affiliate agreed
to reduce the charter rental due from the Company by approximately
$1,669,000.
5. CAPITALIZED LEASE OBLIGATIONS
Future minimum lease payments under capitalized computer equipment
leases as of December 31, 1997 are as follows:
1998 $ 51,780
1999 51,780
2000 51,780
2001 29,999
-------
Total minimum lease payments 185,339
Interest portion (26,992)
-------
Present value of minimum lease
payments 158,347
Less current portion (35,908)
-------
$122,439
=======
6. NOTES PAYABLE
Following is a summary of long-term debt at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Ship-financing bonds and notes (Title XI)
totaling $16,918,000 maturing on March 30,
2023; payable in 50 semi-annual installments
of principal and interest; interest is fixed
at 6.52%; collateralized by vessels; amount
is guaranteed by The United States of America
under the Title XI Federal Ship Financing
Program $16,918,000
Ship-financing bonds and notes (Title XI)
totaling $10,515,000 maturing on September
30, 2022; payable in 50 semi-annual install-
ments of principal and interest; interest is
fixed at 7.07%; collateralized by vessels;
amount is guaranteed by The United States of
America under the Title XI Federal Ship
Financing Program 10,515,000
Borrowings under $7.1 million line of credit
maturing April 1, 2000; payable in 35 monthly
installments of principal and interest plus a
final payment of $340,205 plus interest;
interest on outstanding borrowings at fixed
rate of 7.98%; collateralized by tractors
with a carrying value of $5,359,712 at
December 31, 1997 3,957,902
Notes payable to finance company totaling
$4,957,569 maturing from June to October
2001; payable in 60 monthly installments
of principal and interest; interest at
fixed rates ranging from 8.867% to 9.290%;
collateralized by trailers with a carrying
value of $4,387,105 at December 31, 1997 3,764,498 $ 4,626,830
Note payable to bank totaling $1,680,000
maturing October 2006; payable in 120
monthly installments of principal and
interest; interest is fixed at 7.95%;
collateralized by land and buildings and
structures with a carrying value of
$2,729,330 at December 31, 1997 1,484,000 1,652,000
Notes payable to bank totaling $6,333,512
matured during 1997; amounts were payable
in 48 monthly installments of principal
and interest; interest at variable or
fixed rate as selected by the Company 1,641,754
Notes payable to finance company totaling
$1,032,500 maturing June 2000; payable in
60 monthly installments of principal and
interest; interest at a rate of 3.5% above
LIBOR (9.187%) at December 31, 1997);
collateralized by trailers with a carrying
value of $556,189 at December 31, 1997 477,260 681,800
Notes payable to finance company totaling
$3,068,796 matured during 1997; amounts
were payable in 48 monthly installments of
principal and interest; interest varied at
3.75% above the LIBOR rate 322,424
Unsecured notes payable matured in 1997;
interest at prime plus 1% 101,333
---------- ----------
37,116,660 9,026,141
Less current portion (3,156,142) (3,117,069)
---------- ----------
$33,960,518 $ 5,909,072
========== ==========
</TABLE>
In March 1997, the Company obtained a $7.1 million line of credit from
a financial institution. At the election of the Company, interest on
each borrowing under the line of credit will accrue at (a) a variable
interest rate of the financial institution's Base Rate, (b) a variable
interest rate of 1.40% above the financial institution's Eurodollar
Rate or (c) a fixed interest rate of 1.40% above the financial
institution's three year cost of funds. The line is used to purchase
tractors which will be used as collateral.
The debt agreements contain certain restrictive covenants, including
requirements to maintain tangible net worth (as defined), a debt
ratio, interest coverage and debt service coverage at certain levels.
Following are maturities of long-term debt for each of the next five
years:
1998 $ 3,156,142
1999 3,609,539
2000 4,199,414
2001 1,957,485
2002 1,265,320
Thereafter 22,928,760
----------
$37,116,660
==========
7. OPERATING LEASES
The Company has various operating lease agreements, principally for
its office facilities, terminals and equipment. Certain of the leases
contain provisions calling for additional contingent rentals based on
volume of transportation activity.
Future minimum rental payments required under operating leases that
have initial or remaining noncancellable lease terms in excess of one
year as of December 31, 1997 are as follows:
1998 $ 14,596,000
1999 11,204,000
2000 10,036,000
2001 9,968,000
2002 9,295,000
Thereafter 71,185,000
-----------
$126,284,000
===========
Lease expense for all operating leases, including leases with terms of
less than one year, was $16,879,647, $14,806,980 and $12,683,332 for
1997, 1996 and 1995.
8. OTHER ACCRUED LIABILITIES
1997 1996
Fringe benefits $ 600,674 $ 556,363
Marine expense 925,731 886,513
Salaries and wages 352,362 265,610
Other 1,520,091 926,613
--------- ---------
$3,398,858 $2,635,099
========= =========
9. INCOME TAXES
The components of the benefit for income taxes is comprised of the
following as of December 31, 1997:
Current:
Federal $ 201,164
State 25,146
--------
226,310
--------
Deferred:
Federal (580,334)
State (72,542)
--------
(652,876)
--------
$(426,566)
========
Income taxes for the year ended December 31, 1997 differ from the
amount computed by applying the statutory Federal corporate rate to
income before income taxes. The differences are reconciled as
follows:
Tax benefit at statutory Federal rate $(831,422)
Valuation allowance 900,000
Nondeductible expenses 68,693
State income taxes, net of federal benefit (39,334)
Pro rata income allocated to S Corporation year 428,382
Recognition of deferred tax liability (994,060)
Other 41,175
--------
Total income tax benefit $(426,566)
========
The components of the Company's net deferred tax asset at December 31,
1997 is as follows:
Deferred tax assets:
Employee stock option $3,240,895
Net operating loss 185,934
Accrued expense 110,360
Allowance for bad debts 443,032
---------
Gross deferred assets 3,980,221
Deferred tax liabilities:
Fixed asset basis 2,359,343
Other 68,002
---------
Gross deferred tax liabilities 2,427,345
Deferred tax asset valuation allowance 900,000
---------
Net deferred tax asset $ 652,876
=========
Prior to July 23, 1997, the Company was organized under Subchapter S
of the Internal Revenue Code for income tax purposes and therefore,
all Federal and certain state income taxes were the responsibility of
the Company's stockholders. The Company was subject to state income
taxes in those states that do not recognize Subchapter S elections.
State income tax expense for 1997, 1996 and 1995 was not significant
due to the utilization of net operating loss carryforwards.
For tax purposes, the Company had available, at December 31, 1997, net
operating loss ("NOL") carryforwards for regular federal income tax
purposes of approximately $489,000 which will expire in equal amounts
through the year 2005.
10. COMMON STOCKHOLDERS' EQUITY
Common Stock:
In July 1997, the Company completed an underwritten initial public
offering ("IPO") of 3,105,000 shares of its common stock at an initial
offering price of $10.00 per share, yielding gross proceeds of
$31,050,000. Net proceeds to the Company as a result of the IPO were
$28,491,286 after deduction of underwriting, legal, accounting and
other offering related expenses totaling $2,558,714.
Also in July 1997, the Company's Board of Directors and stockholders
authorized the following which became effective in connection with the
Company's initial public offering: (I) a 15,700-for-1 stock split,
(ii) an increase in the authorized number of common shares from 2,000
to 20,000,000, (iii) a change in the par value of common stock from
$1.00 to $.01 and (iv) 1,000,000 shares of preferred stock with a par
value of $.01 per share. Stockholder's equity has been restated to
give retroactive recognition to the stock split and change in par
value in prior periods. In addition, all references in the financial
statements to the number of shares and per share amounts have been
restated.
Earnings Per Share:
The following is a reconciliation of the numerators and denominators
of the basic EPS computations for net income available to common
shareholder:
<TABLE>
<CAPTION>
1997 1996
--------------------------------------- -----------------------------------------
Income Shares Per Income Shares Per
(Numerator) (Denominator) Share (Numerator) (Denominator) Share
----------- ------------- ----- ----------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Pro forma net (loss)
income available to
common shareholders $(2,416,122) 7,969,610 $(0.30) $2,072,932 6,672,500 $0.31
1995
---------------------------------------
Income Shares Per
(Numerator) (Denominator) Share
----------- ------------- -----
$4,359,708 6,682,178 $0.65
</TABLE>
For the year ended December 31, 1997, options to purchase 468,126
shares of common stock with an exercise price of $10.00 per share were
outstanding but were not included in the computation to arrive at
diluted EPS because the options' exercise prices were greater that
the average market price of the common shares.
Stock Options:
In May 1997, the majority stockholder of the Company granted to the
Company's Chairman and Chief Executive Officer, an option to purchase
up to 942,000 shares of common stock (adjusted for the 15,700-for-1
stock split) owned by him at an exercise price of $.95 per share.
These option were immediately exercisable and have a term of 10
years. In connection with this option, the Company recorded a non-
recurring, non-cash charge to compensation expense during the year
ended December 31, 1997. This option does not involve the issuance
of additional shares of common stock by the company and therefore,
any purchase of shares under the option will not have a dilutive
effect on the Company's book value or earnings per share amounts.
Compensation cost charged to operations associated with the Company's
stock option plans was $8,528,670 in 1997. Compensation cost was
based on the difference between the value of the stock and its
exercise price, multiplied by the number of share vested during the
year.
In 1997, the Company's Board of Directors and stockholders authorized
the establishment of an Incentive Stock Plan (the "Plan"). The
purpose of the Plan is to promote the interests of the Company and
its shareholders by retaining the services of outstanding key
management members and employees and encouraging them to have a
greater financial investment in the Company and increase their
personal interest in its continued success. The Company has reserved
785,000 shares of Common Stock for issuance pursuant to the Incentive
Stock Plan to eligible employees under the Plan.
In July 1997, the Company awarded non-qualified options to executives
covering an aggregate of 392,500 shares at an exercise price equal to
the initial public offering price of the Common Stock. The Board of
Directors also granted non-qualified options to purchase 78,500
additional shares to other employees at an exercise price equal to the
initial public offering price. Such options become exercisable at
the rate of 20% per year beginning on the first anniversary date of
the offering. Options that expire unexercised or are forfeited
become available again for issuance under the Plan.
The Company has adopted the disclosure-only option of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation ("SFAS No. 123")." Accordingly, the Company continues to
account for stock options under Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees," and does
not recognize compensation expense for stock options issued at fair
market value at the date of the grant. Had compensation expense for
stock options been determined based upon the fair value at the grant
date, consistent with the methodology prescribed under SFAS No. 123,
the Company's net earnings and net earnings per share would have
changed to the pro forma amounts indicated below.
As reported
Pro forma net loss $(2,416,122)
Net loss per share (0.30)
Pro forma for SFAS No. 123
Net loss $(2,588,671)
Net loss per share (0.32)
Under SFAS No. 123, the fair value of each option is estimated on the
date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for options granted in
1997: dividend yield of 0 percent, expected volatility of 69.32%,
risk-free interest rate of 6.16%, and expected life of 7 years.
A summary of the status of options under the Company's stock-based
compensation plans as of December 31, 1997 is presented below:
1997
--------------------
Exercise
Outstanding at beginning of year - $ -
Granted 471,000 10.00
Exercised - -
Forfeited (2,874) 10.00
-------
Outstanding at end of year 468,126 10.00
=======
Grants exercisable at year-end -
Weighted-average fair value of
options granted during the year $ 7.13
The following table summarizes information about the outstanding
grants at December 31, 1997:
Exercise Options Remaining Options
Price Outstanding Contractual Life Exercisable
-------- ----------- ---------------- -----------
$ 10.00 468,126 9.6 -
Remaining non-exercisable options as of December 31, 1997 become
exercisable as follows:
1998 93,625
1999 93,625
2000 93,625
2001 93,625
2002 93,626
-------
468,126
=======
11. PROFIT SHARING/401(k) PLAN
The Company has a profit sharing/401(k) Plan which covers sub-
stantially all employees. Participants are allowed to make contribu-
tions of up to 15% of their compensation not to exceed certain limits.
The Company makes matching contributions to the Plan at a rate not in
excess of 3.0% of compensation. The Company contributed approximately
$175,888, $142,994 and $60,546 to the Plan during 1997, 1996 and 1995.
The Company made an optional contribution of $39,000 and $32,700 in
December 1997 and 1996.
12. COMMITMENT
At December 31, 1997, the Company is obligated under construction
agreements totaling approximately $20,300,000.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Cash Equivalents - For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
Restricted Cash and Investments - For those interest bearing deposits
and short-term investments, the carrying amount is a reasonable
estimate of fair value.
Notes payable - Interest rates that are currently available to the
Company for issuance of debt with similar terms and remaining
maturities are used to estimate fair value for debt instruments. The
Company believes the carrying amount is a reasonable estimate of such
fair value.
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, June 30, September 30, December 31,
Quarter Ended 1997 1997 1997 1997
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Operating revenues $16,446,066 $16,170,687 $16,676,100 $17,095,724
Operating income (loss) 1,747,899 (6,733,432) 1,516,502 1,653,152
Net income (loss) before
income tax 1,484,483 (6,991,319) 1,364,856 1,696,621
Pro forma net income (loss) 909,263 (5,253,990) 2,445,963 1,103,016
Pro forma net income
(loss) per share - basic 0.14 (0.79) 0.28 0.11
March 31, June 30, September 30, December 31,
Quarter Ended 1996 1996 1996 1996
------------- ------------- -------------- --------------
Operating revenues $14,568,079 $14,273,906 $16,288,019 $18,018,214
Operating income (loss) 965,751 (187,342) 1,330,870 2,315,228
Net income (loss) before
income tax 709,769 (313,216) 1,044,586 1,968,816
Pro forma net income (loss) 442,821 (199,468) 635,904 1,193,675
Pro forma net income
(loss) per share - basic 0.07 (0.03) 0.10 0.18
</TABLE>
15. SUBSEQUENT EVENT (UNAUDITED)
In January 1998, the Company's Board of Directors authorized and
granted an additional 130,000 non-qualified options to executives
under the Company's Incentive Stock Plan. The exercise price is $10
per share and vest equally over a period of five years.
In March 1998, the Company's Board of Directors authorized an Employee
Stock Purchase Plan that allows employees to invest up to 10% of their
base compensation through payroll deductions. The purchase price will
be 15% less than the fair market value on the last day of the purchase
period.
* * * * * *
<PAGE>
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1997
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND DEDUCTIONS END
OF YEAR EXPENSES (CHARGEOFFS) OF YEAR
<S> <C> <C> <C> <C>
Allowance 1995 $1,125,285 $158,995 $(628,840) 655,440
1996 655,440 673,699 (423,558) 905,581
1997 905,581 381,691 (121,398) 1,165,874
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Not Applicable
PART III
Incorporated by Reference
The information called for by Item 10 -- "Directors and Executive
Officers of the Registrant", Item 11 -- "Executive Compensation", Item 12
-- "Security Ownership of Certain Beneficial Owners and Management" and
Item 13 -- "Certain Relationships and Related Transactions" is
incorporated herein by this reference to the Company's definitive proxy
statement for its annual meeting of stockholders scheduled to be held in
May 1998, which definitive proxy statement is expected to be filed with
the Commission not later than 120 days after the end of the fiscal year to
which this report relates.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents Filed as Part of this Report
Page
1. Financial Statements:
Independent Auditors' Report ................. 15
Balance Sheets ............................... 16
Statements of Operations ..................... 17
Statements of Changes in Common Stockholders'
Equity ..................................... 18
(Deficit)..................................... 18
Statements of Cash Flows ..................... 19
Notes to Financial Statements ................ 20
2. Financial Statement Schedules:
II - Valuation And Qualifying Accounts
Three Years Ended December 31, 1997
All other financial statement schedules have been omitted either
because they are not applicable or because the information that would be
included in such schedules is included elsewhere in the financial
statements or notes thereto.
3 Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
*3.1 -- Form of Amended and Restated Certificate of Incorporation
of the Registrant
*3.2 -- Form of Amended and Restated Bylaws of the Registrant
*4.1 -- See Exhibits 3A and 3B for provisions of the Certificate
of Incorporation and Bylaws of the Registrant defining
the rights of holders of the Registrant's Common Stock
#*10.1 -- Form of Indemnification Agreement with Directors and
Executive Officers
*10.2 -- Bareboat Charter Party dated February 1992
*10.2.1 -- Amendment to Bareboat Charter Party dated December 31,
1994
*10.2.2 -- Second Amendment to Bareboat Charter Party dated October
1995
*10.2.3 -- Third Amendment to Bareboat Charter Party dated March 1,
1997
*10.2.4 -- Form of Fourth Amendment to Bareboat Charter Party
**10.2.5 -- Fourth Amendment to Bareboat Charter Party dated June
30, 1997
*10.3 -- Promissory Note dated January 1, 1997 payable to
Kadampanattu Corp. in the principal amount of $4,569,131
*10.4 -- Construction and Term Loan Agreement dated as of October
13, 1995 between the Registrant, Kadampanattu Corp. and
The First National Bank of Boston, as Agent
*10.4.1 -- First Amendment to Construction and Term Loan Agreement
dated as of May 9, 1996
*10.4.2 -- Second Amendment to Construction and Term Loan Agreement
dated as of July 10, 1996
*10.4.3 -- Third Amendment to Construction and Term Loan Agreement
and Consent and Limited Waiver dated as of January 1,
1997
*10.5 -- Chattel Mortgage Line of Credit Agreement dated as of
February 28, 1997
*10.6 -- Vessel Construction Contract dated as of December 30,
1996 between Coastal Ship, Inc. and Halter Marine, Inc.
*10.6.1 -- Assignment of Vessel Construction Contract dated
March 24, 1997 between Coastal Ship, Inc. and the
Registrant
*10.6.2 -- Amendment No. 1 to Vessel Construction Contract dated as
of April 1997
*10.7 -- Real Estate Promissory Note dated April 18, 1996 between
the Registrant and First Union National Bank of Florida
*10.8 -- Commitment to Guarantee Obligations
*10.8.1 -- Trust Indenture
*10.8.2 -- United States Government Ship Financing Bond, 1997 Series
in the amount of $10,515,000
*10.8.3 -- Title XI Reserve Fund and Financial Agreement
*10.9 -- Agreement and Lease dated as of August 1, 1991 between
the Registrant and the Jacksonville Port Authority
*10.9.1 -- Amendment #5 to Exhibit B, Schedule of Fees and Charges
#*10.11 -- Incentive Stock Plan
#*10.11.1 -- Form of Stock Option Award Agreement
***10.12 -- Trailer Bridge, Inc. Employee Stock Purchase Plan
***27.1 -- Financial Data Schedule
* Incorporated by reference to the indicated exhibit to the Company's
Registration Statement on Form S-1 (File No. 333-28221) which became
effective on July 23, 1997.
** Incorporated by reference to the indicated exhibit to the Company's
Form 10-Q for the quarter ended September 30, 1997.
*** Filed herewith
# Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the last quarter
of the fiscal year covered by this report.
<PAGE>
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, in the
City of New York, and State of New York, on this 31st day of March 1997.
TRAILER BRIDGE, INC.
By: /s/ John D. McCown
John D. McCown
Chairman of the Board 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 in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ John D. McCown Chairman of the Board and
John D. McCown Chief Executive Officer
and Director (Principal
Executive Officer) March 31, 1998
/s/ Mark A. Tanner Vice President --
Mark A. Tanner Administration and Chief
Financial Officer
(Principal Financial and
Accounting Officer) March 31, 1998
/s/ Malcom P. McLean Director
Malcom P. McLean March 31, 1998
/s/ Kenneth G. Younger Director
Kenneth G. Younger March 31, 1998
/s/ Artis E. James Director
Artis E. James March 31, 1998
<PAGE>
EXHIBIT INDEX
(Exhibits being filed with this Form 10-K)
*3.1 -- Form of Amended and Restated Certificate of Incorporation
of the Registrant
*3.2 -- Form of Amended and Restated Bylaws of the Registrant
*4.1 -- See Exhibits 3A and 3B for provisions of the Certificate
of Incorporation and Bylaws of the Registrant defining
the rights of holders of the Registrant's Common Stock
#*10.1 -- Form of Indemnification Agreement with Directors and
Executive Officers
*10.2 -- Bareboat Charter Party dated February 1992
*10.2.1 -- Amendment to Bareboat Charter Party dated December 31,
1994
*10.2.2 -- Second Amendment to Bareboat Charter Party dated October
1995
*10.2.3 -- Third Amendment to Bareboat Charter Party dated March 1,
1997
*10.2.4 -- Form of Fourth Amendment to Bareboat Charter Party
**10.2.5 -- Fourth Amendment to Bareboat Charter Party dated June
30, 1997
*10.3 -- Promissory Note dated January 1, 1997 payable to
Kadampanattu Corp. in the principal amount of $4,569,131
*10.4 -- Construction and Term Loan Agreement dated as of October
13, 1995 between the Registrant, Kadampanattu Corp. and
The First National Bank of Boston, as Agent
*10.4.1 -- First Amendment to Construction and Term Loan Agreement
dated as of May 9, 1996
*10.4.2 -- Second Amendment to Construction and Term Loan Agreement
dated as of July 10, 1996
*10.4.3 -- Third Amendment to Construction and Term Loan Agreement
and Consent and Limited Waiver dated as of January 1,
1997
*10.5 -- Chattel Mortgage Line of Credit Agreement dated as of
February 28, 1997
*10.6 -- Vessel Construction Contract dated as of December 30,
1996 between Coastal Ship, Inc. and Halter Marine, Inc.
*10.6.1 -- Assignment of Vessel Construction Contract dated
March 24, 1997 between Coastal Ship, Inc. and the
Registrant
*10.6.2 -- Amendment No. 1 to Vessel Construction Contract dated as
of April 1997
*10.7 -- Real Estate Promissory Note dated April 18, 1996 between
the Registrant and First Union National Bank of Florida
*10.8 -- Commitment to Guarantee Obligations
*10.8.1 -- Trust Indenture
*10.8.2 -- United States Government Ship Financing Bond, 1997 Series
in the amount of $10,515,000
*10.8.3 -- Title XI Reserve Fund and Financial Agreement
*10.9 -- Agreement and Lease dated as of August 1, 1991 between
the Registrant and the Jacksonville Port Authority
*10.9.1 -- Amendment #5 to Exhibit B, Schedule of Fees and Charges
#*10.11 -- Incentive Stock Plan
#*10.11.1 -- Form of Stock Option Award Agreement
***10.12 -- Trailer Bridge, Inc. Employee Stock Purchase Plan
***27.1 -- Financial Data Schedule
* Incorporated by reference to the indicated exhibit to the Company's
Registration Statement on Form S-1 (File No. 333-28221) which became
effective on July 23, 1997.
** Incorporated by reference to the indicated exhibit to the Company's
Form 10-Q for the quarter ended September 30, 1997.
*** Filed herewith
# Management contract or compensatory plan or arrangement.
Exhibit 10.12
Trailer Bridge, Inc. Employee Stock Purchase Plan
The purpose of the 1998 Employee Stock Purchase Plan is to make available
to eligible employees of Trailer Bridge, Inc. ( the "COMPANY"), and
certain related companies a means of purchasing shares of Trailer Bridge,
Inc. Common Stock through voluntary, regular payroll deductions. The Plan
is not subject to the provisions of the Employee Retirement Income
Security Act of 1974, but is intended to qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "CODE"). The Plan shall be administered interpreted and
construed in accordance with Section 423 of the Code.
Participation in the Plan is entirely voluntary, and the Company makes no
recommendations to employees as to whether they should or should not
participate.
II. DEFINITIONS
2.1. DEFINITIONS. The following words and phrases shall have the
following meanings:
"ADMINISTRATOR" means the entity or person designated to act as
Administrator of the Plan pursuant to SECTION 6.1.
"BASE COMPENSATION" means gross compensation for the relevant pay period,
including overtime pay, but excluding all bonuses, severance pay, any
extraordinary pay, or expense allowances or reimbursements, moving
expenses and income from restricted stock or stock option awards. For
these purposes, gross compensation includes an amount that would be
included in taxable income but for the fact that it was contributed to a
qualified plan pursuant to an elective deferral under Section 401(k) of
the Code or contributed under a salary reduction agreement pursuant to
Section 125 of the Code.
"BOARD" means the Board of Directors of Trailer Bridge, Inc.
"BROKER" means a duly licensed securities dealer, broker or agent
designated to act as Broker of the Plan pursuant to Section 6.2.
"COMMITTEE" means the Compensation Committee of the Board, which shall
consist entirely of non-employee directors (as defined in Rule 16b-3).
"COMPANY" means Trailer Bridge, Inc..
"COMMON STOCK" means Trailer Bridge, Inc.'s Common Stock, par value $.01
per share.
"CODE" has the meaning set forth in ARTICLE I.
"ELIGIBLE EMPLOYEE" means any employee of Trailer Bridge, Inc. Company,
excluding any employee (a) whose customary employment with the employee's
Employer is 20 hours or less per week, (b) whose customary employment with
the employee's Employer is not for more than five months in any calendar
year, or (c) who immediately after the grant of an option under this Plan
to the employee would (in accordance with the provisions of Sections 423
and 424(d) of the Code) own stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the "employer
corporation" or of its "PARENT CORPORATIONS" or "SUBSIDIARY CORPORATIONS,"
as defined in Section 424 of the Code.
"EMPLOYER" means, with respect to any Participant, the Trailer Bridge,
Inc. Company of which the Participant is an Eligible Employee.
"FAIR MARKET VALUE" means, with respect to a share of Common Stock, the
Last Trade price (Closing Price reported) of a share of Common Stock as
reported by the NASDAQ (or by the principal national stock exchange on
which the Common Stock is then listed) on the date of valuation, if such
date is a business day, or the immediately preceding business day, if such
date is not a business day.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION 9.2.
"INITIAL OFFERING PERIOD" means the Offering Period commencing on the Plan
Start Date.
"1933 ACT" means the Securities Act of 1933, as amended.
"OPTION" means an option granted pursuant to this Plan at the beginning
of each Offering Period to acquire Common Stock
"PURCHASE DATE" means the last day of each Offering Period.
"OFFERING PERIOD" means each six months during the period beginning on the
Plan Start Date unless the Plan is terminated earlier.
"PAYROLL DEDUCTION ACCOUNT" means, with respect to each Participant, the
amounts credited to the Participant's account from the payroll deductions
made by the Participant under this Plan, less any amounts withdrawn from
such account (for payment of Common Stock, payment to the Participant,
payment of withholding and other taxes or amounts or payment of other
obligations or amounts).
"PARTICIPANT" has the meaning set forth in SECTION 3.2.
"PLAN" means the Trailer Bridge, Inc. 1998 Employee Stock Purchase Plan as
the same may be amended from time to time.
"PLAN START DATE" means March 1, 1998.
"RELATED CORPORATION" means any present or future corporation which (i)
would be a "subsidiary corporation" or "parent corporation" of Trailer
Bridge, Inc. as such terms are defined in Section 424 of the Code, and
(ii) is designated as a participating employer in this Plan by the Board.
Kadampanattu Corp. has been so designated as a related corporation in this
Plan. Kadampanattu Corp. shall reimburse Trailer Bridge, Inc. for the
participation of Kadampanattu Corp. employees.
"RULE 16B-3" means Rule 16b-3 under the 1933 Act.
"STOCK ACCOUNT" means, with respect to each Participant, the number of
whole shares of Common Stock credited under this Plan to the Participant's
account. Dividends with respect to shares of Common Stock credited to a
Participant's Stock Account shall be paid to the Participant and shall not
be held in either the Participant's Stock Account or Payroll Deduction
Account.
"TRAILER BRIDGE, INC." means Trailer Bridge, Inc. or a Related
Corporation.
III. PARTICIPATION
3.1 ELIGIBLE EMPLOYEES. Subject to ARTICLE VIII, all Eligible Employees
as of the beginning of each Offering Period may participate in the Plan
for such Offering Period at their election.
3.2 PARTICIPATION PROCEDURES. If an Eligible Employee does not otherwise
have an election to become a Participant in effect, each Eligible Employee
choosing to participate in the Plan (herein called a "PARTICIPANT") during
an Offering Period shall enroll as a Participant in the Plan by filing
with the Participant's Employer a completed enrollment form (authorized by
the Administrator) prior to any deadline determined by the Company.
3.3. EMPLOYEE CONTRIBUTIONS. Subject to other limitations provided in
this Plan, a Participant may contribute under the Plan a minimum of one
percent (1%) and a maximum of ten percent (10%) of the Participant's Base
Compensation. An enrollment form and payroll deduction authorization will
remain effective for each Offering Period until terminated in writing by a
Participant or until the Participant is no longer eligible to participate
in the Plan. The payroll deduction authorization may be reduced or
terminated at any time by the Participant's written request submitted to
the Participant's Employer; PROVIDED, HOWEVER, that a Participant may not
recommence or increase payroll deductions until the beginning of the next
Offering Period, nor may a Participant make more than one revision of the
Participant's payroll deduction authorization in any Offering Period.
Termination of deductions shall constitute withdrawal from the Plan as set
forth in SECTION 3.5 and cancellation of any outstanding Options of the
Participant. Reduction or termination of deductions will become effective
as soon as practicable after a Participant's written request is received
by the Participant's Employer.
3.4. PARTICIPANT RESTRICTION. Notwithstanding any provisions of this
Plan to the contrary, no Participant will be granted an option under this
Plan which would permit the Participant's rights to purchase shares of
stock under all employee stock purchase plans of Trailer Bridge, Inc. and
"parent corporations" and "subsidiary corporations" (within the meaning of
Section 424 of the Code) to accrue at a rate which exceeds $25,000 of the
Fair Market Value of such stock (determined at the time each Option is
"GRANTED" (within the meaning of Code Section 423(b) (8)) for each
Calendar year during which any Option granted to such Participant is
outstanding at any time, as provided in Sections 423 and 424(d) of the
Code.
3.5. WITHDRAWAL FROM PLAN. A Participant may withdraw from the Plan
(thereby canceling all Options then in existence) at any time by giving
written notice to the Participant's Employer and to the Administrator.
The Administrator shall, as soon as practicable after receiving written
notice of a Participant's withdrawal from the Plan, cause to be delivered
to the Participant a check representing any funds held to the credit of
the Participant's Payroll Deduction Account. A Participant who has
withdrawn from the Plan may thereafter reenter the Plan by following the
procedure described under SECTION 3.2, but not sooner than the beginning
of the next Offering Period after the Participant has withdrawn from
participation.
3.6. TERMINATION OF PARTICIPANT's EMPLOYMENT. Upon termination of a
Participant's employment from the Trailer Bridge, Inc. Companies for any
reason, including death or disability, the Participant's Stock Account and
Payroll Deduction Account in the Plan shall be closed, and all existing
Options held by the Participant shall be canceled. The Administrator
shall, as soon as practicable after termination of a Participant's
employment, cause to be delivered to the Participant or the Participant's
estate or the Participant's designated beneficiary as provided below, a
check representing any funds held to the credit of the Participant's
Payroll Deduction Account. In the event of a Participant's death, the
Participant's Common Stock and Payroll Deduction Account shall be
delivered and paid to the estate of such Participant or to a beneficiary
designated by the Participant in writing on a form approved by the
Administrator.
IV. OPTIONS TO PURCHASE STOCK; MAXIMUM SHARES AVAILABLE
4.1. MAXIMUM SHARES. The maximum number of shares which shall be issued
under the Plan, subject to adjustment upon changes in Common Stock under
ARTICLE VII, shall be 150,000 shares.
4.2. OFFERINGS. Subject to ARTICLE XIII, the Company shall make
consecutive offerings on the beginning of each Offering Period to
Participants to purchase Common Stock as long as shares authorized remain
available for issuance. Each offering as of the beginning of each
Offering Period shall be the total number of shares authorized under
SECTION 4.1, less the number of shares issued by purchases of Common Stock
under SECTION 5.5 in prior Offering Periods.
V. PURCHASE OF STOCK PURSUANT TO OPTIONS
5.1. PAYROLL DEDUCTION ACCOUNTS. Each Trailer Bridge, Inc. Company will
deduct from its Participants' paychecks such amounts as have been
authorized by the Participants and, promptly after the end of each month,
remit to the Administrator all amounts so deducted during the month,
together with a report showing each Participant and the amounts allocable
to the Payroll Deduction Account of each Participant. All payroll
deductions made by the Participant shall be credited to his or her account
under the Plan. All deductions in each account will be used to purchase
Common Stock for the individual on each Purchase Date.
5.2. STOCK ACCOUNTS. The Administrator will open and maintain a Stock
Account in the name of each Participant to which will be credited all
shares of Common Stock purchased for the Participant's benefit.
Participant's shares will be automatically deposited into accounts as soon
as practicable after each Purchase Date. The Participant shall have the
right to sell all or any part of the shares held in the Participant's
Stock Account, pursuant to the procedures established by the
Administrator.
5.3. GRANT OF OPTIONS AND PURCHASE. Subject to Article VIII, each
person who is a Participant on the first day of an Offering Period will as
of the first day of such Offering Period be granted an Option for such
period. Such Option will be for the number of whole shares of Common
Stock to be determined by dividing(a) the balance in the Participant's
Payroll Deduction Account on the Purchase Date, by (b) the purchase price
per share of Common Stock determined under Section 5.4 below; PROVIDED,
HOWEVER, that the quotient in this SECTION 5.3 shall be rounded down to a
whole number. The number of shares of Common Stock receivable by each
Participant upon exercise of an Option for an Offering Period shall be
reduced, on a substantially proportionate basis, in the event that the
number of shares then available under the Plan is otherwise insufficient.
5.4. PURCHASE PRICE. The purchase price of each share of Common Stock
sold pursuant to the exercise of an Option shall be 0.85 multiplied by the
Fair Market Value of the Common Stock on the last day of the Offering
Period.
5.5. EXERCISE OF OPTIONS. Each person who is a Participant in the Plan on
the Purchase Date will be deemed to have exercised on the Purchase Date
the Option granted to the Participant for that Offering Period. Upon such
exercise, the balance of the Participant's Payroll Deduction Account shall
be applied to the purchase of the number of whole shares of Common Stock
determined under SECTION 5.3, and the amount of shares of Common Stock
purchased shall be credited to the Participant's Stock Account. In the
event that the balance of the Participant's Payroll Deduction Account
following an Offering Period is in excess of the total purchase price of
the shares of Common Stock so sold, the balance of the Payroll Deduction
Account shall be returned to the Participant; PROVIDED,HOWEVER, that if
the balance in the Payroll Deduction Account consists solely of an amount
equal to the value of a fractional share it will be retained in the
Payroll Deduction Account and carried over to the next Offering Period.
No fractional shares shall be issued hereunder.
Notwithstanding anything herein to the contrary, Trailer Bridge, Inc.'s
obligation to sell and deliver shares of Common Stock under the Plan is
subject to the approval required of any governmental authority in
connection with the authorization, issuance, sale or transfer of such
shares, to any requirements of the NASDAQ or any national securities
exchange applicable thereto, and to compliance by Trailer Bridge, Inc.
with other applicable legal requirements in effect from time to time,
including without limitation any applicable tax withholding requirements.
5.6. NO ASSIGNMENT OF PARTICIPANT's INTEREST IN PLAN. A Participant may
not assign, sell, transfer, pledge, hypothecate or alienate any Options or
other interests in or rights under the Plan. Options Under the Plan are
exercisable by a Participant during the Participant's lifetime only by the
Participant. All employees shall have the same rights and privileges
under the Plan.
5.7. VESTING. Each Participant will immediately acquire full ownership
of all shares of Common Stock at the time such shares are credited to the
Participants Stock Account.
5.8. DELIVERY OF STOCK. Participant's shares will be automatically
deposited into accounts as soon as practicable after each Purchase Date.
5.9 DIVIDENDS, SPLITS AND DISTRIBUTIONS. Any stock dividends or stock
splits in respect of shares held in the Participant's Stock Account will
be credited to the Participant's account without charge. Any
distributions to holders of Common Stock or other securities or rights to
subscribe for additional shares of Common Stock will be sold and the
proceeds will be handled in the same manner as a cash dividend, unless the
Participant instructs the Administrator to the contrary.
5.10. VOTING RIGHTS. The Administrator will deliver to each Participant
as promptly as practicable, by mail or otherwise, all notices of meetings,
proxy statements and other material distributed by Trailer Bridge, Inc. to
its stockholders. The full shares of Common Stock in each Participant's
Stock Account will be voted in accordance with the Participant's signed
proxy instructions duly delivered to the Administrator or pursuant to any
other method of voting available to holders of Common Stock. There will be
no charge to the Participant for the Administrator's retention of delivery
of stock certificates, or in connection with notices, proxies or other
such material.
5.11. NO INTEREST TO BE PAID. No interest will be paid to or credited to
the Payroll Deduction Accounts or Stock Accounts of the Participants.
VI. ADMINISTRATION OF PLAN
6.1. THE ADMINISTRATOR AND THE COMMITTEE. To carry out the purposes of
the Plan, the Committee shall appoint an Administrator. The Administrator
may be any company or individual that the Committee deems qualified,
including Trailer Bridge, Inc. The Administrator shall be responsible for
the implementation of the Plan, including allocation of funds and stock to
the Payroll Deduction Accounts and Stock Accounts and keeping adequate and
accurate records for the Participants.
The Committee shall be entitled to adopt and apply guidelines and
procedures consistent with the purposes of the Plan. In order to
effectuate the purposes of the Plan, the Committee shall have the
discretionary authority to construe and interpret the Plan, to supply any
omissions therein, to reconcile and correct any errors or inconsistencies,
to decide any questions in the administration and application of the Plan,
and to make equitable adjustments for any mistakes or errors made in the
administration of the Plan, and all such actions or determinations made by
the Committee, and the application of rules and regulations to a
particular case or issue by the Committee, in good faith, shall not be
subject to review by anyone but shall be final, binding and conclusive on
all persons ever interested hereunder.
6.2. BROKER. The Administrator may, in its discretion, with the consent
and approval of the Committee, appoint a Broker. The Broker may be any
company or individual, company or companies that the Committee deems
qualified; PROVIDED, HOWEVER, that the Broker shall be a licensed
security dealer, broker, or agent authorized to make purchases and sales
of Common Stock.
6.3 REPORTING TO PARTICIPANTS. The Administrator will send to each
Participant a statement at the end of each six month period (or such other
period as determined by the Committee in its sole discretion).
Each such statement shall contain information concerning transactions in
the Participant's Payroll Deduction Account and Stock Account during the
relevant period and reflect the balance in the Participants Payroll
Deduction Account and Stock Account at the end of such period.
VII. ADJUSTMENT UPON CHANGES IN COMMON STOCK
7.1. CHANGES IN COMMON STOCK. If any change is made in the Common Stock
(through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Administrator may make appropriate
adjustments in the number of shares and price per share of Common Stock
subject to the Plan or to any Option granted under the Plan.
7.2. DISSOLUTION; MERGER; CAPITAL REORGANIZATION; ETC. In the event of
(i) a dissolution or liquidation of Trailer Bridge, Inc.; (ii) a merger
or consolidation in which Trailer Bridge, Inc. is not the surviving
corporation, or a reverse merger in which Trailer Bridge, Inc. is the
surviving corporation but the shares of Common Stock by virtue of the
merger are converted into other property, whether in the form of
securities, cash or otherwise; or (iii) any other capital reorganization
in which more than 50 percent of the shares of Common Stock entitled to
vote are exchanged, the Plan shall terminate, unless another corporation
assumes the responsibility of continuing the operation of the Plan or the
Committee determines in its discretion that the Plan shall nevertheless
continue in full force and effect. If the Committee elects to terminate
the Plan, the Administrator shall send to each Participant a stock
certificate representing the number of whole shares to which the
Participant is entitled. In addition, the Administrator shall send checks
drawn on the Plan's account to each Participant in an amount equal to the
funds held to the credit of such Participant's Payroll Deduction Account.
7.3. COMPANY's RIGHT TO RESTRUCTURE, ETC. The grant of any right to a
Participant pursuant to the Plan shall not affect in any way the right or
power of Trailer Bridge, Inc. to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to
merge or to consolidate or to dissolve, liquidate or sell, or transfer all
or any part of its business or assets.
VII. AMENDMENT; TERMINATION OF PLAN
8.1. AMENDMENT AND TERMINATION. Trailer Bridge, Inc., acting through the
Committee, reserves the right to amend or terminate the Plan at any time
or times; PROVIDED, HOWEVER, any amendment that would require the consent
of stockholders under applicable law, rule or regulation (including,
without limitation, the Code, the Exchange Act or any self regulatory
organization such as a national securities exchange), will not be made
unless such stockholders' consent is obtained.
In addition, the Plan shall terminate automatically on the fifth
anniversary of the Plan Start Date, or on any Purchase Date when
Participants become entitled to purchase a number of shares greater than
the number of reserved shares remaining available for purchase, subject to
the allocation of remaining shares pursuant to the last sentence of
SECTION 5.3. Upon termination of the Plan, all amounts held in the
Payroll Deduction Accounts shall, to the extent not used to purchase
shares of Common Stock, be refunded to the Participants entitled thereto.
IX. MISCELLANEOUS
9.1. EXPENSES OF PLAN. The Broker's brokerage commissions, if any,
incurred in connection with purchases of Common Stock under the Plan, and
the Administrator's administrative charges for maintaining Participants'
accounts relating to purchases of securities and all other expenses of
administering or maintaining the Plan will be paid by the Company. If the
Company is acting as Administrator, no expenses will be charged to the
Participants.
9.2. INDEMNIFICATION. In the event and to the extent not insured against
under any contract of insurance with an insurance company, Trailer Bridge,
Inc. shall indemnify and hold harmless each "INDEMNIFIED PERSON," as
defined below, against any and all claims, demands, suits, proceedings,
losses, damages, interest, penalties, expenses (specifically including,
but not limited to, counsel fees to the extent approved by the Board or
otherwise provided by law, court costs and other reasonable expenses of
litigation), and liability of every kind, including amounts paid in
settlement, with the approval of the Board, arising from any action or
course of action related to the Indemnified Person's act or acts or
failure to act. Such Indemnity shall apply regardless of whether such
claims, demands, suits, proceedings, losses, damages, interest, penalties,
expenses and liability arise in whole or in part from (a) the negligence
or other fault of the Indemnified Person, or (b) from the imposition on
such Indemnified Person of any civil penalties or excise taxes pursuant to
the Code or any other applicable laws; except when the same is judicially
determined to be due to gross negligence, fraud, recklessness, or willful
or intentional misconduct of such Indemnified Person. "INDEMNIFIED
PERSON" shall mean each member of the Board, the Administrator, each
member of the Committee and each other employee of any Trailer Bridge,
Inc. Company who is allocated fiduciary responsibility hereunder.
9.3. NO CONTRACT OF EMPLOYMENT INTENDED. The granting of any rights to
and Eligible Employee under this Plan shall not constitute an agreement or
understanding, express or implied, on the part of any Trailer Bridge, Inc.
Company, to employ such Eligible Employee for any specified period.
9.4. GOVERNING LAW. The construction, validity and operation of this
Plan shall be governed by the laws of the State of Florida.
9.5. SEVERABILITY OF PROVISIONS. If any provision of this Plan is
determined to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect the remaining provisions
of this Plan, but such invalid, illegal or unenforceable provisions shall
be fully severable, and the Plan shall be construed and enforced as if
such provision had never been inserted herein.
9.6. NO LIABILITY OF TRAILER BRIDGE, INC. Neither Trailer Bridge, Inc.,
its directors, officers or employees of the Committee, nor any Related
Corporation which is in existence or hereafter comes into existence, shall
be liable to any Participant or other person if it is determined for any
reason by the Internal Revenue Service or any Court having jurisdiction
that the Plan does not qualify under Section 423 of the Code.
IN WITNESS WHEREOF, the Company has caused this Plan to be adopted
effective as of the Plan Start Date.
Trailer Bridge, Inc.
By:________________________________
Name: _____________________________
Title:_____________________________
<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 12 MONTHS ENDED DECEMBER
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 14,277,445
<SECURITIES> 0
<RECEIVABLES> 9,054,813
<ALLOWANCES> (1,165,874)
<INVENTORY> 0
<CURRENT-ASSETS> 22,931,359
<PP&E> 35,823,040
<DEPRECIATION> (5,540,429)
<TOTAL-ASSETS> 76,894,457
<CURRENT-LIABILITIES> 8,951,543
<BONDS> 34,082,957
0
0
<COMMON> 97,775
<OTHER-SE> 33,762,182
<TOTAL-LIABILITY-AND-EQUITY> 76,894,457
<SALES> 0
<TOTAL-REVENUES> 66,388,577
<CGS> 0
<TOTAL-COSTS> 68,204,454
<OTHER-EXPENSES> 80,851
<LOSS-PROVISION> 381,691
<INTEREST-EXPENSE> 548,631
<INCOME-PRETAX> (2,445,359)
<INCOME-TAX> (29,237)
<INCOME-CONTINUING> (2,416,122)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,416,122)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
