SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarter ended Commission file number
September 30, 1998 0-22837
TRAILER BRIDGE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3617986
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10405 New Berlin Road E.
Jacksonville, FL 32226 (904) 751-7100
(address of principal (Zip Code) (Registrant's telephone number)
executive offices)
-------------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
As of September 30, 1998, 9,777,500 shares of the registrant's common
stock, par value $.01 per share, were outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The interim financial statements contained herein reflect all
adjustments which, in the opinion of management, are necessary for a fair
statement of the financial condition and results of operations for the periods
presented. They have been prepared in accordance with the instructions to Form
10-Q and do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements.
Operating results for the three and nine month periods ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. In the opinion of management,
the information set forth in the accompanying balance sheet is fairly stated in
all material respects.
These interim financial statements should be read in conjunction with
the Company's audited financial statements for the three years ended December
31, 1997 that appear in the Company's report on Form 10K.
Statements of Operations for the
Three and Nine Month Periods Ended
September 30, 1998 and 1997 (unaudited) Page 3
Balance Sheets as of
September 30, 1998 and December 31, 1997
(unaudited) Page 4
Statements of Cash Flows for the
Nine Months Ended September 30, 1998 and
1997 (unaudited) Page 5
Notes to Financial Statements as of
September 30, 1998 Page 6
2
<PAGE>
<TABLE>
TRAILER BRIDGE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
----------------------------- ----------------------------
1998 1997 1998 1997
------------ -------------- ------------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES ................... $ 18,851,977 $ 16,676,100 $ 53,607,702 $ 49,292,853
OPERATING EXPENSES:
Salaries wages, and benefits ...... 4,149,018 3,692,541 11,973,639 19,185,975
Rent and purchased transportation:
Related Party .................. 1,249,200 1,870,170 4,887,300 5,671,170
Other .......................... 5,121,110 2,611,011 12,690,094 7,302,299
Fuel .............................. 1,361,319 1,333,504 4,081,608 4,266,258
Operating and maintenance
(exclusive of depreciation shown
separately below) .............. 4,400,266 3,409,886 11,600,489 9,637,780
Taxes and licenses ................ 94,486 106,620 342,568 338,547
Insurance and claims .............. 490,345 488,042 1,399,585 1,422,621
Communications and utilities ...... 210,467 161,639 564,933 432,086
Depreciation and amortization ..... 933,162 612,950 2,558,571 1,961,517
Other operating expenses .......... 1,240,396 873,235 3,209,793 2,543,629
------------ ------------ ------------ ------------
19,249,769 15,159,598 53,308,580 52,761,882
------------ ------------ ------------ ------------
OPERATING (LOSS) INCOME (397,792) 1,516,502 299,122 (3,469,029)
NONOPERATING INCOME
(EXPENSE):
Interest expense, net:
Related Party ................... -- (63,886) -- (249,552)
Other ........................... (305,025) (4,183) (693,722) (341,498)
Gain (loss) on sale of equipment,
net ............................. 61,600 (83,577) 190,565 (81,901)
------------ ------------ ------------ ------------
(243,425) (151,646) (503,157) (672,951)
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE BENEFIT
(PROVISION) FOR INCOME TAXES (641,217) 1,364,856 (204,035) (4,141,980)
BENEFIT (PROVISION) FOR INCOME TAXES .. 205,612 1,081,107 (13,316) 1,020,172
------------ ------------ ------------ ------------
NET (LOSS) INCOME BEFORE PRO FORMA
PROVISION FOR INCOME TAXES (435,605) 2,445,963 (217,351) (3,121,808)
PRO FORMA PROVISION FOR
INCOME TAXES (Note 2) ............... -- -- -- (358,389)
============ ============ ============ ============
PRO FORMA NET (LOSS) INCOME (Note 2) ... $ (435,605) $ 2,445,963 $ (217,351) $ (3,480,197)
============ ============ ============ ============
PRO FORMA NET (LOSS) INCOME PER
SHARE (Note 2) ...................... $ (0.04) $ 0.28 $ (0.02) $ (0.47)
============ ============ ============ ============
PRO FORMA WEIGHTED AVERAGE
SHARES OUTSTANDING ................... 9,777,500 8,713,641 9,777,500 7,360,357
============ ============ ============ ============
</TABLE>
3
<PAGE>
<TABLE>
TRAILER BRIDGE, INC.
BALANCE SHEETS
(Unaudited)
<CAPTION>
September 30, December 31,
1998 1997
-------------- -------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents ....................... $ 3,948,086 $ 14,277,445
Trade receivables, less allowance for doubtful
accounts of $835,817 and $1,165,874 ....... 10,859,810 7,852,992
Other receivables ............................... 191,343 35,947
Prepaid expenses ................................ 1,266,188 764,975
Due from related party .......................... 623,609
------------ ------------
Total current assets ...................... 16,889,036 22,931,359
Property and Equipment, net ........................... 57,139,928 30,282,611
Goodwill, less accumulated amortization of
$299,627 and $264,543 ........................... 869,315 904,399
Restricted Cash and Investments ....................... 4,719,743 20,283,047
Other Assets .......................................... 2,493,053 2,493,041
------------ ------------
TOTAL ASSETS .......................................... $ 82,111,075 $ 76,894,457
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ................................ $ 1,966,868 $ 2,137,251
Other accrued liabilities ....................... 3,827,152 3,398,858
Current portion of notes payable ................ 3,965,532 3,156,142
Current portion of capital lease obligations .... 41,995 35,908
Unearned revenue ................................ 879,765 163,084
Due to related party ............................ 60,300 60,300
------------ ------------
Total current liabilities ................. 10,741,612 8,951,543
Notes Payable, less current portion ................... 37,639,676 33,960,518
Capital Lease Obligations, less current portion ....... 87,181 122,439
------------ ------------
TOTAL LIABILITIES ..................................... 48,468,469 43,034,500
------------ ------------
Commitments
Stockholders' Equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized; no shares issued or outstanding -- --
Common stock, $.01 par value, 20,000,000 shares
authorized; 9,777,500 shares issued and
outstanding in 1998 and 1997 .............. 97,775 97,775
Additional paid-in capital ...................... 37,982,818 37,982,818
Accumulated deficit in earnings ................. (4,437,987) (4,220,636)
------------ ------------
------------ ------------
Total stockholders' equity ................ 33,642,606 33,859,957
------------ ------------
============ ============
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............ $ 82,111,075 $ 76,894,457
</TABLE>
5
<PAGE>
<TABLE>
TRAILER BRIDGE, INC.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1998 and September 30, 1997
(Unaudited)
<CAPTION>
September 30, September 30,
1998 1997
-------------- -------------
Operating activities:
<S> <C> <C>
Net loss $ (217,351) $ (3,121,808)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 2,558,571 1,961,517
Provision for doubtful accounts 542,964 305,334
Deferred income taxes 47,790 (1,107,967)
Noncash compensation 0 8,528,670
Gain (loss) on sale of fixed assets (190,565) 81,901
Decrease (increase) in:
Trade receivables (3,549,782) 185,595
Other receivables (155,396) (310,411)
Prepaid expenses (501,213) 60,433
Increase (decrease) in:
Accounts payable (170,383) 411,168
Accrued liabilities 428,294 61,205
Due from affiliate (623,609) 0
Unearned revenue 716,681 (140,543)
------------ ------------
Net cash (used) provided by operating activities (1,113,999) 6,915,094
------------ ------------
Investing activities:
Decrease in due to affiliate 0 (4,592,992)
Purchases & construction of property, plant & equipment (30,244,227) (11,793,175)
Proceeds from sale of equipment 1,089,390 30,714
Decrease (increase) in deposits/other 127,246 (6,251,071)
Decrease in restricted cash and investments 15,563,304 0
------------ ------------
Net cash used in investing activities (13,464,287) (22,606,524)
------------ ------------
Financing activities:
Proceeds from borrowing on notes payable 7,246,591 12,523,622
Proceeds from sale of common stock 0 28,494,974
Principal payments on notes payable (2,758,043) (2,904,307)
Debt issue costs (210,450) 0
Dividends 0 (7,185,750)
Principal payments under capital lease obligations (29,171) (32,034)
------------ ------------
Net cash provided by financing activities 4,248,927 30,896,505
------------ ------------
Net (decrease) increase in cash and cash equivalents (10,329,359) 15,205,075
Cash and Cash Equivalents, beginning of the period 14,277,445 1,658,921
------------ ------------
Cash and Cash Equivalents, end of period $ 3,948,086 $ 16,863,996
============ ============
Supplemental cash flow information and investing and
financing activities:
Book value of like-kind exchanged assets $ 610,041
</TABLE>
6
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements include all
adjustments, consisting of normal recurring accruals, which the Company
considers necessary for a fair presentation of the results of operations for the
periods shown. The financial statements have been prepared in accordance with
the instructions to Form 10-Q and, therefore, do not include all information and
footnotes necessary for a fair presentation of financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles. The results of operations for any interim period are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the Company's audited financial statements for the three
years ended December 31, 1997 that appear in the Form 10-K.
2. PRO FORMA INFORMATION
Pro Forma Adjustments. Upon closing of the Company's initial public
offering, the Company's status as an S Corporation terminated. The pro forma
adjustments reflect a provision for income taxes that would have been incurred
had the Company not been organized under Subchapter S of the Internal Revenue
Code. The effective rate differs from the statutory rate of 34% due to state
income taxes (net of Federal income tax benefits), amortization of goodwill and
other nondeductible expenses and due to the utilization of the net operating
loss carryforwards of a corporation acquired in 1992.
Pro Forma Net Income Per Share. Pro forma net income per share
reflects a 15,700-for-1 stock split that became effective with the Company's
stock offering.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
RESULTS OF OPERATIONS:
Three Months Ended September 30, 1998 and 1997
Total revenue of $18,851,977 for the three months ended September 30,
1998, increased $2,175,877 or 13.0% compared to the three months ended September
30, 1997. Based upon the deployment of two additional vessels throughout the
entire period in 1998, Trailer Bridge had 54% more vessel capacity compared to
the same period in 1997. Core trailer volume to Puerto Rico increased 27.0%
compared to the year earlier period and total car and other vehicle volume was
up 37.9% compared to the year earlier period. As a result, core trailer revenue
to Puerto Rico increased $1,745,958 or 17.9% compared to the year earlier period
and car and other vehicle revenue increased $667,951 or 26.0% compared to the
year earlier period. Revenue from shipper owned or leased equipment moving to
Puerto Rico increased $10,210 or 0.9%. Trailer volume from Puerto Rico increased
9.4% while related revenue decreased $31,530 or 1.8% compared to the year
earlier period. Non-Puerto Rico revenue of $1,053,101 represented a decrease of
13.4% from the three months ended September 30, 1997.
Operating loss for the three month period ending September 30, 1998
was $397,792, a decrease of $1,914,294 from the $1,516,502 operating income in
the year earlier period. Operating income was lower compared to the year earlier
period due to both reduced rate levels and reduced capacity utilization levels
on the 54% higher vessel capacity offered. As a result, Trailer Bridge's
operating ratio was 102.1% during the third quarter of 1998 compared to the
90.9% operating ratio during the year earlier period. Net interest expense of
$305,025 was up $236,956 from the year earlier period which included significant
interest income on short-term investments. During the three months ended
September 30, 1998, Trailer Bridge also had a gain of $61,600 related to the
sale of older trailer equipment.
Operating expenses for the third quarter were reduced by a $600,000
non-recurring forgiveness of barge charterhire from Kadampanattu Corp. to
Trailer Bridge in recognition of the impact of Hurricane Georges and in
consideration of the efforts of Trailer Bridge to recover and repair the San
Juan triple-deck ramp structure utilized by the two triple-deck barges. The ramp
structure is owned by Kadampanattu Corp. and, in conjunction with its bareboat
charter agreement relating to the two vessels, Trailer Bridge has unlimited use
of the ramp structure during the term of the charter agreement. On September 21,
the floating ramp structure became partially submerged due to the storm.
Following an initial period of disruption and delay, Trailer Bridge developed
alternative methods of discharging and re-loading the two roll-on, roll-off
vessels and those vessels are now back on their weekly schedule. The $600,000
forgiveness of charterhire is slightly below the direct impact Trailer Bridge
estimates the loss of use of the ramp structure due to Hurricane Georges had on
its financial results during the third quarter. The three new Triplestack Box
Carriers(TM) now deployed in Puerto Rico do not utilize the floating ramp
structure and were not adversely affected by Hurricane Georges. Efforts are
continuing to re-float the ramp structure but in the interim the cost related to
discharging and re-loading the two roll-on, roll-off vessels using the
alternative methods will be increased. The terms of the charter agreement did
not obligate Kadampanattu Corp. to forgive the charterhire and Trailer Bridge
does not expect that similar action will be taken in the future.
8
<PAGE>
Loss before income taxes for the three months ended September 30, 1998
was $641,217, a decrease of $2,006,073 from the $1,364,856 net income before
income taxes in the year earlier period. After income taxes, net loss for the
third quarter was $435,605, which was significantly below proforma net income of
$2,445,963 after a non-recurring tax credit for the year earlier period during
which Trailer Bridge operated as an S Corporation. Net loss per share was $.04
for the three months ended September 30, 1998 compared to net income per share
of $.28 for the year earlier period.
Nine Months Ended September 30, 1998 and 1997
Total revenue for the nine months ended September 30, 1998 was
$53,607,702, an increase of $4,314,849 or 8.8% compared to the year earlier
period. Core trailer volume to Puerto Rico increased 26.2% compared to the year
earlier period and total car and other vehicle volume was up 5.8% compared to
the year earlier period. As a result, core trailer revenue to Puerto Rico
increased $3,954,978 or 15.6% compared to the year earlier period and car and
other vehicle revenue increased $500,856 or 4.9% compared to the year earlier
period. Revenue from shipper owned or leased equipment moving to Puerto Rico
increased $563,298 or 18.1%. Trailer volume from Puerto Rico increased 12.8%
while related revenue decreased $187,381 or 3.0% compared to the year earlier
period. Non-Puerto Rico revenue of $3,305,639 represented a decrease of 10.8%
from the year earlier period of 1997.
Operating income for the nine months ended was $299,122, a decrease
of $4,760,519, from the $5,059,641 operating income in the year earlier period
net of a non-recurring charge. Operating income was lower compared to the year
earlier period due to both continued reduced rate levels and lower capacity
utilization levels on the increased vessel capacity offered. As a result,
Trailer Bridge's operating ratio was 99.4% during the nine months ended
September 30, 1998 compared to the 89.7% operating ratio during the year earlier
period. Net interest expense of $693,722 was up $102,672 from the year earlier
period that included significant interest income on short-term investments.
During the nine month period, Trailer Bridge also had a gain of $190,565 related
to the sale of older trailer equipment.
Loss before income taxes for the nine months ended September 30, 1998
$204,035, a decrease of $4,590,725, from the year earlier period, net of a
non-recurring charge. After income taxes, net loss for the nine months was
$217,351, which was significantly below proforma net income of $2,707,578 after
a non-recurring tax credit for the year earlier period during which Trailer
Bridge operated as an S Corporation. Net loss per share was $.02 for the nine
months ended compared to net income per share of $.37 for the year earlier
period, after non-recurring charge.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition remained strong at the end of the
quarter. At September 30, 1998, available cash amounted to $3.9 million, working
capital was $6.1 million and stockholders equity was equal to $33.6 million.
Net cash used by operating activities was $1.1 million for the first
nine months of 1998, compared with $6.9 million provided in 1997.
Net cash used in investing activities was $13.5 million in 1998 and
22.6 million in 1997. The investment spending was primarily for the new TBC
vessels and the related revenue equipment, primarily 53' containers and chassis.
The vessels were funded primarily from Title XI financing and the
revenue equipment was funded primarily from the remaining proceeds of the
Company's IPO in 1997. The Company entered into a $25 million revolving
credit/term loan facility that can be utilized for general corporate purposes.
As of September 30, 1998 the amount available on the loan facility was $14.8
million.
Management believes that cash flow from operations combined with the
company's borrowing capacity under it's revolving credit/term loan facility will
be adequate to meet the Company's debt service requirements, fund continued
growth, and meet working capital needs.
YEAR 2000
Management recognizes the potential effect Year 2000 may have on the
Company's operations and, as a result, has implemented a Year 2000 Compliance
Project. The term "Year 2000 compliant" means that the software, hardware,
equipment, goods or systems utilized by, or material to the physical operations,
business operations, or financial reporting of an entity will properly perform
date sensitive functions before, during and after year 2000.
The Company's Year 2000 Compliance Project includes an awareness
phase, an assessment phase, an implementing phase, and a testing phase of our
data processing network, accounting systems, computer and operating systems and
software packages. The project includes surveying our major customers and
suppliers. Total costs incurred to date associated with the Company's Year 2000
compliance project have been reflected in the Company's income statement
throughout 1998, and were approximately $75,000.
The Company's computer hardware, operating systems, dispatch
applications, PC network and other desktop applications are Year 2000 compliant
as certified by the various vendors and application consultants. Year 2000
compliance for general accounting applications will be implemented and tested
during the fourth quarter of 1998. Based on initial testing, Management does not
anticipate any Year 2000 issues that will materially impact on operations or
operating results.
10
<PAGE>
The Company has surveyed its major suppliers to determine the extent
to which the Company is vulnerable to third parties' failure to resolve their
Year 2000 issues. The company will be able to more adequately assess its third
party risk when responses are received from the majority of the entities
contacted.
Management believes its planning efforts are adequate to address the
Year 2000 Issue and that its risk factors are primarily those that it cannot
directly control, including the readiness of its major suppliers and customers.
Failure on the part of these entities to become Year 2000 compliant could result
in disruption in the Company's cash receipts and disbursements functions. There
can be no guarantee, however, that the systems of unrelated entities upon which
the Company's operations rely will be corrected on a timely basis and will not
have a material adverse effect on the Company.
The Company does not have a formal contingency plan or a timetable
for implementing one. Contingency plans will be established, if they are deemed
necessary, after the Company has adequately assessed the impact on operations
should third parties fail to properly respond to their Year 2000 issues.
FORWARD-LOOKING STATEMENTS
This report may contain statements that may be considered as
forward-looking or predictions concerning future operations. Such statements are
based on management's belief or interpretation of information currently
available. These statements and assumptions involve certain risks and
uncertainties and management can give no assurance that such expectations will
be realized. Among all the factors and events that are not within the Company's
control and could have a material impact on future operating results are general
economic conditions, cost and availability of diesel fuel, adverse weather
conditions and competitive rate fluctuations.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Page Number or Incorporated
Number Description by Reference to
- ------- ----------- ---------------------------
27 Financial Data Schedule Page 12 of sequentially
numbered pages
11
<PAGE>
(b) Reports on Form 8-K - None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
TRAILER BRIDGE, INC.
Date: _11/16/98____ By:_/s/ John D. McCown_
John D. McCown
Chairman and Chief
Executive Officer
Date: _11/16/98____ By:_/s/ Mark A. Tanner
Mark A. Tanner
Vice President of
Administration
and Chief Financial
Officer
13
<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 quarter ended September 30,
1998 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,948,086
<SECURITIES> 0
<RECEIVABLES> 11,695,627
<ALLOWANCES> (835,817)
<INVENTORY> 0
<CURRENT-ASSETS> 16,889,036
<PP&E> 62,985,818
<DEPRECIATION> (5,845,890)
<TOTAL-ASSETS> 82,111,075
<CURRENT-LIABILITIES> 10,741,612
<BONDS> 37,639,676
0
0
<COMMON> 97,775
<OTHER-SE> 33,544,831
<TOTAL-LIABILITY-AND-EQUITY> 82,111,075
<SALES> 0
<TOTAL-REVENUES> 18,851,977
<CGS> 0
<TOTAL-COSTS> 19,249,769
<OTHER-EXPENSES> 243,425
<LOSS-PROVISION> 542,964
<INTEREST-EXPENSE> 305,025
<INCOME-PRETAX> (641,217)
<INCOME-TAX> (205,612)
<INCOME-CONTINUING> (435,605)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (435,605)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
