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
June 30, 1999 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
executive offices) number)
-------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
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 June 30, 1999, 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 sixth month periods ended June 30,
1999 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. 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, 1998 that appear in the Company's Annual Report on Form 10-K.
Statements of Operations for the Three and
Six Months Ended June 30, 1999 and 1998 (unaudited) Page 3
Balance Sheets as of
June 30, 1999 and December 31, 1998 (unaudited) Page 4
Statements of Cash Flows for the
Six Months Ended June 30, 1999 and 1998 (unaudited) Page 5
Notes to Financial Statements as of
June 30, 1999 Page 6
<PAGE>
<TABLE>
<CAPTION>
TRAILER BRIDGE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------------------- ------------------------------------
1999 1998 1999 1998
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
OPERATING REVENUES ................................ $ 22,686,417 $ 18,408,322 $ 45,437,021 $ 34,755,725
OPERATING EXPENSES:
Salaries wages, and benefits ................... 3,898,023 3,931,179 7,861,317 7,824,621
Rent and purchased transportation:
Related Party ............................... 1,829,100 1,829,100 3,638,100 3,638,100
Other ....................................... 6,694,947 4,276,614 13,768,185 7,568,984
Fuel ........................................... 1,607,744 1,381,577 2,967,369 2,720,289
Operating and maintenance
(exclusive of depreciation shown
separately below) ........................... 5,353,351 3,957,817 12,757,183 7,200,223
Taxes and licenses ............................. 174,587 116,885 389,305 248,082
Insurance and claims ........................... 634,908 409,253 1,166,212 909,240
Communications and utilities ................... 206,156 212,359 415,457 354,466
Depreciation and amortization .................. 1,156,611 891,088 2,224,056 1,625,409
Other operating expenses ....................... 990,573 991,578 2,162,855 1,969,397
----------- ----------- ----------- -----------
22,546,000 17,997,450 47,375,039 34,058,811
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS)............................ 140,417 410,872 (1,938,018) 696,914
NONOPERATING INCOME
(EXPENSE):
Interest expense, net........................... (816,695) (203,100) (1,469,488) (388,697)
Gain on sale of equipment....................... 48,866 100,455 79,283 128,965
----------- ----------- ----------- -----------
(767,829) (102,645) (1,390,205) (259,732)
----------- ----------- ----------- -----------
(LOSS) INCOME BEFORE BENEFIT
(PROVISION) FOR INCOME TAXES (627,412) 308,227 (3,328,223) 437,182
BENEFIT (PROVISION) FOR INCOME TAXES .............. 228,035 (159,129) 1,245,167 (218,928)
=========== =========== ========== ===========
NET (LOSS) INCOME $ (399,377) $ 149,098 $(2,083,056) $ 218,254
=========== =========== ========== ===========
NET (LOSS) INCOME PER
SHARE .......................................... $ (0.04) $ 0.02 $ (0.21) $ 0.02
=========== =========== ========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING ............................. 9,777,500 9,777,500 9,777,500 9,777,500
=========== =========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRAILER BRIDGE, INC.
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1999 1998
----------------- -------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,336,157 $ 5,561,996
Trade receivables, less allowance for doubtful
accounts of $1,305,754 and $1,093,403 12,105,320 13,491,451
Other receivables 2,771,290 1,376,576
Prepaid expenses 986,470 840,887
Due from related party - 552,134
-------------- --------------
Total current assets 19,199,237 21,823,044
Property and equipment, net 65,529,069 62,054,638
Goodwill, less accumulated amortization of
$323,017 and $311,322 834,231 857,620
Restricted cash and investments 675,637 1,190,918
Other assets 4,488,024 3,302,869
============== ==============
TOTAL ASSETS $ 90,726,198 $ 89,229,089
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 6,949,172 $ 7,341,141
Other accrued liabilities 4,714,343 6,017,108
Current portion of notes payable 4,310,724 3,988,067
Current portion of capital lease obligations 44,860 42,945
Unearned revenue 380,799 470,684
Due to related party 369,811 -
-------------- --------------
Total current liabilities 16,769,709 17,859,945
Notes payable, less current portion 29,092,464 31,399,115
Revolving line of credit 15,550,000 8,550,000
Capital lease obligations, less current portion 53,154 76,102
-------------- --------------
TOTAL LIABILITIES 61,465,327 57,885,162
-------------- --------------
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 1999 and 1998 97,775 97,775
Additional paid-in capital 37,982,818 37,982,818
Accumulated deficit in earnings (8,819,722) (6,736,666)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 29,260,871 31,343,927
============== ==============
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 90,726,198 $ 89,229,089
============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRAILER BRIDGE, INC.
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1999 and June 30, 1998
(Unaudited)
June 30, June 30,
1999 1998
------------------- ------------------
<S> <C> <C>
Operating activities:
Net (loss) Income $ (2,083,056) $ 218,254
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization 2,249,056 1,625,409
Provision for doubtful accounts 739,997 192,346
Deferred income taxes (1,245,167) 253,402
Gain on sale of fixed assets (79,282) (128,645)
Decrease (increase) in:
Trade receivables 646,134 (1,080,730)
Other receivables (1,394,714) (457,484)
Prepaid expenses (145,583) (428,788)
Increase (decrease) in:
Accounts payable (391,969) 1,123,570
Accrued liabilities (1,302,765) (914,193)
Due to/from related party 921,945 (20,100)
Unearned revenue (89,885) (37,223)
-------------- -------------
Net cash (used in) provided by operating activities (2,175,289) 345,818
-------------- -------------
Investing activities:
Purchases & construction of property, plant & equipment (6,460,562) (22,813,819)
Proceeds from sale of equipment 861,884 783,890
Decrease in other assets 37,874 133,959
Decrease in restricted cash and investments 515,281 11,441,171
-------------- -------------
Net cash used in investing activities (5,045,523) (10,454,799)
-------------- -------------
Financing activities:
Proceeds from borrowing on notes payable 0 1,746,591
Proceeds from borrowing on revolving line of credit 7,000,000 0
Principal payments on notes payable (1,983,994) (1,496,791)
Debt issue costs 0 (209,086)
Principal payments under capital lease obligations (21,033) (19,267)
-------------- -------------
Net cash provided by financing activities 4,994,973 21,447
-------------- -------------
Net decrease in cash and cash equivalents (2,225,839) (10,087,534)
Cash and Cash Equivalents, beginning of the period 5,561,996 14,277,445
-------------- -------------
Cash and Cash Equivalents, end of period $ 3,336,157 $ 4,189,911
============== =============
</TABLE>
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1999
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, 1998 that appear in the Form 10-K.
2. SEGMENTS
The Company's primary business is to transport freight from its
origination point in the continental United States to San Juan, Puerto Rico and
from San Juan, Puerto Rico to its destination point in the continental United
States. The Company provides a domestic trucking system and a barge vessel
system, which work in conjunction with each other to service its customers. The
Company would not employ either system separately; therefore segment reporting
was not necessary.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS:
Three Months Ended June 30, 1999 and 1998
- -----------------------------------------
Total revenue was $22,686,417 for the three months ended June 30,
1999, an increase of $4,278,095 or 23.2% compared to the second quarter of 1998.
Trailer Bridge had 2.7% more overall vessel capacity deployed to Puerto Rico
compared to the second quarter of 1998 as full twice weekly sailing frequency
was initiated but not fully in place throughout the year earlier quarter. Core
trailer volume to Puerto Rico increased 50.9% and total car and other vehicle
volume was up 31.3% compared to the year earlier period. As a result, core
trailer revenue to Puerto Rico increased $3,071,883 or 32.2% and car and other
vehicle revenue increased $1,023,281 or 25.4% compared to the year earlier
period. For the second quarter, revenue from shipper owned or leased equipment
moving to Puerto Rico decreased $71,300 or 5.7% from the year earlier period.
Volume from Puerto Rico increased 15.4% while related revenue increased $96,028
or 4.0% compared to the second quarter of 1998. Total non-Puerto Rico revenue of
$1,318,806 represented an increase of 13.6% from the second quarter of 1998.
Second quarter operating income was $140,417, a decrease of $270,455
from the $410,872 operating income in the year earlier period. Operating income
was lower compared to the year earlier period due to $709,335 of additional
costs related to the disruption resulting from the loss of use of the San Juan
ramp structure due to Hurricane Georges. As a result, Trailer Bridge's operating
ratio was 99.4% during the second quarter of 1999 compared to the 97.8%
operating ratio during the year earlier period. Net interest expense of $816,695
was up $613,595 from the year earlier period that included significant interest
income on short-term investments. During the second quarter of 1999, Trailer
Bridge also had a gain of $48,866 related to the sale of older trailer
equipment.
The $709,335 of estimated additional costs related to the hurricane
situation included $422,123 in operating and maintenance costs (comprised
primarily of stevedoring and port related items), $257,883 in rent and purchased
transportation (comprised primarily of terminal equipment rental, trucking
expense in San Juan and the U.S. and revenue equipment rental), and $29,329 in
salaries and wages.
The San Juan ramp structure was back in service in mid-April but
further refinements were needed before stevedoring related costs began better
resembling pre-Hurricane Georges levels as they did later in the quarter.
Throughout the second quarter, stevedoring related costs lessened as Hurricane
Georges related cost dissipated.
Loss before income taxes for the second quarter was $627,412, a
decrease of $935,639 from net income of $308,227 for the year earlier period.
After income taxes, net loss for the second quarter was $399,377 compared to net
income of $149,098 for the year earlier period. Net loss per share was $.04 for
the second quarter compared to net income per share of $.02 for the year earlier
period.
For the second quarter of 1999, total volume to Puerto Rico including
cars and other vehicles grew 36.6% compared to the same period last year, well
above the 2.7% increase in deployed vessel capacity. Total volumes from Puerto
Rico grew 15.4% or also well above the growth in deployed vessel capacity.
During that period, total revenue to and from Puerto Rico increased 27.1% and
4.0%, respectively, implying reductions of 7.0% and 9.9%, respectively, in the
overall average yield on Trailer Bridge's Puerto Rico business compared to the
same period last year. The Company's Puerto Rico deployed vessel capacity
utilization during the second quarter was 90.6% to Puerto Rico and 30.6% from
Puerto Rico. These were above comparable figures of 68.1% to Puerto Rico and
28.0% from Puerto Rico during the second quarter of 1998. They are, however,
well below the benchmark utilization of 96.0% and 51.6% to and from Puerto Rico
achieved during all of 1995.
Six Months Ended June 30, 1999 and 1998
- ---------------------------------------
Total revenue was $45,437,021 for the six months ended June 30, 1999,
an increase of $10,681,296 or 30.7% compared to the six months ended June 30,
1998. Trailer Bridge had 14.8% more overall vessel capacity deployed to Puerto
Rico compared to the six months ended June 30, 1998 as full twice weekly sailing
frequency was initiated but not fully in place throughout the prior year period.
Core trailer volume to Puerto Rico increased 60.1% and total car and other
vehicle volume was up 21.8% compared to the six months ended June 30, 1998. As a
result, core trailer revenue to Puerto Rico increased $8,325,999 or 46.8% and
car and other vehicle revenue increased $1,898,745 or 25.1% compared to the six
months ended June 30, 1998. For the six months ended June 30, 1999, revenue from
shipper owned or leased equipment moving to Puerto Rico increased $130,212 or
5.1% from the six months ended June 30, 1998. Volume from Puerto Rico increased
16.5% while related revenue increased $158,943 or 3.6% compared to the six
months ended June 30, 1998. Total non-Puerto Rico revenue of $2,406,495
represented an increase of $8,196 from the six months ended June 30, 1998.
Operating loss for the six months ended June 30, 1999 was $1,938,018, a
decrease of $2,634,932 from the $696,914 operating income in the six months
ended June 30, 1998. Operating income was lower compared to the six months ended
June 30, 1999 due to $3,092,245 of additional costs related to the disruption
resulting from the loss of use of the San Juan ramp structure due to Hurricane
Georges. Approximately $2.3 million of these costs occurred in the first quarter
of 1999 and approximately $700,000 of these costs occurred in the early part of
the second quarter of 1999. As a result, Trailer Bridge's operating ratio was
104.3% during the six months ended June 30, 1999 compared to the 98.0% operating
ratio during the six months ended June 30, 1998. Net interest expense of
$1,469,488 was up $1,080,791 from the six months ended June 30, 1998 that
included significant interest income on short-term investments. During the six
months ended June 30, 1999, Trailer Bridge also had a gain of $79,283 related to
the sale of older trailer equipment.
The $3,092,245 of estimated additional costs related to the hurricane
situation included $1,598,946 in operating and maintenance costs (comprised
primarily of stevedoring and port related items), $1,263,113 in rent and
purchased transportation (comprised primarily of terminal equipment rental,
trucking expense in San Juan and the U.S. and revenue equipment rental),
$150,852 in salaries and wages, $17,449 in insurance and claims and $61,885 in
communications and other operating expenses.
Loss before income taxes for the six months ended was $3,328,223, a
decrease of $3,765,405 from the income before income taxes of $437,182 for the
six months ended June 30, 1998. After income taxes, net loss for the six months
ended June 30, 1999 was $2,083,056 compared to net income of $218,254 for the
six months ended June 30, 1998. Net loss per share was $.21 for the six months
ended June 30, 1999 compared to net income per share of $.02 for the six months
ended June 30, 1998.
For the six months ended June 30, 1999, total volume to Puerto Rico
including cars and other vehicles grew 46.0% compared to the six months ended
June 30, 1998, well above the 14.8% increase in deployed vessel capacity. Total
volumes from Puerto Rico grew 14.8% slightly below the 16.5% growth in deployed
vessel capacity. During the six months ended June 30, 1999, total revenue to and
from Puerto Rico increased 37.1% and 7.1%, respectively, implying reductions of
6.1% and 6.7%, respectively, in the overall average yield on Trailer Bridge's
Puerto Rico business compared to the six months ended June 30,1998. The
Company's Puerto Rico deployed vessel capacity utilization during the six months
ended June 30, 1999 was 89.7% to Puerto Rico and 28.7% from Puerto compared to
70.5% and 29.1%, respectively, for the six months ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, available cash amounted to $3.3 million, working
capital was $2.4 million and stockholders equity was equal to $29.3 million. Net
cash used by operations was $2.2 million in the six months ended June 30, 1999
compared to net cash provided by operations of $345,818 in the same period in
1998. Net cash provided by operations in the second quarter of 1999 was $228,086
a significant improvement over the $2.4 million used in the first quarter of
1999, reflecting the dissipation of Hurricane Georges related stevedoring
expenses throughout the second quarter. Net cash used in investing activities
amounted to $5.0 million in the six month period ending June 30, 1999 reflecting
$6.5 million in capital expenditures partially offset by a decrease of
restricted cash and investments of $515,281 representing the proceeds of the
Company's Title XI bond issuances which were used to fund the construction of
the Company's new Triplestack Box Carriers, the last of which was delivered in
the period, and $861,884 in proceeds from the sale of older trailer equipment.
Net cash provided by financing activities was $5.0 million consisting of a $7.0
million draw down under the Company's revolving credit facility partially offset
by $2.0 million in principal payments on notes payable. The Company voluntarily
reduced the capacity of its revolving credit facility to $22 million. The
Company does not expect to utilize this revolving credit facility for the
remainder of 1999.
Management believes that cash flow from operations combined with
equipment financings will be adequate to meet the Company's debt service
requirements, its anticipated capital expenditures, and to meet its working
capital needs for the remainder of 1999.
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 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 were implemented throughout the
year and finally tested on July 1, 1999. Based on the results of the testing,
Management does not anticipate any Year 2000 issues that will materially impact
on operations or operating results.
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's contingency plan is designed to assure that the Company
will be able to continue to provide services in the event that third party
customers or suppliers fail to properly respond to their Year 2000 issues.
FORWARD-LOOKING STATEMENTS
This report contains statements that 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 the risks of weather, economic recessions, changes in
demand for transportation services offered by the Company, and changes in rate
levels for transportation services offered by the Company.
<PAGE>
PART II
OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders
The shareholders of the Company voted on one item at the Annual Meeting of
Shareholders held on May 18, 1999:
1. The election of four directors, to terms ending in 2000.
Votes were cast for election of directors as follows:
Nominee Votes For Votes Withheld
------- --------- --------------
Malcom P. McLean 3,522,769 19,720
John D McCown 3,522,769 19,720
Kenneth G. Younger 3,522,769 19,720
Artis James 3,520,269 22,220
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
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
TRAILER BRIDGE, INC.
Date: August 13, 1999 By: /s/ John D. McCown
---------------------------------
John D. McCown
Chairman and Chief
Executive Officer
Date: August 13, 1999 By: /s/ Mark A. Tanner
---------------------------------
Mark A. Tanner
Vice President of
Administration and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the
condensed financial statements of Trailer Bridge, Inc. as of and for the 6
months ended June 30, 1999 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,336,157
<SECURITIES> 0
<RECEIVABLES> 13,411,073
<ALLOWANCES> 1,305,754
<INVENTORY> 0
<CURRENT-ASSETS> 19,199,237
<PP&E> 74,361,091
<DEPRECIATION> 8,832,022
<TOTAL-ASSETS> 90,726,198
<CURRENT-LIABILITIES> 16,769,710
<BONDS> 33,403,188
0
0
<COMMON> 97,775
<OTHER-SE> 29,163,095
<TOTAL-LIABILITY-AND-EQUITY> 90,726,198
<SALES> 0
<TOTAL-REVENUES> 22,686,417
<CGS> 0
<TOTAL-COSTS> 22,546,000
<OTHER-EXPENSES> 767,829
<LOSS-PROVISION> 268,917
<INTEREST-EXPENSE> 816,695
<INCOME-PRETAX> (627,412)
<INCOME-TAX> (228,035)
<INCOME-CONTINUING> (399,377)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (399,377)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
