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, 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 September 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 nine month periods ended September
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
Nine Months Ended September 30, 1999 and 1998 (unaudited) Page 3
Balance Sheets as of
September 30, 1999 and December 31, 1998 (unaudited) Page 4
Statements of Cash Flows for the
Nine Months Ended September 30, 1999 and 1998 (unaudited) Page 5
Notes to Financial Statements as of
September 30, 1999 Page 6
2
<PAGE>
<TABLE>
TRAILER BRIDGE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------------------- --------------------------------
1999 1998 1999 1998
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
OPERATING REVENUES ............................ $ 20,625,799 $ 18,851,977 $ 66,062,820 $ 53,607,702
OPERATING EXPENSES:
Salaries wages, and benefits ............... 4,109,261 4,149,018 11,970,579 11,973,639
Rent and purchased transportation:
Related Party ........................... 1,849,200 1,249,200 5,487,300 4,887,300
Other ................................... 6,276,954 5,121,110 20,045,138 12,690,094
Fuel ....................................... 1,776,631 1,361,319 4,744,000 4,081,608
Operating and maintenance
(exclusive of depreciation shown
separately below) ....................... 2,214,603 4,400,266 14,971,786 11,600,489
Taxes and licenses ......................... 161,548 94,486 550,854 342,568
Insurance and claims ....................... 231,355 490,345 1,397,567 1,399,585
Communications and utilities ............... 262,607 210,467 676,091 564,933
Depreciation and amortization .............. 1,214,478 933,162 3,463,553 2,558,571
Other operating expenses ................... 1,064,988 1,240,396 3,229,795 3,209,793
---------------- --------------- ---------------- ---------------
19,161,625 19,249,769 66,536,663 53,308,580
---------------- --------------- ---------------- ---------------
OPERATING INCOME (LOSS) ....................... 1,464,174 (397,792) (473,843) 299,122
NONOPERATING INCOME
(EXPENSE):
Interest expense, net....................... (889,423) (305,025) (2,358,912) (693,722)
Gain on sale of equipment................... 4,008 61,600 83,291 190,565
---------------- --------------- ---------------- ---------------
(885,415) (243,425) (2,275,621) (503,157)
---------------- --------------- ---------------- ---------------
INCOME (LOSS) BEFORE (PROVISION)
BENEFIT FOR INCOME TAXES.................... 578,759 (641,217) (2,749,464) (204,035)
BENEFIT (PROVISION) FOR INCOME TAXES .......... (233,142) 205,612 1,012,025 (13,316)
---------------- --------------- ---------------- ---------------
NET INCOME (LOSS) $ 345,617 $ (435,605) $ (1,737,439) $ (217,351)
================ =============== ================ ===============
NET INCOME (LOSS) PER
SHARE ...................................... $ 0.04 $ (0.04) $ (0.18) $ (0.02)
================ =============== ================ ===============
WEIGHTED AVERAGE
SHARES OUTSTANDING ......................... 9,777,500 9,777,500 9,777,500 9,777,500
================ =============== ================ ===============
</TABLE>
3
<PAGE>
<TABLE>
TRAILER BRIDGE, INC.
BALANCE SHEETS
(Unaudited)
<CAPTION>
September 30, December 31,
1999 1998
------------------ -----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,991,295 $ 5,561,996
Trade receivables, less allowance for doubtful
accounts of $1,327,446 and $1,093,403 11,470,690 13,491,451
Other receivables 3,823,137 1,376,576
Prepaid expenses 1,217,209 840,887
Due from related party - 552,134
------------------ -----------------
Total current assets 18,502,331 21,823,044
Property and equipment, net 65,041,262 62,054,638
Goodwill, less accumulated amortization of
$334,712 and $311,322 822,536 857,620
Restricted cash and investments 683,391 1,190,918
Other assets 4,248,255 3,302,869
================== =================
TOTAL ASSETS $ 89,297,775 $ 89,229,089
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 7,238,978 $ 7,341,141
Other accrued liabilities 4,223,077 6,017,108
Current portion of notes payable 4,138,967 3,988,067
Current portion of capital lease obligations 45,875 42,945
Unearned revenue 392,213 470,684
Due to related party 80,400 -
------------------ -----------------
Total current liabilities 16,119,510 17,859,945
Notes payable, less current portion 27,980,471 31,399,115
Revolving line of credit 15,550,000 8,550,000
Capital lease obligations, less current portion 41,306 76,102
------------------ -----------------
TOTAL LIABILITIES 59,691,287 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 (8,474,105) (6,736,666)
------------------ -----------------
TOTAL STOCKHOLDERS' EQUITY 29,606,488 31,343,927
================== =================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 89,297,775 $ 89,229,089
================== =================
</TABLE>
4
<PAGE>
<TABLE>
TRAILER BRIDGE, INC.
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1999 and September 30, 1998
(Unaudited)
<CAPTION>
September 30, September 30,
1999 1998
------------------- ------------------
<S> <C> <C>
Operating activities:
Net (loss) income $ (1,737,439) $ (217,351)
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization 3,463,553 2,558,571
Provision for doubtful accounts 1,223,445 542,964
Deferred income taxes (1,012,025) 47,790
Gain on sale of fixed assets (83,291) (190,565)
Decrease (increase) in:
Trade receivables 797,316 (3,549,782)
Other receivables (2,446,561) (155,396)
Prepaid expenses (376,322) (501,213)
Increase (decrease) in:
Accounts payable (102,163) (170,383)
Accrued liabilities (1,794,031) 428,294
Due to/from related party 632,534 (623,609)
Unearned revenue (78,471) 716,681
------------------- ------------------
Net cash (used in) provided by operating activities (1,513,474) (1,113,999)
------------------- ------------------
Investing activities:
Purchases & construction of property, plant & equipment (7,279,722) (30,244,227)
Proceeds from sale of equipment 981,127 1,089,390
Decrease in other assets 33,432 127,246
Decrease in restricted cash and investments 507,527 15,563,304
------------------- ------------------
Net cash used in investing activities (5,757,617) (13,464,287)
------------------- ------------------
Financing activities:
Proceeds from borrowing on notes payable 0 7,246,591
Proceeds from borrowing on revolving line of credit 7,000,000 0
Principal payments on notes payable (3,267,744) (2,758,043)
Debt issue costs 0 (210,450)
Principal payments under capital lease obligations (31,866) (29,171)
------------------- ------------------
Net cash provided by financing activities 3,700,390 4,248,927
------------------- ------------------
Net decrease in cash and cash equivalents (3,570,701) (10,329,359)
Cash and Cash Equivalents, beginning of the period 5,561,996 14,277,445
------------------- ------------------
Cash and Cash Equivalents, end of period $ 1,991,295 $ 3,948,086
=================== ==================
</TABLE>
5
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 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 which 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.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS:
Three Months Ended September 30, 1999 and 1998
- ----------------------------------------------
Total revenue for the three months ended September 30, 1999, was
$20,625,799, an increase of $1,773,822 or 9.4% compared to the third quarter of
1998. Trailer Bridge had 7.5% less overall vessel capacity deployed to Puerto
Rico compared to the third quarter of 1998 primarily due to one less voyage of
Trailer Bridge's large roll-on, roll-off vessels during the period because of
Hurricane Floyd. The tugboat that was towing Trailer Bridge's vessel the week
of the storm suffered a casualty and needed to be replaced. While neither
Trailer Bridge's vessel nor its cargo was damaged by this marine casualty, the
time and recovery efforts of substituting a new tug caused a major schedule
disruption that resulted in one less roll-on, roll-off voyage.
Core trailer volume to Puerto Rico increased .5% compared to the year
earlier period and total car and other vehicle volume was up 15.3% compared to
the year earlier period. As a result, core trailer revenue to Puerto Rico
increased $364,726 or 3.2% compared to the year earlier period and car and other
vehicle revenue increased $281,185 or 8.7% compared to the year earlier period.
For the third quarter, revenue from shipper owned or leased equipment moving to
Puerto Rico decreased $205,216 or 18.0% from the year earlier period. Volume
from Puerto Rico increased 37.6% while related revenue increased $569,585 or
31.2% compared to the third quarter of 1998. Total non-Puerto Rico revenue of
$1,893,661 represented an increase of 67.6% from the third quarter of 1998.
Third quarter operating income was $1,464,174, an increase of
$1,861,966 from the $397,792 operating loss in the year earlier period.
Operating income during the period was significantly impacted by two
non-recurring events that were partially offsetting. During the period Trailer
Bridge recognized a recovery of certain operating expenses in the amount of
$3,710,000 related to costs associated with the floating ramp structure formerly
used in Jacksonville which have been determined to be insurable losses and
certain other excess miscellaneous expenses related to the floating ramp system.
The recovery was partially offset by the non-recurring revenue effect of the
lost voyage described above. Revenue for the roll-on, roll-off voyage
immediately preceding was $1,108,660. Continuing rate pressure in the Puerto
Rico freight market further offset the non-recurring insurance amount. As a
result of the above, the operating ratio was 92.9% during the third quarter of
1999 compared to the 102.1% operating ratio during the year earlier period. Net
interest expense of $889,423 was up $584,398 from the year earlier period due to
increased debt. During the third quarter of 1999, Trailer Bridge also had a gain
of $4,008 related to the sale of older trailer equipment.
7
<PAGE>
Income before income taxes for the third quarter was $578,759, an
increase of $1,219,976 from the year earlier period. After income taxes, net
income for the third quarter was $345,617 compared to net loss of $435,605 for
the year earlier period. Net income per share was $.04 for the third quarter
compared to net loss per share of $.04 for the year earlier period.
For the third quarter of 1999, total volume to Puerto Rico including
cars and other vehicles decreased 1.7% compared to the same period last year,
above the 7.5% decrease in deployed southbound vessel capacity. Total volumes
from Puerto Rico grew 37.8% or well above the 2.7% decrease in deployed
northbound vessel capacity. During that period, total revenue to and from Puerto
Rico increased 2.8% and 31.2%, respectively, implying an increase of 4.6% and a
decrease of 4.8%, 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 third quarter was 82.7% to
Puerto Rico and 32.8% from Puerto Rico. These were above comparable figures of
77.8% to Puerto Rico and 23.2% from Puerto Rico during the third quarter of
1998. The third quarter capacity utilization levels continue to be below the
benchmark utilization of 96.0% and 51.6% to and from Puerto Rico achieved during
all of 1995.
Nine Months Ended September 30, 1999 and 1998
- ----------------------------------------------
Total revenue was $66,062,820 for the nine months ended September 30,
1999, an increase of $12,455,118 or 23.2% compared to the nine months ended
September 30, 1998. Trailer Bridge had 8.1% more overall vessel capacity
deployed to Puerto Rico compared to the nine months ended September 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
35.8% and total car and other vehicle volume was up 73.9% compared to the nine
months ended September 30, 1998. As a result, core trailer revenue to Puerto
Rico increased $8,690,725 or 29.7% and car and other vehicle revenue increased
$2,179,930 or 20.2% compared to the nine months ended September 30, 1998. For
the nine months ended September 30, 1999, revenue from shipper owned or leased
equipment moving to Puerto Rico decreased $75,004 or 2.0% from the nine months
ended September 30, 1998. Volume from Puerto Rico increased 21.0% while related
revenue increased $638,098 or 10.3% compared to the nine months ended September
30, 1998. Total non-Puerto Rico, including Atlantic Highway, revenue of
$4,300,156 represented an increase of $771,738 from the nine months ended
September 30, 1998.
Operating loss for the nine months ended September 30, 1999 was
$473,843, a decrease of $772,965 from the $299,122 operating income in the nine
months ended September 30, 1998. Operating income was lower compared to the nine
months ended September 30, 1998 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. These additional expenses were
offset in the third quarter by a cost recovery of $3.7 million from an unrelated
ramp casualty. As a result, Trailer Bridge's operating ratio was 100.7% during
the nine months ended September 30, 1999 compared to the 99.4% operating ratio
during the nine months ended September 30, 1998. Net interest expense of
$2,358,912 was up $1,665,190 from the nine months ended September 30, 1998 that
included significant interest income on short-term investments. During the nine
months ended September 30, 1999, Trailer Bridge also had a gain of $83,921
related to the sale of older trailer equipment.
8
<PAGE>
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 nine months ended September 30, 1999
was $2,749,464, a decrease of $2,545,429 from the loss before income taxes of
$204,035 for the nine months ended September 30, 1998. After income taxes, net
loss for the nine months ended September 30, 1999 was $1,737,439 compared to a
net loss of $217,351 for the nine months ended September 30, 1998. Net loss per
share was $.18 for the nine months ended September 30, 1999 compared to net loss
per share of $.02 for the nine months ended September 30, 1998.
For the nine months ended September 30, 1999, total volume to Puerto
Rico including cars and other vehicles grew 27.3% compared to the nine months
ended September 30, 1998, well above the 6.6% increase in deployed vessel
capacity. Total volumes from Puerto Rico grew 21.9% also well above the 9.6%
growth in deployed vessel capacity. During the nine months ended September 30,
1999, total revenue to and from Puerto Rico increased 24.7% and 14.1%,
respectively, implying reductions of 2.1% and 6.4%, respectively, in the overall
average yield on Trailer Bridge's Puerto Rico business compared to the nine
months ended September 30, 1998. The Company's Puerto Rico deployed vessel
capacity utilization during the nine months ended September 30, 1999 was 87.4%
to Puerto Rico and 30.0% from Puerto compared to 73.2% and 27.0%, respectively,
for the nine months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, available cash amounted to $2.0 million,
working capital was $2.3 million and Stockholders equity was equal to $29.6
million. Net cash used by operations was $1.5 million in the nine months ended
September 30, 1999 compared to net cash used by operations of $1.1 million in
the same period in 1998. Net cash used in investing activities amounted to $5.8
million in the nine-month period ending September 30, 1999, reflecting $7.3
million in capital expenditures. This was partially offset by a decrease of
restricted cash and investments of $507,527 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 first quarter. Net cash provided by financing activities was $3.7 million
consisting of a $7.0 million draw down under the Company's revolving credit
facility partially offset by $3.3 million in principal payments on notes
payable.
9
<PAGE>
Preliminary review of October, 1999 results indicates that the Company
generated a profit and positive cash flow from operations for that period
sufficient to meet all obligations. Management believes that available cash
balances and cash flow from operations combined with possible transactions with
Kadampanattu Corp., an affiliate, will be adequate to meet the Company's debt
service requirements, its anticipated capital expenditures, and to meet its
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 Company's computer hardware, operating systems, dispatch applica-
tions, 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. 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 1999, and were approximately $75,000 in
1998 and $15,000 in 1999.
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.
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
10
<PAGE>
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.
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
(b) Reports on Form 8-K - None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
TRAILER BRIDGE, INC.
Date: November 15, 1999 By: /s/ John D. McCown
---------------------------------
John D. McCown
Chairman and Chief
Executive Officer
Date: November 15, 1999 By: /s/ Mark A. Tanner
---------------------------------
Mark A. Tanner
Vice President of Administration
and Chief Financial Officer
12
<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 9
months ended September 30, 1999 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,991,295
<SECURITIES> 0
<RECEIVABLES> 12,798,136
<ALLOWANCES> 1,327,446
<INVENTORY> 0
<CURRENT-ASSETS> 18,502,331
<PP&E> 75,044,666
<DEPRECIATION> 10,003,404
<TOTAL-ASSETS> 89,297,775
<CURRENT-LIABILITIES> 16,119,511
<BONDS> 32,119,438
0
0
<COMMON> 97,775
<OTHER-SE> 29,508,712
<TOTAL-LIABILITY-AND-EQUITY> 89,297,775
<SALES> 0
<TOTAL-REVENUES> 20,625,799
<CGS> 0
<TOTAL-COSTS> 19,161,625
<OTHER-EXPENSES> 885,415
<LOSS-PROVISION> 483,448
<INTEREST-EXPENSE> 889,423
<INCOME-PRETAX> 578,759
<INCOME-TAX> 233,142
<INCOME-CONTINUING> 345,617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 345,617
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
