SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
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 No.)
incorporation or organization)
10405 New Berlin Road E., Jacksonville, FL 32226
(904) 751-7100
(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 report 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. [ ]
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 23, 2000 was
$4,657,500 (based upon $1.50 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 30, 2000, 9,777,500 shares of the registrant's common stock, par
value $.01 per share, were outstanding.
<PAGE>
Item 8. Financial Statements and Supplementary Data
This Amendment to the Form 10-K of Trailer Bridge, Inc. is being filed
for the purpose of correcting 3 typographical errors in the line items
Current portion of revolving line of credit, Total current liabilities and Total
Liabilities on the Balance Sheet.
TRAILER BRIDGE, INC.
Financial Statements for the Three Years in the Period Ended December
31, 1999 and Independent Auditors' Report
* * * * * *
2
<PAGE>
TRAILER BRIDGE, INC.
Financial Statements for the Three Years
in the Period Ended December 31, 1999
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, 1999 and 1998, and the related statements of
operations, changes in stockholders' equity, and cash flows for the three years
in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche, LLP
Certified Public Accountants
Jacksonville, Florida
March 30, 2000
<PAGE>
TRAILER BRIDGE, INC.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,445,750 $ 5,561,996
Trade receivables, less allowance for doubtful
accounts of $1,368,514 and $1,093,403 12,535,138 13,491,451
Other receivables 76,498 1,376,576
Due from affiliate 2,750,200 552,134
Prepaid expenses 1,202,443 840,887
----------- -----------
Total current assets 19,010,029 21,823,044
PROPERTY AND EQUIPMENT, net 63,086,924 62,054,638
GOODWILL, less accumulated amortization of
$358,101 and $311,322 810,841 857,620
RESTRICTED CASH AND INVESTMENTS 691,419 1,190,918
OTHER ASSETS 4,463,425 3,302,869
----------- -----------
TOTAL ASSETS $ 88,062,638 $ 89,229,089
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,460,770 $ 7,341,141
Accrued liabilities 3,793,885 6,017,108
Current portion of notes payable 4,615,862 3,988,067
Current portion of revolving line of credit 1,943,750 -
Current portion of capital lease obligations 83,010 42,945
Unearned revenue 499,506 470,684
----------- -----------
Total current liabilities 18,396,783 17,859,945
NOTES PAYABLE, less current portion 26,762,440 31,399,115
REVOLVING LINE OF CREDIT, less current portion 13,606,250 8,550,000
CAPITAL LEASE OBLIGATIONS, less current portion 89,657 76,102
----------- -----------
TOTAL LIABILITIES 58,855,130 57,885,162
----------- -----------
COMMITMENTS (Notes 4, 7 and 12)
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 authorized
shares; 9,777,500 shares outstanding 97,775 97,775
Additional paid-in capital 37,982,818 37,982,818
Accumulated deficit (8,873,085) (6,736,666)
----------- -----------
Total stockholders' equity 29,207,508 31,343,927
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 88,062,638 $ 89,229,089
=========== ===========
</TABLE>
See notes to financial statements.
2
<PAGE>
TRAILER BRIDGE, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
OPERATING REVENUES $ 88,552,088 $ 77,240,644 $ 66,388,577
OPERATING EXPENSES:
Salaries, wages, and benefits 16,171,939 16,284,073 14,722,568
Compensation expense recognized
for stock option 8,528,670
Rent and purchased transportation:
Related party 7,336,500 6,736,500 7,500,000
Other 27,449,734 20,305,185 10,019,705
Fuel 6,645,479 5,701,701 5,617,199
Operating and maintenance (exclusive of
depreciation shown separately below) 18,541,337 19,849,857 12,869,034
Taxes and licenses 610,669 558,866 452,275
Insurance and claims 1,962,541 2,061,199 1,900,334
Communications and utilities 820,735 825,309 587,655
Depreciation and amortization 4,731,153 3,527,662 2,597,887
Other operating expenses 4,402,351 4,435,941 3,409,127
----------- ----------- -----------
88,672,438 80,286,293 68,204,454
----------- ----------- -----------
OPERATING LOSS (120,350) (3,045,649) (1,815,877)
NONOPERATING INCOME (EXPENSE):
Interest expense, net:
Related party (278,641)
Other (3,339,382) (1,035,769) (269,990)
Gain (loss) on sale of equipment, net 81,499 207,255 (80,851)
----------- ----------- ------------
(3,257,883) (828,514) (629,482)
----------- ----------- ------------
LOSS BEFORE PROVISION AND PRO FORMA
PROVISION FOR INCOME TAXES (3,378,233) (3,874,163) (2,445,359)
BENEFIT FOR INCOME TAXES 1,241,814 1,358,133 426,566
----------- ----------- -----------
NET LOSS BEFORE PRO FORMA PROVISION
FOR INCOME TAXES (2,136,419) (2,516,030) (2,018,793)
PRO FORMA PROVISION FOR INCOME TAXES (NOTE 2) (397,329)
----------- ----------- -----------
PRO FORMA NET LOSS (NOTE 2) $ (2,136,419) $ (2,516,030) $ (2,416,122)
=========== =========== ===========
PRO FORMA NET LOSS
PER COMMON SHARE
Basic $ (0.22) $ (0.26) $ (0.30)
=========== =========== ===========
Diluted $ (0.22) $ (0.26) $ (0.30)
=========== =========== ===========
</TABLE>
See notes to financial statements.
3
<PAGE>
TRAILER BRIDGE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Retained
Common Stock Additional Earnings
---------------------------- Paid-in (Accumulated
Shares Amount Capital Deficit) Total
-------------- ------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 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
Net loss (2,516,030) (2,516,030)
---------- ------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 9,777,500 97,775 37,982,818 (6,736,666) 31,343,927
Net loss (2,136,419) (2,136,419)
---------- ------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1999 9,777,500 $ 97,775 $ 37,982,818 $ (8,873,085) $ 29,207,508
========== ======= =========== =========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
TRAILER BRIDGE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (2,136,419) $ (2,516,030) $ (2,018,793)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 4,731,153 3,574,132 2,597,887
Provision for uncollectible accounts 2,001,439 1,040,721 381,691
(Gain) loss on sale of equipment (81,499) (207,255) 80,851
Compensation expense recognized for stock options 8,528,670
Deferred income taxes (1,241,814) (1,332,642) (652,876)
Change in assets and liabilities:
(Increase) decrease in:
Trade receivables (1,045,126) (6,784,572) 176,581
Other receivables 1,300,078 (1,235,237) (141,339)
Due from affiliate (2,198,066) (612,434)
Prepaid expenses (361,556) (75,912) 199,996
Other assets 81,258 59,936 67,014
Increase (decrease) in:
Accounts payable 119,629 5,203,890 155,830
Accrued liabilities (2,223,223) 2,618,250 763,759
Unearned revenue 28,822 307,600 (60,543)
------------ ------------ ------------
Net cash (used in) provided by operating activities (1,025,324) 40,447 10,078,728
------------ ------------ ------------
INVESTING ACTIVITIES:
Due to affiliate (4,592,892)
Purchases and construction of property and equipment (6,548,900) (36,172,044 (20,434,204)
Proceeds from the sale of equipment 1,039,370 1,126,390 31,764
Decrease (increase) in restricted cash and investments 499,499 19,718,986 (20,909,904)
------------ ------------ ------------
Net cash used in investing activities (5,010,031) (15,326,668) (45,905,236)
------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from borrowings on notes payables 1,746,591 31,740,797
Proceeds from borrowings on revolving line of credit 7,000,000 8,550,000
Proceeds from sale of common stock 28,491,286
Payments on notes payable (4,008,880) (3,476,069) (3,650,278)
Payments of dividends (7,185,750)
Debt issue costs (210,450) (909,729)
Payments on capital lease obligations (72,011) (39,300) (41,294)
------------ ------------ ------------
Net cash provided by financing activities 2,919,109 6,570,772 48,445,032
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (3,116,246) (8,715,449) 12,618,524
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 5,561,996 14,277,445 1,658,921
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,445,750 $ 5,561,996 $ 14,277,445
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH
INVESTING AND FINANCING ACTIVITIES:
Cash paid for state income taxes $ 25,673 $ 134,127 $ 46,145
============ ============ ============
Cash paid for interest, net of amount capitalized:
Related party $ 283,653
Other $ 2,982,349 $ 2,249,445 419,739
------------ ------------ ------------
$ 2,982,349 $ 2,249,445 $ 703,392
============ ============ ============
Book value of like kind assets exchanged $ 610,041
============
Equipment acquired under capital lease agreements $ 125,631
============
</TABLE>
See notes to financial statements.
5
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND
1997
- --------------------------------------------------------------------------------
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 in the continental
United States, while marine transportation is offered primarily between
Newark, New Jersey, 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 4-25
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. Replacement 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 impair-
ment. 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.
6
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
- --------------------------------------------------------------------------------
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 and investments held by a
letter of credit for the continued use of a land-based ramp. These funds
have been invested in highly liquid interest bearing deposits, U.S.
Treasury bills and money market accounts 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 in July 1997. Under Subchapter S, the Company was not
subject to federal income taxes.
Earnings Per Share - Basic earnings per share ("EPS") is computed by
dividing earnings available to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution of securities that could share in the earnings.
Stock-Based Compensation - In accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation," ("SFAS No. 123") the Company has elected to
continue to account for its employee stock compensation plans under APB
Opinion No. 25 with pro-forma disclosures of net earnings and earnings per
share, as if the fair value based method of accounting defined in SFAS No.
123 had been applied. Under the intrinsic value based method, compensation
cost is the excess, if any, of the quoted market price of the stock at the
grant date or other measurement date over the amount an employee must pay
to acquire the stock. Under the fair value based method, compensation cost
is measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting period.
New Accounting Standards - In June 1998, the Financial Accounting Standards
Board (the "FASB") issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). This statement
establishes accounting and reporting standards for derivative instruments
and hedging activities. In June 1999, the FASB issued SFAS No. 137, which
deferred the effective date of adoption of SFAS No. 133 for one year. SFAS
No. 133 will be effective for the first quarter of the year ending December
31, 2001. Retroactive application to financial statements of prior periods
is not required. The Company has determined that the implementation of this
statement will not have a material impact on the financial statements.
7
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
- --------------------------------------------------------------------------------
2. PRO FORMA INCOME TAXES
For informational purposes, the statement of operations for year ended
December 31, 1997 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
the period.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1999 and 1998 consist of the
following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Land $ 917,885 $ 917,885
Construction in progress 182,993 6,739,792
Buildings and structures 2,575,070 2,542,581
Office furniture and equipment 2,842,401 2,396,311
Freight equipment 65,515,215 54,677,780
Leasehold improvements 1,939,969 1,355,871
Equipment under capital leases 388,736 263,105
Less accumulated depreciation and amortization (11,275,345) (6,838,687)
----------- -----------
Fixed assets, net $ 63,086,924 $ 62,054,638
=========== ===========
</TABLE>
Depreciation and amortization expense on property and equipment and
equipment under capital leases was $4,684,374, $3,480,882 and $2,551,108 in
1999, 1998 and 1997, respectively. Interest cost of $108,866 and $918,838 was
capitalized during 1999 and 1998, respectively.
4. TRANSACTIONS WITH AFFILIATED COMPANY
The Company leases two roll-on/roll-off barge vessels and the use of a ramp
system from an affiliate under operating lease agreements. The lease
payments are $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 renovations. Such
construction loan is scheduled to be repaid in quarterly installments with
a final maturity of April 1, 2001. 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 $7,336,500, $6,736,500 and $7,500,000 in
1999, 1998 and 1997, respectively. In the third quarter of 1998, the lease
payments to affiliate were reduced by a $600,000 non-recurring forgiveness
in recognition of the impact of Hurricane Georges and in consideration of
the efforts of the Company to recover and repair the San Juan triple-deck
ramp structure utilized by the two triple-deck barges.
In December 1999, the Company recovered from the affiliate $3,710,000 of
excess operating and maintenance expenses incurred during the period that
the Company had limited use of the floating ramp system. In return, the
Company waived any right to any insurance proceeds from the casualty to the
floating ramp system. The Company received $1,000,000 in December 1999 and
the balance was received in February and March 2000. Additional
8
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
- --------------------------------------------------------------------------------
amounts included in due from affiliate in 1999 and 1998 include prepaid
barge charter hire lease rent and reimbursable miscellaneous repair
payments made by the Company related to assets of the affiliate.
5. CAPITALIZED LEASE OBLIGATIONS
Future minimum lease payments under capitalized computer equipment leases
as of December 31, 1999 are as follows:
2000 $ 96,540
2001 94,496
--------
Total minimum lease payments 191,036
Interest portion (18,369)
--------
Present value of minimum lease payments 172,667
Less current portion (83,010)
--------
$ 89,657
========
6. NOTES PAYABLE
Following is a summary of notes payable at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
<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
with a carrying value of $19,197,049 at December 31, 1999;
amount is guaranteed by The United States of America
under the Title XI Federal Ship Financing Program $ 15,902,920 $ 16,579,640
Ship-financing bonds and notes (Title XI) totaling
$10,515,000 maturing on September 30, 2022; payable
in 50 semi-annual installments of principal and interest;
interest is fixed at 7.07%; collateralized by vessels with
a carrying value of $12,475,601 at December 31, 1999;
amount is guaranteed by The United States of America
under the Title XI Federal Ship Financing Program 9,673,800 10,094,400
Borrowings under a $25 million revolving credit and term
loan agreement maturing between April 1, 2000 and April 1,
2001; payable in monthly installments of principal and
interest; interest at fixed rates ranging from 7.38% to
8.08%; collateralized by tractors with a carrying value of
$4,765,791 at December 31, 1999 2,757,975 4,292,729
</TABLE>
9
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
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
$3,456,843 at December 31, 1999 1,810,383 2,814,648
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 $2,272,049 at
December 31, 1999 1,148,000 1,316,000
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
(9.32% at December 31, 1999); collateralized
by trailers with a carrying value of $353,675 at
December 31, 1999 85,224 289,765
----------- -----------
31,378,302 35,387,182
Less current portion (4,615,862) (3,988,067)
----------- -----------
$ 26,762,440 $ 31,399,115
=========== ===========
</TABLE>
The revolving line of credit requires principal payments of $971,875
quarterly beginning in September 2000 and matures on April 1, 2001. In
August 1998, the Company entered into a revolving credit and term loan
agreement. 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 plus the Applicable Margin then
applicable to Base Rate Loans, or (b) the Eurodollar Rate determined for
such Interest Period plus the Applicable Margin then applicable to
Eurodollar Rate Loans. The following is a summary of borrowings outstanding
under the agreement at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Revolving credit $ 15,550,000 $ 8,550,000
Term loan 2,757,975 4,292,729
----------- -----------
$ 18,307,975 $ 12,842,729
=========== ===========
</TABLE>
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.
At December 31, 1999, the Company was in non-compliance with certain
restrictive financial covenants related to the revolving credit and term
loan agreement. Effective March 30, 2000, the Company entered into a
limited waiver and amendment to the revolving credit and term loan
agreement (the "Amendment"). The Amendment provides for a waiver of
compliance with such covenants for the December 31, 1999 and earlier
measurement periods and revises each of the financial covenants for
future periods. The Amendment removes any additional borrowing capacity
under the revolving credit and term loan agreement, increases the interest
rate by .50% on June 30, 2000 and an additional .50% on September 30, 2000,
converts the oustanding revolving line of credit to a term loan on
August 31, 2000 and resets the maturity date of the agreement to April 1,
2001. The Company expects to be in compliance with the restrictive
covenants for 2000.
10
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
- --------------------------------------------------------------------------------
Following are maturities of long-term debt for each of the next five years:
2000 $ 6,559,612
2001 16,164,435
2002 1,265,320
2003 1,265,320
2004 1,265,320
Thereafter 20,408,295
-----------
$ 46,928,302
===========
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, 1999 are as follows:
2000 $ 25,485,000
2001 25,829,000
2002 25,287,000
2003 36,249,000
2004 14,363,000
Thereafter 60,049,000
------------
Total minimum payments required $ 187,262,000
------------
Lease expense for all operating leases, including leases with terms of less
than one year, was $23,484,809, $19,027,272 and $16,879,647 for 1999, 1998 and
1997.
8. ACCRUED LIABILITIES
1999 1998
Fringe benefits $ 903,661 $ 901,573
Marine expense 689,293 3,149,861
Salaries and wages 324,372 336,510
Other 1,876,559 1,629,164
---------- ----------
$ 3,793,885 $ 6,017,108
---------- ----------
11
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
- --------------------------------------------------------------------------------
9. INCOME TAXES
The components of the benefit (expense) for income taxes is comprised of
the following as of December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Current:
Federal $ 22,808 $ (201,164)
State 2,683 (25,146)
---------- ----------
25,491 (226,310)
---------- ----------
Deferred:
Federal $ 1,111,051 1,192,364 580,334
State 130,763 140,278 72,542
---------- ---------- ----------
1,241,814 1,332,642 652,876
---------- ---------- ----------
$ 1,241,814 $ 1,358,133 $ 426,566
========== ========== ==========
</TABLE>
Income taxes for the year ended December 31, 1999, 1998 and 1997 differ
from the amount computed by applying the statutory Federal corporate rate to
income before income taxes. The differences are reconciled as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Tax benefit at statutory Federal rate $ 1,148,599 $ 1,317,216 $ 831,422
Valuation allowance (900,000)
Nondeductible expenses (41,914) (51,136) (68,693)
State income taxes, net of federal benefit 135,129 154,966 39,334
Pro rata income allocated to S Corporation year (428,382)
Recognition of deferred tax liability 994,060
Other (62,913) (41,175)
---------- ---------- ----------
Total income tax benefit $ 1,241,814 $ 1,358,133 $ 426,566
========== ========== ==========
</TABLE>
12
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
- --------------------------------------------------------------------------------
The components of the Company's net deferred tax asset at December 31, 1999
and 1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Deferred tax assets:
Employee stock option $ 3,240,895 $ 3,240,895
Net operating loss 8,347,920 4,297,455
Accrued expense 165,091 189,475
Allowance for bad debts 520,035 415,493
----------- ----------
Gross deferred assets 12,273,941 8,143,318
Deferred tax liabilities:
Fixed asset basis 8,055,753 5,178,795
Other 90,856 79,005
----------- ----------
Gross deferred tax liabilities 8,146,609 5,257,800
Deferred tax asset valuation allowance 900,000 900,000
----------- ----------
Net deferred tax asset $ 3,227,332 $ 1,985,518
=========== ==========
</TABLE>
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 1999, 1998 and 1997 was not significant.
At December 31, 1999, the Company had available net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $21,968,000,
of which $489,000 will expire beginning in the year 2004. Under Internal
Revenue code Section 382, the $489,000 of NOL's become available in equal
amounts through the year of expiration. The remaining NOL's expire
beginning in 2018.
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.
13
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
- --------------------------------------------------------------------------------
Earnings Per Share:
For the years ended December 31, 1999, 1998 and 1997, outstanding options
to purchase shares of common stock at an exercise price of $2.25, $10.00
and $10.00 per share, respectively, were not included in the computation to
arrive at diluted EPS because the options' exercise price exceeded 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. The option was
immediately exercisable with a term of 10 years. In connection with this
option, the Company recorded a non-recurring, non-cash charge to
compensation expense of $8,528,670 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.
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 Plan to eligible employees under the Plan. Awarded options that
expire unexercised or are forfeited become available again for issuance
under the Plan. The options vest equally over a period of five years.
A summary of the status of options under the Company's stock-based
compensation plans as of December 31, 1999, 1998 and 1997 is presented
below:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- -------------------------- --------------------------
Exercise Exercise Exercise
Options Price Options Price Options Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 521,182 $ 10.00 468,126 $ 10.00
Granted 212,600 2.25 130,000 10.00 471,000 $ 10.00
Forfeited (22,524) 9.60 (76,944) 10.00 (2,874) 10.00
Outstanding at end of year 711,258 7.70 521,182 10.00 468,126 10.00
Grants exercisable at year-end 178,923 93,262
Weighted-average fair value of
options granted during the year $ 1.87 $ 7.36 $ 7.13
</TABLE>
14
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
- --------------------------------------------------------------------------------
The following table summarizes information about the outstanding grants at
December 31, 1999:
<TABLE>
<CAPTION>
Weighted-Average
Exercise Options Remaining Options
Price Outstanding Contractual Life Exercisable
-------- ----------- ---------------- ------------
<S> <C> <C> <C>
$ 10.00 499,808 7.8 years 178,923
2.25 211,450 9.2 years
</TABLE>
Remaining non-exercisable options as of December 31, 1999 become
exercisable as follows:
2000 142,252
2001 142,252
2002 142,252
2003 63,290
2004 42,289
-------
532,335
=======
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.
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
As reported
Pro forma net loss $ (2,136,419) $ (2,516,030) $ (2,416,122)
Net loss per share - basic and diluted (0.22) (0.26) (0.30)
Pro forma for SFAS No. 123
Net loss $ (2,649,307) $ (2,930,148) $ (2,588,671)
Net loss per share - basic and diluted (0.27) (0.30) (0.32)
</TABLE>
The Company used the Black-Scholes option-pricing model to determine the
fair value of grants made. The following assumptions were applied in
determining the pro forma compensation cost:
<TABLE>
<CAPTION>
Years ended December 31 1999 1998 1997
<S> <C> <C> <C>
Risk-free interest rate 5.34% 5.76% 6.16%
Expected dividend yield 0% 0% 0%
Expected option life 7 years 7 years 7 years
Expected stock price volatility 96.17% 81.93% 69.32%
</TABLE>
15
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
- --------------------------------------------------------------------------------
11. EMPLOYEE BENEFIT PLANS
The Company has a 401(k) Plan which covers substantially all employees in
he United States. Participants are allowed to make contributions 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 $175,000, $214,000 and
$176,000 to the Plan during 1999, 1998 and 1997. The Company made an
optional contribution of $0, $0 and $39,000 in December 1999, 1998 and
1997.
In addition, the Company has a 165(e) Plan that covers substantially all
employees in Puerto Rico. The Company made contributions of approximately
$18,000, $15,000 and $13,000 to the Plan during 1999, 1998, and 1997.
In March 1998, the Board of Directors authorized an Employee Stock Purchase
Plan which covers substantially all employees. The Plan 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. The Company made contributions of approximately
$15,000 and $6,000 to the Plan during 1999 and 1998.
The Company has a Profit Sharing Plan in which they contributed
approximately $0, $24,000 and $688,000 to the Plan during 1999, 1998, and
1997.
12. CONTINGENCIES
The Company is involved in litigation on a number of matters and is subject
to certain claims which arise in the normal course of business, none of
which, in the opinion of management, are expected to have a materially
adverse effect on the Company's financial statements.
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.
16
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued)
- --------------------------------------------------------------------------------
In the normal course of business, the Company uses an interest rate collar
agreement, to manage its interest rate risk for purposes other than
trading. The Company does not use derivative financial instruments for
speculative purposes. As is customary for these types of instruments, the
Company does not require collateral or other security from other parties to
these instruments. By their nature all such instruments involve risk,
including the credit risk of nonperformance by counterparties. However, at
December 31, 1999, in management's opinion there was no significant risk of
loss in the event of nonperformance of the counterparties to these
financial instruments.
Interest Rate Collar Agreement - The Company enters into an interest rate
contract to manage its exposure to changes in interest rates and to fix the
overall cost of one of its variable rate financings. The contract has no
carrying value with gains and losses recognized as a component of interest
expense.
The contract/notional amount and estimated fair value of the Company's off-
balance-sheet financial instrument are as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------------ -------------------------------------
Contact/Notional Fair Contact/Notional Fair
Amount Value Amount Value
------------------- --------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Interest rate collar agreement $ 1,148,000 $ 26,737 $ 1,316,000 $(38,760)
</TABLE>
14. 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.
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, June 30, September 30, December 31,
Quarter Ended 1999 1999 1999 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Operating revenues $ 22,750,604 $ 22,686,417 $ 20,625,799 $ 22,489,268
Operating (loss) income (2,078,435) 140,417 (2,245,826) 4,063,494 (1)
Net (loss) income before
income tax (2,700,811) (627,412) (3,131,241) 3,081,231
Net (loss) income (1,683,679) (399,377) (1,954,583) 1,901,220
Net (loss) income
per share - basic (0.17) (0.04) (0.20) 0.19
</TABLE>
17
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, June 30, September 30, December 31,
Quarter Ended 1998 1998 1998 1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Operating revenues $ 16,347,403 $ 18,408,322 $ 18,851,977 $ 23,632,942
Operating income (loss) 286,042 410,872 (397,792) (3,344,771)(2)
Net income (loss) before
income tax 128,995 308,227 (641,217) (3,670,168)
Net income (loss) 69,156 149,098 (435,605) (2,298,679)
Net income
(loss) per share - basic 0.01 0.02 (0.04) (0.24)
</TABLE>
(1) Operating income was favorably impacted by a $3.71 million recovery
from an affiliate of excess operating and maintenance costs incurred
and expensed during the period that the Company had limited use of the
floating ramp system.
(2) Operating income was negatively impacted by $3.4 million of
additional costs related to the disruption caused by the loss of use
of the San Juan ramp structure resulting from Hurricane Georges. The
$3.4 million of estimated additional costs included $1,622,613 in
additional operating and maintenance costs (comprised primarily of
stevedoring and port related items), $1,450,427 in additional rent
and purchased transportation expense (comprised primarily of terminal
equipment rental, trucking expense in San Juan and the U.S. and
revenue equipment rental), $117,954 in salaries and wages, $102,374
in insurance and claims and $67,715 in communications and other
operating expenses.
* * * * * *
18
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1999
BALANCE AT CHARGED TO
BEGINNING COSTS AND DEDUCTIONS BALANCE AT
YEAR OF YEAR EXPENSES (CHARGEOFFS) END OF YEAR
---- ---------- --------- ------------ -----------
Allowance for Doubtful Accounts
-------------------------------
1997 905,581 381,691 (121,398) 1,165,874
1998 1,165,874 1,040,721 (1,113,192) 1,093,403
1999 1,093,403 2,001,439 (1,726,328) 1,368,514
19
<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 5th day of April, 2000.
TRAILER BRIDGE, INC.
By: /s/ Mark A. Tanner
--------------------------------------
Mark A. Tanner
Vice President -- Administration
and Chief Financial Officer
20
