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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 Or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 000-23095
JEVIC TRANSPORTATION, INC.
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(Exact name of registrant as specified in its charter)
New Jersey 22-2373402
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Creek Road, Delanco, NJ 08075
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(Address of principal executive offices) (Zip Code)
609-461-7111
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes ___ No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Equity, no par value, 10,697,258 shares outstanding as of October 30,
1998, consisting of two series:
Class A Common Stock, no par value, 5,739,544 shares outstanding as of
October 30, 1998
Common Stock, no par value, 4,957,714 shares outstanding as of
October 30, 1998
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<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
INDEX
Page
----
Part I. Financial Information
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets--September 30, 1998
and December 31, 1997 1
Consolidated Statements of Income--Three
and nine months ended September 30, 1998 and 1997 2
Consolidated Statements of Cash Flows--
Nine months ended September 30, 1998 and 1997 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
Item 1. Consolidated Financial Statements
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 150 $ 7,185
Accounts receivable, less allowance for
doubtful accounts of $1,506 and $1,527 ......................... 24,584 21,792
Prepaid expenses and other ........................................ 4,938 3,172
Deferred income taxes ............................................. 2,102 1,862
--------- ---------
Total current assets ..................................... 31,774 34,011
PROPERTY AND EQUIPMENT, net ........................................... 102,215 77,894
OTHER ASSETS .......................................................... 1,436 1,463
--------- ---------
$ 135,425 $ 113,368
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease
obligations ..................................................... $ 8,054 $ 1,976
Accounts payable and accrued expenses ............................. 18,670 12,514
Claims and insurance reserves ..................................... 3,709 3,917
Deferred freight revenues ......................................... 2,353 1,752
--------- ---------
Total current liabilities ............................... 32,786 20,159
--------- ---------
LONG-TERM DEBT ........................................................ 15,390 15,679
--------- ---------
DEFERRED INCOME TAXES ................................................. 13,908 11,782
--------- ---------
OTHER LIABILITIES ..................................................... 19 211
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 10,000,000 shares authorized; none
issued and outstanding .......................................... -- --
Common stock, no par value, 40,000,000 shares authorized; 4,957,714
and 4,918,656 issued and outstanding, respectively .............. -- --
Class A common stock, no par value, 10,000,000 shares authorized;
5,739,544 shares issued and outstanding ......................... -- --
Additional paid-in capital ........................................ 72,146 71,816
Retained earnings (accumulated deficit) ........................... 1,176 (6,279)
--------- ---------
Total shareholders' equity .............................. 73,322 65,537
--------- ---------
$ 135,425 $ 113,368
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share information)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES ................. $ 57,037 $ 48,871 $ 166,517 $ 139,288
--------- --------- --------- ---------
OPERATING EXPENSES:
Salaries, wages and benefits ... 28,101 24,238 83,467 70,821
Supplies and other expenses .... 10,212 8,858 28,904 26,229
Purchased transportation ....... 7,220 4,603 20,055 13,198
Depreciation and amortization .. 3,684 2,890 10,864 8,272
Operating taxes and licenses ... 2,570 2,449 7,594 6,751
Insurance and claims ........... 1,011 876 3,032 2,852
(Gain) loss on sale of equipment (3) 24 (421) 123
--------- --------- --------- ---------
52,795 43,938 153,495 128,246
--------- --------- --------- ---------
Operating income .......... 4,242 4,933 13,022 11,042
INTEREST EXPENSE, net .............. 341 864 881 2,493
OTHER INCOME, net .................. (57) (36) (148) (91)
--------- --------- --------- ---------
Income before income taxes 3,958 4,105 12,289 8,640
INCOME TAXES ....................... 1,597 170 4,835 350
--------- --------- --------- ---------
NET INCOME ......................... $ 2,361 $ 3,935 $ 7,454 $ 8,290
========= ========= ========= =========
Basic net income per share ..... $ 0.22 $ 0.57 $ 0.70 $ 1.21
========= ========= ========= =========
Diluted net income per share ... $ 0.22 $ 0.56 $ 0.69 $ 1.18
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------
1998 1997
------ ------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income .......................................................... $ 7,454 $ 8,290
Adjustments to reconcile net income to net cash provided by
operating activities --
Depreciation and amortization ................................. 10,864 8,272
(Gain) loss on sale of equipment .............................. (421) 123
Provision for bad debts ....................................... 177 745
Deferred income tax provision ................................. 1,886 149
Changes in assets and liabilities--
Increase in accounts receivable ........................... (2,969) (4,472)
Increase in prepaid expenses and other .................... (1,766) (995)
(Increase) decrease in other assets ...................... 26 (474)
Increase in accounts payable and accrued expenses ......... 6,397 2,985
Decrease in claims and insurance reserves ................. (208) (375)
Increase (decrease) in accrued income taxes ............... (432) 167
Increase in deferred freight revenues...................... 601 514
-------- --------
Net cash provided by operating activities ........... 21,609 14,929
-------- --------
INVESTING ACTIVITIES:
Proceeds from sale of equipment ..................................... 1,572 382
Capital expenditures ................................................ (36,334) (17,102)
-------- --------
Net cash used in investing activities ............... (34,762) (16,720)
-------- --------
FINANCING ACTIVITIES:
Net borrowings on line of credit..................................... 7,000 --
Payments of long-term debt .......................................... (1,212) (7,315)
Proceeds from issuance of long-term debt ............................ -- 15,539
Payments of capital lease obligations ............................... -- (450)
Distributions to shareholder ........................................ -- (1,522)
Proceeds from Employee Stock Purchase Plan .......................... 330 --
-------- --------
Net cash provided by financing activities ........... 6,118 6,252
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ................................................ (7,035) 4,461
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD ................................................. 7,185 2,403
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................................ $ 150 $ 6,864
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Jevic
Transportation, Inc. and subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 1998,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
2. Earnings Per Share
Basic and diluted net income per share have been computed under the guidelines
of Statement of Financial Accounting Standards No. 128, "Earnings per Share."
Basic net income per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding for the period. Diluted net
income per share is computed by dividing net income by the weighted average
number of shares of common stock outstanding for the period, adjusted for the
dilutive effect of common stock equivalents, consisting of dilutive common stock
options using the treasury stock method. The table below sets forth the
reconciliation of basic to diluted net income per share (in thousands, except
per share amounts):
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------------------------
1998 1997
------------------------------ -----------------------------
Per Per
Net Share Net Share
Income Shares Amount Income Shares Amount
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per
share ............ $2,361 10,688 $0.22 $3,935 6,858 $ 0.57
Effect of dilutive
securities ........ -- 45 0.00 -- 185 (0.01)
------ ------ ----- ------ ----- ------
Diluted net income per
share ............. $2,361 10,733 $0.22 $3,935 7,043 $ 0.56
====== ====== ===== ====== ====== ======
</TABLE>
4
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------------------------------
1998 1997
------------------------------ -----------------------------
Per Per
Net Share Net Share
Income Shares Amount Income Shares Amount
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per
share ............ $7,454 10,673 $0.70 $8,290 6,858 $ 1.21
Effect of dilutive
securities ........ -- 143 (0.01) -- 172 (0.03)
------ ------ ----- ------ ----- ------
Diluted net income per
share ............. $7,454 10,816 $0.69 $8,290 7,030 $ 1.18
====== ====== ===== ====== ====== ======
</TABLE>
3. Computer Software Costs
In the period ended September 30, 1998, the Company early adopted the provisions
of AICPA Statement of Position 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." During the three months ended
September 30, 1998, the Company capitalized $279,000 of internally developed
software costs related to an ongoing systems project. Such costs included
$194,000 of wages and benefits for software developers employed by the Company
and $85,000 paid to outside consultants. These costs will be amortized over the
estimated useful life of the software beginning when the new system is placed in
service.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Jevic was founded in 1981 after the deregulation of the trucking industry, and
has developed an operating system which combines the high revenue yield
characteristics of a typical LTL carrier with the operating flexibility and low
fixed costs of a truckload carrier. Most other motor carriers have continued to
specialize as either truckload, moving one shipment at a time, or
less-than-truckload, moving multiple small shipments through networks of up to
500 terminals.
The Company's system uses a small number of regional facilities which serve as
origination points for consolidation of both small and large shipments. The
shipments are then loaded onto line-haul trailers in a sequence which permits
direct unloading at each shipment's destination, eliminating the need to
rehandle individual shipments at one or more breakbulk terminals. Management
focuses on adjusting freight mix to maximize asset utilization. The Company
maintains a high percentage of variable costs in order to minimize the impact of
short-term swings in demand.
Because of the distinct nature of Jevic's operating system, the Company believes
that profitability measures and expense ratios traditionally used to evaluate
truckload or less-than-truckload carriers are generally not meaningful. Jevic's
results of operations have been impacted by two key trends. First, Jevic has
been increasing the percentage of its shipments transported by owner-operators,
who supply their own tractor and bear all associated expenses in return for a
contracted rate. As a result, purchased transportation has increased as a
percentage of operating revenues, offset by a reduction, as a percentage of
operating revenues, of drivers' salaries, wages and benefits, depreciation,
fuel, operating taxes and licenses and other supplies and operating expenses.
Additionally, Jevic has shifted from a policy of leasing revenue equipment to
purchasing revenue equipment. As a result, depreciation and interest expense has
increased as a percentage of operating revenues while lease expense, which is
included in supplies and other expenses, has decreased.
6
<PAGE>
Results of Operations
The following table sets forth for the periods indicated the percentage of
operating revenues represented by certain items in the Company's statements of
income:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
1998 1997 1998 1997
------ ------ ------ ------
Operating revenues 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Operating expenses:
Salaries, wages and benefits ... 49.3 49.6 50.1 50.8
Supplies and other expenses .... 17.9 18.1 17.4 18.8
Purchased transportation ....... 12.7 9.4 12.0 9.5
Depreciation and amortization .. 6.4 5.9 6.5 6.0
Operating taxes and licenses ... 4.5 5.0 4.6 4.9
Insurance and claims ........... 1.8 1.8 1.8 2.0
(Gain) loss on sale of equipment 0.0 0.1 (0.2) 0.1
---- ---- ---- ----
92.6 89.9 92.2 92.1
---- ---- ---- ----
Operating income ................... 7.4 10.1 7.8 7.9
Interest expense, net .............. 0.6 1.8 0.5 1.8
Other income, net .................. (0.1) (0.1) (0.1) (0.1)
---- ---- ---- ----
Income before income taxes ......... 6.9% 8.4% 7.4% 6.2%
==== ==== ==== ====
Three Months Ended September 30, 1998 Compared to Three Months Ended
September 30, 1997
Operating Revenues
Operating revenues increased 16.6% for the three months ended September 30,
1998 to $57.0 million from $48.9 million for the comparable period of 1997. The
increase resulted primarily from a 13.5% increase in total shipments. In
addition, revenue per shipment increased 2.9% to $285 for the three months ended
September 30, 1998 from $277 during the three months ended September 30, 1997.
Operating Expenses
Operating expenses increased 20.3% to $52.8 million for the three months
ended September 30, 1998 from $43.9 million for the comparable period of 1997.
As a percentage of operating revenues, operating expenses increased to 92.6% for
the three months ended September 30, 1998 from 89.9% for the comparable period
of 1997. This increase in operating expenses is primarily due to increased
revenues, as the majority of the Company's operating expenses are variable in
nature. The percentage increase was the result of the Company's increased use of
outside line-haul purchased transportation and local cartage.
Salaries, wages and benefits increased 16.1% to $28.1 million for the three
months ended September 30, 1998 from $24.2 million for the comparable period of
1997. As a percentage of operating revenues, salaries, wages and benefits
decreased to 49.3% for the three months ended September 30, 1998 from 49.6% for
the comparable period of 1997. This percentage decrease was primarily due to the
Company's increased use of outside line-haul transportation in 1998.
7
<PAGE>
Supplies and other expenses, which primarily consist of operating leases,
fuel, tolls, tires, parts and bad debt expense, increased 14.6% to $10.2 million
for the three months ended September 30, 1998 from $8.9 million for the
comparable period of 1997. As a percentage of operating revenues, supplies and
other expenses decreased to 17.9% for the three months ended September 30, 1998
from 18.1% for the comparable period of 1997. This percentage decrease was
primarily due to the Company's continuing shift toward the purchase of revenue
equipment rather than leasing such equipment under operating leases and lower
fuel prices, as well as the Company's increased use of outside line-haul
purchased transportation in 1998.
Purchased transportation increased 56.5% to $7.2 million for the three
months ended September 30, 1998 from $4.6 million for the comparable period of
1997. As a percentage of operating revenues, purchased transportation increased
to 12.7% for the three months ended September 30, 1998 from 9.4% for the
comparable period of 1997. The increase was due to the increased use of outside
line-haul transportation and local cartage to supplement the Company's fleet.
Depreciation and amortization expense increased 27.6% to $3.7 million for
the three months ended September 30, 1998 from $2.9 million for the comparable
period of 1997. As a percentage of operating revenues, depreciation and
amortization increased to 6.4% for the three months ended September 30, 1998
from 5.9% for the comparable period of 1997. The increase was primarily
attributable to the Company's continuing shift toward the purchase of additional
and replacement revenue equipment rather than leasing such equipment under
operating leases and the Company's purchase of computer hardware.
Operating taxes and licenses increased 8.3% to $2.6 million for the three
months ended September 30, 1998 from $2.4 million for the comparable period of
1997. As a percentage of operating revenues, operating taxes and licenses
decreased to 4.5% for the three months ended September 30, 1998 from 5.0% for
the comparable period of 1997. This percentage decrease was primarily
attributable to a decrease in fuel taxes due to the Company's increased use of
outside line-haul transportation providers, who pay for their own taxes and
licenses.
Insurance and claims increased 11.1% to $1.0 million for the three months
ended September 30, 1998 from $900,000 for the comparable period of 1997. As a
percentage of operating revenues, insurance and claims remained unchanged at
1.8%. Increases in cargo claims and environmental expenses were offset by
reduced premiums on renegotiated public liability and property damage insurance
coverages that were effective April 1, 1998. In addition, the Company
experienced favorable development of claims in the public liability and property
damage segment.
Interest Expense
Interest expense decreased 66.7% to $300,000 for the three months ended
September 30, 1998 from $900,000 for the comparable period of 1997. As a
percentage of operating revenues, interest expense decreased to 0.6% for the
three months ended September 30, 1998 from 1.8% for the comparable period of
1997. Interest expense decreased due to the Company having paid off debt with
part of the proceeds of the initial public offering in October 1997.
Income Taxes
Income taxes increased to $1.6 million for the three months ended September
30, 1998 from $170,000 for the comparable period of 1997. In the third quarter
of 1998 the Company was subject to corporate federal and state income taxes.
Prior to the Company's initial public offering in October 1997 the Company was
an S corporation, and, accordingly, was not subject to corporate income taxes,
except for certain states for certain periods.
8
<PAGE>
Nine Months Ended September 30, 1998 Compared to Nine Months Ended
September 30, 1997
Operating Revenues
Operating revenues increased 19.5% for the nine months ended September 30,
1998 to $166.5 million from $139.3 million for the comparable period of 1997.
The increase resulted primarily from a 14.6% increase in total shipments. In
addition, revenue per shipment increased 4.3% to $288 for the nine months ended
September 30, 1998 from $276 during the nine months ended September 30, 1997.
Operating Expenses
Operating expenses increased 19.7% to $153.5 million for the nine months
ended September 30, 1998 from $128.2 million for the comparable period of 1997.
As a percentage of operating revenues, operating expenses increased to 92.2% for
the nine months ended September 30, 1998 from 92.1% for the comparable period of
1997. This increase in operating expenses is primarily due to increased
revenues, as the majority of the Company's operating expenses are variable in
nature. The percentage increase was the result of the Company's increased use of
owner-operators, which was partially offset by a reduction in fuel prices and a
reduction in insurance and claims expense.
Salaries, wages and benefits increased 17.9% to $83.5 million for the nine
months ended September 30, 1998 from $70.8 million for the comparable period of
1997. As a percentage of operating revenues, salaries, wages and benefits
decreased to 50.1% for the nine months ended September 30, 1998 from 50.8% for
the comparable period of 1997. This percentage decrease was primarily due to the
Company's increased use of owner-operators and outside line-haul transportation
in 1998.
Supplies and other expenses, which primarily consist of operating leases,
fuel, tolls, tires, parts and bad debt expense, increased 10.3% to $28.9 million
for the nine months ended September 30, 1998 from $26.2 million for the
comparable period of 1997. As a percentage of operating revenues, supplies and
other expenses decreased to 17.4% for the nine months ended September 30, 1998
from 18.8% for the comparable period of 1997. This percentage decrease was due
to the Company's continuing shift toward the purchase of revenue equipment
rather than leasing such equipment under operating leases, lower fuel prices,
the Company's increased use of owner-operators and outside line-haul purchased
transportation in 1998.
Purchased transportation increased 52.3% to $20.1 million for the nine
months ended September 30, 1998 from $13.2 million for the comparable period of
1997. As a percentage of operating revenues, purchased transportation increased
to 12.0% for the nine months ended September 30, 1998 from 9.5% for the
comparable period of 1997. The percentage increase was primarily due to the
increased use of owner-operators to supplement the Company's fleet and the
increased use of outside line-haul transportation.
Depreciation and amortization expense increased 31.3% to $10.9 million for
the nine months ended September 30, 1998 from $8.3 million for the comparable
period of 1997. As a percentage of operating revenues, depreciation and
amortization increased to 6.5% for the nine months ended September 30, 1998 from
6.0% for the comparable period of 1997. The percentage increase was primarily
attributable to the Company's continuing shift toward the purchase of additional
and replacement revenue equipment rather than leasing such equipment under
operating leases and the Company's purchase of computer hardware.
9
<PAGE>
Operating taxes and licenses increased 11.8% to $7.6 million for the nine
months ended September 30, 1998 from $6.8 million for the comparable period of
1997. As a percentage of operating revenues, operating taxes and licenses
decreased to 4.6% for the nine months ended September 30, 1998 from 4.9% for the
comparable period of 1997. The percentage decrease was primarily attributable to
a decrease in fuel taxes due to the Company's increased use of outside line-haul
transportation and owner-operators, who pay for their own taxes and licenses.
Insurance and claims increased 3.4% to $3.0 million for the nine months
ended September 30, 1998 from $2.9 million for the comparable period of 1997. As
a percentage of operating revenues, insurance and claims decreased to 1.8% for
the nine months ended September 30, 1998 from 2.0% for the comparable period of
1997. The percentage decrease was attributable to favorable development of
claims and reduced premiums on renegotiated insurance coverages that were
effective April 1, 1998.
Interest Expense
Interest expense decreased 64.0% to $900,000 for the nine months ended
September 30, 1998 from $2.5 million for the comparable period of 1997. As a
percentage of operating revenues, interest expense decreased to 0.5% for the
nine months ended September 30, 1998 from 1.8% for the comparable period of
1997. Interest expense decreased due to the Company having paid off debt with
part of the proceeds of the initial public offering in October 1997.
Income Taxes
Income taxes increased to $4.8 million for the nine months ended September
30, 1998 from $350,000 for the comparable period of 1997. In the first nine
months of 1998 the Company was subject to corporate federal and state income
taxes. Prior to the Company's initial public offering in October 1997 the
Company was an S corporation, and, accordingly, was not subject to corporate
income taxes, except for certain states for certain periods.
Liquidity and Capital Resources
The Company's primary sources of liquidity have been funds provided by
operations, equipment leases and bank borrowings. Net cash provided by operating
activities was approximately $21.6 million for the first nine months of 1998
compared to $14.9 million for the corresponding period in 1997. The increase in
cash provided by operations is primarily attributable to the Company's increased
income before depreciation and amortization expense in 1998, a smaller increase
in accounts receivable in 1998 compared to 1997, and the timing of certain
payments, resulting in increased accounts payable in 1998.
Capital expenditures, net of trade-in allowances, totaled approximately
$36.3 million during the first nine months of 1998 compared to $17.1 million in
the comparable period of 1997. For the nine months ended September 30, 1998, the
$36.3 million of capital expenditures were comprised of $18.7 million of revenue
equipment, $13.9 million for facilities and $3.7 million of other equipment.
The Company generally purchases new line-haul tractors and replaces them
after three years. Regional and local tractors are replaced after five years,
depending on levels of use. The Company generated cash proceeds from sales of
used tractors of $1.6 million in the nine months ended September 30, 1998 versus
$382,000 in the comparable period of the prior year.
Net cash provided by financing activities was approximately $6.1 million
for the nine months ended September 30, 1998 compared to net cash provided of
$6.3 million for the comparable period of 1997. At September 30, 1998, total
borrowings under long-term debt totaled $23.4 million, maturing
10
<PAGE>
through 2007, and obligations relating to operating leases totaled $10.4 million
through 2013, of which $1.7 million related to a facility lease with the
Company's founders.
Jevic is a party to a $35 million credit facility with First Union National
Bank. The credit facility includes a $10 million working capital revolving line
of credit, with borrowings limited to 80% of the Company's eligible accounts
receivable, as defined, and a $25 million equipment revolving line of credit
used to purchase or refinance revenue equipment. At September 30, 1998, there
was $4.6 million outstanding under the equipment revolver, $7.0 million
outstanding under the working capital revolver and an additional $525,000 of
outstanding standby letters of credit under the working capital revolver. The
equipment revolving line of credit is secured by a first priority, perfected
security interest in the revenue equipment purchased or refinanced. The rate of
interest on both lines of credit is, at the Company's election, either the
Bank's base rate (higher of the Federal Funds Rate plus 1/2 of 1% or the prime
commercial lending rate of First Union) or a rate based on the London Interbank
Offered Rate (LIBOR). The working capital line of credit expires in June 2003;
the equipment line of credit expires in June 2000. The agreement allows the
Company to convert outstanding amounts under the equipment revolver to term
loans if the line of credit is not renewed. The credit facility contains
covenants made by the Company which limit its ability to make business
acquisitions and pay dividends on its capital stock, including the Common Stock,
among other things.
The Company believes that its cash and cash equivalents, funds generated
from operations and available borrowings under its current or future credit
facilities will be sufficient to fund the Company's activities at least through
1999.
While the Company intends to selectively pursue acquisitions of companies
that are complementary with its operations, the Company currently does not have
any commitments or agreements for any business acquisitions.
Inflation
The Company does not believe that inflation has had a material impact on
its results of operations for the past three years.
Seasonality
In the trucking industry, revenues generally follow a seasonal pattern as
customers reduce shipments during and after the winter holiday season. In
addition, highway transportation can be adversely affected depending upon the
severity of the weather in various sections of the country during the winter
months. The Company's operating expenses have historically been higher in winter
months, due primarily to decreased fuel efficiency and increased maintenance
costs for revenue equipment in colder weather. Accordingly, the Company's
results of operations may fluctuate to reflect such seasonality.
Year 2000 Compliance
Many computer systems were not designed to handle dates beyond the year
1999, and, therefore, computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. If the hardware and
software are not Year 2000 compliant, system failures could occur which could
prevent the Company from conducting business.
The Company has established a Year 2000 team consisting of management and
information technology employees to identify and address Year 2000 issues. This
team is responsible for ascertaining the Year 2000 compliance of the Company's
own computer systems, as well as
11
<PAGE>
determining the compliance level of the Company's vendors and customers. The
team is also responsible for establishing contingency plans in the event that
mission critical systems, vendors or customers are not able to reach Year 2000
compliance.
The Company is in the process of upgrading its primary computer platform in
order to provide increased enterprise computing and additional disaster recovery
capabilities. This new system was designed to be Year 2000 compliant and is
anticipated to be fully operational as of June 1, 1999.
The Company's Year 2000 team has assessed the level of Year 2000 compliance
of the Company's other computer hardware and software components. The assessment
included analyzing the compatibility of all personal computers and their
operating systems, as well as all third party software packages currently used
by the Company. The Company is currently determining the actions required to
bring all personal computers and software packages into Year 2000 compliance.
Management does not expect the costs associated with any required conversions of
such other systems to ensure Year 2000 compliance to be significant.
The Company has contacted its mission critical vendors requesting
information regarding their Year 2000 compliance. Significant customers have
also been contacted to determine the extent of their Year 2000 compliance. The
Company has not received sufficient information to properly assess whether
vendors and customers will be Year 2000 compliant in time to avoid business
interruptions. In the event that any of the Company's significant vendors or
customers do not successfully achieve Year 2000 compliance on a timely basis,
the Company's business or operations could be adversely affected.
Assuming substantial Year 2000 compliance by the Company's significant
vendors and customers, the Company does not expect Year 2000 related
expenditures to have a material adverse impact on its financial condition or
results of operations.
Cautionary Statement for Forward Looking Information
Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations may contain forward-looking
statements. There are a number of risks and uncertainties that could cause
actual results to differ materially from those anticipated by the statements
made above. These include, but are not limited to, general economic factors,
availability of employee drivers and owner-operators, capital requirements,
competition, acquisition of revenue equipment, unionization, fuel, seasonality,
claims exposure and insurance costs, difficulty in managing growth, regulation,
environmental hazards and dependence on key personnel. Further information on
these and other factors which could affect the Company's financial results can
be found in the Company's periodic reports on forms 10-K and 10-Q.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
* Exhibit 27.1 - Financial Data Schedule
b. Reports on Form 8-K - None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on behalf by the undersigned, thereunto duly authorized, on the 14th day of
November, 1998.
JEVIC TRANSPORTATION, INC.
By: _____________________________
Harry J. Muhlschlegel
Chief Executive Officer
By: _____________________________
Brian J. Fitzpatrick
Senior Vice President and
Chief Financial Officer
13
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