- --------------------------------------------------------------------------------
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 March 31, 1998
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.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2373402
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Creek Road, Delanco, NJ 08075
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
609-461-7111
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
---------------------------------------------------
(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, 10,665,872 shares outstanding as of April 29, 1998,
consisting of two series:
Class A Common Stock, no par value, 5,739,544 shares outstanding as of April
29, 1998
Common Stock, no par value, 4,926,328 shares outstanding as of April 29, 1998
- --------------------------------------------------------------------------------
<PAGE>
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
INDEX
Page
----
Part I. Financial Information
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets--March 31, 1998
and December 31, 1997 1
Consolidated Statements of Income--Three
months ended March 31, 1998 and 1997 2
Consolidated Statements of Cash Flows--
Three months ended March 31, 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
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
Item 1. Consolidated Financial Statements
JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- -------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................ $ 4,427 $ 7,185
Accounts receivable, less allowance for doubtful accounts of
$1,594 and $1,527............................................. 22,488 21,792
Prepaid expenses and other....................................... 3,090 3,172
Deferred income taxes............................................ 1,973 1,862
----------- -----------
Total current assets.................................... 31,978 34,011
PROPERTY AND EQUIPMENT, net.......................................... 83,592 77,894
OTHER ASSETS......................................................... 1,720 1,463
----------- -----------
$ 117,290 $ 113,368
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations.. $ 1,961 $ 1,976
Accounts payable and accrued expenses............................ 13,465 12,514
Claims and insurance reserves.................................... 4,512 3,917
Deferred freight revenues........................................ 1,870 1,752
----------- -----------
Total current liabilities.............................. 21,808 20,159
----------- -----------
LONG-TERM DEBT....................................................... 15,207 15,679
----------- -----------
DEFERRED INCOME TAXES................................................ 12,320 11,782
----------- -----------
OTHER LIABILITIES.................................................... 96 211
----------- -----------
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;
4,926,328 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....................................... 71,916 71,816
Retained earnings (accumulated deficit) ......................... (4,057) (6,279)
----------- -----------
Total shareholders' equity............................. 67,859 65,537
----------- -----------
$ 117,290 $ 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)
Three Months Ended
March 31,
--------------------------
1998 1997
--------- ---------
OPERATING REVENUES $ 54,899 $ 44,280
--------- ---------
OPERATING EXPENSES:
Salaries, wages and benefits............... 27,729 22,738
Supplies and other expenses................ 9,551 8,738
Purchased transportation................... 6,360 4,642
Depreciation and amortization.............. 3,545 2,622
Operating taxes and licenses............... 2,551 2,164
Insurance and claims....................... 1,350 970
Loss on sale of equipment.................. 4 28
--------- ---------
51,090 41,902
--------- ---------
Operating income...................... 3,809 2,378
INTEREST EXPENSE, net.......................... 254 758
OTHER INCOME, net.............................. (29) (31)
--------- ---------
Income before income taxes............ 3,584 1,651
INCOME TAXES................................... 1,362 83
--------- ---------
NET INCOME..................................... $ 2,222 $ 1,568
========= =========
Basic net income per share................. $ 0.21 $ 0.23
========= =========
Diluted net income per share............... $ 0.20 $ 0.22
========= =========
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>
Three Months Ended March 31,
-----------------------
1998 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................................. $ 2,222 $ 1,568
Adjustments to reconcile net income to net cash provided by operating
activities --
Depreciation and amortization..................................... 3,545 2,622
Loss on sale of equipment......................................... 4 28
Provision for bad debts........................................... 91 237
Deferred income tax provision .................................... 426 --
Changes in assets and liabilities--
Increase in accounts receivable............................... (787) (1,817)
Decrease in prepaid expenses and other........................ 83 285
Increase in other assets...................................... (257) (69)
Increase (decrease) in accounts payable and accrued expenses.. 1,420 (1,736)
Increase (decrease) in claims and insurance reserves.......... 595 (103)
Increase (decrease) in accrued income taxes................... (583) 56
Increase in deferred freight revenues......................... 118 165
--------- ---------
Net cash provided by operating activities............... 6,877 1,236
--------- ---------
INVESTING ACTIVITIES:
Proceeds from sale of equipment......................................... 147 72
Capital expenditures.................................................... (9,394) (7,641)
--------- ---------
Net cash used in investing activities................... (9,247) (7,569)
--------- ---------
FINANCING ACTIVITIES:
Payments of long-term debt.............................................. (488) (2,122)
Proceeds from issuance of long-term debt................................ -- 9,918
Payments of capital lease obligations................................... -- (191)
Distributions to shareholder............................................ -- (362)
Proceeds from Employee Stock Purchase Plan.............................. 100 --
--------- ---------
Net cash provided by (used in) financing activities..... (388) 7,243
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS.................................................... (2,758) 910
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD..................................................... 7,185 2,403
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................................... $ 4,427 $ 3,313
========= =========
</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 months ended March 31, 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:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------------------------------------
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........... $2,222 10,662 $0.21 $1,568 6,858 $0.23
Effect of dilutive
securities......... -- 206 (0.01) -- 166 (0.01)
------ ------ ----- ------ ----- -----
Diluted net income
per share......... $2,222 10,868 $0.20 $1,568 7,024 $0.22
====== ====== ===== ====== ===== =====
</TABLE>
4
<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 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.
5
<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
March 31,
--------------------
1998 1997
----- ------
Operating revenues 100.0% 100.0%
----- -----
Operating expenses:
Salaries, wages and benefits................. 50.5 51.3
Supplies and other expenses.................. 17.4 19.7
Purchased transportation..................... 11.6 10.5
Depreciation and amortization................ 6.5 5.9
Operating taxes and licenses................. 4.6 4.9
Insurance and claims......................... 2.5 2.2
Loss on sale of equipment.................... 0.0 0.1
----- -----
93.1 94.6
----- -----
Operating income................................. 6.9 5.4
Interest expense, net............................ 0.5 1.7
Other income, net................................ (0.1) (0.1)
----- -----
Income before income taxes....................... 6.5% 3.7%
===== =====
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Operating Revenues
Operating revenues increased 23.9% for the three months ended March 31,
1998 to $54.9 million from $44.3 million for the comparable period of 1997. The
increase resulted primarily from a 15.2% increase in total shipments. The
Company's average tractor fleet grew 16.1% in the first quarter of 1998 over the
first quarter of 1997, and average revenues per tractor per week increased 3.4%
to $4,091 during the three months ended March 31, 1998 from $3,957 during the
three months ended March 31, 1997.
Operating Expenses
Operating expenses increased 22.0% to $51.1 million for the three
months ended March 31, 1998 from $41.9 million for the comparable period of
1997. As a percentage of operating revenues, operating expenses decreased to
93.1% for the three months ended March 31, 1998 from 94.6% 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 decrease was primarily the result of the
Company's increased use of owner-operators in addition to increased tractor
utilization.
6
<PAGE>
Salaries, wages and benefits increased 22.0% to $27.7 million for the
three months ended March 31, 1998 from $22.7 million for the comparable period
of 1997. As a percentage of operating revenues, salaries, wages and benefits
decreased to 50.5% for the three months ended March 31, 1998 from 51.3% for the
comparable period of 1997. This percentage decrease was primarily due to the
Company's increased use of owner-operators in 1998.
Supplies and other expenses, which primarily consist of operating
leases, fuel, tolls, tires, parts and bad debt expense, increased 10.3% to $9.6
million for the three months ended March 31, 1998 from $8.7 million for the
comparable period of 1997. As a percentage of operating revenues, supplies and
other expenses decreased to 17.4% for the three months ended March 31, 1998 from
19.7% 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, to a lesser
extent, the Company's increased use of owner-operators in 1998.
Purchased transportation increased 39.1% to $6.4 million for the three
months ended March 31, 1998 from $4.6 million for the comparable period of 1997.
As a percentage of operating revenues, purchased transportation increased to
11.6% for the three months ended March 31, 1998 from 10.5% for the comparable
period of 1997. The increase was primarily due to the increased use of
owner-operators to supplement the Company's fleet and to substitute for higher
cost, outside line-haul transportation. As a percentage of total purchased
transportation expense, owner-operator expense increased to 55.7% for the three
months ended March 31, 1998 from 47.7% for the comparable period of 1997.
Depreciation and amortization expense increased 34.6% to $3.5 million
for the three months ended March 31, 1998 from $2.6 million for the comparable
period of 1997. As a percentage of operating revenues, depreciation and
amortization increased to 6.5% for the three months ended March 31, 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.
Operating taxes and licenses increased 18.2% to $2.6 million for the
three months ended March 31, 1998 from $2.2 million for the comparable period of
1997. As a percentage of operating revenues, operating taxes and licenses
decreased to 4.6% for the three months ended March 31, 1998 from 4.9% 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
owner-operators, who pay for their own taxes and licenses.
Insurance and claims increased 30.0% to $1.3 million for the three
months ended March 31, 1998 from $1.0 million for the comparable period of 1997.
As a percentage of operating revenues, insurance and claims increased to 2.5%
for the three months ended March 31, 1998 from 2.2% for the comparable period of
1997. The percentage increase was attributable to the purchase of additional
insurance coverages in 1998 that were not in effect in the comparable period of
1997.
7
<PAGE>
Interest Expense
Interest expense decreased 62.5% to $300,000 for the three months ended
March 31, 1998 from $800,000 for the comparable period of 1997. As a percentage
of operating revenues, interest expense decreased to 0.5% for the three months
ended March 31, 1998 from 1.7% 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 1,300% to $1.4 million for the three months
ended March 31, 1998 from $100,000 for the comparable period of 1997. In the
first 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.
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 $6.9 million for the first three months of 1998
compared to $1.2 million for the corresponding period in 1997. The increase in
cash provided by operations is attributable to the Company's increased income
before depreciation and amortization expense in 1998 and the timing of certain
payments, resulting in increased accounts payable.
Capital expenditures, net of trade-in allowances, totaled approximately
$9.4 million during the first three months of 1998 compared to $7.6 million in
the comparable period of 1997. For the three months ended March 31, 1998, the
$9.4 million of capital expenditures were comprised of $6.1 million of revenue
equipment, $3.0 million of facilities and $300,000 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 $147,000 in the three months ended March 31, 1998
versus $72,000 in the comparable period of the prior year.
Net cash used in financing activities was approximately $400,000 for
the three months ended March 31, 1998 compared to net cash provided of $7.2
million for the comparable period of 1997. At March 31, 1998, total borrowings
under long-term debt totaled $17.2 million, maturing through 2007, and
obligations relating to operating leases totaled $9.2 million through 2013, of
which $1.8 million related to a facility lease with the Company's founders.
Jevic is a party to a $25 million credit facility with CoreStates Bank,
N.A. The credit facility includes a $7 million working capital revolving line of
credit, with borrowings limited to 80% of the Company's eligible accounts
receivable, as defined, and an $18 million term loan facility used to purchase
or refinance revenue equipment. At March 31, 1998, there was $3.5 million
outstanding under the term loan facility and $462,500 of outstanding standby
letters of credit under the revolver.
The Company believes that its cash and cash equivalents, funds
generated from operations and available borrowings under its current or future
8
<PAGE>
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 acquisition and is not
in active negotiations regarding any such acquisition.
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 Costs
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. 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 will be Year 2000 compliant. Management is in the process of determining
whether all of the Company's other computer systems are Year 2000 compliant.
Management does not expect the costs associated with any required conversions of
such other systems to ensure Year 2000 compliance to be significant. 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.
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.
9
<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 15th day of May,
1998.
JEVIC TRANSPORTATION, INC.
By: /s/ HARRY J. MUHLSCHLEGEL
--------------------------
Harry J. Muhlschlegel
Chief Executive Officer
By: /s/ BRIAN J. FITZPATRICK
-------------------------
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,427
<SECURITIES> 0
<RECEIVABLES> 24,082
<ALLOWANCES> 1,594
<INVENTORY> 0
<CURRENT-ASSETS> 31,978
<PP&E> 116,788
<DEPRECIATION> 33,196
<TOTAL-ASSETS> 117,290
<CURRENT-LIABILITIES> 21,808
<BONDS> 0
0
0
<COMMON> 71,916
<OTHER-SE> (4,057)
<TOTAL-LIABILITY-AND-EQUITY> 117,290
<SALES> 54,899
<TOTAL-REVENUES> 54,899
<CGS> 0
<TOTAL-COSTS> 51,090
<OTHER-EXPENSES> (29)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 254
<INCOME-PRETAX> 3,584
<INCOME-TAX> 1,362
<INCOME-CONTINUING> 2,222
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,222
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.20
</TABLE>
