FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1997 Commission File No 0-11300
BUILDERS TRANSPORT, INCORPORATED
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 58-1186216
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
POST OFFICE BOX 7005, 2029 WEST DEKALB STREET, CAMDEN, SOUTH CAROLINA 29020
- -----------------------------------------------------------------------------
(address of principal executive offices and zip code)
Registrant's telephone number, including area code (803) 432-1400
-------------
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. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 10, 1997
- ---------------------------- -----------------------------
Common Stock, par value $.01 5,284,019
per share
BUILDERS TRANSPORT, INCORPORATED
INDEX TO FORM 10-Q
Part I FINANCIAL INFORMATION Page No.
- ------------------------------- --------
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996 1
Condensed Consolidated Statements of Income for the Three
Months Ended September 30, 1997 and 1996 and the Nine Months
Ended September 30, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
Part II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS *
ITEM 2. CHANGES IN SECURITIES *
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS *
ITEM 5. OTHER INFORMATION *
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
* No information submitted under this caption.
PART 1. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
September 30 December 31
1997 1996
----------- -----------
(Unaudited) (Note)
(Dollars in Thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 32 $ 50
Accounts receivable, less allowances
(September 30,1997 - $408;
December 31, 1996 - $456) 34,360 34,108
Prepaid expenses 16,511 14,921
Repair parts and operating supplies 3,179 3,538
--------- ---------
TOTAL CURRENT ASSETS 54,082 52,617
PROPERTY AND EQUIPMENT 312,047 309,478
Less accumulated depreciation
and amortization (137,484) (117,235)
--------- ---------
TOTAL PROPERTY AND EQUIPMENT 174,563 192,243
OTHER ASSETS 23,400 23,486
--------- ---------
TOTAL ASSETS $252,045 $268,346
========= =========
-1-
September 30 December 31
1997 1996
----------- -----------
(Unaudited) (Note)
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 17,198 $ 15,889
Other current liabilities 10,099 11,717
Current maturities of long-term debt 102,320 38,156
--------- ---------
TOTAL CURRENT LIABILITIES 129,617 65,762
LONG-TERM DEBT
Revolving credit agreement 0 13,321
Convertible Subordinated Debentures 0 44,632
Capital leases and other 92,075 111,035
--------- ---------
TOTAL LONG-TERM DEBT 92,075 168,988
DEFERRED CREDITS AND OTHER LIABILITIES
Other 9,853 10,273
--------- ---------
TOTAL OTHER LIABILITIES 9,853 10,273
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share
Authorized 1,000,000 shares; no shares issued
at September 30, 1997 or December 31, 1996
Common stock, par value $.01 per share
Authorized 25,000,000 shares; Issued
6,491,070 shares at September 30, 1997 and
6,270,600 shares at December 31, 1996 65 63
Paid-in capital 34,265 33,675
Unearned compensation related to
KSOP receivable (4,232) (4,337)
Retained earnings 5,448 8,968
--------- ---------
35,546 38,369
Less cost of common stock in treasury
(1,207,051 shares at September 30, 1997 and
December 31, 1996) (15,046) (15,046)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 20,500 23,323
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 252,045 $ 268,346
========= =========
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles.
See notes to Condensed Consolidated Financial Statements
-2-
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
--------- --------- --------- ---------
(In thousands, except per share amounts)
OPERATING REVENUE $ 73,002 $ 73,462 $ 219,183 $ 217,390
OPERATING EXPENSES:
Wages, salaries, and employee
benefits 28,479 30,344 86,278 89,657
Operations and maintenance 17,013 16,921 50,923 46,450
Operating taxes and licenses 6,475 6,824 19,815 20,647
Insurance and claims 4,083 4,357 12,188 11,919
Communications and utilities 1,103 1,145 3,034 3,581
Depreciation and equipment rents 7,080 6,792 21,221 20,169
(Gain) loss on disposition of
operating assets 201 363 729 (960)
Rents and purchased transportation 6,795 5,765 18,485 16,163
Other operating expenses 56 270 425 878
--------- --------- --------- ---------
Total Operating Expenses 71,285 72,781 213,098 208,504
--------- --------- --------- ---------
OPERATING INCOME 1,717 681 6,085 8,886
OTHER DEDUCTIONS:
Interest and other expenses 3,607 4,120 11,842 12,280
LOSS BEFORE INCOME TAXES (1,890) (3,439) (5,757) (3,394)
PROVISION FOR INCOME TAXES (734) (1,341) (2,237) (1,324)
--------- --------- --------- ---------
Net Loss $ (1,156) $ (2,098) $ (3,520) $ (2,070)
========= ========= ========= =========
NET LOSS PER COMMON SHARE $ (0.22) $ (0.41) $ (0.67) $ (0.39)
========= ========= ========= =========
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING 5,284,019 5,169,179 5,253,331 5,243,480
See notes to Condensed Consolidated Financial Statements
-3-
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
Nine Months Ended
September 30
1997 1996
----------- -----------
(In thousands)
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 16,931 $ 11,791
INVESTING ACTIVITIES
Purchases of property and equipment (1,373) (1,858)
Proceeds from disposal of property and equipment 2,241 5,786
--------- ---------
NET CASH PROVIDED BY INVESTING
ACTIVITIES 868 3,928
FINANCING ACTIVITIES
Proceeds from lines of credit and
long-term borrowings 17,734
Principal payments on lines of credit,
long-term debt and capital lease obligations (17,817) (33,287)
Proceeds from the issuance of common stock 4
Purchase of treasury stock (234)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (17,817) (15,783)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (18) (64)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 50 109
--------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 32 $ 45
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 9,540 $ 11,971
Noncash investing activity:
Property and equipment acquired
through capital leases $ 5,068 $ 17,548
Noncash financing activity:
Common stock issued under employee
benefit plans $ 592 $ 390
See notes to Condensed Consolidated Financial Statements
-4-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
Note A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information 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 management's opinion, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended September 30,
1997, are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997. For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
Note B -- LONG-TERM DEBT
During the second quarter of 1997, the Company defaulted on the scheduled
payments under its equipment capital leases ($133.8 million). The capital
leases represent primarily leased revenue equipment capitalized for
approximately $210 million with accumulated amortization of approximately
$70.0 million. The capital lease defaults also constitute a default under the
Credit Facility that would permit acceleration of that debt. The Company also
defaulted on the May 1, 1997 and November 1, 1997 interest payments on its
6 1/2% Convertible Subordinated Debentures and the August 15, 1997 interest and
sinking fund payments on its 8% Convertible Subordinate Debentures. This
continuing default constitutes a violation of the trust indenture governing
those debentures that would permit acceleration of the debenture indebtedness.
As a result of the above defaults, the Credit Facility, the equipment capital
leases, the 6 1/2% Convertible Subordinated Debentures, and the 8% Convertible
Subordinated Debentures have been classified as current liabilities with the
exception of the long-term portion of the equipment capital leases where the
equipment lessors and lenders have signed restructuring agreements.
The Company has engaged Alex. Brown & Sons as financial advisors in order to
assist with restructuring it various equipment capital leases and convertible
subordinated debentures. The Company has presented restructuring proposals to
the equipment lessors and lenders and to the representatives of the
bondholders. The Company contemplates that the restructuring of the
convertible subordinated debentures will be successful and will generate
significant taxable income.
See "Management's Discussion and Analysis of the Financial Condition and
Results of Operations -Financial Condition, Liquidity and Sources of Capital
and -Recent Developments and Trends" for additional details of the
restructuring.
-5-
Note C -- EARNINGS PER SHARE
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
----------- ----------- ----------- -----------
PRIMARY:
Average shares outstanding 6,491,070 6,270,442 6,460,382 6,258,470
Assumed exercise of stock
options -0- 76,805 -0- 158,088
Treasury stock (1,207,051) (1,178,068) (1,207,051) (1,173,078)
----------- ----------- ----------- -----------
Totals 5,284,019 5,169,179 5,253,331 5,243,480
=========== =========== =========== ===========
Net loss $(1,156,201) $(2,098,492) $(3,519,894) $(2,069,769)
=========== =========== =========== ===========
Per share amount:
Net loss $ (.22) $ (.41) $ (.67) $ (.39)
=========== =========== =========== ===========
FULLY DILUTED:
Average shares outstanding 6,491,070 6,270,442 6,460,382 6,258,470
Assumed exercise of stock
options 88,734 76,805 91,495 206,042
Assumed conversion of 8%
Convertible Subordinated
Debentures issued
September 9, 1985 1,001,516 1,001,516 1,001,516 1,050,557
Assumed conversion of
6 1/2% Convertible
Subordinated Debentures
issued May 9, 1986 592,079 592,079 592,079 592,079
Treasury stock (1,207,051) (1,178,068) (1,207,051) (1,173,078)
----------- ----------- ----------- -----------
Totals 6,966,348 6,762,774 6,938,421 6,934,070
=========== =========== =========== ===========
Net loss $(1,156,201) $(2,098,492) $(3,519,894) $(2,069,769)
Add 8% Convertible
Subordinated Debentures
interest, net of
income tax effect 300,582 300,582 891,944 942,601
Add 6 1/2% Convertible
Subordinated Debentures
interest, net of
income tax effect 223,375 223,375 662,841 667,697
----------- ----------- ----------- -----------
Adjusted net income $ (632,244) $(1,574,535) $(1,965,109) $( 459,471)
=========== =========== =========== ===========
Per share amount:
Net loss $ (.09)*$ (.23)*$ (.28)*$ (.07)*
=========== =========== =========== ===========
* Anti-dilutive
-6-
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per share, which will require a change, effective
December 31, 1997, in the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact of Statement 128 on the calculation of primary and fully
diluted earnings per share for these quarters is not expected to be material.
-7-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Operating revenues for the third quarter of 1997 were $73.0 million, compared
to $73.5 million for the third quarter of 1996, and for the first nine months
of 1997, were $219.2 million, compared to $217.4 million for the first nine
months of 1996.
Net loss for the third quarter of 1997 was $1.2 million, compared to $2.1
million for the third quarter of 1996, and net loss for the first nine months
of 1997 was $3.5 million compared to a net loss of $2.1 million for the first
nine months of 1996.
The operating ratio (operating expenses as a percentage of operating revenues)
was 97.6% and 97.2% for the third quarter and first nine months of 1997,
respectively, compared to 99.1% and 95.9% for the same periods in 1996.
Operating income during the third quarter was $1.7 million, compared to
$681,000 in the third quarter of 1996 and for the first nine months of 1997 was
$6.1 million, compared to $8.9 million for the first nine months of 1996.
Operating expenses, as a percentage of revenues, were lower in the third
quarter of 1997 as compared to the third quarter of 1996. This was a result
primarily of the cost reduction efforts started in the fourth quarter of 1996
and substantially completed during the first quarter of 1997. There were
increases in purchased transportation as a result of increasing the number of
owner operators by approximately 30% from 211 in 1996 to 276 in 1997.
Operating expenses, as a percentage of revenues, were higher in the first nine
months of 1997 as compared to the first nine months of 1996 as a result of
increases in maintenance expenses and purchased transportation. Additionally,
the first nine months of 1997 reflected losses on disposal of operating assets
of $729,000 compared to gains of $960,000 in the same period of 1996.
Comparing the third quarter of 1997 to the second quarter of 1997, freight
volume continued to improve in the dedicated fleet division, however, freight
volume was flat in the van division and decreased in the flatbed division.
Demand for motor freight transportation has remained strong in all divisions,
however, growth in freight volumes has not occurred as expected due to an
increase in the number of unmanned trucks in the third quarter of 1997.
-8-
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's future operating results may be affected by a number of factors
such as: uncertainties relative to economic conditions; industry factors
including, among others, competition, rate pressure, driver availability and
fuel prices; and, the Company's ability to sell its services profitably,
successfully increase market share in its core businesses and effectively
manage expense growth relative to revenue growth in anticipation of continued
pressure on gross margins. The Company's operating results could be adversely
affected should the Company be unable to anticipate customer demand accurately
or to effectively manage the impact on the Company of changes in the trucking,
transportation and logistics industries.
Because of the foregoing factors, as well as other factors affecting the
Company's operating results, past financial performances should not be
considered to be a reliable indicator of future performance, and investors
should not use historical trends to anticipate results or trends in future
periods.
FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL
In conjunction with the proposed restructuring of the Company's debt
obligations, the Company has entered into amended lease or loan agreements
with most of the Company's equipment lessors and lenders that have resulted in
revised payment schedules. Pursuant to these revised payment schedules, the
Company has made payments aggregating $13.6 million on various portions of
principal and interest payments originally scheduled for April through October
1997, that aggregated $23.4 million prior to obtaining the amendments to these
credit agreements. With respect to other equipment debt agreements in which
the Company has not yet reached an agreement with its lessors, the Company has
made partial payments aggregating $679,000 for April through October.
The original scheduled payments for April through October aggregated $2.2
million for these lessors. The Company did not make the interest payments on
its 61/2% Convertible Subordinated Debentures that were due May 1, 1997 and
November 1, 1997. The Company also did not make the interest payment or
sinking fund payment on its 8% Convertible Subordinated Debentures due August
15, 1997. See "Recent Developments and Trends" and Note B to Condensed
Consolidated Financial Statements.
Prepaid expenses increased by approximately 11% since December 31, 1996,
primarily due to the normal annual prepayment of licenses and taxes and an
increase in prepaid tires. Repair parts and operating supplies decreased by
approximately 10% since December 31, 1996, primarily as a result of the efforts
of the Company to minimize inventory levels.
Even though there was lower operating income in the first nine months
of 1997, compared to the first nine months of 1996, operating cash flows
increased primarily as a result of decreased accounts receivables in 1997 as
compared to 1996. The Company's cash flow and cash requirements tend to
fluctuate during the year. Generally more cash is required during the first
part of the year, primarily to fund the Company's annual prepayments of
operating taxes and licenses and less profitable operations. Cash flow from
operations generally increases consistently beginning in the second quarter
through year-end. The Company uses the revolving portion of its Credit
Facility to smooth cyclical cash flows associated with its operations.
-9-
RECENT DEVELOPMENTS AND TRENDS
In March 1997, the Company retained Alex. Brown & Sons Incorporated as its
financial advisor to assist in restructuring certain of the Company's debt
obligations. As noted above, the Company has restructured the payment
schedules on much of its equipment debt. With respect to other equipment debt
agreements in which the Company has not yet reached an agreement with its
lessors, the total suspended payments aggregated $1.5 million. The
Company is therefore in default under those agreements, and, while the Company
has no payment defaults under its general credit facility (pursuant to which
$13.8 million is currently outstanding), the equipment debt defaults constitute
defaults under the general credit facility that would permit acceleration of
that debt. Further, certain of the equipment debt defaults have become events
of default with respect to the Company's two series of Convertible Subordinated
Debentures(pursuant to which $46.8 million is currently outstanding) that also
would permit acceleration. The Company has not made interest payments due May
1, 1997, and November 1, 1997, with respect to its 6 1/2% Convertible
Subordinated Debentures. The Company has not made the interest payment or
sinking fund payment due August 15, 1997, on its 8% Convertible Subordinated
Debentures. The Company has received no demands or notices of default under
its general credit agreement, nor does the Company expect any such demands or
notices so long as its restructuring discussions are progressing satisfactorily.
The Company has executed amended lease or loan agreements with certain of the
equipment lessors and lenders which represents $111.7 million of the total
outstanding for the capital leases and loans ($133.8 million). The Company
has reached an agreement in principle and awaits documentation with certain of
the equipment lessors and lenders which represents $14.9 million of the total
outstanding.
The Company has, however, received notices of default or lawsuits from
equipment creditors representing approximately $7.2 million in outstanding
equipment debt purporting to exercise various remedies ranging from termination
of leases and return of equipment to acceleration of remaining amounts under
the applicable equipment leases or loans. The Company and its financial
advisor regard this as a customary and expected response, and they are
currently engaged in discussions with those creditors as well as
representatives of holders of the Company's Convertible Subordinated
Debentures. The Company believes, based on the progress of the restructuring
discussions to date, that it will be able to achieve a successful restructuring
that will improve the Company's cash flow and better position the Company for
a return to profitability and achieving its long-term goals. The Company
contemplates that the successful restructuring of the convertible subordinated
debentures will generate significant taxable income.
FORWARD LOOKING STATEMENTS
Statements in this document that are not historical facts are hereby identified
as "forward looking statements" for the purpose of the safe harbor provided
by Section 21E of the Securities Exchange Act of 1934 and Section 27A of the
Securities Act of 1933. The Company cautions readers that such "forward
looking statements", including without limitation, those relating to the
Company's future business prospects, revenues, working capital, liquidity,
capital needs, interest costs and income, wherever they occur in this document
or in other statements attributable to the Company are necessarily estimates
reflecting the best judgment of the Company's senior management and involve a
-10-
number of risks and uncertainties that could cause actual results to differ
materially from those suggested by the "forward looking statements." Such
"forward looking statements" should, therefore, be considered in light of
various important factors including those set forth below and others set forth
from time to time in the Company's reports and registration statements filed
with the SEC.
The foregoing discussions under "FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF
CAPITAL" and "RECENT DEVELOPMENTS AND TRENDS" are particularly susceptible
to the risks and uncertainties discussed above. Moreover, the Company through
its senior management may from time to time make such "forward looking
statements" about the matters described herein or other matters concerning the
Company.
The Company disclaims any intent or obligation to update "forward looking
statements."
-11-
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
For a discussion of certain defaults see "Management's Discussion and Analysis
of the Financial Condition and Results of Operations: Financial Condition,
Liquidity and Sources of Capital and Recent Developments and Trends" and Note B
to Condensed Consolidated Financial Statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 Financial Date Schedule (for SEC use only)
(b) Reports on Form 8-K. There were no reports on Form 8-K filed for the
quarter ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUILDERS TRANSPORT, INCORPORATED
Date: November 14, 1997 By: /S/ T.M. Guthrie
----------------------- -----------------------------
T.M. Guthrie
Chief Financial Officer
and Treasurer
Signed in the dual capacity
of a duly authorized officer
of the Registrant and the
Principal Accounting Officer
of the Registrant
-12-
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<PERIOD-END> SEP-30-1997
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