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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ______ TO ______
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COMMISSION FILE NUMBER 0-11300
BUILDERS TRANSPORT, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 58-1186216
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2029 W. DEKALB ST., 29020-7005
POST OFFICE BOX 7005, CAMDEN, SC (Zip Code)
(Address of Principal Executive Offices)
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(803) 432-1400
(Registrant's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
8% CONVERTIBLE SUBORDINATED DEBENTURES DUE AUGUST 15, 2005
6 1/2% CONVERTIBLE SUBORDINATED DEBENTURES DUE MAY 1, 2011
(Titles of Classes)
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 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 definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 16, 1998: Common Stock, par value $.01 per
share -- $6,958,504.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date: the number of shares
outstanding as of March 16, 1998, of the registrant's issued and outstanding
class of stock, its $0.01 per share par value common stock, was 5,284,019.
DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference into this Annual Report on Form 10-K.
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TABLE OF CONTENTS
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PAGE
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 1
SPECIAL NOTE REGARDING POTENTIAL CASH FLOW SHORT-FALL....... 1
PART I...................................................... 2
ITEM 1. Business...................................... 2
ITEM 2. Properties.................................... 9
ITEM 3. Legal Proceedings............................. 11
ITEM 4. Submission of Matters to a Vote of Security
Holders................................... 11
PART II..................................................... 12
ITEM 5. Market for the Registrant's Common Equity and
Related Stockholder Matters............... 12
ITEM 6. Selected Financial Data....................... 13
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 14
ITEM 8. Financial Statements and Supplementary Data... 21
ITEM 9. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure.... 41
PART III.................................................... 41
ITEM 10. Directors and Executive Officers of the
Registrant................................ 41
ITEM 11. Executive Compensation....................... 43
ITEM 12. Security Ownership of Certain Beneficial
Owners and Management..................... 49
ITEM 13. Certain Relationships and Related
Transactions.............................. 51
PART IV..................................................... 52
ITEM 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K....................... 52
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SPECIAL NOTE REGARDING
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 (the "Exchange Act") and
Section 27A of the Securities Act of 1933 (the "Securities Act"). Builders
Transport, Incorporated ("Builders" or the "Company") cautions readers that any
"forward-looking statements" include, 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 management and involve a 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 set forth from time to time in the Company's reports and other documents
filed with the Securities and Exchange Commission (the "SEC").
"Forward-looking statements" are found at various places throughout this
document, including Management's Discussion and Analysis of Financial Conditions
and Results of Operations. Moreover, the Company's management may from time to
time make "forward-looking statements" about matters described herein or other
matters concerning the Company. The Company disclaims any intent or obligation
to update any such "forward-looking statements".
All "forward-looking statements related to the Company are subject to risks and
uncertainties which may be beyond the Company's control. For additional
discussion of the various risks and other factors bearing on "forward-looking
statements" see the applicable discussions herein, particularly "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" and "-- Factors that May Affect Future
Results".
SPECIAL NOTE REGARDING POTENTIAL CASH FLOW SHORT-FALL
Builders' current cash flow projections indicate that the Company may not be
able to satisfy all of its payables that come due in April unless the Company
obtains additional funding. The Company has recently obtained a non-binding
agreement from a potential lender to replace the Company's current credit
agreement with a new credit agreement that would make an additional $9 million
to $10 million available to the Company. No assurance can be given that Builders
will obtain this new financing, or if it does, that it will be able to close the
financing in time to satisfy all of the Company's April payables. Additionally,
if Builders' right to self-insure were to be revoked by the Federal Highway
Administration (the "FHWA") (see "Business -- Risk Management and Insurance"),
the Company estimates that its additional insurance cost for the first six
months that it could not self-insure would be approximately $6 million (which
figure could be retroactively adjusted downward if the Company's loss experience
justified it). See "Management's Discussion and Analysis of Financial Conditions
and Results of Operations -- Liquidity and Capital Resources."
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PART I
ITEM 1. BUSINESS.
GENERAL
Builders is a truckload carrier that transports a wide range of commodities in
both intrastate and interstate commerce. From its origins as a Southeastern
regional, high service, flatbed carrier for a limited number of building
materials shippers, the Company has expanded and developed into a carrier that
provides dedicated contract carriage, dry van and flatbed service for shippers
of a variety of products in the medium- and short-haul and regional markets.
These products include, among others, textiles, tires, paper products, metal
products, chemicals, consumer goods and building materials. Throughout its
history, the Company has concentrated on tailoring its services to the specific
requirements of individual customers. As a result, the preponderance of
Builders' business involves providing high-quality, specialized services to
service-sensitive shippers. To assure the most efficient response to the
differing requirements of customers at numerous shipping locations, Builders has
a network of terminals where over-the-road tractors are based and drivers are
domiciled. This terminal network is supplemented by miscellaneous staging lots
near certain major shipping points. The Company utilizes a computerized
operations system to control and facilitate the movement of freight. Builders'
operating philosophy is founded on maintaining the highest level of service in
the most efficient manner possible. (See "-- Developments in the Company's
Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Recent Developments and Trends" for a discussion of how
Builders' 1998 Operating Plan may change certain aspects of the Company's
business.)
Builders is headquartered in Camden, South Carolina, and its total operation
encompasses thousands of plants, warehouses and shipping points of regularly
served customers in the eastern two-thirds of the United States and the
Provinces of Ontario and Quebec, Canada. The Company holds common and contract
carrier authority to transport general commodities in interstate commerce
between all points in the United States (see "-- Regulation").
No single customer (including groups of customers under common control and
affiliated customers) accounted for as much as ten percent of Builders'
consolidated revenues in 1997.
OPERATIONS
Builders currently conducts operations from 43 terminals. Each terminal is the
base for specific over-the-road tractors and is the domicile of the drivers who
operate those tractors. Thirty of these terminals have facilities and staff to
provide fueling and routine and heavy maintenance. (See "-- Developments in the
Company's Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Recent Developments and Trends" for a
discussion of the Company's plan to reduce the number of its maintenance
facilities.) The Company also operates miscellaneous staging lots near certain
major shipping points. The Company believes this network of facilities enhances
its ability to provide highly responsive, specialized services at its customers'
major shipping locations in an efficient manner.
Each customer's shipment is accorded exclusive use of a trailer; goods of more
than one customer are not carried on the same trailer. Builders' preferred
operating procedure is for a unit carrying a shipment to proceed directly from
origin to destination with no delay en route occasioned by a change of drivers,
relays or circuitous routing via terminals. The Company operates computerized
Central Control Departments for van, flatbed and dedicated operations. These
departments strive
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to maintain fleet balance by locating and procuring freight shipments that
originate near the destination of another shipment that is en route or already
scheduled. The Central Control Departments send this information to the
terminal, and each terminal then dispatches its domiciled drivers accordingly.
Builders has begun to recruit commission agents aggressively in addition to its
efforts to recruit owner-operators. The Company believes that the increased use
of owner-operators and commission agents will tend to protect the Company during
business downturns and to provide increased revenue without adding proportionate
fixed costs. (See "-- Owner-Operators and Commission Agents".)
Builders believes its range of services is one of the most comprehensive offered
by any truckload carrier. The Company's services are divided into three major
categories:
Flatbed Operations. Builders' Flatbed Division provides customized
transportation to service-sensitive shippers. The Company strives to meet all
specific pickup and delivery schedules requested by both single and
multi-location shippers. This customized service is designed to accommodate the
increasing number of shippers that utilize just-in-time delivery techniques or
that seek to reduce costs by controlling their inventory levels. In recent
years, the Flatbed Division has diversified its commodity mix that now includes,
among other things, lumber, steel, aluminum, wallboard, roofing materials and
pipe. This makes the division less vulnerable to periodic downturns in any
single business segment represented in the Flatbed Division's customer base. For
certain customers, the Flatbed Division also acts as a single source provider of
logistics support. (Logistic support includes supervising all of a shipper's
trucking needs, even though some of those needs may be met by carriers other
than Builders.)
Dry Van Operations. The Company's Dry Van Division services a broad array of
customers with a variety of shipping needs. The division's primary traffic
consists of medium-haul routes and is geographically confined to the eastern
two-thirds of the United States and the Provinces of Ontario and Quebec, Canada.
The Van Division's customers include many Fortune 500 companies who subscribe to
a "core-carrier" strategy as well as smaller companies with regional shipping
needs. Services include just-in-time delivery, electronic data interchange and
mobile satellite communications, as well as tailored services required to meet
specific customer needs such as dedicated capacity and team operations. (See
"-- Developments in the Company's Business" for a discussion of the Company's
plan to sharpen this division's focus and to redeploy Van Division assets that
cannot be used effectively in the division's refocused operations.)
Dedicated Contract Carriage. Builders' Dedicated Fleet Division provides
dedicated equipment and personnel on a contractual basis to each of its
customers for that customer's exclusive use, frequently as a lower cost
alternative to private carriage. In some instances, Dedicated Fleet supplements
this dedicated service with customized linehaul service. While providing
shippers with a higher level of service, Dedicated Fleet frees for other uses
that portion of a shipper's capital that would have been invested in a private
fleet. This allows shippers to deploy resources to their primary businesses that
otherwise would be diverted to transportation. Dedicated Fleet's service also
includes the administrative staffing associated with operating a private fleet.
Other Specialized Services. In addition to those already noted, other
specialized services that all Builders' divisions offer to a shipper when
required to meet that shipper's needs include the following: (i) assignment of a
specific number of linehaul units to the shipper on a continuing basis; (ii)
establishment of a trailer pool on the shipper's property or on a Builders lot
near the shipper's property; (iii) close coordination with the shipper to assure
delivery at specified times; (iv) establishment of individualized pricing
formats and information exchange systems, including
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electronic data interchange, to complement the shipper's systems designs and
information flows; and (v) utilization of two-driver teams in those instances
where a shipper's needs can be met more efficiently in that manner.
MARKETING
The primary focus of Builders' marketing strategy is to increase freight density
within defined market areas that are consistent with the Company's growth and
profit objectives. The goal is to provide optimal equipment utilization and
superior customer service in furtherance of Builders' aim to be a leader in the
truckload industry. The Company vigorously markets all its services including
Flatbed, Van, Dedicated Fleet and logistics support. (See "-- Owner-Operators
and Commission Agents" and "-- Developments in the Company's Business" for a
discussion of the Company's recent decision to recruit commission agents and
their anticipated impact on marketing.)
The directors of sales for the Flatbed and Van Divisions supervise the
activities of regional sales managers in obtaining strategically located
business to balance traffic flows. The directors of sales report directly to
their respective division vice presidents. The vice president of Dedicated Fleet
and two sales vice presidents within that division are responsible for
developing contacts with shippers who desire dedicated services.
Builders compiles and publishes its own pricing schedules to maintain
flexibility in responding rapidly to the varying service demands of its
customers. It does not participate in any collective rate making with other
carriers through rate bureaus or tariff publishing agents. The Company does not
compete for, or handle, any less-than-truckload business.
REVENUE EQUIPMENT
At December 31, 1997, Builders' linehaul fleet, including owner-operators'
equipment, consisted of 2,699 over-the-road tractors and 6,330 trailers. The
equipment is assigned to the three operating divisions as follows: Flatbed
Division 1,017 tractors and 1,742 trailers; Van Division 890 tractors and 2,396
trailers; and Dedicated Fleet 792 tractors and 2,192 trailers. (See
"-- Developments in the Company's Business" for a discussion of the possible
redeployment of certain Van Division assets.) The average age of Builders'
tractors and trailers at December 31, 1997, was 2.75 years and 6.25 years,
respectively.
All Company-owned tractors are manufactured using consistent drive-train
specifications. This standardization enables the Company to repair and service
any unit of equipment at any of the Company's full-service terminal locations,
provide a consistent and simplified driver training program, and reduce spare
parts inventory to a minimum level. All tractors are now equipped with fully
electronic engine systems.
Additionally, all tractors purchased since late 1994 have been premium tractors
that represent a significant upgrade over the Company's previously existing
tractor specifications. These new tractors include, among other things, extra
large cabins, double sleeper bunks and more powerful electronic engines. The
Company has over 1,300 two-way mobile satellite communication systems in the
tractors that operate primarily in the Van Division. The Company hopes that,
over time, its exceptional equipment will tend to help attract and retain
high-quality, professional drivers by improving their work environment. To date,
the Company cannot demonstrate, however, that this higher quality equipment has
helped ameliorate Builders' problems in recruiting and retaining drivers. (See
"-- Developments in the Company's Business".)
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COMPETITION
Competition is based largely on the price and quality of service offered.
Builders competes predominately with private carriage and other truckload
carriers. The Company competes to a lesser degree with railroads, intermodal
carriers, air freight carriers, freight forwarding companies and less-than-truck
load motor common carriers.
Builders concentrates on providing high quality, specialized transportation in
the most efficient manner possible to service-sensitive customers operating in
the eastern two-thirds of the United States and the Provinces of Ontario and
Quebec, Canada. Builders is often the primary carrier at the shipping locations
that it serves.
EMPLOYEES
At December 31, 1997, Builders employed over 3,400 people of whom approximately
2,600 were drivers. None of the Company's employees is a member of any
collective bargaining unit, and Builders' management believes employee relations
are excellent.
Drivers. Builders has established several programs to increase driver loyalty
and to provide a greater stake in the Company to drivers. Drivers are
compensated on the basis of miles driven, and base pay for miles driven
increases with a driver's length of employment with Builders. The Company
maintains a KSOP benefit plan for drivers and most other employees. Under this
plan, Builders may match some portion of the employees' contribution in the form
of Builders' Common Stock.
Safety and Training. Builders conducts comprehensive training programs to
promote safety, customer relations, service standards, productivity and positive
attitudes. Driver training and safety programs are developed jointly by the
Company's Safety and Fleet Development Department. The Company's goal is to earn
the reputation of being the safest truckload carrier in the industry.
All drivers meet or exceed all United States Department of Transportation
("DOT") qualifications. All driver qualification files are updated at least
annually to maintain compliance with DOT regulations. Since 1994, Builders has
operated, or contracted, with driver schools to provide training for
inexperienced and entry level drivers and to help them acquire the federally
mandated Commercial Drivers License.
In addition, Builders has a comprehensive training program for all drivers newly
hired by Builders, even if they have previous driving experience. Each driver
applicant must pass a driving skills road test as part of the employment
application and screening process. Once accepted for employment, each driver
attends the Company's New Driver Orientation. New Driver Orientation is a
three-day training program that is conducted at one of Builders' five regional
training terminals. Among the topics included in Builders' training program are:
defensive driving; pre-trip inspection; regulatory compliance; hazardous
materials handling; load fastening and protection; equipment maintenance;
equipment operations; company policies; and emergency reporting procedures. This
training is conducted by full-time training specialists. Drivers, regardless of
past driving experience, must successfully complete this training prior to being
released to a Driver Trainer. New drivers may be assigned to a qualified Driver
Trainer for a period of one to four weeks, depending on their past driving
experience and their skills mastery. The Driver Trainers complete evaluations of
the new drivers that are intended to assure competence in basic driving and
customer service skills.
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Ongoing training is conducted through drivers' safety meetings at various
terminal locations. The Company's Safety Department provides training topics and
content. The focus of these safety efforts is the prevention of accidents and
injuries. Additionally, Builders utilizes the services of an outside firm to
conduct road observations to identify any drivers who may need counseling or
retraining. The Company marks its trailers with a toll-free number to facilitate
the motoring public's reporting of driving behaviors. Compliments and complaints
are investigated and directed to the appropriate terminal manager for follow-up.
As part of the Company's corrective action process, remedial training is
available to all drivers upon request. Builders also requires remedial training
for drivers with excessive log errors or who are involved in preventable
accidents.
Builders' 1998 Operating Plan identifies the following specific areas of
safety-related focus: (i) recruiting and maintaining the most qualified drivers;
(ii) improving driver and management safety training; (iii) implementing
periodic reviews of driving records, using outside training institutes and
developing structural disciplinary programs; (iv) creating incentive bonuses for
drivers with good safety records; (v) improving maintenance procedures; and (vi)
raising awareness of safety-related issues on a Company-wide basis.
In February 1998, the DOT completed its fourth safety audit of Builders in the
last five years. The Company achieved a satisfactory rating in all categories in
this most recent audit.
OWNER-OPERATORS AND COMMISSION AGENTS
During 1997, the Company continued to expand its fleet with equipment purchased
by independent contractors ("owner-operators"). This provides marketing,
operating, safety, recruiting, driver retention and financial advantages to the
Company. The Company believes that the owner-operators with whom it contracts
are generally more experienced than the general driver population and that they
have a vested interest in protecting their own equipment that motivates them to
operate in a cautious manner. Owner-operators are responsible for paying all
their operating expenses including fuel, maintenance, equipment payments and all
other equipment-related expenses. Owner-operators are compensated by the Company
on a rate per mile or percentage of revenue basis. At December 31, 1997, the
Company had contracts with 307 owner-operators. The terms of the Company's
agreements with its owner-operators differ depending on a variety of factors
relating to each owner-operator relationship.
Additionally, the Company began to recruit commission agents in 1997, primarily
to augment the Van Division's business. Many of these commission agents have
long-term relationships with an established customer base. These relationships
tend to be based on extremely high levels of service that sometimes permit
above-market rates. The use of commission agents provides additional
opportunities to diversify the Company's customer base and to increase capacity
on an as-needed basis. Many of the commission agents also bring with them their
own affiliated owner-operators. The Company intends to expand the use of
commission agents into all its operating divisions in the future.
REGULATION
Builders' operations in interstate commerce were regulated by the Interstate
Commerce Commission (the "ICC") through 1995. Effective December 31, 1995, the
ICC was eliminated by the ICC Termination Act and certain of the ICC's authority
was transferred to the DOT. Under the ICC Termination Act, the DOT has assumed
responsibility for motor carrier licensing, financial reporting, motor carrier
self-insurance and certain other matters formerly under the ICC's jurisdiction.
(See "-- Risk Management and Insurance" for a discussion of a February 1998
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Order issued by the DOT's FHWA requiring Builders to show why its authority to
self-insure should not be revoked.) The ICC Termination Act created the Surface
Transportation Board, an independent body within the DOT, to assume certain
duties previously performed by the ICC. The remaining motor carrier oversight is
now conducted by other departments in the DOT. There was no appreciable impact
on the Company's operations during 1996 or 1997 as a result of the transfer of
authority to the DOT. The ICC Termination Act also mandates that the DOT review
over the next several years matters such as driver fatigue, registration of
carrier insurance and cargo liability. The Company cannot assess at this time
what effect, if any, these reviews may have on its operations.
The federal government and state agencies continue to regulate such matters as
weight and dimensions of equipment. Safety requirements for motor carrier
operations continue to be prescribed by the DOT (see "-- Employees: Safety and
Training"). Additionally, Builders is subject to regulation by certain
governmental agencies in Ontario and Quebec due to the Company's operations in
those Provinces.
Builders' operations are subject to regulation by the Environmental Protection
Agency and by various state environmental regulatory agencies with respect to
matters involving water quality and effluent limitation, underground storage
tanks and the handling, storage and disposal of solid waste and hazardous
materials. (See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Environmental Matters.")
RISK MANAGEMENT AND INSURANCE
Builders' Risk Management program provides a multi-faceted approach to the
protection of the Company's assets and interests through a combination of
insurance, self-insurance, and excess and umbrella coverages.
In February 1998, the FHWA issued a Show-Cause Order to Builders giving the
Company 30 days to respond and show cause why its authority to self-insure
should not be revoked or to request a hearing. The primary thrust of the FHWA's
Show-Cause Order was the Company's recent financial performance and the
Company's failure to maintain a net tangible asset level of at least $2 million.
Company representatives have recently met with FHWA officials to discuss
Builders' current situation, and, on March 23, 1998, Builders filed its formal
response to the Show-Cause Order. In its response, Builders argued that it
should be permitted to continue self-insuring for a number of reasons including:
(i) the prospect of financial recovery afforded by Builders' business plan; (ii)
Builders' history of emerging successfully from periods of financial
uncertainty; (iii) Builders' commitment to safety and recent successful
completion of safety audits (see "--Employees: Safety and Training"); and (iv)
the additional financial burden that would be placed on Builders' plan for
financial recovery if the Company were to lose its right to self-insure. There
is no assurance that the Company will retain its right to self-insure. (See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources").
The Company believes that the coverages described below are adequate and
appropriate. Builders self-insures its automobile liability and general
liability exposures with a retention of $1 million and $500,000, respectively,
combined single limits per occurrence. The funding obligation within the
retention is secured by a letter of credit in the amount of $1 million payable
to a trustee for potential claimants. Several umbrella liability policies
increase both automobile and general liability coverage to $35 million.
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Workers' compensation and employer's liability exposure is covered by a
combination of self-insurance programs, self-insured excess insurance contracts
and insurance contracts. A self-insured retention of $500,000 per occurrence
applies to the self-insured states of Alabama, Arkansas, Georgia, Indiana,
Mississippi, North Carolina, Oklahoma, South Carolina and Tennessee with
underwriters assuming excess liability up to statutory limits for workers'
compensation and $1 million per occurrence for employer's liability. Workers'
compensation and employer's liability exposure is covered by insurance policies
in Florida, Kansas, Kentucky, Virginia, Illinois, Iowa, Louisiana,
Massachusetts, Michigan, New Jersey, New York and Pennsylvania. Coverage is
provided to statutory limits with a deductible/retention of $250,000 per
occurrence. Employer's liability coverage is $1 million per occurrence. The
Company's funding obligation within the deductible retention is secured by
letters of credit in favor of the underwriter. The Company participates in state
funds providing workers' compensation coverage in Ohio. In Texas, occupational
accident full medical and indemnity benefits are provided under a self-insured
ERISA plan. The previously noted umbrella policy provides liability coverage of
$34 million in excess of the underlying coverages for workers' compensation and
employer's liability.
Executive liability, fiduciary liability and commercial crime coverage is
provided by a policy with limits of $5 million annual aggregate for executive
liability with a deductible of $500,000; $2.5 million each loss and annual
aggregate for fiduciary liability with a deductible of $50,000; and $2.5 million
for designated commercial crime acts with a deductible of $25,000.
The Company has cargo insurance coverage with limits of $500,000 per loss with
deductibles of $500,000, $500,000 and $25,000 per occurrence, respectively, for
the flatbed, dedicated fleet and van divisions.
DEVELOPMENTS IN THE COMPANY'S BUSINESS
Financial Results. During 1997 the Company recorded an operating loss of $35.0
million and a net loss of $50.5 million ($9.60 per share). In 1996, the Company
recorded an operating loss of $2.5 million and a net loss of $15.2 million
($3.00 per share). The operating ratio (operating expenses as a percentage of
operating revenues) was 112.2 percent for 1997, compared to 100.9 percent for
1996. Operating revenues for the year ended December 31, 1997, were $288.1
million compared to $289.4 million in 1996. The Company's revenues were
negatively impacted by the large number of unmanned tractors during 1997 due to
the Company's inability to hire and retain an adequate number of qualified
drivers. (See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of these results, particularly fourth
quarter adjustments and write-offs.)
Potential Debt Restructuring. In late March 1997, the Company retained BT Alex.
Brown, Incorporated as financial adviser to review various alternatives with
respect to restructuring certain of the Company's debt obligations. The Company
did not make the interest payments on its 6 1/2% 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. Moreover, the Company defaulted on
payment of much of its equipment debt during 1997. The Company was able,
however, to restructure a significant portion of its equipment debt obligations
(see "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources"). The Company has, with its
financial adviser, BT Alex. Brown, Incorporated, been engaged in discussions
with an Ad Hoc Committee of its debentureholders in an effort to restructure the
Company's approximately $51 million (including accrued interest) of outstanding
debenture debt. To date, those discussions have resulted in little progress. The
Company has
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announced its intention to register a proposed exchange offer for the
outstanding debenture debt, but the Ad Hoc Committee has announced that it would
not support the Company's proposed exchange offer. The Company is currently
evaluating whether to proceed with the proposed exchange offer in the face of
opposition from the Ad Hoc Committee. (See "Management's Discussion and Analysis
of Financial Condition -- Liquidity and Capital Resources").
Due to the equipment debt defaults and the debenture defaults, the debenture
debt is subject to immediate acceleration as is the debt under the Company's
general credit agreement. The Company has received no demands or notices of
default under its general credit agreement, however, nor does the Company expect
any such demands or notices in the immediate future. The Company is engaged in
discussions with another lender that may lead to an increased line of credit
over that which is now available to the Company. There is no assurance, however,
that those discussions will be successful. (See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and Note 3 to Consolidated Financial Statements).
Show-Cause Order Threatening to Revoke Builders' Right to Self-Insure. See
"-- Risk Management and Insurance" for a discussion of the FHWA's Show-Cause
Order and Builder's response to that order, and see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" for a discussion of the financial impact should the Company
lose its right to self-insure.
1998 Operating Plan. In addition to the Company's financial restructuring
efforts, the Company has created a 1998 Operating Plan (portions of which were
actually implemented in late 1997) to focus directly on the operational issues
that have led to the Company's current difficulties. The basic long-term
objectives of this plan include improving service levels, increasing equipment
utilization, alleviating driver shortages, streamlining maintenance operations,
increasing the number of owner-operators and more closely integrating the
Company's business segments. To achieve these objectives, the Company is
attempting to increase the number of commission agents and owner-operators and
selling or reallocating under-utilized equipment; recruit and retain more
Company drivers by developing a more favorable pay package based on safe
driving; increase the number of owner-operators by offering more flexible
compensation packages for them; improve business quality by increasing business
in the Company's more lucrative transportation service areas while eliminating
less profitable business arrangements; streamline the Company's maintenance
operations through the reduction of maintenance facilities and parts
inventories; continue to reduce accident costs by expanding driver training and
safety programs; and reduce fuel costs through the use of a new computer-based
fuel optimization program.
Acquisition of Equipment. Builders restricted capital expenditures severely
during 1997. Of the Company's $5.7 million in 1997 capital expenditures
(including capitalized leases), $5.1 million was applied to the acquisition of
70 new tractors.
ITEM 2. PROPERTIES.
At March 16, 1998, Builders operated 43 terminals, at the following locations:
Birmingham, Alabama -- Flatbed
Cuba, Alabama (Meridian, Mississippi area) -- Van and Flatbed
Decatur, Alabama* -- Dedicated Fleet
Hartselle, Alabama -- Dedicated Fleet
West Memphis, Arkansas -- Flatbed and Dedicated Fleet
Lakeland, Florida* -- Dedicated Fleet
9
<PAGE> 12
Brunswick, Georgia* -- Dedicated Fleet
Forest Park, Georgia (Atlanta area) -- Dedicated Fleet
Ft. Valley, Georgia* -- Dedicated Fleet
McDonough, Georgia (Atlanta area) -- Flatbed and Van
Newnan, Georgia -- Dedicated Fleet
Savannah, Georgia -- Flatbed and Dedicated Fleet
Akron, Indiana -- Dedicated Fleet
North Vernon, Indiana* -- Dedicated Fleet
Portage, Indiana* -- Flatbed
Iowa City, Iowa* -- Dedicated Fleet
Medicine Lodge, Kansas -- Flatbed
Nicholson, Mississippi (New Orleans area) -- Flatbed
Kalamazoo, Michigan* -- Dedicated Fleet
Halifax, North Carolina -- Flatbed
Lexington, North Carolina -- Van, Flatbed and Dedicated Fleet
Lumberton, North Carolina -- Flatbed
Monroe, North Carolina* -- Dedicated Fleet
North Wilkesboro, North Carolina -- Dedicated Fleet
Cincinnati, Ohio -- Dedicated Fleet
Munroe Falls, Ohio* -- Dedicated Fleet
Newark, Ohio -- Van
Sidney, Ohio* -- Dedicated Fleet
Youngstown, Ohio -- Flatbed
Tulsa, Oklahoma -- Flatbed and Dedicated Fleet
Carlisle, Pennsylvania -- Dedicated Fleet
Hartsville, South Carolina -- Dedicated Fleet
Laurens, South Carolina -- Van
Lugoff, South Carolina (Camden area) -- Van, Flatbed and Dedicated Fleet
North Augusta, South Carolina -- Flatbed and Van
Carthage, Tennessee -- Dedicated Fleet
Nashville, Tennessee -- Flatbed and Dedicated Fleet
Newport, Tennessee* -- Dedicated Fleet
White Pine, Tennessee -- Van
Dallas, Texas -- Van and Flatbed
Rotan, Texas -- Flatbed
Front Royal, Virginia* -- Dedicated Fleet
Parkersburg, West Virginia -- Dedicated Fleet
- ---------------
* These 13 terminals, while being the base for over-the-road tractors and the
domicile for drivers, do not include the facilities for both routine and heavy
maintenance that, historically, have been characteristic of Builders'
full-service terminal network. The Company's 1998 Operating Plan calls,
however, for streamlining maintenance operations through, among other things,
reducing the number of maintenance facilities.
Of the 43 terminals, 21 are owned outright (subject to encumbrances securing the
Company's credit facility) and 22 are operated under lease agreements.
The Company's general offices and division headquarters for Flatbed, Van and
Dedicated Fleet, comprising 32,000 square feet, are located in Camden, South
Carolina. Builders also operates a corporate maintenance support facility in a
55,000-square foot building in Lugoff, South Carolina, near the Company's
general offices. This facility includes shops where new tractors are prepared
for service, and tractor and trailer body work and painting are done. Builders'
general offices and division headquarters were sold during 1995 in a sale and
leaseback transaction. This lease is for a
10
<PAGE> 13
five-year term with four successive optional renewal terms of five years each.
The corporate maintenance facility is owned outright by the Company.
From time to time Builders opens new terminals and closes old terminals
depending upon its customers' requirements. Each terminal is the base for
specified over-the-road tractors and is the domicile of the drivers who operate
those tractors. The Company believes this network of facilities enhances its
ability to provide highly responsive, specialized services at its customers'
major shipping locations in an efficient manner.
In addition, Builders operates miscellaneous staging lots near major shipping
points. The Company also owns certain small real estate parcels including a
22-acre tract of unimproved property, near Savannah, Georgia; and commercial
property which was formerly used for terminals in Grand Prairie, Texas,
Midlothian, Texas (both near Dallas), and Amarillo, Texas. The Grand Prairie
property is under lease.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to routine litigation incidental to its business,
primarily involving claims for personal injury and property damage incurred in
the transportation of freight. The Company believes that adverse results in one
or more of these cases would not have a material adverse effect on its financial
position. The Company maintains excess insurance above its self-insured levels
which covers extraordinary liabilities resulting from such claims to a level
that management considers adequate.
See "Business -- Risk Management and Insurance" and Notes 3 and 4 to the
Consolidated Financial Statements and see "Business -- Employees: Safety and
Training" for a discussion of a Show-Cause Order recently filed by the FHWA
threatening to revoke the Company's right to self-insure.
The Company defaulted on certain equipment debt obligations and debenture
obligations during 1997. While Builders negotiated restructured and amended
financing arrangements with most of its equipment creditors, two equipment
lessors sued the Company and obtained judgments that required Builders to return
approximately 130 tractors and approximately 50 trailers to equipment lessors.
Ultimately, the Company may also be required to pay deficiency judgments in
connection with those two leases (see Note 3 to the Consolidated Financial
Statements).
The Company's default on its debenture obligations makes the total of those
obligations (approximately $51 million including accrued interest) subject to
immediate acceleration by the debentureholders. If the debentureholders
accelerate Builders' debenture obligations, then the debentureholders could
pursue legal remedies attempting to mandate payment or to force the Company into
bankruptcy (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and Note 3 to the
Consolidated Financial Statements).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of stockholders of the Company during
the fourth quarter of 1997.
11
<PAGE> 14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock trades on The Nasdaq Stock Market under the ticker
symbol "TRUK". The Company has recently received notice that it no longer meets
the criteria for listing on the Nasdaq Stock Market. The Company also believes
that it does not meet the criteria for listing on the NASDAQ SmallCap Market,
and the Company is preparing an application for listing on the OTC Bulletin
Board. As of March 16, 1998, there were approximately 2,000 holders of the
Company's Common Stock (including individual participants in security position
listings). The following table sets forth, for the calendar periods indicated,
the range of high and low sales prices from January 1, 1996:
<TABLE>
<CAPTION>
1996 High Low
- ---- ------- ------
<S> <C> <C>
First Quarter............................................... $10.125 $7.375
Second Quarter.............................................. 9.875 7.625
Third Quarter............................................... 8.875 6.500
Fourth Quarter.............................................. 6.875 2.500
1997 HIGH LOW
- ---- ------- ------
First Quarter............................................... $ 3.813 $2.125
Second Quarter.............................................. 4.000 2.500
Third Quarter............................................... 4.000 2.250
Fourth Quarter.............................................. 3.250 1.375
1998 HIGH LOW
- ---- ------- ------
First Quarter (through March 16, 1998)...................... $ 1.875 $ 0.75
</TABLE>
On March 16, 1998, the last sale price for the Common Stock was $1.50 per share.
The Company has never paid a cash dividend on its Common Stock. The Company has
agreed, in some of the financing agreements to which it is a party, to certain
restrictions on the payment of dividends. (See Note 3 to Consolidated Financial
Statements.) The Company reviews its dividend policy from time to time. Future
dividends, if any, will be determined by the Company's Board of Directors in
light of circumstances existing from time to time, including the Company's
growth, profitability, financial condition, results of operations, continued
existence of the restrictions described above and other factors deemed relevant
by the Company's Board of Directors.
12
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1997(5) 1996(4) 1995 1994 1993(1)
- ----------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA
Operating revenues...................... $288,145 $289,419 $289,527 $286,243 $250,009
Provision for special charge(2)......... 18,745 -- 1,420 -- --
Operating income........................ (35,044) (2,500) 15,149 19,710 17,131
Interest expense and other expenses..... 15,468 16,033 15,145 12,593 11,499
Income (loss) before income taxes and
cumulative effect of accounting
change................................ (50,512) (18,533) 4 7,117 5,632
Provision (benefit) for income taxes.... -- (3,300) (215) 2,602 2,590
-------- -------- -------- -------- --------
Income (loss) before cumulative effect
of accounting change.................. (50,512) (15,233) 219 4,515 3,042
Cumulative effect of accounting change,
net of taxes(3)....................... -- -- (7,291) -- --
-------- -------- -------- -------- --------
Net income (loss)....................... $(50,512) $(15,233) $ (7,072) $ 4,515 $ 3,042
======== ======== ======== ======== ========
Earnings (loss) per common share:
Basic earnings (loss) per common share
before cumulative effect of
accounting change.................. $ (9.60) $ (3.00) $ .04 $ .85 $ .60
Cumulative effect of accounting
change............................. -- -- (1.43) -- --
-------- -------- -------- -------- --------
Basic earnings (loss) per common
share.............................. $ (9.60) $ (3.00) $ (1.39) $ .85 $ .60
======== ======== ======== ======== ========
Diluted earnings (loss) per common
share.............................. $ (9.60) $ (3.00) $ (1.39) $ .80 $ .57
======== ======== ======== ======== ========
BALANCE SHEET DATA
Total assets............................ $209,866 $268,346 $272,061 $244,067 $207,665
Long-term debt including current
maturities............................ 183,705 207,144 201,128 163,199 130,869
Total stockholders' equity (deficit).... (26,457) 23,323 38,289 45,578 43,087
</TABLE>
- ---------------
(1) Includes operations of VMC truckload Business since August 27, 1993.
(2) Special charge relates to the sale and exiting of the tire loading and
warehousing operations in February 1996 and write-off of goodwill in 1997.
(3) Cumulative effect adjustment relates to the adoption of SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and For Long-Lived
Assets To Be Disposed Of."
(4) The Company made certain year-end adjustments in 1996 resulting from changes
in estimates relating to reserves for claims payable that were material to
the results of the fourth quarter. These adjustments, after applicable
income tax reductions, reduced net income by approximately $3,000,000.
(5) Included in the fourth quarter 1997 results are pre-tax charges of $18.7
million for the write-off of goodwill and $9.2 million to adjust the claims
payable reserves. The Company determined that the goodwill recorded in
connection with the purchase of various lines of business was impaired and
accordingly recorded a charge of $18.7 million to write-off the goodwill.
The additional claims expense was accrued as a result of recent increases in
the severity of accidents and the amounts required to settle claims. (See
Note 13 to the Consolidated Financial Statements).
13
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following table sets forth the percentage relationship of revenue and
expense items to operating revenue for the periods indicated.
<TABLE>
<CAPTION>
Percentage of Operating
Revenue
Year Ended December 31
---------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenue........................................... 100.0% 100.0% 100.0%
Operating expenses:
Wages, salaries and employee benefits....................... 40.8 41.7 41.2
Operations and maintenance.................................. 25.6 23.3 20.5
Operating taxes and licenses................................ 9.3 9.4 9.5
Insurance and claims........................................ 8.5 7.5 6.2
Communications and utilities................................ 1.4 1.7 1.6
Depreciation and equipment rents............................ 9.9 9.3 8.5
Loss (Gain) on disposition of carrier property and
equipment................................................. .7 (.2) (.2)
Rents and purchased transportation.......................... 8.9 7.6 6.6
Miscellaneous operating expenses............................ .6 .6 .4
Special charges............................................. 6.5 -- .5
----- ----- -----
Total operating expenses.................................... 112.2 100.9 94.8
----- ----- -----
Operating (loss) income..................................... (12.2) (.9) 5.2
Interest and other expenses................................. 5.4 5.5 5.2
Benefit for income taxes.................................... -- (1.1) (.1)
----- ----- -----
Net income (loss) before cumulative effect of accounting
change.................................................... (17.6) (5.3) .1
Cumulative effect of accounting change...................... -- -- (2.5)
----- ----- -----
Net loss.................................................... (17.6)% (5.3)% (2.4)%
===== ===== =====
</TABLE>
The following table sets forth certain industry data regarding the operations of
the Company.
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Truckloads per week........................................ 9,606 9,621 9,879
Average miles per trip..................................... 508 514 495
Total tractor miles (in thousands)......................... 254,000 257,000 254,000
Total tractors operated (at year end):
Company-owned.............................................. 2,392 2,562 2,606
Owner-operators............................................ 307 223 204
Total tractors............................................. 2,699 2,785 2,810
Total trailers operated (at year end)...................... 6,330 6,765 6,283
</TABLE>
RESULTS OF OPERATIONS
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Operating revenues for the year ended December 31, 1997, were $288.1 million as
compared to $289.4 million in 1996. The Company's revenue was negatively
impacted by the large number of unmanned tractors during 1997 due to the
Company's inability to hire and retain an adequate number of qualified drivers.
14
<PAGE> 17
During 1997, the Company recorded an operating loss of $35.0 million and a net
loss of $50.5 million ($9.60 per share). In 1996, the Company recorded an
operating loss of $2.5 million and a net loss of $15.2 million ($3.00 per
share).
The operating ratio (operating expenses as a percentage of operating revenues)
was 112.2% for 1997 compared to 100.9% for 1996. The increased operating ratio
resulted from the following:
Operating revenues suffered from an inability to obtain adequate rate
relief to cover inflationary costs, primarily driver wages.
Operations and maintenance expenses increased 9% due to a substantial
increase in driver recruiting and training costs of $3.6 million. The
Company continues to place significant effort on driver recruiting and
training. Also, repair costs increased $2.6 million.
Insurance and claim expenses rose 12% due to the number and severity of
accidents during 1997 and the high amount required to settle several of the
claims. This resulted in upward revisions in some open claims files.
Rents and purchased transportation costs increased 17% reflecting the
continued increase in use of owner-operators. The number of owner-operators
employed by the Company increased to 263, on average, during 1997. In 1996
the average number of owner-operators employed by the Company was 208. This
increase continues to cause a redistribution of certain costs from expense
categories related to Company-owned equipment (fuel, driver wages,
depreciation, etc.) to the rents and purchased transportation expense
account.
Special charges of $18.7 million related to the write-off of goodwill.
Miscellaneous operating expenses include $1.0 million associated with the
restructuring of the Company's equipment obligations.
The Company did not record an income tax benefit for 1997 and increased the
income tax valuation allowance to $19.5 million based on the Company's
assessment of the likelihood of not realizing a portion of the net operating
loss and credit carryforwards. Realization of the deferred tax assets associated
with the NOL and credit carryforwards is dependent upon generating sufficient
taxable income prior to their expiration. Management believes that there is a
risk that certain of these NOL and credit carryforwards may expire.
Included in the fourth quarter 1997 results are pre-tax charges of $18.7 million
for the write-off of goodwill and $9.2 million to adjust the claims payable
reserves. The Company determined that the goodwill recorded in connection with
the purchase of various lines of business was impaired and accordingly recorded
a charge of $18.7 million to write-off the goodwill. The additional claims
expense was accrued as a result of recent increases in the severity of accidents
and the amounts required to settle claims.
The financial results for the third quarter ended September 30, 1997 were
restated for the following: a)$2.2 million relating to a valuation allowance
against income tax benefits previously recorded due to the significant losses
incurred to date and management's assessment as to the likelihood at that time
of such amounts being realized, b) $1.6 million relating to increases to the
claims liability as discussed above, which pertain to the third quarter, c) $1.8
million relating to certain operating accounts based upon management's
reevaluation of amounts accrued in the third quarter, and d) $600,000 of
non-operating costs, primarily associated with the debt restructuring, which the
Company determined should be expensed in the third quarter rather than amortized
based upon review of the final restructured agreements. (See Note 13 to
Consolidated Financial Statements).
15
<PAGE> 18
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Operating revenues for the year ended December 31, 1996 were $289.4 million as
compared to $289.5 million in 1995. Operating revenues for 1995 included
revenues totaling $5.7 million associated with the tire loading and warehousing
operations closed in February 1996. The Company's revenue was negatively
impacted by the large number of unmanned tractors during 1996 due to the
Company's inability to hire and retain an adequate number of qualified drivers.
During 1996, the Company recorded an operating loss of $2.5 million and a net
loss of $15.2 million ($3.00 per share). In 1995, the Company recorded operating
income of $15.1 million and a net loss of $7.1 million, after cumulative effect
of an accounting change ($1.39 loss per share).
The operating ratio (operating expenses as a percentage of operating revenues)
was 100.9% for 1996 compared to 94.8% for 1995. The increased operating ratio
resulted from the following:
Operating revenues suffered from an inability to obtain adequate rate
relief to cover inflationary costs, primarily driver wages.
Wages, salaries and employee benefits as a percentage of revenues
increased, due to an increase in driver wages and workers' compensation
costs that were partially offset by a reduction in non-driver employees, an
increase in the use of owner-operators, and the closing of the tire loading
and warehousing operations. Driver wages increased one cent per mile in
January 1996. Workers' compensation costs increased $2.4 million compared
to 1995, primarily, as a result of an increase in the frequency and
severity of accidents and injuries due in part to the bad winter weather in
early 1996.
Operations and maintenance expenses increased 14 percent due to a
substantial increase in fuel, repair and tire costs. Fuel costs increased
$5.2 million, repair costs increased $1.4 million and tire costs increased
$1.6 million during 1996.
Insurance and claim expenses rose 22 percent due to the number and severity
of accidents during 1996 and the high amount required to settle several of
the claims. This resulted in upward revisions in some open claims files.
Depreciation and equipment rents increased 10 percent due to the pace of
depreciation accompanying the Company's equipment replacement program. 1996
depreciation expenses included a full year's depreciation on equipment
acquired in 1995, as well as, a partial year's depreciation on equipment
added in 1996. Increased reliance on owner-operators partially offset this
increase.
Rents and purchased transportation costs increased 14 percent reflecting
the continued increase in use of owner-operators. The number of
owner-operators employed by the Company increased to 208, on average,
during 1996. In 1995 the average number of owner-operators employed by the
Company was 182. This increase caused a redistribution of certain costs
from expense categories related to Company-owned equipment (fuel, driver
wages, depreciation, etc.) to the rents and purchased transportation
expense account.
Interest and other expenses rose 6% in relation to revenue to $16.0 million in
1996, due in large part to the additional interest charges associated with debt
incurred as a result of the Company's equipment replacement program. During
1996, a full year's interest was incurred on obligations used to purchase
equipment added in 1995, as well as a partial year's interest on obligations
used to purchase equipment added in 1996.
16
<PAGE> 19
The Company made certain year-end adjustments in 1996 resulting from changes in
estimates relating to reserves for claims payable that were material to the
results of the fourth quarter. These adjustments, after applicable income tax
reduction reduced net income by approximately $3,000,000.
The income tax benefit for 1996 was reduced by recording an income tax valuation
allowance of $3.2 million based on the Company's assessment of the likelihood of
not realizing a portion of the net operating loss and credit carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
Builders' current cash flow projections indicate that the Company may not be
able to satisfy all of its payables that come due in April unless the Company
obtains additional funding. The Company has recently obtained a non-binding
agreement from a potential lender to replace the Company's current credit
agreement with a new credit agreement that would make an additional $9 million
to $10 million available to the Company. No assurance can be given that Builders
will obtain this new financing, or if it does, that it will be able to close the
financing in time to satisfy all of the Company's April payables. Additionally,
if Builders' right to self-insure were to be revoked by the FHWA (see
"Business -- Risk Management and Insurance"), the Company estimates that its
additional insurance cost for the first six months that it could not self-insure
would be approximately $6 million (which figure could be retroactively adjusted
downward if the Company's loss experience justified it).
The potential lender's most recent proposal would increase the Company's
borrowing availability by approximately $9 million to $10 million over the
present credit agreement. The potential lender has almost completed its due
diligence work, and a final credit decision is anticipated shortly; however,
there is no assurance that this lender will reach a favorable credit decision.
In the event the Company is not successful in replacing its current credit
agreement, the present lender will have the right, under the credit agreement,
to exercise certain remedies, including accelerating the repayment of any loans
outstanding thereunder. There can be no assurance that the lender will continue
to forbear from exercising its remedies.
Cash generated from operations increased to $22.4 million in 1997 from $15.7
million during 1996. The Company's cash flows 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. Cash flow from operations generally increases consistently
beginning in the second quarter through year-end. The Company uses its revolving
credit facility to smooth cyclical cash flows associated with its operations.
Outstanding borrowings under that credit facility decreased to $12.9 million at
December 31, 1997, compared to $13.3 million at December 31, 1996.
In addition to the $22 million revolving credit facility, the other items
available in the $36.5 million credit agreement were a $1 million term loan and
an irrevocable letter of credit facility of up to $12.5 million.
Borrowings under the revolving credit facility are limited to a specified
percentage of customer accounts receivable, as defined in the credit agreement,
or $22 million, whichever is less. As of March 16, 1998, the unused availability
under the credit agreement was approximately $600,000. The interest rate on
borrowings under the credit agreement is prime plus 1%. Fees on outstanding
letters of credit are 2 1/4% per annum, and fees on the unused portion of the
revolving credit and letter of credit facilities are 1/2% per annum. The credit
agreement obligations are secured by substantially all the Company's assets that
are not collateralized under other financing agreements.
17
<PAGE> 20
The credit agreement includes certain financial covenants and restrictions on
payment of dividends, capital expenditures, indebtedness and the sale of certain
assets. At December 31, 1997, the Company was in violation of certain of the
financial covenants contained in the credit agreement. The Company has received
no demands or notices of default under its credit agreement, nor does the
Company expect any such demands or notices in the immediate future. The credit
agreement is scheduled to expire on December 31, 1999 (see Note 3 to
Consolidated Financial Statements).
Capital expenditures during 1997 were $5.7 million including capitalized leases
of $5.1 million. These capital expenditures and capital leases were primarily
for new, more efficient revenue equipment that replaced older equipment that was
sold. Proceeds from the sale of property and equipment amounted to $2.3 million.
In March 1997, the Company began restructuring certain of its debt obligations.
The Company suspended monthly payments on its equipment debt for April and May,
1997, aggregating $7.0 million in payments. The Company was therefore in default
under those agreements totaling over $133 million at that time.
As of December 31, 1997, restructured agreements with a majority of the
equipment lenders had been reached providing for the deferral of payments.
However, the Company is in payment default with the remaining equipment lenders
with a total outstanding amount in default of $16,273,000 at December 31, 1997.
The restructured agreements did not provide for any forgiveness of principal,
only the deferral of payments. The Company is also in default of various
financial covenants with certain equipment lenders with the total outstanding
amounts in default of $18,663,000 at December 31, 1997. These amounts are
classified as current liabilities on the balance sheet.
While the Company has no payment defaults under its general credit agreement,
the equipment debt defaults constitute cross defaults under the general credit
agreement 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 that also would
permit acceleration. The Company did not make interest payments due May 1, 1997,
and November 1, 1997, with respect to its 6 1/2% Convertible Subordinated
Debentures. The Company did not make the interest or sinking fund payment due
August 15, 1997, on its 8% Convertible Subordinated Debentures. The general
credit agreement and the two series of Convertible Subordinated Debentures are
classified as current liabilities on the balance sheet.
At December 31, 1997, the Company had available for issuance (and not otherwise
reserved) approximately 17 million authorized shares of its Common Stock and 1
million authorized shares of its $.01 per share par value preferred stock. This
stock could be issued, at any time, in connection with an acquisition, to
increase working capital, or for any other business purpose deemed appropriate
by the Board of Directors. Currently, there are no specific plans for the use of
the available authorized stock, other than the potential issuance of Common
Stock in connection with a contemplated exchange offer Builders has announced
that it proposes to register with the Securities and Exchange Commission in
connection with the restructuring of its outstanding debenture debt. As
currently contemplated that exchange offer would involve the issuance of
approximately 5 million shares of Common Stock. An ad hoc committee of
debentureholders claiming to control approximately fifty percent of the
outstanding debentures has announced that it will not support the exchange offer
on the terms currently contemplated. There is no assurance that the Company will
proceed with that exchange offer.
18
<PAGE> 21
The Company has adopted a very conservative capital expenditure budget for 1998.
The Company has not made any 1998 capital purchase commitments.
As a result of the reduced capital expenditure budget for 1998, the Company
currently plans to repay a significant amount of equipment debt during 1998. The
Company will remain highly leveraged for the foreseeable future, however,
without a significant equity infusion. The majority of the Company's debt
relates to equipment financing and is closely matched with the expected useful
lives of the equipment collateralizing the debt.
SEASONALITY
In the trucking industry generally, results of operations reflect a seasonal
pattern as customers reduce shipments during and after the winter holiday season
and its attendant weather variations. Accordingly, without growth in business,
the first and fourth quarters of a year would account for less revenue and net
income than the second and third quarters. Builders' quarterly results have
traditionally reflected this seasonality. Moreover, the extent of these seasonal
variations can change significantly from one year to the next depending,
particularly, on the severity of winter weather and its impact on travel
conditions and the economy.
IMPACT OF INFLATION
Inflation has in the past been, and may in the future be, a significant factor
in the economy. While the Company does not believe that inflation had a
significant impact on its results of operations in 1997, Builders continues to
monitor closely the impact of inflation, if any, and to optimize its impact on
prevailing price trends.
Equipment. The service lives of the Company's revenue equipment are relatively
short (five to ten years), and a regular cycle of equipment replacement ensures
that depreciation, as reported in the financial statements, reasonably
approximates current costs. This tends to neutralize, over time, the impact of
inflation in the cost of new equipment on results of operations.
Fuel. The cost and availability of fuel is significant to Builders' results of
operations. Historically, the Company has never experienced a situation in which
fuel shortages were so severe that adequate supplies could not be obtained, nor
is the Company aware of this having ever been the case for other companies in
the truckload segment of the industry. Fuel shortages do impact prices, however,
and from time to time in the past, fuel costs have been volatile. When fuel
prices have spiked in the past, the Company and others in the industry have been
able to ameliorate, to some extent, the negative effect on results of operations
by imposing fuel surcharges. Shippers' acceptance of fuel surcharges typically
lags behind the increase in fuel prices. Thus, the level of such surcharges is
sometimes not sufficient to offset totally the negative impact of the increased
costs until fuel prices recede toward their historic norms.
The Company has a network of authorized truck stops, where it has negotiated
fuel pump prices at an average wholesale rack price plus a small pumping fee for
the vendor. The Company believes that this pricing arrangement helps to prevent
the vendor from realizing excessive retail profit margins in certain less
competitive areas. In December 1997, the Company began to use fuel optimization
software in its selection of the lowest cost truck stop along the route that a
driver is scheduled to travel. The Company believes this software will be
effective in lowering its fuel costs. Additionally, the Company has hedged its
fuel costs on a limited basis in the past, and is currently considering hedging
part of its 1998 fuel requirements.
19
<PAGE> 22
ENVIRONMENTAL MATTERS
The Environmental Protection Agency and various state environmental regulatory
agencies regulate the Company's operations with respect to matters involving
water quality and effluent limitation, under ground storage tanks and the
handling, storage and disposal of solid waste and hazardous materials.
Capital expenditures include amounts spent for various environmental matters. In
addition, the Company provides for costs related to contingencies when a loss is
probable and the amount is reasonably determinable (based on case by case
consultation with environmental specialists). Receivables relating to claims for
recovery are recorded only when realization is probable. Recorded recoveries
were not material for the year ended December 31, 1997.
Capital expenditures for all environmental control efforts were not material in
1997, and they are not expected to be material in 1998.
COMPUTER SYSTEMS/SOFTWARE -- YEAR 2000 ISSUES
The Company is aware of the issues associated with the programming code in
existing computer systems/software as the year 2000 approaches. Many existing
computer software applications restrict the date field to two digits. This could
result in a system failure or miscalculations causing disruptions to normal
operations after the turn of the century. The issue becomes whether corrective
code exists in the Company's critical computer applications and if that code
will produce accurate information with relation to date-sensitive calculations
in the year 2000 and beyond.
The Company has determined that it will need to modify or replace portions of
its software so its computer systems will function properly with respect to
dates in the year 2000 and beyond. However, a majority of the Company's systems
were upgraded in 1996 and are Year 2000 Ready. The Company also has initiated
discussions with its significant suppliers, large customers and financial
institutions to ensure that those parties have appropriate plans to remediate
Year 2000 issues where their systems interface, through electronic data
interchange, or otherwise impact the Company's operations. The Company is
assessing the extent to which its operations are vulnerable should those
organizations fail to remediate properly their computer systems.
The Company's Year 2000 initiative is centrally managed by the Company's staff.
The Company is well under way with these efforts, which are scheduled to be
completed by mid 1998. While the Company believes its efforts are adequate to
address its Year 2000 concerns, there can be no guarantee that the systems of
other companies on which the Company's systems and operations rely will be
converted on a timely basis and will not have a material effect on the Company.
The cost of the Year 2000 initiatives is not expected to be material to the
Company's results of operations or financial position.
FACTORS THAT MAY AFFECT FUTURE RESULTS
See "-- Liquidity and Capital Resources" for a discussion of the Company's
current cash flow shortage. 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, the ability to recruit and
retain adequate numbers of qualified drivers, competition, rate pressure, and
fuel prices; the Company's ability to obtain sufficient working capital to
continue as a going concern (see "-- Liquidity and Capital Resources"); the
ability to restructure its debt (see "-- Liquidity and Capital Resources"); the
ability to attract and retain adequate operations executives (see "Directors and
Executive Officers of the Registrant"); retaining the right to self-insure and
the
20
<PAGE> 23
ability to obtain adequate insurance (see "Business -- Risk Management and
Insurance"); the 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. In addition, 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.
RECENT DEVELOPMENTS AND TRENDS
For a discussion of recent developments and trends, see
"Business -- Developments in the Company's Business" and "-- Liquidity and
Capital Resources".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Consolidated financial statements of the Company meeting the requirements of
Regulation S-X are filed on the succeeding pages of this Item 8 of this Annual
Report on Form 10-K.
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. 22
Audited Consolidated Financial Statements
Consolidated Statements of Operations..................... 23
Consolidated Balance Sheets............................... 24
Consolidated Statements of Stockholders' Equity........... 25
Consolidated Statements of Cash Flows..................... 26
Notes to Consolidated Financial Statements................ 27
</TABLE>
21
<PAGE> 24
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Builders Transport, Incorporated
We have audited the accompanying consolidated balance sheets of Builders
Transport, Incorporated and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
Our audits also included the financial statement schedule listed in the index at
Item 14(a). These financial statements and the schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and the schedule based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Builders Transport, Incorporated and subsidiaries at December 31, 1997 and 1996,
and the consolidated results of operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Notes 1 and 11 of the Notes to the Consolidated Financial
Statements, the Company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" in 1995.
The accompanying consolidated financial statements have been prepared assuming
that Builders Transport, Incorporated and subsidiaries will continue as a going
concern. The Company has incurred recurring losses from operations and has a
working capital deficiency. In addition, the Company has not complied with
certain covenants of loan and lease agreements with its lenders, which provide
for acceleration of the amounts due under these circumstances. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are described in Note 1.
The 1997 consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
ERNST & YOUNG LLP
Charlotte, North Carolina
March 13, 1998
22
<PAGE> 25
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------
(in thousands, except per share
amounts)
<S> <C> <C> <C>
Operating revenues.................................... $288,145 $289,419 $289,527
Operating expenses:
Wages, salaries and employee benefits............... 117,419 120,707 119,236
Operations and maintenance.......................... 73,670 67,452 59,370
Operating taxes and licenses........................ 26,756 27,158 27,611
Insurance and claims................................ 24,506 21,832 17,846
Communications and utilities........................ 4,156 4,919 4,670
Depreciation and equipment rents.................... 28,485 27,040 24,559
Loss (gain) on disposition of carrier property and
equipment........................................ 1,970 (493) (643)
Rents and purchased transportation.................. 25,540 21,883 19,164
Miscellaneous operating expenses.................... 1,942 1,421 1,145
Special charges..................................... 18,745 -- 1,420
-------- -------- --------
323,189 291,919 274,378
-------- -------- --------
Operating income (loss)............................... (35,044) (2,500) 15,149
Interest and other expenses, net...................... 15,468 16,033 15,145
-------- -------- --------
Income (loss) before income taxes and cumulative
effect of accounting change......................... (50,512) (18,533) 4
Income tax benefit.................................... -- 3,300 215
-------- -------- --------
Income (loss) before cumulative effect of accounting
change.............................................. (50,512) (15,233) 219
Cumulative effect of accounting change, net of income
taxes of $4,096..................................... -- -- (7,291)
-------- -------- --------
Net loss.............................................. $(50,512) $(15,233) $ (7,072)
======== ======== ========
Earnings (loss) per common share:
Basic and diluted earnings (loss) per common share:
Earnings (loss) before cumulative effect of
accounting change.............................. $ (9.60) $ (3.00) $ 0.04
Cumulative effect of accounting change........... -- -- (1.43)
-------- -------- --------
Net loss per common share........................ $ (9.60) $ (3.00) $ (1.39)
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE> 26
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1996
- ----------------------------------------------------------------------------------
(in thousands,
except share
amounts)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 48 $ 50
Accounts receivable:
Customers, less allowances of $591 in 1997 and $456 in
1996.................................................. 25,531 26,118
Other.................................................. 4,342 7,990
-------- --------
29,873 34,108
Prepaid expenses:
Tires in service....................................... 11,746 12,957
Taxes, licenses and other.............................. 1,480 1,964
Repair parts and operating supplies.................... 2,541 3,538
-------- --------
15,767 18,459
-------- --------
Total current assets.............................. 45,688 52,617
Property and equipment, net................................. 161,325 192,243
Other assets:
Costs in excess of net assets of businesses acquired...... 19,305
Miscellaneous, less allowance of $242 in 1997 and $168 in
1996................................................... 2,316 3,644
-------- --------
2,316 22,949
-------- --------
$209,329 $267,809
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable and accrued expenses............... $ 17,256 $ 11,756
Taxes other than income................................... 1,532 1,315
Wages, salaries and benefits.............................. 4,161 3,496
Claims payable............................................ 16,879 9,426
Current portion of long-term debt and capital lease
obligations............................................ 118,291 38,156
-------- --------
Total current liabilities......................... 158,119 64,149
Long-term debt and capital lease obligations, less current
portion................................................... 65,414 168,988
Reserve for claims payable and other........................ 11,177 10,273
Deferred income taxes....................................... 1,076 1,076
Stockholders' equity:
Preferred stock, par value $.01 per share: authorized
1,000,000 shares; none outstanding
Common stock, par value $.01 per share: authorized
25,000,000 shares; issued 6,491,070 shares in 1997 and
6,270,600 shares in 1996............................... 65 63
Capital in excess of par value............................ 34,265 33,675
Unearned compensation related to employee stock benefit
plan (KSOP) receivable................................. (4,197) (4,337)
Retained earnings (accumulated deficit)................... (41,544) 8,968
-------- --------
(11,411) 38,369
Less treasury stock, 1,207,051 shares in 1997 and 1996, at
cost...................................................... 15,046 15,046
-------- --------
Total stockholders' equity (deficit).............. (26,457) 23,323
-------- --------
$209,329 $267,809
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 27
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unearned
Compensation
Capital Related to
Common in Excess KSOP Retained Treasury
Stock of Par Receivable Earnings Stock Total
- -----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1994........... $62 $33,178 $(4,617) $ 31,273 $(14,318) $ 45,578
Net loss............. (7,072) (7,072)
Issuance of common
stock to 401(k)
plan............... 25 25
Exercise of stock
options............ 78 78
Purchase of treasury
stock.............. (460) (460)
Contribution to
KSOP............... 140 140
--- ------- ------- -------- -------- --------
Balance at December
31, 1995........... 62 33,281 (4,477) 24,201 (14,778) 38,289
Net loss............. (15,233) (15,233)
Issuance of common
stock to 401(k)
plan............... 1 357 358
Exercise of stock
options............ 37 37
Purchase of treasury
stock.............. (268) (268)
Contribution to
KSOP............... 140 140
--- ------- ------- -------- -------- --------
Balance at December
31, 1996........... 63 33,675 (4,337) 8,968 (15,046) 23,323
Net loss............. (50,512) (50,512)
Issuance of common
stock to 401(k)
plan............... 2 590 592
Contribution to
KSOP............... 140 140
--- ------- ------- -------- -------- --------
BALANCE AT DECEMBER
31, 1997........... $65 $34,265 $(4,197) $(41,544) $(15,046) $(26,457)
=== ======= ======= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 28
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.............................................. $(50,512) $(15,233) $ (7,072)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization....................... 29,337 28,203 25,505
(Gain) loss on dispositions......................... 1,570 (988) (921)
Deferred income taxes............................... -- (3,281) 33
Cumulative effect of accounting change.............. -- 7,291
Special charges..................................... 18,745 1,420
Changes in operating assets and liabilities:
Accounts receivable.............................. 4,235 (5,293) 2,218
Trade accounts payable and accrued expenses...... 4,815 2,171 659
Reserve for claims payable....................... 8,653 5,341 1,206
Other............................................ 5,576 4,794 (461)
-------- -------- --------
Net cash provided by operating activities............. 22,419 15,714 29,878
INVESTING ACTIVITIES
Purchases of equipment................................ (1,184) (2,093) (6,810)
Proceeds from disposal of equipment................... 2,293 10,074 11,421
-------- -------- --------
Net cash provided by investing activities... 1,109 7,981 4,611
FINANCING ACTIVITIES
Proceeds from lines of credit and long-term
borrowings.......................................... 14,331 4,000
Principal payments on line of credit, long-term debt
and capital lease obligations....................... (23,530) (37,854) (38,007)
Proceeds from issuance of common stock................ 37 78
Purchase of common stock for treasury................. (268) (460)
-------- -------- --------
Net cash used in financing activities................. (23,530) (23,754) (34,389)
-------- -------- --------
Increase (decrease) in cash and cash equivalents...... (2) (59) 100
Cash and cash equivalents at beginning of year........ 50 109 9
-------- -------- --------
Cash and cash equivalents at end of year.............. $ 48 $ 50 $ 109
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE> 29
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS: Builders Transport, Incorporated (the "Company"),
through its wholly-owned subsidiaries, operates as a truckload carrier
transporting a wide range of commodities in both interstate and intrastate
commerce.
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred losses of
$50.5 million, $15.2 million and $7.0 million for the years ended December 31,
1997, 1996 and 1995, respectively, and is in violation of certain loan covenants
that give the lenders the right to accelerate the due date of their loans, among
other remedies. In addition, the Department of Transportation ("DOT") notified
the Company on February 20, 1998, that it had dropped below the required $2
million in tangible net worth to maintain its ability to self insure for BIPD
and workers' compensation claims. The Company has 30 days to present their case
to the DOT. The Company has filed a formal response with the DOT arguing that
the Company should continue to be permitted to self-insure, and is now awaiting
a response from the DOT. There is no assurance that the Company will continue to
be able to self-insure and may, therefore, be required to secure and fund the
cost of additional commercial insurance. These conditions, among others, raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of reported asset amounts or the amounts
and classification of liabilities that might result from the outcome of this
uncertainty.
The Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flows to meet its obligations on a timely basis, cure
the violations of the long term debt agreements, and ultimately to attain
profitability. Management is working to restructure certain debt obligations and
to obtain additional financing. The Company is also strategically reviewing its
divisional operations, equipment assignments and driver recruitment process in
order to improve profitability. Management believes that successful execution of
these plans will enable the Company to meet its cash requirements for the next
year.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
CASH EQUIVALENTS: The Company considers all highly liquid investments readily
convertible into cash or having a maturity of three months or less when
purchased to be cash equivalents.
REVENUE RECOGNITION: Operating revenues and related expenses are recognized on
the date the freight is picked up for shipment. This method of revenue
recognition is not materially different from methods deemed preferable by the
Financial Accounting Standards Board Emerging Issues Task Force in their
consensus opinion Issue No. 91-9.
PREPAID TIRES: The cost of tires acquired with revenue equipment, together with
replacement tires, is capitalized and amortized on the straight-line method over
the tires' estimated useful life. The average amortization period for new
additions to prepaid tires is approximately three years. Recapping costs are
expensed as incurred.
27
<PAGE> 30
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT: Carrier property and equipment is carried at cost
including expenditures for readying the assets for use. Major additions and
improvements are capitalized while maintenance and repairs that do not improve
or extend the lives of the respective assets are charged to expense as incurred.
Depreciation is computed on the straight-line method over the estimated useful
life. Leasehold improvements are amortized over the lives of the leases.
Noncarrier property comprises terminal facilities and staging lots no longer
utilized in the Company's operations and land held for investment purposes.
Gains and losses on property dispositions are included in operations.
STOCK BASED COMPENSATION: The Company accounts for stock options grants under
Accounting Principals Board Opinion No. 25, "Accounting for Stock Issued to
Employees". Accordingly, compensation expense for stock options is measured as
the excess, if any, of the quoted market price of the Company's stock at the
date of grant over the exercise price. In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123 (SFAS
No. 123) "Accounting for Stock-Based Compensation." SFAS No. 123 encourages, but
does not require, adoption of a fair value method of accounting for employee
stock-based compensation plans. As permitted by SFAS No. 123, the Company has
elected to disclose the pro forma net income (loss) and earnings (loss) per
share as if the fair value method had been applied in measuring compensation
expense.
FAIR VALUES OF FINANCIAL INSTRUMENTS: At December 31, 1997 and 1996, the
carrying value of financial instruments such as cash equivalents, accounts
receivable and payable and the long-term credit agreement approximated their
fair values. The fair value of the Company's 8% and 6 1/2% convertible
subordinated debentures are estimated using the average of the quoted market bid
and ask prices. The fair value of these debentures at December 31, 1997 was
approximately $23,659,000. The carrying value of the debentures at December 31,
1997 was $46,788,000.
ACCOUNTING CHANGES: The Company implemented Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (SFAS No. 121) as of January 1, 1995. This
statement establishes accounting standards for determining impairment of
long-lived assets. The Company periodically assesses the realizability of its
long-lived assets and evaluates such assets for impairment whenever events or
changes in circumstances indicate the carrying amount of an asset may not be
recoverable. For assets to be held, impairment is determined to exist if
estimated future cash flows, undiscounted and without interest charges, are less
than the carrying amount. For assets to be disposed of, impairment is determined
to exist if the estimated net realizable value is less than the carrying amount.
As discussed in Note 11, the Company recognized a cumulative effect adjustment
as of January 1, 1995 for certain assets that were planned to be disposed of.
CREDIT RISK: Financial investments that potentially subject the Company to
concentrations of credit risk consist primarily of accounts receivable.
Concentrations of credit risk with respect to account receivable are limited due
to the Company's diversified freight base with no one customer, industry, or
geographic region making up a large percentage of the account receivable or
revenues. As of December 31, 1997, the Company had no significant concentrations
of credit risk.
28
<PAGE> 31
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 amount reported in the financial statements and
accompanying notes. Estimates made by the Company relate primarily to self
insurance accruals, valuation of long-lived assets, realization of deferred tax
assets and allowances for uncollectible accounts. Actual results could differ
from these estimates.
EARNINGS PER SHARE: Effective for the Company's consolidated financial
statements for the year ended December 31, 1997, the Company adopted SFAS No.
128, "Earnings per Share", which replaces the presentation of primary earnings
per share ("EPS") and fully diluted EPS with a presentation of basic EPS and
diluted EPS, respectively. Basic EPS excludes dilution and is computed by
dividing earnings available to common stockholders by the weighted-average
number of common shares outstanding for the period. Similar to fully diluted
EPS, diluted EPS assumes conversion of the convertible preferred stock, the
elimination of the related preferred stock dividend requirement, and the
issuance of common stock for all other potentially dilutive equivalent shares
outstanding. All prior-period EPS data have been restated. The adoption of this
new accounting standard did not have a material effect on the Company's reported
EPS amounts.
RECLASSIFICATION: Certain prior year amounts have been reclassified for
comparative purposes.
RECENT ACCOUNTING PRONOUNCEMENTS: In June 1997, the Financial Accounting
Standards Board issued SFAS No. 130, "Reporting Comprehensive Income". This
statement establishes standards for reporting the components of comprehensive
income and requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be included in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income includes net income as well as
certain items that are reported directly within a separate component of
stockholders' equity and by pass net income. The provisions of this statement
are effective beginning with 1998 interim reporting. These disclosure
requirements will have no impact on financial position or results of operations.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". The
provisions of this statement require disclosure of financial and descriptive
information about an enterprise's operating segments in annual and interim
financial reports issued to shareholders. The statement defines an operating
segment as a component of an enterprise that engages in business activities that
generate revenue and incur expense, whose operating results are reviewed by
chief operating decision makers in the determination of resource allocation and
performance, and for which discrete financial information is available. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This statement is effective for fiscal
years beginning after December 15, 1997, however, it is not required to be
applied for interim reporting in the initial year of application. The Company is
currently evaluating the impact of this statement on the disclosures included in
its annual and interim period financial statements.
29
<PAGE> 32
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1996
--------- ---------
<S> <C> <C>
Carrier property:
Land...................................................... $ 4,941 $ 4,941
Buildings................................................. 20,752 20,741
Revenue equipment......................................... 251,434 257,657
Service equipment and other............................... 19,698 19,666
--------- ---------
296,825 303,005
Non-carrier property........................................ 4,711 6,473
--------- ---------
301,536 309,478
Less reserves for depreciation and amortization............. (140,211) (117,235)
--------- ---------
$ 161,325 $ 192,243
========= =========
</TABLE>
NOTE 3. CREDIT AGREEMENT, DEBT, AND CAPITAL LEASES
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Credit agreement:(a)
Term loan................................................. $ 1,000 $ 2,000
Revolver.................................................. 12,948 13,321
8% convertible subordinated debentures(b)................. 24,437 24,437
6 1/2% convertible subordinated debentures(c)............. 22,351 22,351
Capital leases(d)......................................... 122,969 145,035
-------- --------
183,705 207,144
Less: Current portion..................................... 118,291 38,156
-------- --------
$ 65,414 $168,988
======== ========
</TABLE>
- ---------------
(a) The credit agreement, which expires December 31, 1999, provides for a
maximum availability of $36.5, comprising a $1 million term loan, a
revolving credit facility of up to $22 million, of which $12.9 million was
outstanding at December 31, 1997, and irrevocable letters of credit of up to
$12.5 million that may be reduced to $8.5 million at the request of the
lenders. The Company may increase the letter of credit facility by up to an
additional $2 million, however, by reducing the revolving credit facility by
a like amount. The term portion of the credit agreement is payable in 1998.
Borrowings under the revolving credit facility are limited to a specified
percentage of customer accounts receivable, as defined in the credit
agreement. The interest rate on borrowings under the credit agreement is
prime plus 1%. Fees on outstanding letters of credit are 2 1/4% per annum,
and fees on the unused portion of the
30
<PAGE> 33
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
revolving credit and letter of credit facilities are 1/2% per annum. The
credit agreement obligations are secured by substantially all the Company's
assets that are not collateralized under other financing agreements.
(b) The 8% convertible subordinated debentures issued in 1985 are convertible
(until maturity or prior redemption) into common stock at $24.40 per share
(equal to 1,001,516 shares at December 31, 1997). The debentures are subject
to certain optional redemption provisions, sinking fund requirements from
1998 to 2004, inclusive, and optional retirement provisions, and are
subordinated to all present and future senior indebtedness of the Company.
(c) The 6 1/2% convertible subordinated debentures issued in 1986 are
convertible (until maturity or prior redemption) into common stock at $37.75
per share (equal to 592,079 shares at December 31, 1997). The debentures are
subject to certain optional redemption provisions, sinking fund requirements
from 2002 to 2010, inclusive, and optional retirement provisions, and are
subordinated to all present and future senior indebtedness of the Company.
(d) Capital leases represent primarily leased revenue equipment capitalized for
$197,392,000 and $204,373,000 with accumulated amortization of $74,035,000
and $53,816,000 at year end 1997 and 1996, respectively. The leases are for
periods of up to nine years and provide for various renewal options. The
tractor and trailer leases also provide a purchase option, any time after
36, 48, 60, 84, or 108 months, at predetermined termination values. The
termination values have been included in the capital lease obligation.
The credit agreement, and certain capital lease agreements contain financial
covenants and restrictions on payments of dividends, capital expenditures,
indebtedness and the sale of certain assets. There are no retained earnings
available for payment of dividends at December 31, 1997.
In March 1997, the Company began restructuring certain of the debt obligations.
The Company suspended monthly payments on its equipment debt for April and May,
1997 aggregating $7.0 million in payments. The Company was therefore in default
under those agreements totaling over $133 million at that time.
As of December 31, 1997, restructured agreements with a majority of the
equipment lenders has been reached providing for the deferral of payments.
However, the Company is in payment default with the remaining equipment lenders
with a total outstanding amount in default of $16,273,000 at December 31, 1997.
The restructured agreements did not provide for any forgiveness of principal,
only the deferral of payments. The Company is also in default of various
financial covenants with certain equipment lenders with the total outstanding
amounts in default of $18,663,000 at December 31, 1997. These amounts are
classified as current liabilities on the balance sheet.
As a result of one of the agreements in default, the Company returned the
underlying equipment to the lender. Another equipment lender filed a lawsuit
relating to the default under the agreement and has requested the return of the
underlying equipment. Under each of these agreements, the Company continues to
be liable for any shortfalls in the potential amounts subsequently received by
the lenders upon the disposition of the equipment. The lenders have not notified
the Company of the amounts due, if any, resulting from the defaults. The Company
has not recorded any amounts in the accompanying financial statements relating
to these contingencies.
31
<PAGE> 34
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
While the Company has no payment defaults under its general credit facility, the
equipment debt defaults constitute cross 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 that also would
permit acceleration. The Company did not make interest payments due May 1, 1997
and November 1, 1997 with respect to its 6 1/2% Convertible Subordinated
Debentures. The Company did not make the interest or sinking fund payment due
August 15, 1997 on its 8% Convertible Subordinated Debentures. The general
credit facility and the two series of Convertible Subordinated Debentures are
classified as current liabilities on the balance sheet.
The aggregate annual maturities of long-term debt, capital leases, and
noncancelable operating leases (including reflecting those agreements in default
as current) at December 31, 1997, are as follows (in thousands):
<TABLE>
<CAPTION>
Operating Long-Term Capital
Year Leases Debt Leases Total
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998..................................... $1,096 $60,736 $ 64,960 $126,792
1999..................................... 726 24,317 25,043
2000..................................... 404 21,879 22,283
2001..................................... 5 9,774 9,779
2002..................................... 4 7,920 7,924
Thereafter............................... 11 11,566 11,577
------ ------- -------- --------
2,246 60,736 140,416 203,398
Less amounts representing interest....... (17,447) (17,447)
------ ------- -------- --------
$2,246 $60,736 $122,969 $185,951
====== ======= ======== ========
</TABLE>
Interest expense on debt and capital leases amounted to $15,588,000 in 1997,
$15,905,000 in 1996, and $14,794,000 in 1995. During 1995, approximately
$600,000 of interest was capitalized.
Rental expense for revenue equipment, facilities, and office equipment amounted
to $3,647,000 in 1997, $4,009,000 in 1996, $3,846,000 and in 1995.
NOTE 4. RESERVE FOR CLAIMS PAYABLE
Under an agreement with its insurance underwriters, the Company is liable up to
$1,000,000 for any single occurrence for bodily injury and personal liability
claims. Excess liability is assumed by the underwriters for claims up to
$35,000,000. The Company's agreement with its underwriters is secured by letters
of credit totaling $2,900,000. Additionally, $1,301,000 and letters of credit
aggregating $5,234,000 have been deposited with various regulatory agencies to
satisfy self-insurance requirements. That portion of the reserve for claims
estimated to be payable within one year is classified as a current liability.
Reserves for workers' compensation are based upon historical trends, claim
frequency, severity, the Company's experience and other factors, and are
discounted to present value. Adjustments to previously established reserves are
included in operating results. At December 31, 1997 and 1996, estimated future
payments for these claims aggregated approximately $5,713,000 and
32
<PAGE> 35
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$4,526,000, respectively. The present value of these estimated future payments
was approximately $4,476,000 at December 31, 1997, and $2,953,000 at December
31, 1996, discounted at rates of 5.4% for 1997 and 7.3% for 1996. The estimated
future payments at December 31, 1997, are $934,000 in 1998, $1,036,000 in 1999,
$683,000 in 2000, $465,000 in 2001, $354,000 in 2002, and $2,241,000 thereafter.
NOTE 5. INCOME TAXES
The benefit for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Current............................................ $ -- $ (19) $(111)
Deferred -- (3,281) (104)
----- ------- -----
$ -- $(3,300) $(215)
===== ======= =====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation............................... $ 6,095 $13,183
Capital leases and other................................. 4,294 2,929
-------- -------
10,389 16,112
Deferred tax assets:
Allowances for accounts receivable and claims reserves... 8,417 5,498
Net operating loss carryforwards......................... 10,166 4,300
General business, minimum tax and other credit
carryforwards......................................... 6,098 6,155
Other deferred tax assets................................ 4,175 2,333
-------- -------
Total deferred tax assets.................................. 28,856 18,286
Valuation allowance........................................ (19,543) (3,250)
-------- -------
Net deferred tax assets.................................... 9,313 15,036
-------- -------
Net deferred tax liabilities..................... $ 1,076 $ 1,076
======== =======
</TABLE>
Realization of the deferred tax assets associated with the NOL and credit
carryforwards is dependent upon generating sufficient taxable income prior to
their expiration. Management believes that there is a risk that certain of these
NOL and credit carryforwards may expire unused and, accordingly, has established
a valuation allowance against them.
33
<PAGE> 36
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The reasons for the difference between total income tax expense (benefit) and
the amount computed by applying the statutory federal income tax rate to income
before income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed tax expense (benefit) using the statutory
federal income tax rate........................... $(17,175) $(6,301) $ (1)
Increase (decrease) in taxes arising from:
State taxes, net of federal benefit............... (884) (361) 7
Increase in valuation allowance................... 16,293 3,250
Tax rate increases (decreases).................... 18 (228)
Prior year (over) under accrual................... (100)
Nondeductible expenses............................ 1,994 94 86
Other items....................................... (228) 21
-------- ------- -----
$ -- $(3,300) $(215)
======== ======= =====
</TABLE>
At December 31, 1997, the Company had net operating loss carryforwards for
federal tax purposes of $28,044,000 expiring in the years 2010 through 2012,
general business credit carryforwards of $5,347,000 expiring in years 1998
through 2004, state net operating loss carryforwards of $31,863,000 expiring in
years 1998 through 2009, and minimum tax credits of $750,000 that carry forward
indefinitely.
NOTE 6. BENEFIT PLANS
The Company has a stock option plan that permits the granting of options to
purchase up to an aggregate of 1,450,000 shares of common stock to officers and
key employees. Under this Plan, options to purchase shares of common stock may
be granted at not less than 100% of the fair market value at the date of grant,
or 110% of fair market value in the case of any employee who holds more than 10%
of the combined voting power of the Company's common stock as of the date of
grant if the option is designated as an incentive stock option.
The Company also has a Non-employee Directors' Stock Option Plan. This plan
provides for the granting of options to purchase up to an aggregate of 100,000
shares of common stock to members of the Board of Directors of the Company who
are not employees of the Company or any of its subsidiaries. Under the Plan,
options to purchase 10,000 shares of common stock were granted to each
non-employee director upon the Board's adoption of this plan, and options to
purchase 10,000 shares will be granted to any new Non-employee Director upon his
or her election to the Board of Directors. Each Non-employee Director shall
receive additional options to purchase 2,000 shares each even numbered year
during the Plan's existence beginning March 29, 1994, at not less than 100% of
the fair market value at the date of the grant.
In November 1996, the Company canceled options to purchase 1,080,000 shares,
with exercise prices ranging from $6.0625 to $15.375, and concurrently issued
1,080,000 options with an exercise price of $3 per share. The Company's stock
option plans have authorized the grant of options to employees and directors for
up to 1,190,039 shares of the Company's common stock. All
34
<PAGE> 37
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
options granted have ten year terms and vest and become fully exercisable at the
end of four years of continued employment.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for risk-free interest rates of 5.4%, a dividend yield of 0%;
volatility factors of the expected market price of the Company's common stock of
0.72; and a weighted-average expected life of the option of five years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands except for earnings per share
information):
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Pro forma net loss.......................................... $50,939 $15,698
Pro forma loss per share:
Basic and Diluted......................................... $ 9.68 $ 3.09
</TABLE>
The effects of SFAS No. 123 in this proforma disclosure may not be indicative of
future amounts. SFAS 123 does not apply to options granted prior to 1995.
The following table summarizes the changes in options outstanding and related
price ranges for shares of common stock under options:
<TABLE>
<CAPTION>
Number Option Price
of Shares Per Share
- ---------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1995................ 1,109,646 $ 3.75 - $15.375
Exercised..................................... (5,375) $6.0625 - $7.9375
Expired or canceled........................... (1,462,830) $6.0625 - $15.375
Granted....................................... 1,606,333 $ 3.00 - $9.8125
----------
Outstanding at December 31, 1996................ 1,247,774 $ 3.00 - $10.50
----------
Exercised..................................... --
Expired or canceled........................... (137,735) $ 3.00 - $10.50
Granted....................................... 80,000 $2.4375 - $3.1875
----------
OUTSTANDING AT DECEMBER 31, 1997................ 1,190,039 $2.4375 - $10.50
==========
</TABLE>
At December 31, 1997, options to purchase 504,872 shares were exercisable, and
98,117 shares were reserved for future grants.
35
<PAGE> 38
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Builders Transport, Incorporated Employee's Retirement Savings & Profit
Sharing Plan (the "KSOP") is available to substantially all Company employees
who meet the eligibility requirements. The KSOP utilizes the shares of common
stock that were acquired by the ESOP in 1989 and that remain unallocated to make
the Company's future 401(k) matching contributions under the KSOP. The amount of
the Company's 401(k) matching contribution under the KSOP is now discretionary.
However, it is anticipated that by December 31, 2011, all of the common stock
acquired by the ESOP in 1989 will have been allocated as the KSOP loan is
repaid.
The KSOP will obtain the funds to repay the loan through tax deductible
contributions made by the Company to the KSOP. The Company incurred interest
expense of $366,000, $379,000, and $390,000 and compensation expense of
$223,000, $229,000, and $234,000 related to the KSOP during the years ended
December 31, 1997, 1996 and 1995, respectively. Compensation expense is
recognized under the shares allocated method.
Contributions accrued for all defined contribution plans were $1,247,000 in
1997, $1,537,000 in 1996, and $1,278,000 in 1995.
NOTE 7. SUPPLEMENTAL INFORMATION TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Additional information related to the consolidated statements of cash flows with
regard to certain cash payments and noncash investing and financing activities
is as follows (in thousands):
<TABLE>
<CAPTION>
December 31
-----------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid:
Interest......................................... $12,643 $16,172 $15,098
Income taxes..................................... 200
Noncash investing activity:
Equipment acquired through capital leases........ 5,068 27,412 69,718
Noncash financing activity:
Common stock issued under employee benefit
plans......................................... 732 498 165
</TABLE>
36
<PAGE> 39
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. EARNINGS (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------
(In thousands, except per share
amounts)
<S> <C> <C> <C>
Numerator:
Net income (loss) before cumulative effect
account change........................... $ (50,512) $ (15,233) $ 219
Cumulative effect of accounting change...... (7,291)
---------- ---------- ----------
Numerator for basic and diluted loss per
share -- loss available to common
stockholders(1)............................. $ (50,512) $ (15,233) $ (7,072)
========== ========== ==========
Denominator:
Denominator for basic and diluted loss per
share -- weighted-average shares
outstanding(1)........................... 5,261,066 5,079,943 5,084,252
========== ========== ==========
Basic and diluted loss per share.............. $ (9.60) $ (3.00) $ (1.39)
========== ========== ==========
</TABLE>
- ---------------
(1) The effect of stock options and the conversion of the two series of
Convertible Subordinated Debentures is antidilutive and is therefore
excluded from the calculation of diluted earnings per share.
NOTE 9. RELATED PARTY TRANSACTIONS
During 1995, the Company entered into an agreement with Two Trees, a New York
general partnership for the sale and leaseback of the building that houses the
Company's offices and division headquarters and related land, located in Camden,
South Carolina. The Company's Chairman of the Board is a general partner of Two
Trees. The Company has purchase and lease renewal options at projected future
fair market values under the agreement.
The cost and associated accumulated depreciation of the building, approximately
$3,473,000 and $899,000, respectively, have been removed from the accounts and
the gain realized on the sale of approximately $392,000 has been deferred. The
deferred gain will be credited to income as rent expense adjustments over the
lease term of five years. Payments under the lease approximate $454,000
annually, commencing in October 1995. The Company has an outstanding letter of
credit totaling $1,600,000 to Two Trees in support of the lease payments.
In connection with the sale and leaseback, the Company paid $200,000 in
brokerage commissions to Two Trees. The fees paid are based on ordinary and
customary standards for such services and the lease payments are based on the
fair market value of the property.
In November 1996, the disinterested members of the Company's Board of Directors
unanimously approved a $300,000 principal amount, short-term loan to the
Company's Chairman of the Board at the market level interest rate. The loan was
repaid in full with accrued interest prior to December 31, 1996.
37
<PAGE> 40
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the sale of non-carrier property in October 1997, the Company
paid $100,000 in brokerage commissions to Two Trees.
NOTE 10. SPECIAL CHARGES
In the fourth quarter of 1995, the Company recorded special charges of
$1,420,000 associated with exiting the tire loading and warehousing business.
The special charges comprise principally the loss on sale of equipment
(consummated in February 1996) and write-downs of accounts receivable,
intangibles and other assets.
During 1997, the Company determined that the carrying value of the goodwill
recorded in connection with the purchase of various lines of business was
impaired. Accordingly, the Company recorded a charge of $18,745,000 relating to
the write-off of goodwill. At December 31, 1996, the accumulated amortization,
being taken over forty years, was $2,837,000.
NOTE 11. IMPAIRMENT OF LONG-LIVED ASSETS
During 1994, the Company initiated a plan to dispose of certain older revenue
equipment and to reduce the average age of its fleet. The adoption of SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed Of," as of January 1, 1995, required the Company to recognize a
cumulative effect adjustment to the extent the carrying value of the affected
assets exceeded the estimated net realizable value.
Prior to the cumulative effect adjustment, this revenue equipment to be disposed
of had a carrying amount of $19,408,000 as of January 1, 1995. The Company
recorded a pre-tax cumulative effect adjustment of $11,387,000 to reduce the
carrying amount to the estimated net realizable value of $8,021,000. The
after-tax cumulative effect adjustment was a charge of $7,291,000 or $1.43 per
share. The carrying amount of assets remaining to be disposed of is $2,128,000
and $6,031,000 as of December 31, 1996 and 1995, respectively.
NOTE 12. CONTINGENCIES
The Company is involved in various legal proceedings and claims that have arisen
in the ordinary course of its business that have not been finally adjudicated,
other than those discussed in Note 3. Many of these other proceedings are
covered in whole or in part by insurance. These other legal matters, when
finally concluded and determined will not, in the opinion of management, have a
material adverse effect upon the financial position of the Company.
38
<PAGE> 41
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations for the
years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 QUARTER ENDED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30(3) DECEMBER 31
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue................... $70,993 $75,187 $73,002 $ 68,963
Operating expenses(2)............... 70,799 71,014 75,264 106,112
Net income (loss)................... (2,409) 45 (7,372) (40,776)
Basic and diluted earnings (loss)
per common share*................. (.46) .01 (1.39) (7.71)
</TABLE>
<TABLE>
<CAPTION>
1996 Quarter Ended
-----------------------------------------------
March 31 June 30 September 30 December 31
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue....................... $70,487 $73,442 $73,462 $ 72,028
Operating expenses(1)................... 66,901 68,822 72,781 83,415
Net income (loss)....................... (328) 357 (2,098) (13,164)
Basic and diluted earnings (loss) per
common share*......................... (.06) .07 (.41) (2.60)
</TABLE>
- ---------------
(1) The Company made certain year-end adjustments in 1996 resulting from changes
in estimates relating to reserves for claims payable that were material to
the results of the fourth quarter. These adjustments, after applicable
income tax reductions, reduced net income by approximately $3,000,000.
(2) Included in the fourth quarter 1997 results are pre-tax charges of $18.7
million for the write-off of goodwill and $9.2 million to adjust the claims
payable reserves. The Company determined that the goodwill recorded in
connection with the purchase of various lines of business was impaired and
accordingly recorded a charge of $18.7 million to write-off the goodwill.
The additional claims expense was accrued as a result of recent increases in
the severity of accidents and the amounts required to settle claims.
(3) The financial results for the third quarter ended September 30, 1997 were
restated for the following: (a) $2.2 million relating to a valuation
allowance against income tax benefits previously recorded due to the
significant losses incurred to date and management's assessment as to the
likelihood at that time of such amounts being realized, (b) $1.6 million
relating to increases to the claims liability as discussed in (2) above,
which pertain to the third quarter, (c) $1.8 million relating to certain
operating accounts based upon management's reevaluation of amounts accrued
in the third quarter, and (d) $600,000 of non-operating costs, primarily
associated with the debt restructuring, which the Company
39
<PAGE> 42
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
determined should be expensed in the third quarter rather than amortized
based upon review of the final restructured agreements. The originally
reported amounts were as follows:
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
SEPTEMBER 30, 1997
(AS PREVIOUSLY
REPORTED)
---------------------
<S> <C>
Operating revenue........................................... $73,002
Operating expenses.......................................... 71,285
Net income (loss)........................................... (1,156)
Basic and diluted earnings (loss) per common share*......... (.22)
</TABLE>
* Earnings (loss) per share ("EPS") amounts have been restated to reflect the
adoption of Statement of Financial Accounting Standards No. 128, "Earnings
per Share," which replaces the presentation of primary EPS and fully diluted
EPS with a presentation of basic EPS and diluted EPS, respectively.
40
<PAGE> 43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table gives certain information regarding directors and executive
officers of the Company at March 16, 1998. Each Director is elected for a
one-year term. All Directors will be up for election at the 1998 Annual Meeting
of stockholders of the Company. Only four of the seven seats on Builders' Board
of Directors are currently filled due to Mr. Morton's death and the resignations
from the Board earlier in 1998 of Mr. Braatz and Arthur C. Baxter. The Board of
Directors has not yet decided whether to reduce the size of the Board, fill some
or all of the vacancies or to leave those seats vacant for the time being.
<TABLE>
<CAPTION>
Name Age Current Position
- ---- --- ----------------
<S> <C> <C>
David C. Walentas......................... 59 Chairman of the Board and Director
Stanford M. Dinstein...................... 50 Vice Chairman of the Board and Chief
Executive Officer and Director
Roy R. Parsons............................ 50 President and Chief Operating Officer
John R. Morris............................ 54 President -- Dedicated Fleet Division and
Director
T. M. Guthrie............................. 50 Chief Financial Officer and Treasurer
P. Michael Davis.......................... 57 Vice President -- Dedicated Fleet Division
Daniel P. Braatz.......................... 37 Vice President -- Flatbed Division
Pierson G. Mapes.......................... 60 Director
Frederick S. Morton*...................... 77 Director
</TABLE>
- ---------------
* Mr. Morton died March 22, 1998.
David C. Walentas is, and has been for more than 25 years, principally engaged
in the develop ment, management and construction of real estate. Mr. Walentas
owns and operates more than three million square feet of commercial property and
owns and manages more than 2,000 apartment units. His real estate development
activities are carried on through various entities, including Two Trees, a New
York general partnership ("Two Trees"). His real estate management activities
are principally carried on through Two Trees Management Co., of which he is its
sole proprietor. His real estate construction activities are principally carried
on through The Gair Co., and, since January 1986, through The Washington Street
Construction Co., Inc. Mr. Walentas is President and sole proprietor of both of
these companies. Mr. Walentas has served as a director continuously since 1990.
Mr. Walentas was named the Company's Chairman of the Board following the 1990
Annual Meeting of Stockholders.
Stanford M. Dinstein, a certified public accountant, is, and has been for more
than 20 years, principally engaged as an independent financial and management
consultant to Two Trees and other private corporations and partnerships. Mr.
Dinstein, a senior officer and director of Builders since 1990, has served the
Company in a variety of financial, administrative and operational capacities,
and, in August 1993, was named Chief Executive Officer.
41
<PAGE> 44
Roy R. Parsons was elected President and Chief Operating Officer on January 14,
1998. Prior to that, he had served as General Manager of the Company's Dedicated
Transportation Services Division since joining the Company in 1993 when the
Company acquired certain assets of Vernon Milling Company, Inc. (a trucking
company) where Mr. Parsons had been employed for over three years as General
Manager. Prior to that, Mr. Parsons was employed as General Manager of Saber
Transportation for six years.
John R. Morris joined the Company in January 1986 and was in charge of its
Dedicated Fleet operations from that time until January 1989 when he was named
President and Chief Operating Officer of the Company, in which position he
served until being named President of the Company's Dedicated Services and
Contract Logistics Group in December 1993. Mr. Morris was again named President
and Chief Operating Officer in December 1995. Mr. Morris also filled the
position of Chief Executive Officer on two occasions between June 1990 and
November 1992. Prior to joining the Company, Mr. Morris was employed by McLean
Trucking Company for 23 years. Mr. Morris served on the Board from January 1989
to September 1990 and has served as a director continuously since his
reappointment in October 1990.
T. M. Guthrie has been employed by the Company since 1985. Prior to joining the
Company, Mr. Guthrie was employed by McLean Trucking Company for 11 years. He
served the Company as Vice President, Administration and Treasurer from 1986
until he was elected Chief Financial Officer and Treasurer in 1996.
P. Michael Davis serves as Vice President of the Dedicated Fleet Division and
has been employed by the Company since 1986. Mr. Davis previously served the
Company as Vice President of Sales. Prior to joining the Company, Mr. Davis was
employed by McLean Trucking Company for 23 years.
Daniel P. Braatz joined Builders in June 1996 and was named Vice President of
the Flatbed Division in December 1996. He served as President and Chief
Operating Officer and Director of the Company from May 1997 until early 1998,
when he resigned as a Director and returned to the position of Vice President of
the Flatbed Division. Prior to joining Builders, Mr. Braatz served in several
management positions with J. B. Hunt Transport, most recently as Senior Vice
President Sales and Marketing.
Pierson G. Mapes is a retired television executive. From November 1982 through
his retirement in June 1994, he was the President of the NBC Television Network.
In that capacity, Mr. Mapes oversaw the network's affiliate relations,
advertising sales and marketing areas. Mr. Mapes has served as a director of the
Company since April 1996.
Frederick S. Morton was, prior to June 1989, Professor of Business
Administration at The Darden School of the University of Virginia and a
consultant in the areas of corporate strategy, effective operations management
and management development. After June 1989, Mr. Morton was Professor Emeritus
at the University of Virginia and continued his consulting activities until he
died on March 22, 1998. Mr. Morton served as a director of the Company
continuously after his election at the 1990 Annual Meeting of Stockholders.
There are no family relationships among executive officers or other significant
employees.
COMPLIANCE WITH BENEFICIAL OWNERSHIP REPORTING RULES
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and certain officers and persons who own more than 10% of a registered
class of the Company's equity securities; to file within certain specified time
periods reports of ownership and changes in
42
<PAGE> 45
ownership with the SEC. Such officers, directors and shareholders are required
by SEC regulations to furnish the Company with copies of all such reports that
they file. Based solely on a review of copies of reports filed with the SEC
since January 1, 1997, and written representations by certain officers and
directors, all persons subject to the reporting requirements of Section 16(a)
filed the required reports on a timely basis during 1997.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth for the fiscal years ended December 31, 1995,
1996 and 1997, the cash compensation paid or accrued by the Company, as well as
certain other compensation paid or accrued for those years, for services in all
capacities to the individual serving as the Company's Chief Executive Officer
throughout 1997, and to the Company's four most highly compensated executive
officers, other than the Chief Executive Officer, who were serving as executive
officers at the end of 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------- --------------------- (I)
(A) (B) (C) (D)(1) (G)(2) ALL OTHER
SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)(3)
- --------------------------- ---- ---------- --------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
David C. Walentas................ 1997 $195,000 -0- -0- $1,470
Chairman of the Board 1996 195,000 -0- 375,000 2,011
1995 182,083 $127,998 -0- 2,539
Stanford M. Dinstein............. 1997 $275,000 -0- -0- $1,649
Vice Chairman and 1996 275,000 -0- 212,500 2,050
Chief Executive Officer 1995 258,854 $ 64,340 -0- 3,820
John R. Morris................... 1997 $225,000 -0- -0- $1,221
President -- Dedicated Fleet 1996 225,000 -0- 94,937 1,620
1995 190,000 $ 64,125 -0- 3,309
Daniel Braatz(4)................. 1997 $200,000 -0- -0- -0-
Vice President -- Flatbed
Division 1996 200,000 -0- -0- -0-
T.M. Guthrie..................... 1997 $125,000 -0- -0- $ 985
Chief Financial Officer 1996 120,000 -0- 16,000 -0-
and Treasurer 1995 113,542 -0- -0- 2,730
</TABLE>
- ---------------
(1) Columns (e), (f) and (h) relating, respectively, to "Other Annual
Compensation," "Restricted Stock Awards," and "LTIP Payouts" have been
deleted because no compensation required to be reported in such columns was
awarded to, earned by, or paid to, any of the above individuals during the
periods covered by such columns.
(2) All information in this column relates to options because the Company has
not granted any stock appreciation rights ("SARs").
(3) During 1995, 1996 and 1997, respectively, 333, 766 and 1,022 shares; 501,
781 and 1,147 shares; 434, 617 and 849 shares; 0 shares; and 358, 0 and 685
shares vested in the Benefit Plan accounts of Messrs. Walentas, Dinstein,
Morris, Braatz and Guthrie, respectively. Based on the closing sales price
for the Common Stock on December 31, 1995, December 31, 1996, and December
31, 1997, of $7.625, $2.625 and $1.438, respectively, as reported by Nasdaq,
the dollar value of these shares for Messrs. Walentas, Dinstein, Morris,
43
<PAGE> 46
Braatz and Guthrie was: $2,539, $2,011 and $1,470; $3,820, $2,050 and
$1,649; $3,309, $1,620 and $1,221; $0; and $2,730, $0 and $985,
respectively.
(4) Mr. Braatz became an executive officer of the Company on June 3, 1996;
therefore, information for the fiscal year 1995 is not applicable.
OPTION GRANTS IN LAST FISCAL YEAR
No stock options or SARs were granted during the last fiscal year to the
individuals listed in the Summary Compensation Table.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the individuals
listed in the Summary Compensation Table concerning unexercised options held as
of the end of the fiscal year. No options were exercised during the last fiscal
year by the individuals listed in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(*)
<TABLE>
<CAPTION>
(a) (d)
Number of Securities
Underlying Unexercised
Options at
Fiscal Year End
Name Exercisable/Unexercisable
---- -------------------------
<S> <C>
David C. Walentas........................................... 200,000/225,000
Stanford M. Dinstein........................................ 97,500/127,500
John R. Morris.............................................. 43,038/56,962
Daniel Braatz............................................... 60,000/90,000
T. M. Guthrie............................................... 6,400/9,600
</TABLE>
- ---------------
(*) All information in this table relates to options because the Company has not
granted any SARs. Columns (b) and (c) have been deleted because no options
were exercised during the last fiscal year by the individuals listed in the
Summary Compensation Table. Column (e) has been deleted because there were
no in-the-money options at fiscal year-end because the closing sales price
for the Common Stock on December 31, 1997, was $1.438 as reported by NASDAQ.
As reported in the Company's definitive proxy statement for the 1997 Annual
Meeting of Stockholders, the exercise price of stock options for a number of the
Company's employees, including Messrs. Walentas and Dinstein, were adjusted
downward in 1996. In early 1998, the Company announced that Messrs. Walentas and
Dinstein had voluntarily revoked the 1996 repricing of their stock options so
that the exercise price on these stock options reverted to their higher,
pre-repricing levels.
COMPENSATION OF DIRECTORS
The Company pays to each director who is not otherwise an employee of the
Company an annual fee of $15,000 payable quarterly. In addition, members of the
Audit Committee receive an annual fee of $3,000 payable quarterly. Directors who
are not otherwise employees are reimbursed for out-of-pocket expenses related to
their duties as directors of the Company. Mr. Morton's estate currently holds
options to purchase 14,000 shares (which will expire June 20, 1998), and Mr.
44
<PAGE> 47
Mapes currently holds an option to purchase 10,000 shares, of the Company's
Common Stock pursuant to the Non-Employee Directors' Stock Option Plan, which
provides to each of the Company's non-employee directors a grant of an option to
purchase 10,000 shares of the Company's Common Stock upon their election as a
director at the stock's then current fair market value and an additional grant
of an option to purchase 2,000 shares of the Company's Common Stock at the
stock's then current fair market value every two years that they remain on the
Board.
EMPLOYMENT CONTRACTS, CHANGE-IN-CONTROL ARRANGEMENTS AND TERMINATION OF
EMPLOYMENT AGREEMENTS
On March 1, 1991, the Company entered into an employment agreement with Mr.
Dinstein to replace his previous employment agreement dated October 1, 1990. The
agreement provides that during the term of the agreement, Mr. Dinstein's minimum
gross annual salary will be $100,000. The term of the agreement renews
automatically on the anniversary date of the agreement in one-year increments,
unless it is terminated in accordance with the agreement.
ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
During the fiscal year ended December 31, 1997, the members of the Company's
Stock Option and Executive Compensation Committee were Messrs. Baxter (who
resigned from the Board of Directors in January 1998), Morton (who died in March
1998) and Mapes, and the members of the Company's Compensation and Nominating
Committee were Messrs. Walentas and Dinstein. Both Messrs. Walentas and Dinstein
were officers of the Company and its subsidiaries during fiscal year 1997 and
certain prior years. Messrs. Walentas and Dinstein currently serve as Chairman
and as Vice Chairman and Chief Executive Officer of the Company, respectively.
Neither Messrs. Baxter, Morton nor Mapes was an officer or employee of the
Company or any of its subsidiaries during fiscal year 1997 or any prior year.
(See "Certain Relationships and Related Transactions" for descriptions of
transactions between the Company and a partnership that is controlled by Mr.
Walentas and for which Mr. Dinstein acts as a consultant.)
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Stock Option and Executive Compensation Committee makes recommendations to
the Board concerning which of the Company's employees are eligible to
participate in and receive grants under the Company's Stock Option Plan; and
makes decisions and determinations with respect to the compensation arrangements
for those members of the Company's senior management who also are members of the
Company's Compensation and Nominating Committee. The Compensation and Nominating
Committee is responsible for recommending to the Board the compensation
arrangements for the Company's senior management other than any members of the
Company's senior management who are members of the Compensation and Nominating
Committee. Under rules established by the Securities and Exchange Commission,
the Company is required to provide a report of the committees of the Board
responsible for compensation recommendations that sets forth both the
committees' compensation policies applicable to the Company's executive officers
and the committees' bases for the chief executive officers' compensation for the
last fiscal year.
45
<PAGE> 48
Compensation Policies Applicable to Executive Officers. Generally, in
establishing levels of compensation for executive officers, the committees
consider all factors they deem appropriate, which may include, among others:
- conditions in the motor carrier industry and the business community,
generally, that influence the Company's ability to attract and retain
executives with the talent and experience to maintain the Company's
position of industry leadership and to optimize stockholder returns;
- the Company's recent operating results compared to prior operating
results;
- general economic conditions that may influence operating results;
- achievement of specific business initiatives;
- alignment of the interests of executive officers with those of
stockholders through award opportunities that can result in ownership of
common stock.
The above factors are only generally considered and all compensation decisions
during 1997 were subjectively determined. The committee determined, based on the
above factors and the financial results of the Company, that no bonuses would be
issued in 1997.
The Company currently has an employment agreement with Mr. Dinstein (see
"Employment Contracts, Change-in-Control Arrangements and Termination of
Employment Agreements"). This employment agreement contains the general terms of
his employment and establishes the minimum compensation that he is entitled to
receive, but does not prohibit, limit or restrict his ability to receive
additional compensation from the Company, whether in the form of base salary,
bonus, stock options or otherwise.
At present, the executive compensation program comprises salary, certain bonus
opportunities, and long-term incentives in the form of stock options and
participation in Company-wide benefit programs. The higher that one rises in the
corporate hierarchy, the more the mix of compensation shifts towards reliance on
stock-based awards. In determining 1997's compensation, generally, the
committees took into account the Company's performance over the past several
years.
Bases for the Compensation of Mr. Dinstein. No objective criteria were used to
establish the compensation of Mr. Dinstein, but rather his base salary was
subjectively determined. However, in addition to all the criteria listed above,
the determination of Mr. Dinstein's salary for 1997 took into account, as it did
in 1996, the increased management role he has assumed with respect to the
Company, particularly following his election as Chief Executive Officer in
August 1993.
46
<PAGE> 49
Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal
Revenue Code limits, with certain exceptions, the Company's corporate tax
deduction for compensation paid to certain officers of the Company to no more
than $1,000,000 per executive per year. The Company's Stock Option Plan is
structured to comply with one of the exceptions contained in Section 162(m).
<TABLE>
<CAPTION>
STOCK OPTION AND COMPENSATION AND
EXECUTIVE COMPENSATION COMMITTEE* NOMINATING COMMITTEE
- ---------------------------------------- ----------------------------------------
<S> <C>
Pierson Mapes David C. Walentas
Stanford M. Dinstein
</TABLE>
- ---------------
* While Messrs. Baxter and Morton served on this Committee throughout 1997 and
were integrally involved in all its decisions, Mr. Baxter resigned in January
1998, and Mr. Morton died in March 1998.
47
<PAGE> 50
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total stockholder
returns (assuming reinvestment of dividends, if any) for the Company, the NASDAQ
Market (U.S.) and NASDAQ Trucking and Transportation Stocks. The NASDAQ Trucking
and Transportation Stocks Index is made available by NASDAQ in conjunction with
the Center for Research in Securities Prices at the University of Chicago. The
issuers included in the NASDAQ Trucking and Transportation Stocks Index are
United States and foreign companies whose stock is traded on NASDAQ and who have
Standard Industrial Classification codes beginning with 37, 42, 44, 45 and 47.
Upon receipt of a written request mailed to the Company's Chief Executive
Officer postage prepaid at the Company's corporate headquarters, the Company
will undertake to make accessible the identity of those companies making up the
index in a prompt manner. In preparing the graph it was assumed that $100 was
invested at the market close price on December 31, 1992, as reported by NASDAQ.
<TABLE>
<CAPTION>
Builders Nasdaq
Measurement Period Transport, (Trucking &
(Fiscal Year Covered) Incorporated Nasdaq (US) Transportation)
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 196.88 114.79 121.49
1994 135.94 112.21 110.17
1995 94.54 158.69 128.46
1996 33.60 195.18 141.78
1997 17.98 239.57 181.59
</TABLE>
48
<PAGE> 51
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the Company's best knowledge as of March 16,
1998, with respect to the beneficial ownership of Common Stock by (a) each
person known to the Company to be the beneficial owner of more than five percent
of the Common Stock, (b) all directors and nominees, (c) the individuals listed
in the Summary Compensation Table contained herein, and (d) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Amount of
Name of Beneficial Owner Beneficial Ownership
(and address for those owning -----------------------
more than five percent) Shares Percent(1)
----------------------------- --------- ----------
<S> <C> <C>
Builders Transport, Incorporated Employees
Retirement Savings & Profit Sharing Plan(2)
c/o Benefit Plan Committee
Attn: T. Michael Guthrie
Builders Transport, Incorporated
Post Office Box 7005
Camden, South Carolina 29020-7005(2)...................... 1,016,138 19.230%
Messrs. David C. Walentas(3)(4) and
Stanford M Dinstein(3)(4)................................. 942,516 17.837%
T. Rowe Price Associates, Inc.(5)
100 E. Pratt Street
Baltimore, Maryland 21202................................. 545,348 10.128%
Eli W. Tullis(6)
62 Chateau Mouton Drive
Kenner, Louisiana 70065................................... 425,100 8.045%
Dimensional Fund Advisors Inc.(7)
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401............................ 322,600 6.105%
Northern Trust Corporation(8)
50 South La Salle Street
Chicago, Illinois 60675................................... 274,800 5.200%
Loomis, Sayles & Company, L.P.(9)
One Financial Center
Boston, Massachusetts..................................... 529,891 9.114%
T. M. Guthrie(10)........................................... 9,609 *
Daniel Braatz(11)........................................... 60,000 *
John R. Morris(12).......................................... 46,805 *
Pierson G. Mapes(13)........................................ 5,000 *
Frederic S. Morton(14)...................................... 5,800 *
All Executive Officers and Directors
as a Group (8 Persons)(15)................................ 1,053,130 18.556%
</TABLE>
- ---------------
(1) Except as otherwise noted herein, percentage is determined on the basis of
5,284,019 shares of Common Stock issued and outstanding as of March 16,
1998, plus securities deemed outstanding pursuant to Rule 13d-3(d)(1) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). An
asterisk indicates beneficial ownership of less than 1%.
49
<PAGE> 52
(2) Effective January 1, 1994, the Company's 401(k) Plan and ESOP were merged
and amended to form the Builders Transport, Incorporated Employees
Retirement Savings & Profit Sharing Plan (the "Benefit Plan"). The Benefit
Plan may be deemed to be the beneficial owner of the shares of Common Stock
that it holds. The Benefit Plan shares voting power with the Benefit Plan
participants and, based on a Schedule 13G dated February 13, 1998, filed by
the National Commerce Bancorporation, Memphis, Tennessee, trustee for the
Benefit Plan, the trustee has sole dispositive power with respect to the
shares of Common Stock.
(3) The address of this individual is 2029 West DeKalb Street, Camden, South
Carolina 29020.
(4) Messrs. Walentas and Dinstein reported on Amendment No. 20 dated October 5,
1994, to Schedule 13D filed pursuant to Section 13 of the Exchange Act that
they may be deemed to be a "group" within the meaning of Section 13(d)(3)
of the Exchange Act. Both members of the "group" may be deemed to
beneficially own the Common Stock owned by the other member of the "group",
although both members of the "group" disclaim beneficial ownership of the
shares owned by the other member of the "group". Mr. Walentas beneficially
owns 822,579 shares, which includes 200,000 shares of Common Stock reserved
for issuance to Mr. Walentas pursuant to stock options that were
exercisable at, or within sixty days of, March 13, 1998, 1,000 shares owned
by Mr. Walentas' wife, and 3,596 shares vested in or allocated to Mr.
Walentas' Benefit Plan account. Mr. Dinstein beneficially owns 119,937
shares, which includes 97,500 shares reserved for issuance to Mr. Dinstein
pursuant to stock options that were exercisable at, or within sixty days
of, March 13, 1998, and 3,895 shares vested or allocated in Mr. Dinstein's
account in the Benefit Plan. Mr. Walentas and Mr. Dinstein both are
Directors and executive officers of the Company.
(5) Based on a Schedule 13G/A dated February 9, 1998, these securities are
owned by various indivi dual and institutional investors including the T.
Rowe Price Small Cap Value Fund, Inc. (which owns 545,348 shares,
representing 10.128% of the shares outstanding, 100,348 of these shares are
beneficially owned subject to conversion privileges under Rule 13d-3 of the
Exchange Act Rules), which T. Rowe Price Associates, Inc. ("Price
Associates") serves as investment adviser with power to direct investments
and/or shared power to vote the securities. For purposes of the reporting
requirements of the Exchange Act, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(6) In a Schedule 13D dated November 14, 1997, Mr. Tullis reported he owned,
with sole voting and dispositive power, 425,400 shares of Common Stock
representing 8.045% of the shares outstanding.
(7) In a Schedule 13G dated February 10, 1998, Dimensional Fund Advisors Inc.
and certain of its affiliates reported that they may be deemed to own, with
sole dispositive power, a total of 322,600 shares of Common Stock
representing 6.105% of the shares outstanding. However, persons who are
officers of Dimensional Fund Advisors Inc. also serve as officers of DFA
Investment Trust Company (the "Trust") and DFA Investment Dimensions Group
Inc. (the "Fund"), each an open-end management investment company
registered under the Investment Company Act of 1940. In their capacities as
officers of the Fund and of the Trust, these persons vote 52,500 shares,
and 63,400 shares, of the total shares reported, which are owned by the
Fund and the Trust, respectively. Divisional Fund Advisors Inc. and its
affiliates, however, disclaim beneficial ownership of these securities.
(8) In a Schedule 13G dated February 17, 1998, Northern Trust Corporation and
certain of its affiliates which are all banks as defined in section 3(a)(6)
of the Exchange Act reported that they may be deemed to own 274,800 shares
of Common Stock representing 5.200% of
50
<PAGE> 53
the shares outstanding. Of the 274,800 shares reported Northern Trust
Corporation and/or its affiliates have sole dispositive power over 24,800
shares and sole voting power over the total 274,800 shares.
(9) In a Schedule 13G dated February 12, 1998, Loomis, Sayles & Company, L.P.
("Loomis, Sayles") reported that it had the sole power to vote 399,595
shares of Common Stock, a shared power to vote 76,843 shares of Common
Stock and a shared dispositive power over the total 529,891 shares of
Common Stock. The Schedule 13G was filed with respect to shares, Loomis,
Sayles has the right to acquire as a result of its beneficial ownership of
convertible securities.
(10) Includes 6,400 shares reserved for issuance to Mr. Guthrie pursuant to
stock options that were exercisable at, or within 60 days of March 16,
1998, and 2,058 shares vested or allocated in Mr. Guthrie's account in the
Benefit Plan and 100 shares owned by his wife.
(11) Includes 60,000 shares reserved for issuance to Mr. Braatz pursuant to
stock options that were exercisable at, or within 60 days of March 16,
1998.
(12) Includes 37,975 shares reserved for issuance to Mr. Morris pursuant to
stock options that were exercisable at, or within 60 days of March 16,
1998, and 3,120 shares vested or allocated in Mr. Morris' account in the
Benefit Plan.
(13) Includes 4,000 shares reserved for issuance to Mr. Mapes pursuant to stock
options that were exercisable at, or within 60 days of March 16, 1998.
(14) Includes 5,600 shares reserved for issuance to Mr. Morton pursuant to stock
options that were exercisable at, or within 60 days of March 16, 1998.
(15) Includes 391,475 shares of Common Stock reserved for issuance to executive
officers or Directors of the Company pursuant to stock options that were
exercisable at, or within sixty days of, March 16, 1998, and 12,669 shares
of Common Stock vested or allocated in accounts of the Company's executive
officers in the Benefit Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Mr. Walentas has a 90% general partnership interest in Two Trees, a New York
general partner ship. Mr. Dinstein is, and has been for more than 18 years, a
financial and management consultant to Two Trees. During 1995, the Company
entered into an agreement with Two Trees for the sale and leaseback of the
building that houses the Company's offices and division headquarters and related
land, located in Camden, South Carolina. The Company has purchase and lease
renewal options at projected future fair market values under the sale and
leaseback arrangement. The sale price was $3,500,000. The sale price was based
on independent appraisals received by the Company. The Company realized a gain
on the sale of approximately $592,000 less $200,000 paid in brokerage
commissions to Two Trees. The Company's payments under the initial lease term of
five years approximate $454,000 annually. Those payments commenced in October
1995. The Company has an outstanding letter of credit totaling $1,600,000 in
support of its lease payments.
During 1997, the Company sold unimproved property that it owned on Hutchinson
Island near Savannah, Georgia, for approximately $2 million. In connection with
that sale, Builders paid $100,000 in brokerage commissions to Two Trees.
The fees paid were based on ordinary and customary standards for such services,
and the lease payments were based on the fair market value of the property.
51
<PAGE> 54
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT.
(1) FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Independent Auditors, Ernst & Young LLP........... 22
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995.......................... 23
Consolidated Balance Sheets as of December 31, 1997 and
1996...................................................... 24
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1997, 1996, 1995................. 25
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.......................... 26
Notes to Consolidated Financial Statements.................. 27
(2) FINANCIAL STATEMENT SCHEDULE.
Consolidated Schedule as of and for the years ended December
31, 1997, 1996 and 1995
II -- Valuation and Qualifying Accounts..................... 58
</TABLE>
All other financial statements and schedules have been omitted because they are
not required or are not applicable.
52
<PAGE> 55
(3) EXHIBITS (NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K).
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------- -------
<C> <S> <C>
3.1 -- Amended and Restated Certificate of Incorporation of the
Company, incorporated by reference to Exhibit 3.1 to the
Company's Quarterly Report for the quarter ended June 30,
1992, on Form 10-Q, filed August 14, 1992
3.2 -- Amended and Restated Bylaws of the Company, as amended,
incorporated by reference to Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1993, filed March 31, 1994
4.1 -- Indenture between the Company and The First National Bank of
Maryland, dated as of August 15, 1985, incorporated by
reference to Exhibit (4)B to the Company's Amendment No. 1
to Registration Statement on Form S-1, filed August 29, 1985
(No. 2-99727)
4.2 -- Indenture between the Company and The First National Bank of
Maryland, dated as of May 1, 1986, incorporated by reference
to Exhibit (4)B to the Company's Amendment No. 1 to
Registration Statement on Form S-1, filed May 1, 1986 (No.
33-5057)
4.3 -- First Supplemental Indenture between the Company and The
First National Bank of Maryland, dated as of September 1,
1986, incorporated by reference to Exhibit 4a1 to the
Company's Quarterly Report for the quarter ended September
30, 1986 on Form 10-Q, filed November 14, 1986
10.1* -- Builders Transport, Incorporated Restated 1986 Incentive
Stock Option Plan, incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, filed August 11, 1994
10.2 -- Stock Purchase Agreement dated as of December 21, 1989, by
and between the Company and AmSouth Bank N.A., as Trustee
(subsequently assigned to National Bank of Commerce) under
the stock benefit plan, incorporated by reference to Exhibit
1 to the Company's Report on Form 8-K, filed December 29,
1989
10.3 -- Secured Loan Agreement dated as of December 21, 1989, by and
among Builders Transport, Incorporated, the Subsidiaries,
and AmSouth Bank N.A., as Trustee (subsequently assigned to
National Bank of Commerce) under the stock benefit plan,
incorporated by reference to Exhibit 4 to the Company's
Report on Form 8-K, filed December 29, 1989.
10.4 -- First Amendment dated as of January 1, 1994, to Secured Loan
Agreement dated as of December 21, 1989 (subsequently
assigned to National Bank of Commerce) incorporated by
reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, filed March
31, 1994
10.5 -- Pledge Agreement dated as of December 21, 1989, by and among
the Company, the Subsidiaries, and AmSouth Bank N.A., as
Trustee (subsequently assigned to National Bank of Commerce)
under the stock benefit plan, incorporated by reference to
Exhibit 5 to the Company's Report on Form 8-K filed December
29, 1989
10.6 -- Assignment dated as of December 22, 1992, of Promissory
Note, Secured Loan Agreement, Pledge Agreement, Stock
Purchase Agreement and Indemnification Agreement to National
Bank of Commerce as Successor Trustee pursuant to the
Builders Transport, Incorporated and Subsidiaries Employee
Stock Benefit Trust, incorporated by reference to Exhibit
10.8 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992, filed March 22, 1993
10.7* -- Builders Transport, Incorporated Employees Retirement
Savings & Profit Sharing Plan, as amended and restated,
incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, filed March 31, 1995
</TABLE>
53
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------- -------
<C> <S> <C>
10.8 -- Trust Agreement under the Builders Transport, Incorporated
Employees Retirement Savings & Profit Sharing Plan,
incorporated by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, filed March 31, 1995
10.9* -- Employment Agreement dated October 1, 1990, by and between
the Company and P. Michael Davis, as amended, incorporated
by reference to Exhibit 10.11 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992, filed
March 22, 1993
10.10* -- Employment Agreement dated March 1, 1991, between the
Company and Stanford M. Dinstein, incorporated by reference
to Exhibit 10.11 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993, filed March 31, 1994
10.11* -- Employment Agreement dated December 16, 1993, between the
Company and John R. Morris, incorporated by reference to
Exhibit 10.13 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993, filed March 31, 1994
10.12 -- Consulting Agreement dated April 30, 1993, between the
Company and Two Trees, a New York general partnership,
incorporated by reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1993, filed March 31, 1994
10.13 -- Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993,
incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report for the quarter ended June 30, 1993, on
Form 10-Q, filed August 12, 1993
10.14 -- Amendment No. 1 dated as of November 11, 1993, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993,
incorporated by reference to Exhibit 10.16 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, filed March 31, 1995
10.15 -- Amendment No. 2 effective as of March 31, 1994, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993,
incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1994, filed May 11, 1994
10.16 -- Amendment No. 3 effective as of October 1, 1994, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993,
incorporated by reference to Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, filed March 31, 1995
10.17 -- Amendment No. 4 effective as of February 28, 1995, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993,
incorporated by reference to Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, filed March 31, 1995
10.18 -- Registration Rights Agreement dated August 27, 1993, by and
between Vernon Milling Company, Inc., Elmer Thomas, Builders
Transport, Incorporated and Builders Transport, Inc.,
incorporated by reference to Exhibit 4.1 to the Company's
Report on Form 8-K, filed September 10, 1993
10.19 -- Builders Transport, Incorporated Amended and Restated
Non-Employee Directors' Stock Option Plan, incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1994, filed May
11, 1994
</TABLE>
54
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------- -------
<C> <S> <C>
10.20 -- Agreement of Purchase and Sale by and between Builders
Transport, Incorporated and Two Trees, incorporated by
reference to Exhibit 10.22 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, filed March
29, 1996
10.21 -- Lease Agreement by and between Two Trees and Builders
Transport, Incorporated, incorporated by reference to
Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, filed March 29, 1996
10.22 -- Amendment No. 5 effective as of December 29, 1995, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc.; National Bank of Canada, as
assignee of National Canada Finance Corp.; and Builders
Transport, Inc. dated as of May 28, 1993, incorporated by
reference to Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, filed March
29, 1996
10.23 -- Amendment No. 6 effective as of March 25, 1996, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc.; National Bank of Canada, as
assignee of National Canada Finance Corp.; and Builders
Transport, Inc. dated as of May 28, 1993, incorporated by
reference to Exhibit 10.25 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, filed March
29, 1996
10.24* -- Amendment No. 1 to the Builders Transport, Incorporated
Employees Retirement Savings & Profit Sharing Plan,
incorporated by reference to Exhibit 10.26 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995, filed March 29, 1996
10.25* -- First Amendment made as of March 27, 1996, to Employment
Agreement dated December 16, 1993 between the Company and
John R. Morris, incorporated by reference to Exhibit 10.26
of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, filed March 31, 1997
10.26 -- Amendment No. 7 effective as of June 10, 1996, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Bank of Canada and
Builders Transport, Inc. dated May 28, 1993, incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996, filed
August 14, 1996
10.27 -- Amendment No. 8 dated as of January 10, 1997, to the Amended
and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Bank of Canada and
Builders Transport, Inc. dated May 28, 1993, incorporated by
reference to Exhibit 10.28 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, filed March
31, 1997
10.28 -- Builders Transport, Incorporated press release dated March
21, 1997, relating to Alex. Brown & Sons Incorporated's
retention as financial advisor to review various
alternatives with respect to restructuring the Company's
debt obligations, incorporated by reference to Exhibit 10.29
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, filed March 31, 1997
10.29 -- Amendment to the Builders Transport, Inc. Restated 1986
Incentive Stock Option Plan adopted by resolution dated
September 1, 1996 of the Executive Committee of the Board of
Directors of Builders Transport, Incorporated, incorporated
by reference to Exhibit 10.30 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996, filed
March 31, 1997
10.30 -- Amendment to the Builders Transport, Incorporated Amended
and Restated Non-Employee Directors' Stock Option Plan
adopted by resolution dated November 18, 1996 of the Board
of Directors of Builders Transport, Incorporated,
incorporated by reference to Exhibit 10.31 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1996, filed March 31, 1997
10.31 -- Waiver to Amended and Restated Financing Agreement among CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993
</TABLE>
55
<PAGE> 58
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------- -------
<C> <S> <C>
21 -- Subsidiaries of the Company, incorporated by reference to
Exhibit 21 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, filed March 31, 1995
23 -- Consent of Independent Auditors
24 -- Powers of Attorney
27 -- Financial Data Schedule
</TABLE>
- ---------------
* Denotes a management contract or compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of 1997.
(c) EXHIBITS.
The exhibits required to be filed with this Annual Report on Form 10-K pursuant
to Item 601, of Regulation S-K are listed under "Exhibits" in Part IV, Item
14(a) (3) of this Annual Report on Form 10-K, and are incorporated herein by
reference.
(d) FINANCIAL STATEMENT SCHEDULES.
The Financial Statement Schedules required to be filed with this Annual Report
on Form 10-K are listed under "Financial Statement Schedules" in Part IV, Item
14(a) (2) of this Annual Report on Form 10-K, and are incorporated herein by
reference.
56
<PAGE> 59
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.
BUILDERS TRANSPORT, INCORPORATED
By: *
-----------------------------------
Stanford M. Dinstein
Vice Chairman, Chief Executive
Officer and Director
March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
on Form 10-K has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the board and March 31, 1998
- ----------------------------------------------------- Director
David C. Walentas
* Vice Chairman, Chief Executive March 31, 1998
- ----------------------------------------------------- Office and Director
Stanford M. Dinstein
* President, Dedicated Fleet March 31, 1998
- ----------------------------------------------------- Division and Director
John R. Morris
* Chief Financial Officer and March 31, 1998
- ----------------------------------------------------- Treasurer
T. M. Guthrie
* Director March 31, 1998
- -----------------------------------------------------
Pierson G. Mapes
For the Directors and officers indicated above.
/s/ T. M. GUTHRIE
- -----------------------------------------------------
T. M. Guthrie
Attorney-in-fact
</TABLE>
* T. M. Guthrie, pursuant to Powers of Attorney dated prior to the date hereof,
executed by the officers and Directors listed above and filed with the
Securities and Exchange Commission, by signing his name hereto does hereby
sign and execute this Report on Form 10-K of Builders Transport, Incorporated,
on behalf of the Company and each of the Directors and officers indicated
above, in the capacities in which such names appear above.
57
<PAGE> 60
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- ------------ ------------------------- ------------- -------------
ADDITIONS
-------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS -- DEDUCTIONS -- BALANCE AT
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ----------- ------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Reserves and allowances
deducted from asset
accounts:
Allowance for
uncollectible
accounts
receivable
-- current........ $ 456,087 $ 271,461 $(142,037)(2) $ (5,418)(1) $ 590,929
-- noncurrent..... 168,271 113,078 (10,000) 29,603(1) 241,746
----------- ----------- --------- ----------- -----------
$ 624,358 $ 384,539 $(152,037) $ 24,185 $ 832,675
=========== =========== ========= =========== ===========
Reserve for claims
payable as
self-insurer......... $ 6,952,000 $ 1,585,000 $ 8,537,000
Portion of claims
payable in current
liabilities.......... 9,425,707 26,383,076 509,108(2) 19,439,389(3) 16,878,502
----------- ----------- --------- ----------- -----------
$16,377,707 $27,968,076 $ 509,108 $19,439,389 $25,415,502
=========== =========== ========= =========== ===========
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries.
(2) Transfers between account classifications.
(3) Payments of claims, net of recoveries.
58
<PAGE> 61
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- ------------------------- -------- --------
ADDITIONS
-------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS -- DEDUCTIONS -- BALANCE AT
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
----------- ------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Reserves and
allowances deducted
from asset accounts:
Allowance for
uncollectible
accounts
receivable
-- current....... $ 511,684 $ 91,990 $ (311,000)(2) $ (163,413)(1) $ 456,087
-- noncurrent.... 168,330 59(1) 168,271
----------- ----------- ----------- ----------- -----------
$ 680,014 $ 91,990 $ (311,000) $ (163,354) $ 624,358
=========== =========== =========== =========== ===========
Reserve for claims
payable as
self-insurer........ $ 5,752,000 $ 1,200,000 $ 6,952,000
Portion of claims
payable in current
liabilities......... 5,284,904 22,453,730 792,092(2) 19,105,019(3) 9,425,707
----------- ----------- ----------- ----------- -----------
$11,036,904 $23,653,730 $ 792,092 $19,105,019 $16,377,707
=========== =========== =========== =========== ===========
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries.
(2) Transfers between account classifications.
(3) Payments of claims, net of recoveries.
59
<PAGE> 62
BUILDERS TRANSPORT, INCORPORATED AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- ------------------------- -------- --------
ADDITIONS
-------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS -- DEDUCTIONS -- BALANCE AT
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ----------- ------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Reserves and
allowances deducted
from asset accounts:
Allowance for
uncollectible
accounts
receivable
-- current....... $ 353,779 $ 261,000 $ (1,205)(2) $ 101,890(1) $ 511,684
-- noncurrent.... 258,210 10,119 99,999(1) 168,330
----------- ----------- --------- ----------- -----------
$ 611,989 $ 271,119 $ (1,205) $ 201,889 $ 680,014
=========== =========== ========= =========== ===========
Reserve for claims
payable as
self-insurer........ $ 6,152,000 $(400,000)(2) $ 5,752,000
Portion of claims
payable in current
liabilities......... 4,478,640 20,665,221 937,109(2) 20,796,066(3) 5,284,904
----------- ----------- --------- ----------- -----------
$10,630,640 $20,665,221 $ 537,109 $20,796,066 $11,036,904
=========== =========== ========= =========== ===========
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries.
(2) Transfers between account classifications.
(3) Payments of claims, net of recoveries.
60
<PAGE> 63
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. EXHIBIT PAGE NO.
- ------- ------- ----------
<C> <S> <C> <C>
3.1 -- Amended and Restated Certificate of Incorporation of the
Company, incorporated by reference to Exhibit 3.1 to the
Company's Quarterly Report for the quarter ended June 30,
1992, on Form 10-Q, filed August 14, 1992...................
3.2 -- Amended and Restated Bylaws of the Company, as amended,
incorporated by reference to Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1993, filed March 31, 1994..................................
4.1 -- Indenture between the Company and The First National Bank of
Maryland, dated as of August 15, 1985, incorporated by
reference to Exhibit (4)B to the Company's Amendment No. 1
to Registration Statement on Form S-1, filed August 29, 1985
(No. 2-99727)...............................................
4.2 -- Indenture between the Company and The First National Bank of
Maryland, dated as of May 1, 1986, incorporated by reference
to Exhibit (4)B to the Company's Amendment No. 1 to
Registration Statement on Form S-1, filed May 1, 1986 (No.
33-5057)....................................................
4.3 -- First Supplemental Indenture between the Company and The
First National Bank of Maryland, dated as of September 1,
1986, incorporated by reference to Exhibit 4a1 to the
Company's Quarterly Report for the quarter ended September
30, 1986 on Form 10-Q, filed November 14, 1986..............
10.1* -- Builders Transport, Incorporated Restated 1986 Incentive
Stock Option Plan, incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, filed August 11, 1994..........
10.2 -- Stock Purchase Agreement dated as of December 21, 1989, by
and between the Company and AmSouth Bank N.A., as Trustee
(subsequently assigned to National Bank of Commerce) under
the stock benefit plan, incorporated by reference to Exhibit
1 to the Company's Report on Form 8-K, filed December 29,
1989........................................................
10.3 -- Secured Loan Agreement dated as of December 21, 1989, by and
among Builders Transport, Incorporated, the Subsidiaries,
and AmSouth Bank N.A., as Trustee (subsequently assigned to
National Bank of Commerce) under the stock benefit plan,
incorporated by reference to Exhibit 4 to the Company's
Report on Form 8-K, filed December 29, 1989.................
10.4 -- First Amendment dated as of January 1, 1994, to Secured Loan
Agreement dated as of December 21, 1989 (subsequently
assigned to National Bank of Commerce) incorporated by
reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, filed March
31, 1994....................................................
10.5 -- Pledge Agreement dated as of December 21, 1989, by and among
the Company, the Subsidiaries, and AmSouth Bank N.A., as
Trustee (subsequently assigned to National Bank of Commerce)
under the stock benefit plan, incorporated by reference to
Exhibit 5 to the Company's Report on Form 8-K filed December
29, 1989 10.6 Assignment dated as of December 22, 1992, of
Promissory Note, Secured Loan Agreement, Pledge Agreement,
Stock Purchase Agreement and Indemnification Agreement to
National Bank of Commerce as Successor Trustee pursuant to
the Builders Transport, Incorporated and Subsidiaries
Employee Stock Benefit Trust, incorporated by reference to
Exhibit 10.8 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992, filed March 22, 1993......
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. EXHIBIT PAGE NO.
- ------- ------- ----------
<C> <S> <C> <C>
10.7* -- Builders Transport, Incorporated Employees Retirement
Savings & Profit Sharing Plan, as amended and restated,
incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, filed March 31, 1995..................................
10.8 -- Trust Agreement under the Builders Transport, Incorporated
Employees Retirement Savings & Profit Sharing Plan,
incorporated by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, filed March 31, 1995..................................
10.9* -- Employment Agreement dated October 1, 1990, by and between
the Company and P. Michael Davis, as amended, incorporated
by reference to Exhibit 10.11 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992, filed
March 22, 1993..............................................
10.10* -- Employment Agreement dated March 1, 1991, between the
Company and Stanford M. Dinstein, incorporated by reference
to Exhibit 10.11 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993, filed March 31,
1994........................................................
10.11* -- Employment Agreement dated December 16, 1993, between the
Company and John R. Morris, incorporated by reference to
Exhibit 10.13 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993, filed March 31, 1994
10.12 Consulting Agreement dated April 30, 1993, between the
Company and Two Trees, a New York general partnership,
incorporated by reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1993, filed March 31, 1994..................................
10.13 -- Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993,
incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report for the quarter ended June 30, 1993, on
Form 10-Q, filed August 12, 1993............................
10.14 -- Amendment No. 1 dated as of November 11, 1993, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993,
incorporated by reference to Exhibit 10.16 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, filed March 31, 1995..................................
10.15 -- Amendment No. 2 effective as of March 31, 1994, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993,
incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1994, filed May 11, 1994................................
10.16 -- Amendment No. 3 effective as of October 1, 1994, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993,
incorporated by reference to Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, filed March 31, 1995..................................
10.17 -- Amendment No. 4 effective as of February 28, 1995, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993,
incorporated by reference to Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, filed March 31, 1995..................................
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. EXHIBIT PAGE NO.
- ------- ------- ----------
<C> <S> <C> <C>
10.18 -- Registration Rights Agreement dated August 27, 1993, by and
between Vernon Milling Company, Inc., Elmer Thomas, Builders
Transport, Incorporated and Builders Transport, Inc.,
incorporated by reference to Exhibit 4.1 to the Company's
Report on Form 8-K, filed September 10, 1993................
10.19 -- Builders Transport, Incorporated Amended and Restated
Non-Employee Directors' Stock Option Plan, incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1994, filed May
11, 1994....................................................
10.20 -- Agreement of Purchase and Sale by and between Builders
Transport, Incorporated and Two Trees, incorporated by
reference to Exhibit 10.22 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, filed March
29, 1996....................................................
10.21 -- Lease Agreement by and between Two Trees and Builders
Transport, Incorporated, incorporated by reference to
Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, filed March 29,
1996........................................................
10.22 -- Amendment No. 5 effective as of December 29, 1995, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc.; National Bank of Canada, as
assignee of National Canada Finance Corp.; and Builders
Transport, Inc. dated as of May 28, 1993, incorporated by
reference to Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, filed March
29, 1996....................................................
10.23 -- Amendment No. 6 effective as of March 25, 1996, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc.; National Bank of Canada, as
assignee of National Canada Finance Corp.; and Builders
Transport, Inc. dated as of May 28, 1993, incorporated by
reference to Exhibit 10.25 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, filed March
29, 1996....................................................
10.24* -- Amendment No. 1 to the Builders Transport, Incorporated
Employees Retirement Savings & Profit Sharing Plan,
incorporated by reference to Exhibit 10.26 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995, filed March 29, 1996..................................
10.25* -- First Amendment made as of March 27, 1996, to Employment
Agreement dated December 16, 1993 between the Company and
John R. Morris, incorporated by reference to Exhibit 10.26
of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, filed March 31, 1997...............
10.26 -- Amendment No. 7 effective as of June 10, 1996, to the
Amended and Restated Financing Agreement among the CIT
Group/Business Credit, Inc., National Bank of Canada and
Builders Transport, Inc. dated May 28, 1993, incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996, filed
August 14, 1996.............................................
10.27 -- Amendment No. 8 dated as of January 10, 1997, to the Amended
and Restated Financing Agreement among the CIT Group/
Business Credit, Inc., National Bank of Canada and Builders
Transport, Inc. dated May 28, 1993, incorporated by
reference to Exhibit 10.28 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, filed March
31, 1997....................................................
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. EXHIBIT PAGE NO.
- ------- ------- ----------
<C> <S> <C> <C>
10.28 -- Builders Transport, Incorporated press release dated March
21, 1997, relating to Alex. Brown & Sons Incorporated's
retention as financial advisor to review various
alternatives with respect to restructuring the Company's
debt obligations, incorporated by reference to Exhibit 10.29
of the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, filed March 31, 1997...............
10.29 -- Amendment to the Builders Transport, Inc. Restated 1986
Incentive Stock Option Plan adopted by resolution dated
September 1, 1996 of the Executive Committee of the Board of
Directors of Builders Transport, Incorporated, incorporated
by reference to Exhibit 10.30 of the Company's Annual Report
on Form 10-K for the year ended December 31, 1996, filed
March 31, 1997..............................................
10.30 -- Amendment to the Builders Transport, Incorporated Amended
and Restated Non-Employee Directors' Stock Option Plan
adopted by resolution dated November 18, 1996 of the Board
of Directors of Builders Transport, Incorporated,
incorporated by reference to Exhibit 10.31 of the Company's
Annual Report on Form 10-K for the year ended December 31,
1996, filed March 31, 1997..................................
10.31 -- Waiver to Amended and Restated Financing Agreement among CIT
Group/Business Credit, Inc., National Canada Finance Corp.
and Builders Transport, Inc. dated as of May 28, 1993.......
21 -- Subsidiaries of the Company, incorporated by reference to
Exhibit 21 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, filed March 31, 1995......
23 -- Consent of Independent Auditors.............................
24 -- Powers of Attorney..........................................
27 -- Financial Data Schedule.....................................
</TABLE>
- ---------------
* Denotes a management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 10.31
WAIVER TO
AMENDED AND RESTATED
FINANCING STATEMENT
DATED AS OF MAY 28, 1993
THIS WAIVER dated as of November 14, 1997, is made by THE CIT GROUP/BUSINESS
CREDIT, INC., a New York corporation ("CITBC"), NATIONAL BANK OF CANADA, a
Canadian chartered bank ("NBC", and together with CITBC, the "Lenders"), and
CITBC, in its capacity as the agent for the Lenders ("Agent"), for the benefit
of BUILDERS TRANSPORT, INC., a Georgia corporation ("Company").
PRELIMINARY STATEMENT
The Company, the Agent, NBC, and CITBC are parties to that certain Amended and
Restated Financing Agreement, dated as of May 28, 1993, as amended to date (the
"Financing Agreement"). Terms defined in the Financing Agreement and not
otherwise defined herein are used herein as therein defined.
The Company has requested certain waivers of the terms of the Financing
Agreement, and the Agent and the Lenders have agreed, upon and subject to all of
the terms, conditions and provisions of this Amendment, to such requests.
NOW, THEREFORE, in consideration of the Financing Agreement, the advances and
other financial accommodations made thereunder, the mutual promises hereinafter
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Waiver. The Lenders and the Agent hereby waive, subject to
the provisions of Section 2, compliance and the effects of non-compliance
by the Company with the provisions of Section 7 of the Financing Agreement
as to (a) the Company's Net Worth (paragraph 9) to the extent that the
Company's Net Worth as of September 30, 1997, was not less than
$20,500,147, (b) the Interest Coverage Ratio (paragraph 13) to the extent
that the Company's Interest Coverage Ratio as of September 30, 1997, was
not less than 0.51 to 1, and (c) the Leverage Ratio (paragraph 14) to the
extent that the Company's Leverage Ratio as of September 30, 1997, was not
greater than 11.29.
Section 2. Effectiveness of Waiver. Section 1 of this Waiver shall
become effective as of the date hereof upon receipt by the Agent of a
waiver fee in the amount of $10,000, for the ratable account of the
Lenders, and of the following, each in form and substance satisfactory to
the Agent and the Lenders:
(a) at least five copies of this Amendment, each duly executed and
delivered by the Company and each Lender;
(b) confirmations duly executed and delivered by the Guarantors of
their Guaranties in the form attached to this Amendment; and
(c) such other documents, instruments and certificates as the Agent
or any Lender may reasonably request in connection with this Waiver.
Section 3. Effect of Waiver. Except as expressly modified hereby, the
Financing Agreement and all terms, conditions and provisions thereof remain
in full force and effect and
<PAGE> 2
are hereby ratified and confirmed. The execution, delivery and
effectiveness of this Waiver shall not, except as expressly provided
herein, operate as a waiver of any right, power or remedy of any Lender or
the Agent under any of the Loan Documents, nor constitute a waiver of any
provision of any of the Loan Documents.
Section 4. Counterpart Execution; Governing Law.
(a) Execution in Counterparts. This Waiver may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall
constitute but one and the same agreement.
(b) Governing Law. This Waiver shall be governed by and construed
in accordance with the internal laws of the State of Georgia, without
giving effect to principles of conflicts of laws.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be executed
(or acknowledged) by their respective officers thereunto duly authorized, as of
the date first above written.
THE CIT GROUP/BUSINESS CREDIT, INC.,
a New York corporation,
as Agent and as a Lender
By /s/ Robert Bernier
------------------------------------
Title: Vice President
---------------------------------
NATIONAL BANK OF CANADA,
a Canadian chartered bank
By /s/ C. Collie
------------------------------------
Title: Vice President
---------------------------------
By /s/ Dan Shaw
------------------------------------
Title: Assistant Vice President
---------------------------------
BUILDERS TRANSPORT, INC.,
a Georgia corporation, as the
Company
By /s/ T.M. Guthrie
------------------------------------
Title: CFO & Treasurer
---------------------------------
Acknowledged and accepted this
14th day of November, 1997
[CORPORATE SEAL]
ATTEST:
/s/ NANCY P. BEAN
- --------------------------------------
Assistant Secretary
<PAGE> 4
CONSENT, RELEASE AND CONFIRMATION OF GUARANTORS
Each of the undersigned, each a "Guarantor" as defined in the Amended and
Restated Financing Agreement dated May 28, 1993, among Builders Transport, Inc.,
as borrower, The CIT Group/Business Credit, Inc., as Agent for the Lenders (as
such term is defined therein) and as a Lender and National Bank of Canada, as a
Lender, hereby acknowledges receipt of the foregoing Waiver to Amended and
Restated Financing Agreement and confirms for the benefit of the Agent and the
Lenders, that each of the Guaranty or Non-Recourse Guaranty, as the case may be,
dated January 3, 1992, as amended, executed and delivered by the undersigned
continues in full force and effect as a guaranty in accordance with its terms
and continues to be secured by any collateral therefor and that each of the
undersigned hereby waives and releases any and all claims it may have against
the Agent or any Lender or any of their respective shareholders, directors,
employees or agents arising out of any event or circumstance existing on or
prior to the date hereof and arising under the Original Financing Agreement (as
defined in the aforesaid Amended and Restated Financing Agreement), the
aforesaid Amended and Restated Financing Agreement, the Guaranty, the
Non-Recourse Guaranty or any related document or in connection with the
transactions contemplated thereby.
Dated: November 14, 1997.
BUILDERS TRANSPORT OF TEXAS, INC.
By: /s/ T. M. Guthrie
------------------------------------
Title: CFO & Treasurer
------------------------------------
CCG, INC.
By: /s/ T. M. Guthrie
------------------------------------
Title: CFO & Treasurer
------------------------------------
BUILDERS TRANSPORT, INCORPORATED
By: /s/ T. M. Guthrie
------------------------------------
Title: CFO & Treasurer
------------------------------------
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-14988, 33-59948 and 33-86626) pertaining to the Incentive
Stock Option Plan, Non-employee Directors' Stock Option Plan and the Employee
Retirement Plan of Builders Transport, Incorporated and subsidiaries and in the
related Prospectuses of our report dated March 13, 1998, with respect to the
consolidated financial statements and schedule of Builders Transport,
Incorporated and subsidiaries included in the Annual Report (Form 10-K) for the
year ended December 31, 1997.
ERNST & YOUNG LLP
CHARLOTTE, NORTH CAROLINA
MARCH 30, 1998
<PAGE> 1
EXHIBIT 24(A)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Director or officer
of Builders Transport, Incorporated, a Delaware corporation (the "Company"),
hereby constitutes and appoints Stanford M. Dinstein, John R. Morris, T.
Michael Guthrie or Robert E. Lee Garner the true and lawful agents and
attorneys-in-fact of the undersigned with full power and authority in each of
said agents and attorneys-in-fact, acting singly, to sign for the undersigned
as Director or an officer of the Company, or as both, the Company's 1997 Annual
Report on Form 10-K to be filed with the Securities and Exchange Commission,
Washington, D.C. under the Securities Exchange Act of 1934, and to sign any
amendment or amendments to such Annual Report, including an Annual Report
pursuant to Form 11-K to be filed as an amendment to the Form 10-K; hereby
ratifying and confirming all acts taken by such agents and attorneys-in-fact as
herein authorized.
DATED: MARCH 24, 1998.
/S/ DAVID C. WALENTAS
---------------------------
DAVID C. WALENTAS
<PAGE> 2
EXHIBIT 24(B)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Director or officer
of Builders Transport, Incorporated, a Delaware corporation (the "Company"),
hereby constitutes and appoints Stanford M. Dinstein, John R. Morris, T.
Michael Guthrie or Robert E. Lee Garner the true and lawful agents and
attorneys-in-fact of the undersigned with full power and authority in each of
said agents and attorneys-in-fact, acting singly, to sign for the undersigned
as Director or an officer of the Company, or as both, the Company's 1997 Annual
Report on Form 10-K to be filed with the Securities and Exchange Commission,
Washington, D.C. under the Securities Exchange Act of 1934, and to sign any
amendment or amendments to such Annual Report, including an Annual Report
pursuant to Form 11-K to be filed as an amendment to the Form 10-K; hereby
ratifying and confirming all acts taken by such agents and attorneys-in-fact as
herein authorized.
DATED: MARCH 24, 1998.
/s/ STANFORD M. DINSTEIN
-----------------------------
STANFORD M. DINSTEIN
<PAGE> 3
EXHIBIT 24(C)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Director or officer of
Builders Transport, Incorporated, a Delaware corporation (the "Company"), hereby
constitutes and appoints Stanford M. Dinstein, John R. Morris, T. Michael
Guthrie or Robert E. Lee Garner the true and lawful agents and attorneys-in-fact
of the undersigned with full power and authority in each of said agents and
attorneys-in-fact, acting singly, to sign for the undersigned as Director or an
officer of the Company, or as both, the Company's 1997 Annual Report on Form
10-K to be filed with the Securities and Exchange Commission, Washington, D.C.
under the Securities Exchange Act of 1934, and to sign any amendment or
amendments to such Annual Report, including an Annual Report pursuant to Form
11-K to be filed as an amendment to the Form 10-K; hereby ratifying and
confirming all acts taken by such agents and attorneys-in-fact as herein
authorized.
DATED: MARCH 24, 1998.
/s/ JOHN R. MORRIS
-------------------------
JOHN R. MORRIS
<PAGE> 4
EXHIBIT 24(D)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Director or officer
of Builders Transport, Incorporated, a Delaware corporation (the "Company"),
hereby constitutes and appoints Stanford M. Dinstein, John R. Morris, T.
Michael Guthrie or Robert E. Lee Garner the true and lawful agents and
attorneys-in-fact of the undersigned with full power and authority in each of
said agents and attorneys-in-fact, acting singly, to sign for the undersigned
as Director or an officer of the Company, or as both, the Company's 1997 Annual
Report on Form 10-K to be filed with the Securities and Exchange Commission,
Washington, D.C. under the Securities Exchange Act of 1934, and to sign any
amendment or amendments to such Annual Report, including an Annual Report
pursuant to Form 11-K to be filed as an amendment to the Form 10-K; hereby
ratifying and confirming all acts taken by such agents and attorneys-in-fact as
herein authorized.
DATED: MARCH 24, 1998.
/s/ T. M. GUTHRIE
-------------------------
T. M. GUTHRIE
<PAGE> 5
EXHIBIT 24(E)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Director or officer
of Builders Transport, Incorporated, a Delaware corporation (the "Company"),
hereby constitutes and appoints Stanford M. Dinstein, John R. Morris, T.
Michael Guthrie or Robert E. Lee Garner the true and lawful agents and
attorneys-in-fact of the undersigned with full power and authority in each of
said agents and attorneys-in-fact, acting singly, to sign for the undersigned
as Director or an officer of the Company, or as both, the Company's 1997 Annual
Report on Form 10-K to be filed with the Securities and Exchange Commission,
Washington, D.C. under the Securities Exchange Act of 1934, and to sign any
amendment or amendments to such Annual Report, including an Annual Report
pursuant to Form 11-K to be filed as an amendment to the Form 10-K; hereby
ratifying and confirming all acts taken by such agents and attorneys-in-fact as
herein authorized.
DATED: MARCH 24, 1998.
/s/ PIERSON G. MAPES
------------------------
PIERSON G. MAPES
<PAGE> 6
EXHIBIT 24(F)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Director or officer
of Builders Transport, Incorporated, a Delaware corporation (the "Company"),
hereby constitutes and appoints Stanford M. Dinstein, John R. Morris, T.
Michael Guthrie or Robert E. Lee Garner the true and lawful agents and
attorneys-in-fact of the undersigned with full power and authority in each of
said agents and attorneys-in-fact, acting singly, to sign for the undersigned
as Director or an officer of the Company, or as both, the Company's 1997 Annual
Report on Form 10-K to be filed with the Securities and Exchange Commission,
Washington, D.C. under the Securities Exchange Act of 1934, and to sign any
amendment or amendments to such Annual Report, including an Annual Report
pursuant to Form 11-K to be filed as an amendment to the Form 10-K; hereby
ratifying and confirming all acts taken by such agents and attorneys-in-fact as
herein authorized.
DATED: MARCH 24, 1998.
/s/ ROY R. PARSONS
--------------------------
ROY R. PARSONS
<PAGE> 7
EXHIBIT 24(G)
BUILDERS TRANSPORT, INCORPORATED
SECRETARY'S CERTIFICATE
I, Robert E. Lee Garner, hereby certify as follows:
1. I am the Secretary of Builders Transport, Incorporated, a
corporation duly organized and existing in good standing under the laws of the
State of Delaware (the "Company"), and as such I am authorized to execute and
deliver this certificate.
2. Attached hereto as Annex I is a true, complete and correct copy of a
resolution duly adopted on December 16, 1997, by the Company's Board of
Directors; said resolution has not been altered, amended or repealed; said
resolution has been in full force and effect at all times since the date of its
adoption; and said resolution is in full force and effect as of the date of
this certificate.
IN WITNESS WHEREOF, I have hereunto set my hand as of this 27th day of March,
1998.
/s/ ROBERT E. LEE GARNER
---------------------------------
ROBERT E. LEE GARNER
SECRETARY
BUILDERS TRANSPORT, INCORPORATED
<PAGE> 8
ANNEX I
RESOLVED, that in connection with the preparation and filing of the Company's
Annual Report on Form 10-K with the Securities and Exchange Commission, each of
the Company's officers and Directors who may be required to execute said Form
10-K or any amendment thereto (whether on behalf of the Company or as an officer
or Director thereof or by attesting the seal of the Company or otherwise) be,
and he hereby is, authorized to execute a power of attorney appointing the
Company's Chairman of the Board of Directors, the Vice Chairman of the Board of
Directors and Chief Executive Officer, President, Treasurer or Secretary his
true and lawful agent and attorney-in-fact to execute in his name, place and
stead (in any such capacity) and as attorney and agent for the Company said Form
10-K and any and all amendments thereto, and all instruments necessary in
connection therewith, to attest the seal of the Company thereon, and to file the
same with the Securities and Exchange Commission, said attorney-in-fact and
agent to have full power and authority to do and perform every act whatsoever
necessary, appropriate or desirable to be done in the premises as fully and to
all intents and purposes as any such officer or Director might or could do in
person.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUILDERS TRANSPORT, INC. FOR THE YEAR ENDED DECEMBER 31,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 48
<SECURITIES> 0
<RECEIVABLES> 29,873
<ALLOWANCES> 591
<INVENTORY> 2,541
<CURRENT-ASSETS> 45,688
<PP&E> 301,536
<DEPRECIATION> 140,211
<TOTAL-ASSETS> 209,329
<CURRENT-LIABILITIES> 158,119
<BONDS> 65,414
0
0
<COMMON> 65
<OTHER-SE> (26,522)
<TOTAL-LIABILITY-AND-EQUITY> 209,329
<SALES> 288,145
<TOTAL-REVENUES> 288,145
<CGS> 0
<TOTAL-COSTS> 323,189
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,468
<INCOME-PRETAX> (50,512)
<INCOME-TAX> 0
<INCOME-CONTINUING> (50,512)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50,512)
<EPS-PRIMARY> (9.6)
<EPS-DILUTED> (9.6)
</TABLE>
