UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-23210
TRISM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3491658
(State or other jurisdiction of incorporation or
organization) (I.R.S. Employer Identification No.)
4174 Jiles Road, Kennesaw, Georgia 30144
(Address of principal executive offices) (Zip Code)
(770) 795-4600
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
As of September 30, 1998, 5,718,237 shares of TRISM, Inc.'s
common stock, par value $.01 per share, were outstanding.
Page 1
TRISM, INC
TABLE OF CONTENTS
ITEM PAGE
Part I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8
Part II OTHER INFORMATION
Item 1. Legal Proceedings 7
Item 6. Exhibits and Reports on Form 8-K 13
Page 2
ITEM 1. Financial Statements
TRISM, Inc.
Consolidated Balance Sheets
As of September 30, 1998 and December 31, 1997
(In thousands, unaudited)
September December
30, 1998 31, 1997
ASSETS
Current assets:
Cash and cash equivalents $ 921 6,271
Restricted cash and insurance deposits
899 1,010
Accounts receivable, net of allowance
for doubtful accounts of $1,316 and
$2,070 for 1998 and 1997, respectively
41,926 44,076
Materials and supplies 1,445 1,643
Prepaid expenses 19,087 18,418
Deferred income taxes 2,709 3,789
Total current assets 66,987 75,207
Property and equipment, at cost 178,482 184,232
Less: accumulated depreciation and (63,085 ) (62,428 )
amortization
Net property and equipment 115,397 121,804
Intangibles, net 18,377 18,685
Other 2,026 3,128
Total assets $ 202,787 218,824
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,783 11,859
Bank overdraft 3,213 4,796
Accrued expenses and insurance reserves
17,785 13,733
Current maturities of long-term debt:
Principal payments 12,227 13,025
Residual obligations on equipment debt
4,738 8,696
Total current liabilities 47,746 52,109
Long-term debt, less current 127,962 135,833
maturities
Insurance reserves 5,110 5,423
Deferred income taxes 421 2,314
Total liabilities 181,239 195,679
Commitments and contingencies
Stockholders' equity:
Common stock; $.01 par; 10,000 shares
authorized; issued 5,903 shares 59 59
Additional paid-in capital 37,232 37,327
Loans to stockholders (273 ) (368 )
Accumulated deficit (13,833 ) (12,324 )
Treasury stock, at cost, 201 and
166 shares at 1998 and 1997,
respectively (1,637 ) (1,549 )
Total stockholders' equity 21,548 23,145
Total liabilities and stockholders'
equity $ 202,787 218,824
See accompanying notes to consolidated financial statements.
Page 3
TRISM, Inc.
Consolidated Statements of Operations
For the three months and nine months
ended September 30, 1998 and 1997
(In thousands, except per share amounts, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Revenues $75,170 78,472 224,492 237,545
Operating expenses:
Salaries, wages and 28,506 27,753 85,423 84,799
fringe benefits
Operating supplies 10,172 11,276 31,580 35,044
and expenses
Operating taxes and 6,959 6,666 20,501 20,843
licenses
Contractor equipment 6,134 4,682 17,312 13,893
Brokerage carrier 5,243 7,572 14,379 21,049
expense
Depreciation and 4,871 4,683 14,926 14,063
amortization
General supplies and 3,672 4,014 11,025 12,564
expenses
Revenue equipment 3,590 3,636 10,255 11,161
rents
Claims and insurance 2,497 2,950 7,182 8,765
Communications and 1,178 1,257 3,819 3,917
utilities
Loss on disposition 379 311 917 708
of assets
Restructuring and non- 350 - 752 3,000
recurring expenses
Total 73,551 74,800 218,071 229,806
operating expenses
Operating income 1,619 3,672 6,421 7,739
Interest expense, net 3,550 3,781 11,147 11,430
Other expense 114 (226 ) - (320 )
(income)
Income (loss) before
income tax benefit (2,045 ) 117 (4,726 ) (3,371 )
and extraordinary item
Income tax benefit (715 ) (29 ) (1,654 ) (1,008 )
Income (loss) before (1,330 ) 146 (3,072 ) (2,363 )
extraordinary item
Extraordinary item,
gain on extinguishment 1,563 - 1,563 -
of debt, net of
income taxes of $841
Net earnings (loss) $ 233 146 (1,509 ) (2,363 )
Basic earnings (loss)
per share:
Income (loss) before (.23 ) .03 (.53 ) (.41 )
extraordinary item
Extraordinary item .27 - .27 -
Net earnings (loss) $ .04 .03 (.26 ) (.41 )
Diluted earnings (loss)
per share:
Income (loss) before (.23 ) .03 (.53 ) (.41 )
extraordinary item
Extraordinary item .27 - .27 -
Net earnings (loss) $ .03 (.26 ) (.41 )
.04
Weighted average number of
shares used in
computation of basic and 5,719 5,737 5,719 5,737
diluted earnings (loss)
per share
See accompanying notes to consolidated financial statements.
Page 4
TRISM, Inc.
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1998 and 1997
(In thousands, unaudited)
1998 1997
Cash flows from operating activities:
Net loss $ (1,509 ) (2,363 )
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 15,553 14,573
Loss on disposition of assets 917 708
Provision for losses on accounts 488 970
receivable
Deferred gain on sale-leaseback (194 ) 473
Restructuring and non-recurring 324 610
charge, net
Deferred income taxes (813 ) (1,008 )
Extraordinary gain, net (1,563 ) -
Changes in assets and liabilities:
Accounts receivable 1,662 7,950
Prepaid expenses (669 ) (1,080 )
Accrued expenses and insurance reserves 3,609 5,079
Accounts payable (2,076 ) (415 )
Other 318 235
Net cash provided by operating
activities 16,047 25,732
Cash flows from investing activities:
Proceeds from sale of assets 10,098 4,668
Purchases of property and equipment (3,296 ) (1,871 )
Proceeds from sale-leaseback - 7,334
Collection of notes receivable and 406 587
other, net
Refund of restricted deposits 111 (1,273 )
Contingent acquisition payments (200 ) -
Net cash provided by investing 7,119 9,445
activities
Cash flows from financing activities:
Net proceeds (repayment) under
revolving credit agreement 194 (14,411 )
Repayment of long-term debt and capital
lease obligations (27,039 ) (12,062 )
Decrease in bank overdrafts (1,583 ) 206
Purchase of treasury stock (88 ) -
Payment of deferred loan costs - (458 )
Net cash used in financing activities
(28,516 ) (26,725 )
(Decrease) increase in cash and cash
equivalents (5,350 ) 8,452
Cash and cash equivalents, beginning of
period 6,271 1,468
Cash and cash equivalents, end of period
$ 921 9,920
Supplemental cash flow information:
Cash paid during the period for:
Interest ($107 capitalized in 1998)
$ 8,772 8,593
Capital lease equipment purchases and
borrowings $ 15,781 10,049
See accompanying notes to the consolidated financial statements.
Page 5
TRISM, Inc.
Notes to Consolidated Financial Statements
Accounting Policies
The 1997 Annual Report on Form 10-K for Trism, Inc. includes a
summary of significant accounting policies and should be read in
conjunction with this Form 10-Q. The statements for the periods
presented are condensed and do not contain all information
required by generally accepted accounting principles to be
included in a full set of financial statements. In the opinion
of management, all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial
position as of September 30, 1998 and December 31, 1997 and the
results of operations and cash flows for the periods ended
September 30, 1998 and 1997, respectively have been included.
The results of operations for any interim period are not
necessarily indicative of the results of operations to be
expected for the entire year. Certain reclassifications were
made to the 1997 accounts to reflect classifications adopted in
1998.
Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components
in the financial statements. SFAS No. 130 is effective for the
Company's fiscal year beginning January 1, 1998.
Reclassification of financial statements for earlier periods
presented for comparative purposes is required. The adoption of
SFAS No. 130 had no impact on the Company's consolidated results
of operations, financial position or cash flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131
establishes standards for the way that public business
enterprises report information about operating segments in annual
and interim financial statements. It also establishes standards
for related disclosures about products, services, and geographic
areas. SFAS No. 131 is required beginning with the Company's
1998 annual financial statements and prior period disclosures are
required to be restated. The Company is in the process of
evaluating the disclosure requirements. The adoption of SFAS No.
131 will have no material impact on the Company's consolidated
results of operations, financial position or cash flows.
In February 1998, the FASB issued SFAS No. 132, Employers'
Disclosure about Pensions and Other Post Retirement Benefits.
SFAS No. 132 standardized the disclosure requirements for
pensions and other post retirement benefits to the extent
practical. This standard is effective beginning with the
Company's 1998 annual financial statements, and prior period
disclosures are required to be restated. Management is currently
reviewing the provisions of SFAS No. 132 and does not believe
that the Company's financial statements will be materially
impacted by the adoption.
On June 15, 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities
(FAS133). FAS 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999 (January 1, 2000 for
the Company). FAS 133 requires that all derivative instruments
be recorded on the balance sheet at their fair value. Changes in
the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if
it is, the type of hedge transaction. Management of the Company
anticipates that the adoption of FAS 133 will not have a
significant effect on the Company's results of operations or its
financial position.
Corporate Restructuring and Non-Recurring Expenses
During the third quarter of 1998, the Company recorded a pre-tax
severance provision of $350,000 pertaining to the reduction of
certain administrative personnel and a pre-tax $450,000 provision
relating to the early disposal of identified tractors and
trailers. Furthermore, the Company recorded a pre-tax charge of
$402,000 for a separation and consulting agreement in the second
quarter of 1998.
In February 1997, the Company announced an organizational
restructuring to consolidate certain sales, operations, and
administrative functions and reengineer business processes to
reduce overhead and increase operational efficiency. During
1997, the Company recorded total charges of $3.2 million
associated with the organizational restructuring.
Page 6
Long Term Debt
Revolving Credit Facility
On July 15, 1997, the Company refinanced its revolving credit
facility ("Facility") with a $45 million credit line (the
"Revolver"). The proceeds of the Revolver were used to retire
the Facility loan and are available for the Company's working
capital needs. The Revolver matures July 15, 2000 and contains
provisions for a letter of credit subline of $15 million, bears
interest at the Prime rate plus .25% or LIBOR plus 2.25%, and is
secured by accounts receivable. The Revolver also includes
covenants applicable once Availability under the Revolver falls
below $8 million for 10 consecutive business days. Availability
under the Revolver was approximately $12.8 million at September
30, 1998, net of a reduction for outstanding letters of credit of
approximately $11.4 million. The foregoing letters of credit and
deposits totaling $.9 million are furnished to insurance carriers
as collateral for the estimated cost of claim payments as of
September 30, 1998. In August 1998, the agreement was amended
to modify and redefine a financial convenant.
Senior Subordinated Notes
The Company's Senior Subordinated Notes ("Notes") bear interest
at 10.75 % payable on June 15th and December 15th of each year
through December 15, 2000. The Notes are redeemable at the
option of the Company, in whole or in part, on or after December
15, 1998, at a redemption price of 105% through December 1999 and
102.5 % thereafter. Through September 30, 1998, the Company has
repurchased $13.8 million of the notes of which $9.5 million of
the notes were repurchased in the first nine months of 1998.
Contingencies
Under the Comprehensive Environmental Responses, Compensation and
Liability Act ("CERCLA") and similar state laws, a transporter of
hazardous substances may be liable for the costs of responding to
the release or threatened release of hazardous substances from
disposal sites if such transporter selected the site for
disposal. Because it is the Company's practice not to select the
sites where hazardous substances and wastes will be disposed, the
Company does not believe it will be subject to material liability
under CERCLA and similar laws.
Although the Company has been identified as a "potentially
responsible party" (PRP) at three sites, solely because of its
activities as a transporter of hazardous substances, the Company
does not believe it will be subject to material liabilities at
such sites.
The Company is a party to certain legal proceedings incidental to
its business, primarily involving claims for personal injury or
property damage arising from the transportation of freight. The
Company does not believe that these legal proceedings, or any
other claims or threatened claims of which it is aware, are
likely to materially and adversely affect the Company's financial
conditions. With regard to personal injury, property damage,
workers' compensation claims, and cargo claims, the Company is
and has been covered by insurance. Such matters may include
claims for punitive damages. It is an open question in some
jurisdictions in which the Company does business as to whether or
not punitive damages awards are covered by insurance.
The Company is a defendant in one additional litigation in the
Circuit Court of Jefferson County, Alabama. The case is
captioned Roy A. Reese v. Trism Specialized Carriers, Inc. and
Tri-State Motor Transit Co. It arises from a lease, transfer and
consulting agreement between the Company and plaintiff (Mr. Reese
and his wholly owned corporation) dated August 24, 1992.
Plaintiff alleges breach of contract, promissory fraud,
conversion and conspiracy claims arising from the Company's
termination of the contract. He seeks compensatory and punitive
damages. The Company maintains that it properly terminated the
contract because of misrepresentations and non-performance by
plaintiff and his company, and has asserted certain
counterclaims.
The case was tried in August 1996, and plaintiff was awarded
$47,000 in rental fees admitted by the Company to be due for the
use of plaintiff's trailer equipment after cancellation of the
original contract. All other claims for damages were found in
favor of the defendant (the "Company"). Plaintiff appealed to
the Alabama Court of Civil Appeals which reversed and remanded
the case on the legal argument that the jury had found both
defendants liable to plaintiff but only awarded damages ($47,000)
to one defendant.
Both parties appealed the matter to the Alabama Supreme Court
which granted a certiorari, but subsequently (June 19, 1998)
quashed its writ, effectively sending the case back to the
Alabama Court of Civil Appeals which has ordered a new trial.
The Company is aware of no reason that it cannot again prevail in
a second trial.
In addition to matters referred to above, the Company is a party
to certain additional lawsuits, none of which is believed to
involve a significant risk of materially and adversely affecting
the Company's financial condition.
Page 7
Management's Discussion and Analysis of Financial Conditions and
Results of Operations
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking statements. Certain statements
in this Form 10-Q include information that is forward-looking,
such as the Company's opportunities to reduce overhead costs and
increase operational efficiency, its anticipated liquidity and
capital requirements and the results of legal proceedings.
The matters referred to in forward-looking statements could be
affected by the risks and uncertainties involved in the Company's
business. Subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary
statements in this paragraph.
The following discussion and analysis should be read in
conjunction with the Company's Consolidated Financial Statements
and notes for the year ended December 31, 1997 and quarter ended
September 30, 1998.
The following table summarizes certain financial information on a
percentage of revenue basis for the three and nine months ended
September 30, 1998 and 1997.
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Percentage of Revenue
Basis:
Operating Revenue: 100.0 100.0 100.0 100.0
Operating Expenses:
Salaries, wages and fringe 37.9 35.4 38.1 35.7
benefits
Operating supplies and 13.5 14.3 14.1 14.8
expenses
Operating taxes and 9.2 8.5 9.1 8.8
licenses
Contractor equipment 8.1 6.0 7.7 5.8
Brokerage carrier expense 7.0 9.6 6.4 8.9
Depreciation and 6.5 6.0 6.6 5.9
amortization
General supplies and 4.9 5.1 4.9 5.2
expenses
Revenue equipment rents 4.8 4.6 4.6 4.7
Claims and insurance 3.3 3.8 3.2 3.7
Communications and 1.6 1.6 1.7 1.6
utilities
Restructuring expenses and
non-recurring charge 0.5 - 0.3 1.3
Loss on disposition of 0.5 0.4 0.4 0.3
assets
Total operating expenses
97.8 95.3 97.1 96.7
Income from operations 2.2 4.7 2.9 3.3
Interest expense, net 4.8 4.7 5.0 4.8
Other expense (income) 0.1 (0.2 ) - (0.1 )
Income (loss) before income
taxes and extraordinary
item (2.7 ) 0.2 (2.1 ) (1.4 )
Income tax benefit (1.0 ) - (0.7 ) (0.4 )
Income (loss) before
extraordinary item (1.7 ) 0.2 (1.4 ) (1.0 )
Extraordinary item, gain on
extinguishment of debt,
net of income taxes of
$841 2.0 - 0.7 -
Net earnings (loss) 0.3 0.2 (0.7 ) (1.0 )
Page 8
Summary of Third Quarter 1998 Results
Net earnings for the quarter ended September 30, 1998, amounted
to $233,000 or $.04 per basic share compared to net earnings of
$146,000 or $.03 per basic share in the third quarter of 1997.
The third quarter 1998 results include a pre-tax gain of
approximately $2.4 million relating to the repurchase and
retirement of $8.5 million of its senior subordinated notes.
Additionally, the 1998 quarterly results include a pre-tax
severance provision of $.4 million pertaining to the reduction of
certain administrative personnel and a $.5 million pre-tax
provision relating to the early disposal of identified tractors
and trailers.
Third quarter operating results were negatively impacted by lower
revenue yield in the Heavy Haul market and by competitive market
conditions in the munitions and hazardous waste markets that
negatively impacted pricing, load ratio and asset productivity.
The Company's average vacant tractors were at 178 units during
the third quarter of 1998 as compared to 115 units in the third
quarter of 1997.
Operating Revenue
Operating revenue decreased $3.3 million, or 4.3% from the third
quarter 1997 to 1998 and $13.0 million, or 5.5% for the nine
months ended September 30, 1997 to 1998. Revenue per loaded mile
amounted to $1.76 for the quarter ended September 30, 1998 and
$1.77 for the nine months ended September 30, 1998 compared to
$1.76 for the third quarter of 1997 and $1.74 for the nine months
ended September 30, 1997. The foregoing rates were additionally
impacted by a decline in the load ratio of 1.1% and total miles
driven of approximately .2 million from the third quarter of 1997
to 1998. The load ratio and total miles driven also declined by
1.0% and 5.3 million miles, respectively for the nine months
ended September 30, 1997 to 1998.
External factors influencing the quarterly and nine-month period
results were primarily related to the Company's exit from the
Commercial Flatbed market in 1997. The improvement was offset by
more competitive market conditions in the munitions and hazardous
waste markets which negatively impacted pricing, load ratio and
asset productivity at Secured. In addition, the Heavy Haul
market was impacted by lower yield in the higher margin
commodities.
For the nine months ended September 1998 to 1997, the Secured
Materials market was primarily impacted by lower demand in the
government munitions and hazardous waste business of
approximately $3.0 million and $5.0 million, respectively. The
foregoing revenue declines were partially offset by an increase
in general freight business that traditionally has lower profit
margins. Increased competition from regional truck carriers and
the loss of two significant dedicated fleets in the hazardous
waste business also negatively impacted Secured revenues.
Operating revenues between the periods includes the following (in
thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
Market 1998 1997 1998 1997
Heavy Haul (a) $52,730 52,346 155,375 156,801
Secured Materials 23,208 25,795 72,413 80,029
Trism Logistics 1,237 3,424 5,366 9,264
Eliminations and other (2,005 ) (3,093 ) (8,662 ) (8,549 )
$75,170 78,472 224,492 237,545
(a) Includes Commercial Flatbed results as if the
consolidation into Heavy Haul occurred as of January 1,
1997. Operating revenue for the Commercial Flatbed market
amounted to approximately $3.4 million during the third
quarter of 1997 and $15.0 million for the nine months ended
September 30, 1997.
Page 9
Operating Income
Operating income was impacted by certain external business
factors described in the Operating Revenue Section of this
discussion.
Third Quarter 1998 to 1997
Operating income for the three months ended September 30, 1998
was affected by positive profit contributions in comparison to
1997 on a per mile basis as follows: (a) lower fuel costs of $0.8
million primarily due to a reduction in the per gallon cost of
fuel; (b) lower claims and insurance costs of $0.8 million as a
result of favorable accident and claims experience; and (c) lower
fixed freight expenses of approximately $.1 million relating to
reduced personnel and administrative expenses.
Offsets to the positive profit contribution variances impacting
third quarter 1998 operating income compared to 1997 resulted
from (a) higher driver and lease operator costs of $1.7 million
due to an increase in driver compensation rates, lease operator
miles of 1.5 million, and higher driver recruiting and
advertising expenses; (b) higher maintenance charges of
$.2 million resulting from an increase in the overall
age of the tractor fleet; (c) higher escort and permit
charges of $.4 million; (d) severance provision of $.4 million
pertaining to the reduction of certain administrative personnel;
(e) loss provision on early disposal of revenue equipment of $.5
million; and (f) other, net expenditure increases of $0.1
million.
Nine Months Ended September 30, 1998 to 1997
Operating income for the nine months ended September 30, 1998 was
affected by positive profit contributions in comparison to 1997
on a per mile basis as follows: (a) restructuring charge of $3.0
million recorded in 1997 with no corresponding adjustment in
1998; (b) lower fuel costs of $3.2 million primarily due to a
reduction in the per gallon cost of fuel; (c) lower claims and
insurance costs of $1.8 million as a result of favorable accident
and claims experience; and (d) lower fixed freight expenses of
approximately $0.9 million relating to reduced personnel and
administrative expenses.
Offsets to the positive profit contribution variances impacting
operating income for the nine months ended September 30, 1998
compared to 1997 resulted from: (a) higher driver and lease
operator costs of $4.1 million due to an increase in driver
compensation rates, lease operator miles of 3.3 million, and
higher driver recruiting and advertising expenses; (b) higher
maintenance charges of $1.3 million resulting from an increase in
the overall age of the tractor fleet; (c) higher escort and
permit charges of $1.3 million; (d) non-recurring charge of $.4
million for a separation and consulting agreement; (e) severance
provision of $.4 million pertaining to the reduction of certain
administrative personnel; (f) loss provision on early disposal of
revenue equipment of $.5 million; and (g) other, net expenditure
increases of $1.9 million.
Operating income (loss) between the periods includes the
following (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
Market 1998 1997 1998 1997
Heavy Haul (a) $ 2,431 2,550 5,919 5,446
Secured Materials (b) (474 ) 1,014 1,019 4,985
Logistics 12 108 235 308
Restructuring and non-
recurring charges (350 ) - (752 ) (3,000 )
Operating income $ 1,619 3,672 6,421 7,739
Operating expense ratio
(c) 97.8 % 95.3 % 97.1 % 96.7 %
(a) Includes Commercial Flatbed results as if the consolidation
into Heavy Haul occurred as of January 1, 1997. The operating
loss for the Commercial Flatbed market amounted to $.5 million
during the third quarter of 1997 and $2.0 million for the nine
months ended September 30, 1997.
(b) Includes a $450,000 provision relating to the early disposal
of identified tractors and trailers.
(c) The operating ratio represents operating expenses as a
percentage of operating revenue.
Page 10
Operating and Other Expenses
Total operating expenses were approximately $73.6 million for the
three months ended September 30, 1998 and $218.1 million for the
nine months ended September 30, 1998 compared to $74.8 million
for the three months ended September 30, 1997 and $229.8 million
for the nine months ended September 30, 1997. The following
expense categories increased or decreased significantly as a
percentage of revenue between the periods:
Salaries, wages and fringe benefits increased 2.5% and 2.4% of
revenue from the quarter and nine-month period ended September
30, 1997 to the corresponding periods in 1998, respectively. The
increases are primarily due to driver compensation increases.
Operating supplies decreased .8% and .7% of revenue from the
quarter and nine-month period ended September 30, 1997 to the
corresponding periods in 1998, respectively. The improvement
resulted from reduced fuel expenditures partially offset by an
increase in maintenance expenses due to the increasing age of the
tractor fleet.
Contractor equipment expenses increased by 2.1% of revenue for
the quarter ended September 30, 1998 to 1997, and 1.9% of revenue
for the nine months ended September 30, 1998 to 1997. The
percentage of revenue fluctuations is attributable to an overall
increase in lease operator rates and miles.
Brokerage expenses decreased 2.6% and 2.5% of revenue from the
quarter and nine month period ended September 30, 1998 to 1997
consistent with the decline in brokerage revenue of $2.7 million
and $5.0 million for the quarter and nine month period ended
September 1998 to 1997, respectively.
Claims and insurance costs decreased by .5% of revenue for the
quarter and nine months ended September 30, 1998 to 1997 as a
result of favorable accident and claims experience trends in
1998.
Income tax expense (benefit) was based upon an effective tax rate
of 35% for the three months ended September 30, 1998 and 1997.
The effective tax rate for the nine months ended September 30,
1998 was 35% compared to 30% in 1997.
Liquidity and Capital Resources
Net cash provided by operating activities was $16.0 million in
1998 compared to $25.7 million in 1997. The decrease is
primarily due to lower operating income, net of the restructuring
and non-recurring charges, and reduced gross collection amounts
on accounts receivable due to lower sales. The accounts
receivable turnover improved to 48 days in 1998 compared to 51
days in 1997.
Net cash provided by investing activities was $7.1 million in
1998 compared to $9.4 million in 1997. The decrease in investing
activity cash is primarily attributed to an increase in purchases
of property and equipment.
Net cash used in financing activities was $28.5 million in 1998
compared to $26.7 million in 1997. The increase in cash used in
financing activities related to net borrowings under the
Company's revolving credit line of $.2 million in 1998 versus net
repayments under the credit line of $14.4 million in 1997.
Furthermore, the Company repaid long-term debt, capital lease
obligations, and note payments of approximately $17.5 million in
1998 compared to $12.1 million in 1997. Additionally, the
Company repurchased and retired $9.5 million of its senior
subordinated notes at a pre-tax gain of $2.4 million in 1998.
Capital Requirements
The Company estimates 1998 capital expenditures for tractor and
trailer equipment of approximately $37 million, net of $2.5
million from the sale of replaced equipment. The Company has
obtained finance commitments for its needs during 1998. In
addition, residual obligations of approximately $4.7 million
primarily relating to certain capital lease obligations will
mature in the next twelve months, and the Company will have the
option to either purchase the revenue equipment for the residual
amount, sell the equipment and repay the residual, or return the
equipment to the lessor at the end of the lease term.
Page 11
The Company believes that it will be able to meet its on-going
capital requirements, scheduled principal payments and working
capital needs from cash flow from operations, availability under
its working capital line, proceeds from the sale of equipment and
additional borrowing commitments. The Company also has
additional borrowing capacity supported by unencumbered tangible
assets.
Year 2000 Computer Update
The Year 2000 issue is the result of computer programs having
been written using two digits, rather than four, to define the
applicable year. If the Company's computer programs with date-
sensitive functions are not Year 2000 compliant, they may
recognize a date using "00" as the Year 1900 rather than the Year
2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things,
a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
The Company has assessed the potential impact of the Year 2000 to
its internal computer systems. In the Company's AIX-based
operating environment, all dates are converted to a five-digit
number, which is a count of the number of days since December 31,
1969. Furthermore, the system interprets all dates as future
year rather than a prior year, thus Year 2000 will not be
interpreted as 1900.
During the Second Quarter of 1998, the Company conducted testing
of the Company's core freight, administrative and management
computer systems. The Company structured a series of tests that
were performed to verify that its systems are fully Year 2000
compliant. Preliminary test results indicate that the Company is
on track towards having addressed the Year 2000 issue by the end
of the Fourth Quarter of 1998. However, the test results have not
yet been evaluated by an independent party as of the Third
Quarter of 1998.
The Company is also concerned about its computer interface with
certain suppliers and customers and will take steps to isolate
Company systems from Year 2000 problems arising from such
interfaces, but cannot predict the compliance of those other
systems. Because of this risk, the Company has requested its
primary suppliers to certify that their systems either are now or
will be Year 2000 compliant by third quarter 1999. Through
September 30, 1998, approximately 95% of the Company's primary
suppliers have responded positively to the Company's
certification request.
The Company estimates that there are 100 personal computer
devices that are currently in service throughout the Company and
approximately 100 communications and tracking units on Company
tractors that are not Year 2000 compliant. The Company has a
formal plan to either replace these devices or obtain an upgrade
unit from certain vendors.
Inflation and Fuel Costs
Inflation can be expected to have an impact on the Company's
earnings; however, the effect of inflation has been minimal over
the past three years. An extended period of inflation or
increase in fuel costs would adversely affect the Company's
results of operations without a corresponding freight rate
increase from customers.
The Company uses forward purchase commitments to reduce its
exposure to fluctuations in fuel prices by entering into short-
term fuel price agreements for the actual delivery of fuel.
These agreements, which settle monthly, fix the price of fuel for
approximately 2.3 million gallons or approximately 35% of the
Company's estimated usage during each of the fourth quarter of
1998 and the first and fourth quarter of 1999. The Company
recognizes an expense or benefit on these agreements in the
period in which the fuel is used.
Page 12
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
The following exhibits are filed as part of this
report:
Designation Nature of Exhibit
11 Computation of Basic and Diluted earnings (loss) per share
10.1 Revolving Line of Credit Facility with CIT - Second
Amendment
B. Reports on Form 8-K
During the quarter covered by this report there were no
reports on Form 8-K filed.
Items 2, 3, and 5 of Part II were not applicable and
have been omitted.
Page 13
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.
TRISM, INC.
By:/s/Edward L. McCormick
Edward L. McCormick
Director, President and
Chief Executive Officer
By:/s/James G. Overley
James G. Overley
Senior Vice President
of Finance, Chief
Financial Officer and
Treasurer
Date: November 16, 1998
Page 14
TRISM, INC.
Exhibit Index
Exhibit Number Description Page Number
11 Computation of basic and diluted earnings 16
Per common share
10.1 Revolving Line of Credit Facility with
CIT - Second Amendment 17
Page 15
EXHIBIT 11
TRISM, INC.
Computation of Basic and Diluted Earnings Per Common Share
(In thousands, except per share amounts, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Income (loss) before
extraordinary item $(1,329 ) 146 (3,072 ) (2,363 )
Extraordinary item, gain
on extinguishment of
debt, net of income
taxes of $841
1,563 - 1,563 -
Net earnings (loss) $ 233 146 (1,509 ) (2,363 )
Weighted average number
of shares
Basic:
Average common shares
outstanding 5,719 5,737 5,719 5,737
Diluted:
Average common shares
outstanding 5,719 5,737 5,719 5,737
Common share equivalents
resulting from assumed
exercise of stock
options
- - - -
5,719 5,737 5,719 5,737
Basic Earnings (loss)
per share:
Income (loss) before
extraordinary item (.23 ) .03 (.53 ) (.41 )
Extraordinary item .27 - .27 -
Net earnings (loss) $ .04 .03 (.26 ) (.41 )
Diluted Earnings (loss)
per share:
Income (loss) before
extraordinary item (.23 ) .03 (.53 ) (.41 )
Extraordinary item .27 - .27 -
Net earnings (loss) $ .04 .03 (.26 ) (.41 )
Earnings (Loss) Per Share
Basic earnings (loss) per share excludes dilution and is computed
by dividing net earnings (loss) by the weighted average number of
common shares outstanding. Common shares outstanding include
issued shares less shares held in treasury. Diluted earnings per
share reflect the potential dilution that could occur if
securities or other contracts to issue common stock were
exercised or converted into common stock (common stock
equivalents). Diluted earnings per share is calculated by
dividing net income by the sum of the weighted average number of
common shares outstanding and dilutive common stock equivalents
at the end of each reporting period. Common stock equivalents
are excluded from the diluted calculation if a net loss was
incurred for the period as these transactions are anti-dilutive.
Page 16
Exhibit 10.1
TRISM, INC.
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (the
"Amendment") is made and entered into as of August 12, 1998, by
and among TRISM, INC. and certain of its subsidiaries
(collectively referred to herein as the "Borrowers"), the lenders
whose signatures appear below, together with the other lenders,
if any, party to the Agreement (hereinafter defined) from time to
time (collectively referred to herein as the "Lenders"), and THE
CIT GROUP/BUSINESS CREDIT, INC., in both of its capacities under
the Agreement, as the agent and as a Lender ("CIT").
For the purpose of conforming the same to the intention of
the parties and for other value received, it is hereby agreed
that that certain Loan and Security Agreement, dated July 14,
1997, (as amended, the "Agreement"), among Borrowers, Lenders and
CIT, shall be amended and modified in the following particulars:
1. Capitalized terms, as used herein, if not otherwise defined
herein, shall have the respective meanings set forth in the
Agreement.
2. The definitions of "Operating Lease Obligations" and "Total
Liabilities" in Section 1.1 of the Agreement are hereby amended
by striking such definitions and inserting in lieu thereof the
following:
"Operating Lease Obligations" means the aggregate
amount of all obligations under all Operating Leases of
the Borrower and any of its Subsidiaries as of the end
of any relevant fiscal period, where such obligations,
with respect to any such Operating Lease, are in an
amount equal to the sum of the following, in each case
discounted to present value using the implicit interest
rate embedded in such Operating Lease: (a) the monthly
lease payment under such Operating Lease multiplied by
the number of months then remaining in the term of such
Operating Lease plus (b) the amount of any optional or
mandatory residual payment due at the end of the term
of such Operating lease upon payment of which such
Borrower will acquire the asset(s) subject to such
Operating Lease.
"Total Liabilities" means, as at the end of any
relevant fiscal period, the sum of (a) the Liabilities
reflected on the Consolidated Balance Sheet as of such
date and (b) the aggregate amount of all Operating
Lease Obligations of Borrower and all of its
Subsidiaries as of such date.
3. Section 11.1 of the Agreement is hereby amended by deleting
therefrom subsection (c) and inserting in lieu thereof the
following new subsection (c):
"(c) Maximum Leverage Ratio. Upon and after the event
of an Availability Shortfall, the Borrowers shall not
permit its Leverage Ratio at any time (i) through and
including the month ended June 30, 1998, to exceed 8.75
to 1.00, and (ii) at all times thereafter, to exceed
12.00 to 1.00."
4. Borrowers agree to pay to Agent, for the benefit of the
Lenders, an amendment fee of $2,500, and Borrowers further agree
that Agent may charge such fee to Borrowers' loan account under
the Agreement immediately upon the execution and delivery hereof.
5. From and after the date hereof the Agreement shall be deemed
to mean the Agreement, as amended hereby.
6. Each Borrower hereby reaffirms each of the agreements,
covenants, and undertakings set forth in the Agreement and each
and every other agreement, instrument and document executed in
connection therewith or pursuant thereto as if such Borrower were
making said agreements, covenants and undertakings on the date
hereof.
7. This Amendment represents a modification only and is not,
and should not be construed as, a novation.
8. Except as hereinabove set forth, the Agreement shall remain
otherwise unmodified and in full force and effect, and all other
documents, instruments and agreements executed in connection
therewith or pursuant thereto shall remain in full force and
effect.
Page 17
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment under hand and seal as of the date first above
written.
BORROWERS:
TRISM, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
TRISM SECURED TRANSPORTATION, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
TRI-STATE MOTOR TRANSIT CO.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
AERO BODY AND TRUCK EQUIPMENT, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
TRI-STATE TRANSPORTATION SERVICES, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
DIABLO SYSTEMS, INCORPORATED d/b/a/
DIABLO TRANSPORTATION, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
EMERALD LEASING, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
McGIL SPECIAL SERVICES, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
TRISM EASTERN, INC. c/b/a/
C.I. WHITTEN TRANSFER
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
TRISM HEAVY HAUL, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
Page 18
TRISM SPECIALIZED CARRIERS, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
TRISM SPECIAL SERVICES, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
E.L. POWELL & SONS TRUCKING CO., INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
TRISM TRANSPORT, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
TRISM TRANSPORT SERVICES, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
TRISM LOGISTICS, INC.
By: James G. Overley
Title: Senior Vice President of Finance,
Chief Financial Officer and Treasurer
LENDERS:
THE CIT GROUP/BUSINESS CREDIT, INC.
By: Dean Chakalos
Title: Vice President
FLEET CAPITAL CORPORATION
By: Ralph J. Infante
Title: Vice President
FINOVA CAPITAL CORPORATION
By: Brian Rujawitz
Title: Assistant Vice President
AGENT:
THE CIT GROUP BUSINESS CREDIT, INC.
By: Dean Chakalos
Title: Vice President
Page 19
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 921
<SECURITIES> 0
<RECEIVABLES> 41926
<ALLOWANCES> 1316
<INVENTORY> 1445
<CURRENT-ASSETS> 66987
<PP&E> 178482
<DEPRECIATION> 63085
<TOTAL-ASSETS> 202787
<CURRENT-LIABILITIES> 47746
<BONDS> 85200
0
0
<COMMON> 59
<OTHER-SE> 21399
<TOTAL-LIABILITY-AND-EQUITY> 202787
<SALES> 75170
<TOTAL-REVENUES> 75170
<CGS> 73551
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<OTHER-EXPENSES> 114
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3550
<INCOME-PRETAX> (2045)
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<EXTRAORDINARY> 1563
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