<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 2000
------------------
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 0-23948
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BOYD BROS. TRANSPORTATION INC.
(Exact name of Registrant as specified in its charter)
Delaware 63-6006515
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
3275 Highway 30, Clayton, Alabama 36016
---------------------------------------
(Address of principal executive offices)
(Zip Code)
(334) 775-1400
--------------
(Registrant's telephone number, including area code)
Indicate by checkmark 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) Yes [X] No [ ], and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 13, 2000.
Common Stock, $.001 Par Value 2,998,430
----------------------------- ---------
(Class) (Number of Shares)
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page Number
<S> <C>
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
September 30, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Operations
Three- and Nine-month Periods Ended September
30, 2000 and 1999 5
Condensed Consolidated Statements of Cash Flows
Nine-month Periods Ended September 30,
2000 and 1999 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
2
<PAGE> 3
BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 409,453 $ 1,006,826
Marketable securities 250,000 250,000
Accounts receivable:
Trade and interline 13,068,548 12,475,739
Other 430,682 1,082,615
Current portion of net investment in
sales-type leases 2,365,919 3,620,723
Inventories 421,720 326,202
Prepaid tire expense 405,035 837,136
Other prepaid expenses 2,435,155 2,488,484
Deferred income taxes 281,834 281,834
----------- -----------
Total current assets 20,068,346 22,369,559
----------- -----------
PROPERTY AND EQUIPMENT:
Land and land improvements 2,263,326 2,263,326
Buildings 2,930,411 2,927,611
Revenue equipment 70,831,196 69,944,259
Other equipment 11,729,908 11,510,214
Leasehold improvements 377,831 377,831
Construction in progress 4,362,802 3,539,437
----------- -----------
Total 92,495,474 90,562,678
Less accumulated depreciation and
amortization 28,380,749 28,680,556
----------- -----------
Property and equipment, net 64,114,725 61,882,122
----------- -----------
OTHER ASSETS:
Net investment in sales-type leases 4,415,483 8,522,614
Goodwill 3,787,984 3,955,834
Deposits and other assets 468,913 438,372
Revenue equipment available for lease 6,456,394 2,287,267
----------- -----------
Total other assets 15,128,774 15,204,087
----------- -----------
TOTAL $99,311,845 $99,455,768
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
---- ----
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 2,500,000 $ --
Current maturities of long-term debt 16,635,844 14,245,584
Accounts payable - trade and interline 2,862,416 4,070,946
Income taxes 76,962 802,395
Accrued liabilities:
Self-insurance claims 2,019,537 1,768,114
Salaries and wages 914,936 746,805
Other 1,524,341 1,785,087
------------ ------------
Total current liabilities 26,534,036 23,418,931
LONG-TERM DEBT 33,019,283 34,688,582
DEFERRED INCOME TAXES 10,954,964 10,954,964
------------ ------------
Total liabilities 70,508,283 69,062,477
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value - 1,000,000
shares authorized; no shares issued and
outstanding -- --
Common stock, $.001 par value - 10,000,000
shares authorized; 4,081,910
shares issued and outstanding 4,082 4,082
Treasury stock at cost, 1,083,480 shares (2000)
and 751,670 (1999) (7,865,086) (5,900,746)
Additional paid-in capital 16,839,570 16,839,570
Retained earnings 19,824,996 19,450,385
------------ ------------
Total stockholders' equity 28,803,562 30,393,291
------------ ------------
TOTAL $ 99,311,845 $ 99,455,768
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 31,202,168 $ 35,475,470 $ 97,628,842 $ 98,760,593
OPERATING EXPENSES:
Salaries, wages and
employee benefits 10,102,502 8,929,944 29,387,099 26,516,395
Cost of independent contractors 8,199,349 12,595,138 28,089,723 33,293,004
Fuel 3,824,129 3,085,736 10,602,686 8,272,325
Operating supplies 3,204,674 3,120,624 8,531,645 8,368,203
Taxes and licenses 640,173 711,399 2,218,878 2,023,311
Insurance and claims 1,573,705 1,579,176 5,139,393 4,607,466
Communications and utilities 378,978 396,330 1,156,871 1,121,071
Depreciation and amortization 2,768,578 2,646,656 8,556,193 7,999,525
Gain on disposition of property
and equipment, net (682,590) (333,516) (1,100,251) (1,429,419)
Other 296,539 502,154 1,351,709 1,284,089
------------ ------------ ------------ ------------
Total operating expenses 30,306,037 33,233,641 93,933,946 92,055,970
------------ ------------ ------------ ------------
OPERATING INCOME 896,131 2,241,829 3,694,896 6,704,623
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES):
Interest income 24,972 25,141 70,030 72,778
Interest expense (993,485) (625,343) (2,959,213) (1,616,645)
------------ ------------ ------------ ------------
Other expenses, net (968,513) (600,202) (2,889,183) (1,543,867)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES (72,382) 1,641,627 805,713 5,160,756
PROVISION (BENEFIT) FOR INCOME TAXES (7,278) 659,593 431,102 2,101,852
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (65,104) $ 982,034 $ 374,611 $ 3,058,904
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE
(Basic and Diluted) $ (0.02) $ 0.28 $ 0.12 $ 0.86
============ ============ ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,000,223 3,522,757 3,128,890 3,552,829
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
2000 1999
---- ----
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 374,611 $ 3,058,904
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 8,556,193 7,999,526
Net effect of sales-type leases on cost of independent contractors (755,059) (1,286,443)
Gain on disposal of property and equipment, net (1,100,251) (1,429,419)
Changes in assets and liabilities provided (used) cash:
Accounts receivable (59,124) (2,044,914)
Deferred income taxes -- 401,450
Deposits and other assets (359,371) (1,244,066)
Accounts payable- trade and interline 1,208,530 4,293,646
Accrued liabilities and other current liabilities (566,625) (476,460)
------------ ------------
Net cash provided by operating activities 7,298,904 9,272,224
------------ ------------
INVESTING ACTIVITIES:
Purchase of short-term investments -- --
Payments received on sales type leases 2,833,677 2,613,526
Capital expenditures:
Revenue equipment (16,178,794) (26,282,562)
Other equipment (1,112,124) (2,439,556)
Proceeds from disposals of property and equipment 5,304,344 4,804,898
------------ ------------
Net cash used in investing activities (9,140,374) (21,303,694)
------------ ------------
FINANCING ACTIVITIES:
Purchase of common stock, net of stock issued to
employee stock purchase plan (1,964,340) (4,235,576)
Net proceeds under line of credit 2,500,000 1,500,000
Proceeds from long-term debt 10,575,018 19,803,989
Principal payments on long-term debt (9,854,057) (5,450,263)
------------ ------------
Net cash provided by financing activities 1,244,097 11,618,150
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (597,373) (413,320)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,006,826 1,361,664
------------ ------------
BALANCE AT END OF PERIOD $ 409,453 $ 948,344
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes $ 1,088,928 $ 2,662,230
============ ============
Interest $ 2,959,213 $ 1,439,503
============ ============
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:
Net investment in sales-type leases $ 585,620 $ 5,379,803
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all normal adjustments considered
necessary to present fairly the financial position of Boyd Bros. Transportation
Inc. and Subsidiary ("Boyd Bros." or the "Company") as of September 30, 2000 and
December 31, 1999, along with the results of operations and cash flows for the
three and nine-month periods ended September 30, 2000 and 1999. Interim results
are not necessarily indicative of results for a full year.
The condensed consolidated financial statements and notes are presented
as permitted by Form 10-Q, and do not contain certain information included in
the Company's audited consolidated financial statements and notes for the fiscal
year ended December 31, 1999.
The unaudited condensed consolidated financial statements and notes
should be read in conjunction with the summary of accounting policies and notes
to the financial statements included in the Company's Form 10-K for the year
ended December 31, 1999.
2. PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of
Boyd Bros. and its wholly owned subsidiary, Welborn Transport, Inc. ("Welborn
Transport"). Boyd Bros. and Welborn Transport are referred to herein
collectively as the "Company." All significant intercompany balances,
transactions and stockholdings have been eliminated.
3. ENVIRONMENTAL MATTERS
The Company's operations are subject to certain federal, state and
local laws and regulations concerning the environment. Certain of the Company's
facilities are located in historically industrial areas, and therefore, there is
the possibility of environmental liability as a result of operations by prior
owners as well as the Company's use of fuels and underground storage tanks at
its regional service centers.
4. CAPITAL TRANSACTIONS
In February 1999, the Company's Board of Directors authorized a program
under which the Company may purchase up to 600,000 shares of its common stock in
open market or negotiated transactions. During the first nine months of 2000,
the Company repurchased, net of employee stock purchases, 331,810 shares for
$1,964,340. As of September 30, 2000, the Company is authorized to buy an
additional 3,860 shares of its common stock under this program.
5. ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". In June 2000, the FASB issued
SFAS No. 138, which amends certain provisions of SFAS 133. The Company has begun
to implement SFAS 133 and is currently inventorying embedded derivatives and
addressing various other SFAS 133-related issues. Boyd Bros. will adopt SFAS
133 and the corresponding amendments under SFAS 138 on January 1, 2001. SFAS
133, as amended by SFAS 138, is not expected to have a material impact on the
Company's consolidated results of operations, financial position or cash flows.
6. RECLASSIFICATIONS
Certain reclassifications have been made to the 1999 consolidated
financial statements to conform to the 2000 presentation.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is a flatbed truckload carrier that operates throughout
most of the continental United States, hauling steel products and building
materials. In these markets, Boyd Bros. serves high-volume, time-sensitive
shippers that demand time-definite delivery.
Historically, the Company has owned its revenue equipment and operated
through employee-operators. The Company's expansion in the past, therefore, has
required significant capital expenditures, which Boyd Bros. has funded through
secured borrowings. During 1997, as a strategy to expand the Company's potential
for growth, the Company began adding owner/operators to its fleet. The Company
then accelerated the implementation of this strategy in December 1997 with the
acquisition of Welborn Transport which specializes in short-haul routes using a
largely owner/operator fleet.
RESULTS OF OPERATIONS
Results for the third quarter and first nine months of 2000 reflected,
among other things, inconsistent freight, continued pressure from high fuel
prices, increased insurance costs, higher interest expense and other
Company-fleet operating costs which affected net income for the period. Aside
from the direct impact on the Company's profits, higher fuel costs have
significantly diminished the profits available to owner/operators, causing
attrition in the Company's owner/operator fleet, particularly in its Welborn
division where the number of owner/operators declined to 209 at September 30,
2000, from 300 at September 30, 1999. In the Boyd Bros. division, the departure
of owner/operators also has required the Company to assimilate power units into
its Company-owned operations. At September 30, 2000, the Boyd division had 135
owner/operators compared with 230 at the end of the third quarter of 1999. In
total, 344, or 34%, of the Company's 1,009 power units were owner/operated at
September 30, 2000, compared with 530, or 52%, of the Company's 1,025 power
units at the same time last year. Also, during the third quarter of 2000, the
Boyd division started a freight brokerage company to replace the brokerage
company at Welborn Transport that was closed during the second quarter.
Quarterly review
Operating revenues decreased $4,273,302 or 12.0% for the three-month
period ended September 30, 2000 compared with the same period in 1999. The
decrease was due in part to the closing of the brokerage company at Welborn,
which was replaced by a new freight brokerage company at the Boyd division, and
also the closing of the specialized at Welborn. This interruption in brokerage
services and the closing of the specialized division at Welborn accounted for
$1,250,000 of the decrease in revenues. The remainder of the decrease in
revenues was attributable to inconsistent freight and the utilization of the
fleet. Operating revenues decreased $1,131,751 or 1.2% for the nine-month period
ended September 30, 2000 compared with the same period in 1999.
Total operating expenses decreased $2,927,604 or 8.8% compared with the
third quarter of 1999. The operating ratio for the third quarter of 2000 was
97.1% compared with 93.7% for the same period in 1999. The increase in fuel
costs for the third quarter of 2000 compared with the same period in 1999
accounted for the greater increase in the operating expenses percentage.
Salaries, wages and employee benefits increased $1,172,558 or 13.1%
compared with the third quarter of 1999 due to the decrease in the number of
owner/operators and the resulting increase in the number of Company drivers. As
a percentage of operating revenues, salaries, wages and employee benefits
increased to 32.4% from 25.2% for the same period last year. Cost of independent
contractors, or owner/operators, decreased $4,395,789 or 34.9% in the third
quarter of 2000 as the Company's owner/operator fleet decreased to 344 power
units in the third quarter of 2000 from 530 power units in the third quarter of
1999. The decrease also was attributable to an interruption of brokerage
services. As a percentage of operating revenues, cost of independent contractors
decreased to 26.3% from 35.5% for the same period last year. Fuel costs
increased $738,393 or 23.9% compared with the third quarter of 1999 due to
higher cost per gallon and a decrease in mileage efficiency and also a decrease
in the number of owner/operator units. As a percentage of operating revenues,
fuel costs increased to 12.3% from 8.7% for the same period last year. Operating
supplies increased $84,050 or 2.7% compared with the third quarter of 1999 due
to the increase in tire costs and tarp replacement costs. As a percentage of
operating revenues, operating supplies increased to 10.3% from 8.8% last year.
Taxes and licenses declined $71,226 or 10.0% compared with the third quarter of
1999 due to the elimination of the specialized hauling division at Welborn
Transport and a decrease in the
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Company's fleet size. As a percentage of operating revenues, taxes and licenses
remained constant at 2.0% for the third quarters of 2000 and 1999. Insurance and
claims decreased $5,471 or .4% compared with the third quarter of 1999.
Insurance and claims as a percentage of operating revenues increased to 5.0%
from 4.5% for the same period last year. Communication and utilities decreased
$17,352 or 4.4% compared with the third quarter of 1999 due to a re-negotiated
contract with a major telecommunications company and the implementation of an
internal monitoring program. As a percentage of operating revenues,
communication and utilities increased to 1.2% from 1.1% for the same period last
year. Depreciation and amortization expense increased $121,922 or 4.6% compared
with the third quarter of 1999 due to an increase in the Company's fleet size
and also an increase in the proportion of the Company-owned fleet. As a
percentage of operating revenues, depreciation and amortization increased to
8.9% from 7.5% for the same period last year. Gain on disposition of property
and equipment, net increased $349,074 or 104.7% compared with the third quarter
of 1999 due to the Company's capital equipment replacement program. As a
percentage of operating revenues, gain on disposition of property increased to
2.2% from 0.9% last year. Other expense decreased $205,615 or 41.0% compared
with the third quarter of 1999. Interest expense increased $368,142 or 58.9%
compared with the third quarter of 1999. As a percentage of operating revenues,
interest expense increased to 3.2% from 1.8% for the same period last year
primarily due to an increase in debt incurred to finance revenue equipment, much
of which was subsequently leased to owner/operators, and also due to an increase
in the base LIBOR rate on the Company's outstanding debt during the third
quarter of 2000 compared with rates that prevailed during the same period last
year. The Company continues to replenish its fleet of tractors and trailers on
an as needed basis. Provision for income taxes declined $666,871 or 101.1%
compared with the third quarter of 1999. As a percentage of pre-tax income,
provision for income taxes decreased to 10.1% from 40.2% for the same period
last year.
Year-to-date Review
Operating revenues decreased $1,131,751 or 1.2% to $97,628,842 in the
nine-month period ended September 30, 2000, compared with $98,760,591 in the
same period in 1999. The decrease for the period ended September 30, 2000 was
due primarily to the interruption of brokerage services at Welborn Transport.
Total operating expenses increased $1,877,976 or 2.0% to $93,933,946
for the year-to-date period ended September 30, 2000, compared with $92,055,970
for the same period in 1999. The operating ratio for the first nine months of
2000 was 96.2% compared with 93.2% for the same period last year.
Salaries, wages and employee benefits increased $2,870,704 or 10.8%
compared with the first nine months of 1999 to $29,397,099 from $26,516,395. As
a percentage of operating revenues, salaries, wages and benefits increased to
30.1% from 26.8% due to an increase in the number of Company drivers and
non-driver associates. Cost of independent contractors declined $5,203,281 or
15.6% compared with the nine months of 1999 to $28,089,723 from $33,293,004. As
a percentage of operating revenues, cost of independent contractors declined to
28.8% from 33.7%, reflecting a lower number of owner/operators. Aggregate fuel
costs increased $2,330,361 or 28.2% compared with the first nine months of 1999
to $10,602,686 from $8,272,325. As a percentage of operating revenues, fuel
costs increased to 10.9% from 8.4% because of higher fuel cost per gallon and a
decline in the Company's owner/operator fleet. Operating supplies increased
$163,442 or 2.0% compared with the first nine months of 1999 to $8,531,645 from
$8,368,203. As a percentage of operating revenues, operating supplies increased
to 8.7% from 8.5%. Taxes and licenses increased $195,567 or 9.7% compared with
the first nine months of 1999 to $2,218,878 from $2,023,311. As a percentage of
operating revenues, taxes and licenses increased to 2.3% from 2.0% due to an
increase in the Company's fleet size. Insurance and claims increased $531,927 or
11.5% compared with the first nine months of 1999 to $5,139,393 from $4,607,466.
As a percentage of operating revenues, insurance and claims increased to 5.3%
from 4.7%, reflecting an increase in cargo claims and accident frequency, as
well as an increase in insurance premiums. Communications and utilities
increased $35,800 or 3.2% compared with the first nine months of 1999 to
$1,156,871 from $1,121,071. As a percentage of operating revenues, communication
and utilities increased to 1.2% from 1.1%. Depreciation and amortization
increased $556,668 or 7.0% compared with the first nine months of 1999 to
$8,556,193 from $7,999,525. As a percentage of operating revenues, depreciation
and amortization increased to 8.8% from 8.1% because of the purchase of new
revenue equipment and also the return of owner/operated tractors to the
Company's fleet that were subject to lease/purchase arrangements in previous
periods. Gain on disposition of property and equipment, net decreased $329,168
or 23.0% compared with the first nine months of 1999 to $1,100,251 from
$1,429,419. As a percentage of operating revenues, gain of disposition of
property and equipment, net declined to 1.1% from 1.4%, reflecting the Company's
completion of a significant capital equipment replacement program last year.
Other expense increased $67,620 or 5.3%
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compared with the first nine months of 1999 to $1,351,709 from $1,284,089. As a
percentage of operating revenues, other expense increased to 1.4% from 1.3%.
Interest expense increased $1,342,568 or 83.0% compared with the first nine
months of 1999 to $2,959,213 from $1,616,645. As a percentage of operating
revenues, interest expense increased to 3.0% from 1.6% primarily due to an
increase in debt incurred to finance revenue equipment, much of which was
subsequently leased to owner/operators, and also due to an increase in the base
LIBOR rate on the Company's outstanding debt during the first nine months of
2000 compared with rates that prevailed in the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for capital expenditures
and operating expenses, including labor costs, fuel costs and operating
supplies. Historically, the Company's primary sources of cash have been
continuing operations, bank borrowings and the issuance of common stock of the
Company.
Accounts receivable (trade and interline) at September 30, 2000,
increased $592,809 or 4.8%. This represented 13.2% of total assets at September
30, 2000 versus 16.5% of total assets at December 31, 1999. The increase was due
to the sales volume and a slight increase in the days of revenue in accounts
receivable (trade and interline) for the period ended September 30, 2000, which
rose to 36.7 days from 34.5 days in the same period in 1999. Management believes
this slight increase in accounts receivable aging does not reflect a change in
underlying trends in uncollectible accounts; the Company has not recognized any
significant bad debt expense in any of the periods represented relating to trade
receivables. The Company does reserve for bad debts that are related to
sales-type leases. Bad debt expense on sales-type leases for the quarter ended
September 30, 2000 was $185,440 and for the nine months ended September 30, 2000
was $964,965.
Net cash flow provided by operating activities was $7,298,904 during
the first nine months of 2000 compared with $9,272,224 during the same period
for 1999. The Company's bank debt bears interest ranging from LIBOR plus 1.00%
to LIBOR plus 1.75%, all payable in monthly installments with maturities through
May 2004. The bank debt is collateralized by revenue equipment. The Company also
has two lines of credit with limits of $1,750,000 and $2,500,000, respectively,
bearing interest at the bank's 30-day LIBOR rate plus 1.25%. As of September 30,
2000, the Company had $2,500,000 outstanding on its lines of credit.
Management anticipates increasing the size of the Company's fleet in
2000 by an aggregate of 35 tractors and 50 trailers, net of replacements, at an
anticipated cost of approximately $7,500,000. Management expects to continue
financing such equipment purchases through equipment financing arrangements with
various lenders.
As of September 30,2000, the Company believes that the availability of
credit under both lines of credit and internally generated cash will be adequate
to finance its operations and anticipated capital expenditures through fiscal
year 2000.
YEAR 2000 COMPLIANCE
In June 1998, the Company developed and began implementing a plan to
review its overall Year 2000 compliance. The plan encompassed the Company's
critical information technology ("IT") and its critical non-IT systems that are
necessary to execute the Company's basic functions of hauling freight via the
Company's flatbed trucks.
The Company did not experience any significant malfunctions or errors
in its operating or business systems when the date changed from 1999 to 2000.
Based on operations since January 1, 2000, the Company does not expect any
significant impact on its ongoing business as a result of the "Year 2000 issue."
However, it is possible that the full impact of the date change, which was of
concern due to computer programs that use two digits instead of four digits to
define years, has not been fully recognized. For example, it is possible that
Year 2000 or similar issues such as leap year-related problems may occur with
billing, payroll, or financial closings at month, quarter or year ends. The
Company believes that any such problems are likely to be minor and correctable.
In addition, the Company could still be negatively impacted if its customers or
suppliers are adversely affected by Year 2000 or similar issues. The Company
currently is not aware of any significant Year 2000 or similar problems that
have arisen for its customers and suppliers.
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The Company expended $105,000 on Year 2000 readiness efforts from 1998
to 1999. These efforts included replacing some outdated, noncompliant hardware
and noncompliant software as well as identifying and remediating Year 2000
problems.
FUEL PRICE TREND
Diesel fuel prices increased materially during the first nine months of
2000 compared with prevailing prices in the same period last year. The average
price per gallon of diesel fuel increased from about $.96 per gallon at the
beginning of 1999 to nearly $1.60 at the end of the third quarter of 2000. If
fuel prices continue to increase or remain at these higher levels for a
continued period of time, higher fuel costs may have a material adverse effect
on the financial condition and business operations of the Company. Additionally,
the increased fuel costs may also have a material adverse effect on the
Company's efforts to build a base of owner/operators, expand its pool of
available trucks and diversify its operations. Higher fuel costs dilute the
financial incentive for owner/operators, who are typically paid a flat rate per
mile; therefore, as a result of higher fuel prices, about 50 drivers left the
Company's owner/operator program in 1999 and about 100 drivers have departed in
the first nine months of 2000. The diminishing number of owner/operators further
affects the Company's financial condition - and therefore compounds the direct
impact of higher fuel costs - because each owner/operator that leaves the
Company's Boyd Bros. division also leaves behind a power unit that must then be
absorbed into the Company's fleet. As a result, each of these trucks can no
longer be recorded as a variable expense that is related to a contractual rate
per mile, incurred only if freight is moved, but must instead be recorded as a
Company-owned truck with indirect costs of ownership, such as depreciation,
maintenance and capital expenses. Continuing higher fuel costs may lead to empty
trucks, diminished fleet efficiency, and reduced revenue potential.
FORWARD-LOOKING STATEMENTS
Certain of the above statements contained herein under the caption
"Management's Discussion and Analysis Financial Conditions and Result of
Operations" constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, business conditions and growth in the economy, including the
transportation and construction sectors in particular, competitive factors,
including price pressures and the ability to recruit and retain qualified
drivers, the ability to control internal costs, particularly fuel costs which
have continued to rise materially during the first nine months of 2000 that are
not passed on to the Company's customers, the cost of complying with government
regulations that are applicable to the Company, and other factors referenced
elsewhere herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate risk due to its long-term debt,
which at September 30, 2000 bore interest rates ranging from 1.00% to 1.75%
above the bank's LIBOR rate. Under the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 107, Disclosures about Fair Value of Financial
Instruments, the Company has estimated the fair value of its long-term debt
approximates its carrying value, using a discounted cash flow analysis based on
borrowing rates available to the Company. The effect of a hypothetical 10%
increase in interest rates would increase the estimated fair value of the
Company's long-term debt by approximately $700,000. Management believes that
current working capital funds are sufficient to offset any adverse effects
caused by changes in the interest rates.
PART II. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial data schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
ended September 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Boyd Bros. Transportation Inc.
(Registrant)
Date: November 14, 2000 /s/ Richard C. Bailey
---------------------
Richard C. Bailey, Chief Financial Officer
(Principal Accounting Officer)
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