UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

   
(Mark One)
[X]
x
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31,June 30, 2004

OR

   
[]
o
 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 0-23948

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) 63-6006515
(IRS Employer Identification
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), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]x No [  ]o

Indicate by check mark whether the registrant is an accelerated filter (as defined in Rule 12b-2 of the Exchange Act). Yes [  ]o No [X]x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of March 31,August 6, 2004.

   
Common Stock, $.001 Par Value 2,711,9582,711,966

 
 
 
(Class) (Number of Shares)

 


INDEX

     
  Page Number
    
    
June 30, 2004 (unaudited) and December 31, 2003  3 
Three and Six Months Ended March 31,June 30, 2004 and 2003  5 
Six Months Ended March 31,June 30, 2004 and 2003  6 
  7 
  1112 
  1922 
  1922 
    
  2023 
  2023 
  2023 
  2023 
  2023 
  2023 
  2124 
 EX-10.1 SECURITY AGREEMENTEx-10.1 Security Agreement dated May 24, 2004
 EX-31.1 SECTIONSection 302 CERTIFICATION OF THECertification of the CEO
 EX-31.2 SECTIONSection 302 CERTIFICATION OF THECertification of the CFO
 EX-32.0 SECTIONSection 906 CERTIFICATION OF THECertification of the CEO&CFO & CFO

2


PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

BOYD BROS. TRANSPORTATION INC.

CONSOLIDATED BALANCE SHEETS

                
 March 31, DECEMBER 31, June 30, December 31,
 2004
 2003
 2004
 2003
 (UNAUDITED)  (UNAUDITED) 
ASSETS
  
CURRENT ASSETS:  
Cash and cash equivalents $19,753 $283,474  $19,737 $283,474 
Accounts receivable, less allowance for doubtful accounts of $338,426 (2004) and $323,426 (2003): 
Accounts receivable, less allowance for doubtful accounts of $353,426 (2004) and $323,426 (2003): 
Trade and interline 11,795,122 9,415,968  12,616,293 9,415,968 
Other 942,565 620,366  1,041,590 620,366 
Current portion of net investment in sales-type leases 2,199,402 2,217,101  2,362,621 2,217,101 
Parts and supplies inventory 737,914 677,899 
Prepaid licenses and permits 204,212 487,586 
Inventories 744,674 677,899 
Prepaid taxes and licenses 831,618 487,586 
Other prepaid expenses 786,747 952,751  741,971 952,751 
Deferred and refundable income taxes 2,630,875 2,571,959  2,764,959 2,571,959 
 
 
 
 
  
 
 
 
 
Total current assets 19,316,590 17,227,104  21,123,463 17,227,104 
 
 
 
 
  
 
 
 
 
PROPERTY AND EQUIPMENT:  
Land and land improvements 2,952,576 2,952,576  2,952,576 2,952,576 
Buildings 7,976,061 7,976,061  7,976,061 7,976,061 
Revenue equipment 63,620,810 63,005,857  64,418,097 63,005,857 
Other equipment 13,114,616 12,991,961  13,161,439 12,991,961 
Leasehold improvements 386,384 386,384  408,552 386,384 
 
 
 
 
  
 
 
 
 
Total 88,050,447 87,312,839  88,916,725 87,312,839 
Less accumulated depreciation and amortization 35,979,518 34,906,078  37,274,649 34,906,078 
 
 
 
 
  
 
 
 
 
Property and equipment, net 52,070,929 52,406,761  51,642,076 52,406,761 
 
 
 
 
  
 
 
 
 
OTHER ASSETS:  
Net investment in sales-type leases 4,711,465 5,402,732  3,865,649 5,402,732 
Goodwill, net of accumulated amortization of $912,077 3,466,746 3,466,746 
Goodwill 3,466,746 3,466,746 
Revenue equipment held for lease 399,693 981,974  891,088 981,974 
Deposits and other assets 624,980 384,767  364,481 384,767 
 
 
 
 
  
 
 
 
 
Total other assets 9,202,884 10,236,219  8,587,964 10,236,219 
 
 
 
 
  
 
 
 
 
TOTAL $80,590,403 $79,870,084  $81,353,503 $79,870,084 
 
 
 
 
  
 
 
 
 

See notes to unaudited consolidated financial statements.

3


BOYD BROS. TRANSPORTATION INC.

CONSOLIDATED BALANCE SHEETS

                
 March 31, DECEMBER 31, June 30, December 31,
 2004
 2003
 2004
 2003
 (UNAUDITED)  (UNAUDITED) 
LIABILITIES AND STOCKHOLDERS’ EQUITY
  
CURRENT LIABILITIES:  
Accounts payable - trade and interline 4,516,799 3,362,064 
Accounts payable $4,156,499 $3,361,125 
Line of credit 2,149,514 1,141,772  955,524 1,141,772 
Current maturities of long-term debt 7,811,887 10,498,666 
Income taxes payable 942,118 939 
Accrued liabilities:  
Self-insurance claims 5,502,747 5,480,194  6,487,332 5,480,194 
Salaries and wages 816,589 338,503  938,815 338,503 
Other 920,153 1,160,683  1,192,624 1,160,683 
Current maturities of long-term debt 8,758,440 10,498,666 
 
 
 
 
  
 
 
 
 
Total current liabilities 22,664,242 21,981,882  22,484,799 21,981,882 
LONG-TERM DEBT 19,039,027 19,385,035  19,105,310 19,385,035 
DEFERRED INCOME TAXES 12,415,398 12,415,398  12,365,398 12,415,398 
 
 
 
 
  
 
 
 
 
Total liabilities 54,118,667 53,782,315  53,955,507 53,782,315 
 
 
 
 
  
 
 
 
 
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; 4,069,640 shares issued; 2,711,958 shares outstanding at March 31, 2004 and December 31, 2003, respectively 4,070 4,070 
Common stock, $.001 par value - 10,000,000 shares authorized; 4,069,640 shares issued; 2,711,966 shares outstanding at June 30, 2004 and December 31, 2003, respectively 4,070 4,070 
Additional paid-in capital 16,884,622 16,884,622  16,884,622 16,884,622 
Retained earnings 19,207,122 18,823,155  20,133,382 18,823,155 
Treasury stock at cost; 1,357,682 shares at March 31,2004 and December 31, 2003  (9,624,078)  (9,624,078)
Treasury stock at cost; 1,357,674 shares at June 30,2004 and December 31, 2003  (9,624,078)  (9,624,078)
 
 
 
 
  
 
 
 
 
Total stockholders’ equity 26,471,736 26,087,769  27,397,996 26,087,769 
 
 
 
 
  
 
 
 
 
TOTAL $80,590,403 $79,870,084  $81,353,503 $79,870,084 
 
 
 
 
  
 
 
 
 

See notes to unaudited consolidated financial statements.

4


BOYD BROS. TRANSPORTATION INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

                      
 Three Months Ended March 31,
 Three Months Ended June 30,
 Six Months Ended June 30,
 2004
 2003
 2004
 2003
 2004
 2003
OPERATING REVENUES $34,617,390 $32,577,476  $37,896,315 $34,368,130 $72,245,206 $66,945,608 
 
 
 
 
  
 
 
 
 
 
 
 
 
OPERATING EXPENSES:  
Salaries, wages and employee benefits 10,127,732 9,288,776  11,359,031 9,777,817 21,494,044 19,066,592 
Cost of independent contractors 10,554,994 10,545,354  10,998,466 10,945,868 21,553,462 21,491,222 
Operating supplies 7,902,504 6,931,122  7,944,054 6,879,976 15,578,060 13,811,100 
Operating taxes and licenses 611,789 601,614  627,225 641,506 1,239,013 1,243,120 
Insurance and claims 1,090,769 1,282,399  1,665,357 1,114,896 2,756,126 2,447,296 
Communications and utilities 271,888 331,847  310,519 342,817 582,406 674,664 
Depreciation and amortization 2,659,397 2,694,053  2,652,521 2,948,579 5,311,918 5,592,631 
Loss on disposition of property and equipment, net 1,142  
Gain on disposition of property and equipment, net  (23,765)  (196,847)  (22,623)  (196,848)
Other 497,857 564,322  524,192 499,492 1,022,048 1,063,814 
 
 
 
 
  
 
 
 
 
 
 
 
 
Total operating expenses 33,718,072 32,239,487  36,057,600 32,954,104 69,514,454 65,193,591 
 
 
 
 
  
 
 
 
 
 
 
 
 
OPERATING INCOME 899,318 337,989  1,838,715 1,414,026 2,730,752 1,752,017 
 
 
 
 
  
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSES):  
Interest income 330 4,798  224 225 554 5,022 
Interest expense  (257,705)  (308,420)  (257,324)  (283,764)  (515,029)  (592,183)
Other income (expenses) 5,690  (27,517)  (17,189)  (25,066)  (11,498)  (52,584)
 
 
 
 
  
 
 
 
 
 
 
 
 
Other expenses, net  (251,685)  (331,139)  (274,289)  (308,605)  (525,973)  (639,745)
 
 
 
 
  
 
 
 
 
 
 
 
 
INCOME BEFORE PROVISION FOR INCOME TAXES 647,633 6,850  1,564,426 1,105,421 2,204,779 1,112,272 
PROVISION FOR INCOME TAXES 263,666 2,665  630,885 460,130 894,552 462,795 
 
 
 
 
  
 
 
 
 
 
 
 
 
NET INCOME $383,967 $4,185  $933,541 $645,291 $1,310,227 $649,477 
 
 
 
 
  
 
 
 
 
 
 
 
 
BASIC NET INCOME PER SHARE $0.14 $0.00  $0.34 $0.24 $0.48 $0.24 
 
 
 
 
  
 
 
 
 
 
 
 
 
DILUTED NET INCOME PER SHARE $0.13 $0.00  $0.32 $0.23 $0.44 $0.23 
 
 
 
 
  
 
 
 
 
 
 
 
 
AVERAGE SHARES OUTSTANDING 2,711,958 2,710,665  2,711,966 2,710,673 2,711,966 2,710,669 
 
 
 
 
  
 
 
 
 
 
 
 
 
AVERAGE SHARES OUTSTANDING ASSUMING DILUTION 2,950,653 2,842,739  2,951,199 2,836,549 2,950,927 2,837,684 
 
 
 
 
  
 
 
 
 
 
 
 
 

See notes to unaudited consolidated financial statements.

5


BOYD BROS. TRANSPORTATION INC.

CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)

                
 Three Months Ended March 31,
 Six Months Ended June 30,
 2004
 2003
 2004
 2003
OPERATING ACTIVITIES:  
Net income $383,967 $4,185  $1,310,227 $649,477 
Adjustments to reconcile net income (loss) to net cash provided by operating activities: 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation and amortization 2,659,397 2,694,053  5,311,918 5,592,631 
Provision for bad debts 15,000 21,960  28,588 99,726 
Net effect of sales-type leases on cost of independent contractors  (291,621)  (267,856)  (518,465) 94,602 
Loss on disposal of property and equipment, net 1,142  
Gain on disposal of property and equipment, net  (22,623)  (196,847)
Provision for deferred income taxes  (243,000)  (465,960)
Changes in assets and liabilities that provided (used) cash:  
Accounts receivable  (2,716,353)  (2,444,475)  (3,650,137)  (2,066,773)
Other current assets 330,447 450,461   (200,027)  (267,133)
Deposits and other assets  (14,926)   20,286  (625)
Accounts payable- trade and interline 1,154,735 3,497,162  846,351 2,093,794 
Accrued liabilities and other current liabilities 260,109  (1,145,538) 1,639,391  (137,307)
Income taxes payable 942,118  
 
 
 
 
  
 
 
 
 
Net cash provided by operating activities 1,781,897 2,809,952  5,464,627 5,395,585 
 
 
 
 
  
 
 
 
 
INVESTING ACTIVITIES:  
Payments received on sales-type leases 1,040,202 784,459  1,789,330 1,147,020 
Capital expenditures:  
Revenue equipment  (524,649)  (585,859)  (781,356)  (4,037,730)
Other equipment  (156,719)  (208,395)  (313,132)  (671,512)
Proceeds from disposals of property and equipment 232,340   280,540 207,900 
 
 
 
 
  
 
 
 
 
Net cash used in investing activities 591,174  (9,795)
Net cash provided by (used in) investing activities 975,382  (3,354,322)
 
 
 
 
  
 
 
 
 
FINANCING ACTIVITIES:  
Proceeds from sales of common stock  2,151   2,149 
Proceeds from line of credit - net 1,007,742 473,747 
Proceeds from line of credit — net  (186,248) 1,313,825 
Proceeds from long-term debt  382,060   4,001,735 
Principal payments on long-term debt  (3,644,534)  (3,754,442)  (6,517,498)  (7,413,199)
 
 
 
 
  
 
 
 
 
Net cash used in financing activities  (2,636,792)  (2,896,484)  (6,703,746)  (2,095,490)
 
 
 
 
  
 
 
 
 
NET DECREASE IN CASH AND CASH EQUIVALENTS  (263,721)  (96,327)  (263,737)  (54,227)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 283,474 292,514  283,474 292,514 
 
 
 
 
  
 
 
 
 
BALANCE AT END OF PERIOD $19,753 $196,187  $19,737 $238,287 
 
 
 
 
  
 
 
 
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:  
Cash paid during the period for : 
Cash paid during the period for: 
Income taxes, net of refunds $123,942 $1,637,989  $179,352 $1,850,715 
 
 
 
 
  
 
 
 
 
Interest $257,705 $308,420  $515,029 $592,183 
 
 
 
 
  
 
 
 
 
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:  
Net investment in sales-type leases $39,615 $127,993  $120,698 $(3,889,924)
 
 
 
 
  
 
 
 
 
Dealer financed purchases of revenue equipment $1,558,300 $  $3,263,321 $ 
 
 
 
 
  
 
 
 
 

See notes to unaudited consolidated financial statements.

6


BOYD BROS. TRANSPORTATION INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying consolidated financial statements have been prepared in compliance with Form 10-Q instructions and, thus, do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the statements reflect all adjustments, including those of a normally recurring nature, necessary to present fairly the results of the reported interim periods. Interim results are not necessarily indicative of results for a full year. The statements should be read in conjunction with the summary of accounting policies and notes to financial statements included in the Company’s latest annual report on Form 10-K.

2. Principles of Consolidation

The consolidated financial statements include the accounts of Boyd Bros. Transportation Inc. and its wholly owned subsidiaries, Boyd Logistics, Inc. (“Logistics”) and WTI Transport, Inc. (“WTI”). Boyd, Logistics, and WTI are referred to herein collectively as the “Company”. All significant inter-company balances, transactions and stockholdings have been eliminated. Certain reclassifications have been made to prior periods to conform to the current period presented.

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. Stockholders’ Equity

Earnings Per Share

The following is a reconciliation from basic earnings per share to diluted earnings per share for each of the periods presented:

      
 For the Quarter ended      
 March 31,
 For the Quarter ended June 30,
 2004
 2003
 2004
 2003
Numerator:  
Net income $383,967 $4,185  $933,541 $645,291 
Denominator:  
Basic weighted-average shares outstanding 2,711,958 2,710,665  2,711,966 2,710,673 
Effect of dilutive stock options 238,695 132,074  239,241 125,876 
Diluted weighted-average shares outstanding 2,950,653 2,842,739  2,951,207 2,836,549 
Basic earnings per share $0.14 $0.00  $0.34 $0.24 
Diluted earnings per share $0.13 $0.00  $0.32 $0.23 
         
  For the Six Months ended June 30,
  2004
 2003
Numerator:        
Net income $1,310,227  $649,477 
Denominator:        
Basic weighted-average shares outstanding  2,711,966   2,710,669 
Effect of dilutive stock options  238,969   127,015 
Diluted weighted-average shares outstanding  2,950,935   2,837,684 
Basic earnings per share $0.48  $0.24 
Diluted earnings per share $0.44  $0.23 

At March 31, 2004 and 2003 respectively, the7


The Company had outstanding 59,500 and 62,200 in stock options granted that were antidilutive and, therefore, excluded from the diluted earnings per share calculations for each periodall periods presented.

7


Stock Options

The Company adopted the disclosure provisions of Statement of Financial Accounting Standards (“SFAS” or “Statement”) No. 148, “Accounting for Stock-Based Compensation Transition and Disclosure,” which amends SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation, which was originally provided under SFAS No. 123. The Statement also improves the timeliness of disclosures by requiring the information be included in interim, as well as annual, financial statements. The adoption of these disclosure provisions did not have a material effect on the Company’s consolidated results of operations, financial position, or cash flows.

The Company has a stock option plan (the “Plan”) that provides for the granting of stock options to key employees, executive officers and directors. An aggregate of 500,000 shares of the Company’s common stock are reserved for this Plan. The options are exercisable in increments over a five-year period beginning on the first anniversary of the grant and will expire ten years after the date of the grant. No options were granted or exercised in the first quarter of 2004 or 2003.

SFAS No. 123 encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of the grant over the amount an employee must pay to acquire the stock. The option price of all the Company’s stock options is equal to the market value of the stock at the grant date. As such, no compensation expense is recorded in the accompanying consolidated financial statements.

Had compensation cost been determined based upon the fair value at the grant date for awards under the Plan consistent with the methodology prescribed under SFAS No. 123, the Company’s pro forma net income and net income per share would have differed from the amounts reported as follows:

         
For the Quarter Ended March 31,
 2004
 2003
Net income, as reported $383,967  $4,185 
Stock-based employee compensation expense determined under fair value basis, net of tax  (5,677)  (55,347)
   
 
   
 
 
Pro forma net income (loss) $378,290  $(51,162)
   
 
   
 
 
Earnings per share:        
Basic -as reported $0.14  $0.00 
Basic -pro forma $0.14  $(0.02)
Diluted -as reported $0.13  $0.00 
Diluted -pro forma $0.13  $(0.02)
         
For the Quarters Ended June 30,
 2004
 2003
Net income, as reported $933,541  $645,291 
Stock-based employee compensation expense determined under fair value basis, net of tax  (972)  (24,414)
   
 
   
 
 
Pro forma net income $932,569  $620,877 
   
 
   
 
 
Earnings per share:        
Basic — as reported $0.34  $0.24 
Basic — pro forma $0.34  $0.23 
Diluted — as reported $0.32  $0.23 
Diluted — pro forma $0.32  $0.22 
         
For the Six Months Ended June 30,
 2004
 2003
Net income, as reported $1,310,227  $649,477 
Stock-based employee compensation expense determined under fair value basis, net of tax  (6,619)  (54,110)
   
 
   
 
 
Pro forma net income $1,303,608  $595,367 
   
 
   
 
 
Earnings per share:        
Basic — as reported $0.48  $0.24 
Basic — pro forma $0.48  $0.22 
Diluted — as reported $0.44  $0.23 
Diluted — pro forma $0.44  $0.21 

No options were granted in the first quarter of 2004 or 2003.

8


5. Related Party TransactionsTransaction

The Company entered into an agreement with Dempsey Boyd to lease an aircraft for Company use. The agreement is on a month-to-month basis. The Company pays a monthly lease amount of $22,000 with an allowance of twenty hours of flight time per month. For any flight hours that exceed twenty per month, the Company pays an additional $1,000 per flight hour. The Company paid a total of $44,000$66,000 and $132,000 in lease payments to Mr. Boyd during the first quarterthree and six months periods ended June 30, 2004, respectively.

8


The Company has entered into a commitment letter with Dempsey Boyd dated August 4, 2004, pursuant to which Mr. Boyd has committed, subject to the absence of 2004.any material adverse change in the financial condition of the Company and various other closing conditions, to provide up to $9.2 million of the financing necessary to complete the Merger. The term loan will bear interest at a fixed rate of 5.5% per annum, and will have a 36-month term. Mr. Boyd has the option to secure the term loan with available Company assets, but Mr. Boyd has agreed to subordinate the repayment of the term loan to the loans of other Company creditors who require subordination and whose consent is required to proceed forward with the Merger and the term loan. A portion of the amount committed by Mr. Boyd may be replaced by other term or revolving debt from a third party lender prior to or following the closing of the Merger.

6. Goodwill

In June 2001, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 141, “Business Combinations,” andThe Company accounts for goodwill in accordance with SFAS No.142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS No.142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. The Company adopted SFAS Nos. 141 andNo. 142 on January 1, 2002, and, accordingly, ceased amortization of goodwill at that time. The Company evaluates its goodwill for potential impairment in the fourth quarter of each year. As a result of its evaluation in the fourth quarter of 2003, the Company determined there was no impairment. No events have occurred since that assessment date to cause a significant change in the values used for evaluating impairment.

7. Recent Accounting Pronouncements

On March 31, 2004, the FASB issued an Exposure Draft on Share-Based Payments, which is a proposed amendment to FAS 123. The Exposure Draft would require all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The FASB expects to issue a final standard late in 2004 that would be effective for public companies for fiscal years beginning after December 15, 2004. If the exposure draft is issued in final form, the Company will be required to expense the fair value of the stock options granted beginning January 1, 2005 and the fair value of unvested prior grants. The expense for these options will occur over the option vesting period. The Company’s 2003 Form 10-K includes proforma information in Note 1 regarding the impact of expensing stock options on the Company’s net income and earnings per share for prior years.

8. Segment Information

The Company has three reportable segments: the Boyd division (“Boyd”), the Boyd Logistics division (“Logistics”), and the WTI division (“WTI”). Boyd is a flatbed carrier that hauls primarily steel and building products throughout most of the continental United States, and operated an average of 700680 trucks during the first quartersix months of 2004. Boyd averaged 545533 company drivers and 155147 owner-operators during the first quarterhalf of 2004. Logistics brokers freight by identifying external shipping needs and matching available external carrier resources to those needs. This division requires minimal overhead and capital resources and provides a service through logistically coordinating needs for carriers to available carriers and scheduling the service to be provided. All carriers brokered through Logistics are responsible for maintaining proper insurance coverage and are required to provide proof of such coverage prior to brokerage of a load. WTI is a flatbed carrier that hauls steel and roofing products, primarily in the eastern two-thirds of the United States, and operated an average of 215224 trucks during the first quartersix months of 2004. WTI averaged 4042 company drivers and 175182 owner-operators during the first quartersix months of 2004. Unaudited segment reporting information for the periods ended March 31,June 30, 2004 and 2003 is as follows:

9


Results of Operations

                 
Three Months Ended March 31, 2004 Boyd Logistics WTI Total
Operating revenues $25,747,341  $2,828,088  $6,041,961  $34,617,390 
Operating expenses  25,250,908   2,563,627   5,903,537  $33,718,072 
Operating income  496,433   264,461   138,424  $899,318 
Operating ratio  98.1%  90.6%  97.7%  97.4%
     Three Months Ended June 30, 2004
                            
Three Months Ended March 31, 2003 Boyd Logistics WTI Total
 Boyd
 Logistics
 WTI
 Total
Operating revenues $24,311,657  $2,738,900  $5,526,919  $32,577,476  $27,738,887 $2,867,027 $7,290,401 $37,896,315 
Operating expenses  24,009,483   2,593,347   5,636,657   32,239,487  26,661,230 2,622,658 6,773,712 $36,057,600 
Operating income  302,174   145,553   (109,738)  337,989  1,077,657 244,369 516,689 $1,838,715 
Operating ratio  98.8%  94.7%  102.0%  99.0%  96.1%  91.5%  92.9%  95.1%

     Three Months Ended June 30, 2003

                 
  Boyd
 Logistics
 WTI
 Total
Operating revenues $25,359,773  $2,421,732  $6,586,625  $34,368,130 
Operating expenses  24,297,315   2,352,159   6,304,630   32,954,104 
Operating income  1,062,458   69,573   281,995   1,414,026 
Operating ratio  95.8%  97.1%  95.7%  95.9%

     Six Months Ended June 30, 2004

                 
  Boyd
 Logistics
 WTI
 Total
Operating revenues $53,217,730  $5,695,115  $13,332,361  $72,245,206 
Operating expenses  51,643,640   5,186,285   12,684,529   69,514,454 
Operating income  1,574,090   508,830   647,832   2,730,752 
Operating ratio  97.0%  91.1%  95.1%  96.2%

     Six Months Ended June 30, 2003

                 
  Boyd
 Logistics
 WTI
 Total
Operating revenue $49,671,432  $5,160,632  $12,113,544  $66,945,608 
Operating expenses  48,306,799   4,945,506   11,941,286   65,193,591 
Operating income  1,364,633   215,126   172,258   1,752,017 
Operating ratio  97.3%  95.8%  98.6%  97.4%

Identifiable Assets

                 
As of March 31, 2004 Boyd Logistics WTI Total
Cash and bank overdrafts $19,740  $  $13  $19,753 
Property and equipment  47,493,398   277,757   4,299,774   52,070,929 
Goodwill, net     14,300   3,452,446   3,466,746 
Capital expenditures  2,181,005   5,135   53,528   2,239,668 
Total assets  72,471,103   1,483,848   6,635,452   80,590,403 
Long-term debt (including current maturities)  26,361,629      1,435,838   27,797,467 
     As of June 30, 2004
                              
As of December 31, 2003 Boyd Logistics WTI Total
Cash and cash equivalents $116,141  $  $167,333  $283,474 
 Boyd
 Logistics
 WTI
 Total
Cash and bank overdrafts $ $ $19,737 $19,737 
Property and equipment  47,804,787   310,784   4,291,190   52,406,761  46,740,667 369,477 4,531,932 51,642,076 
Goodwill, net  14,300      3,452,446   3,466,746   14,300 3,452,446 3,466,746 
Capital expenditures  13,348,312   90,249   114,526   13,553,087  4,286,958 9,406 61,445 4,357,809 
Total assets  72,230,246   904,813   6,735,025   79,870,084  72,290,250 1,422,357 7,640,896 81,353,503 
Long-term debt (including current maturities)  28,281,728      1,601,973   29,883,701  25,314,461  1,602,736 26,917,197 

     As of December 31, 2003

                 
  Boyd
 Logistics
 WTI
 Total
Cash and cash equivalents $116,141  $  $167,333  $283,474 
Property and equipment  47,804,787   310,784   4,291,190   52,406,761 
Goodwill, net  14,300      3,452,446   3,466,746 
Capital expenditures  13,348,312   90,249   114,526   13,553,087 
Total assets  72,230,246   904,813   6,735,025   79,870,084 
Long-term debt (including current maturities)  28,281,728      1,601,973   29,883,701 

10


9. Merger Agreement

On December 31, 2003, the Company announced that it had entered into an Agreement and Plan of Merger, dated as of December 31, 2003 (the2003. Since that announcement, the Agreement and Plan of Merger has been amended by that certain Amendment No. 1 to Agreement and Plan of Merger dated April 27, 2004, Amendment No. 2 to Agreement and Plan of Merger dated June 30, 2004, and Amendment No. 3 to Agreement and Plan of Merger dated July 9, 2004 (as amended, the “Merger Agreement”), which. The Merger Agreement sets forth the terms and conditions of the proposed acquisitionmerger (the “Merger”) of the Company by BBT Acquisition Corporation, a Delaware corporation (“BBT Acquisition”), with and into the Company. BBT Acquisition is controlled by Dempsey Boyd, the founder and former Chairman and CEO of the Company, his daughter, Gail B. Cooper, the current President and CEO of the Company, his daughter, Ginger B. Tibbs, the current Secretary/Treasurer of the Company, and his wife, Frances S. Boyd.

Under the terms of the Merger Agreement, stockholders of the Company (other than BBT Acquisition and its stockholders) will receive $7.00$9.18 per share, in cash, for each outstanding share of Company Common Stockcommon stock owned by such stockholders. The transaction is structured as a forward merger in which BBT Acquisition will merge with and into the Company, with the Company continuing as the surviving corporation. The boards of directors of each of the Company and BBT Acquisition have unanimously approved the Merger Agreement and the Merger. In the case of the Company’s Board, the approval follows the unanimous recommendation of a special committee of outside directors of the Company that was formed to evaluate and respond to the original proposal of Mr. Boyd and Ms. Cooper.

Completion of the proposed merger between the Company and BBT Acquisition CorporationMerger is conditioned upon, among other things, the availability of sufficient funds for BBT Acquisition Corporation to acquire the outstanding shares of common stock of the Company. BBT Acquisition Corporation anticipates that the merger wouldMerger will be funded from (i) a bank financing interm loan of up to $9.2 million from Dempsey Boyd and (ii) the formbalance of (i) an approximately $13 million revolvingthe funds from the Company’s line of credit and (ii) a $37 million term loan. The merger financing would include a refinancing of allworking capital. A portion of the Company’s outstandingamount committed by Mr. Boyd may be replaced by other term or revolving debt as described above. The Company and BBT Acquisition Corporation are currently involved infrom a third party lender prior to or following the negotiationclosing of a definitive commitment to finance the merger.Merger. As of March 31,June 30, 2004, the Company had a receivable for approximately $400,000$512,000 due from BBT Acquisition Corporation for payment of expenses including, but not limited to, legal fees and valuations associated with the transaction.

The Merger is subject to (i) approval by the holders of a majority of the outstanding shares of the Company’s Common Stockcommon stock which are outstanding as of the August 6, 2004 record date for the special meeting of the Company’s stockholders to be called to consider the Merger, (ii) the completion of the financing arrangements necessary to consummate the Merger, and (iii) certain other closing conditions.

11


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the attached interim consolidated financial statements and with the Company’s 2003 Form 10-K, which included audited financial statements and notes thereto for the fiscal year ended December 31, 2003, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Executive Summary

The Company is one of the largest exclusively flatbed trucking carriers in the United States. The Company provides flatbed transportation services through three divisions:

  Boyd Bros.(“Boyd”) provides longer haul flatbed trucking services in the contiguous United States and some parts of Canada primarily for the steel and construction industries.

  WTI Transport(“WTI”) provides shorter haul flatbed trucking services in the southeastern United States for the steel and construction industries and for an increasingly diverse customer base.

  Boyd Logistics(“Logistics”) provides logistical support to the Boyd and WTI divisions of the Company and brokers freight through the use of other trucking companies.

The Company uses both Company employed drivers and independent owner-operators who are responsible for maintaining and insuring their own equipment. The Company has continued to pursue a strategy of reducing the number of Company employed drivers in favor of independent owner-operators in an effort to reduce costs. As part of this strategy, the Company maintains an owner-operator lease program to attract qualified owner-operators. Despite recent problems encountered with keeping qualified drivers in the lease program, theThe Company believes new policies implemented in the fourth quarter of 2003 will eventually be successfulaid its efforts in recruiting and maintaining qualified owner-operators.

The Company’s greatest cash requirements are recruiting and retaining qualified drivers, acquiring tractors and trailers, and operating its equipment (including driver pay, fuel costs, insurance and maintenance). The Company’s financial results are affected by the availability of qualified drivers and the market for new and used tractors. Because the Company is primarily self-insured for cargo, personal injury and property damage claims on its tractors and for workers’ compensation benefits for its drivers, financial results may also be affected by driver safety, medical costs, the legal and regulatory environment and the costs of insurance coverage to protect against catastrophic losses.

     FirstSecond Quarter and Year to Date Highlights

     • Revenue Growth.The Company’s operating revenues increased by 6.3%10.3%, or approximately $2$3.5 million in the firstsecond quarter of 2004 as compared to the same period in 2003. The increase in total operating revenues was primarily due to increased revenues generated by the Company’s Boyd and WTIall three divisions. Boyd’s operating revenues increased 5.9%approximately $2.4 million or 9.4% over operating revenues from the firstsecond quarter of 2003, and WTI’s operating revenues increased 9.3%approximately $0.7 million or 10.7% and Logistic’s operating revenues increased approximately $0.4 million or 18.4% over the same period last year. In each case, the increase in operating revenues was due to both diversification outside of the steel and building materials industries and increases in revenue per mile. Boyd revenue per mile increased by $0.09$0.13 per mile and WTI revenue per mile increased by $0.11$0.12 per mile, in each case over revenues per mile for the same period in 2003. Logistics’ operating revenues increased 3.3% or $89,188 over the same period last year.

     • Driver Retention.Increases in driver pay and the implementation of a new program for retention of new owner-operators helped to decrease driver turnover. Boyd drivers received pay increases totaling $0.03$0.05 per mile during the first quarterhalf of 2004. Additionally, new owner-operators entering the Boyd lease purchase program with less than one year of previous experience as an owner-operator must work as Company drivers for a periodminimum of four (4) weeks. The program allows drivers to become acclimated to working for Boyd prior to entering the lease purchase program.

12


FirstSecond Quarter Challenges

     • Fuel Costs.The increasing cost of diesel fuel continues to be one of the Company’s most difficult challenges. Fuel expense increased $520,483,$803,181, or 11.3%19%, during the firstsecond quarter of 2004 as compared to the same period in 2003. The Company has been able to partially offset increased fuel prices by recovering fuel surcharges from customers. Fuel surcharge revenue, which is included in operating revenues, increased $437,551$798,267 to $1,429,115,$1,821,558, or 44.1%78.0%, from $991,564$1,023,291 for the quarter ended March 31,June 30, 2003. Competitive conditions in the transportation industry, as well as poor economic conditions in the steel industry, have negatively impacted the Company’s ability to pass through fuel cost increases to its customers.

     • Increased Operating Expenses.Total operating expenses increased $1.5$3.1 million, or 4.6%9.4%, over the same period in 2003. Fuel expense was a large component of this increase, as discussed above, but increases in salaries, wages and employee benefits also contributed to the increase in total operating expenses. Salaries, wages and employee benefits increased 9%18.1% during the firstsecond quarter of 2004 as compared to the same period in 2003. The increase iswas attributable to the Boyd division, both due to the increases in driver pay during the first quarter of 2004 and to an increase of approximately 400,000 miles in the number of miles driven by Company drivers during the quarter compared to the same period last year. Additionally, insurance expense increased due to increases in expenses related to workers compensation claims.

Recent Developments

On December 31, 2003, the Company announced that it had entered into an Agreement and Plan of Merger, whichdated as of December 31, 2003. Since that announcement, the Agreement and Plan of Merger has been amended by that certain Amendment No. 1 to Agreement and Plan of Merger dated April 27, 2004, Amendment No. 2 to Agreement and Plan of Merger dated June 30, 2004, and Amendment No. 3 to Agreement and Plan of Merger dated July 9, 2004 (as amended, the “Merger Agreement”). The Merger Agreement sets forth the terms and conditions of the proposed acquisitionmerger (the “Merger”) of the Company by BBT Acquisition Corporation, a Delaware corporation (“BBT Acquisition”)., with and into the Company. BBT Acquisition is controlled by Dempsey Boyd, the founder and former Chairman and CEO of the Company, his daughter, Gail B. Cooper, the current President and Chief Executive OfficerCEO of the Company, Frances S. Boyd andhis daughter, Ginger B. Tibbs, and together they hold approximately 72%the current Secretary/Treasurer of the Company’s outstanding common stock. The Agreement and Plan of Merger provides for the merger of BBT Acquisition into the Company, and results in each stockholderhis wife, Frances S. Boyd.

Under the terms of the Merger Agreement, stockholders of the Company (other than BBT Acquisition and its stockholders) receiving $7.00will receive $9.18 per share, in cash, for each outstanding share of Company common stock owned at the time of the merger.

On May 5, 2004,by such stockholders. The transaction is structured as a forward merger in which BBT Acquisition will merge with and into the Company, announced that it had entered into an amendmentwith the Company continuing as the surviving corporation. The Merger is subject to the merger agreement with BBT Acquisition extending its termination date until June 30, 2004, from April 30, 2004. The Company also announced that a commitment for financing for the merger had been entered into(i) approval by the parties, subject to certain closing conditions. The transaction remains subject to the completionholders of financing arrangements, approval by a majority of the outstanding shares of the Company’s common stock which are outstanding as of the August 6, 2004 record date for the special meeting of the Company’s stockholders called to consider the Merger, (ii) the completion of the financing arrangements necessary to consummate the Merger, and (iii) certain other customary closing conditions.

13


Quarterly Review:

The following tables set forth, by segment, the percentage relationship of expense items to operating revenues and certain other operating statistics for the periods indicated:

                                                                
 Company
 Boyd
 Logistics
 WTI
 Company
 Boyd
 Logistics
 WTI
 Quarter Ended March 31,
 Quarter Ended June 30,
 2004
 2003
 2004
 2003
 2004
 2003
 2004
 2003
 2004
 2003
 2004
 2003
 2004
 2003
 2004
 2003
Operating revenues  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%
Operating expenses  
Salaries, wages, and employee benefits 29.3 28.5 35.4 34.4 7.8 7.4 12.9 13.0  30.0 28.5 37.0 34.4 8.3 8.9 11.9 12.8 
Cost of independent contractors 30.5 32.4 17.9 20.2 78.0 81.2 62.0 61.5  29.0 31.8 15.8 19.0 78.1 83.3 59.9 62.1 
Fuel 14.8 14.1 18.6 17.7 0.0 0.0 5.3 5.2  13.2 12.2 16.5 15.3 0.1 0.4 5.5 4.4 
Operating supplies 8.0 7.2 9.5 8.3 2.4 2.6 4.7 4.4  7.8 7.8 9.0 9.3 2.2 1.9 5.4 4.4 
Operating taxes and licenses 1.8 1.8 1.9 2.1 0.0 0.0 2.0 1.6  1.7 1.9 1.8 2.1 0.0 0.0 1.6 1.8 
Insurance and claims 3.1 3.9 3.6 3.7 0.8 0.0 2.4 6.8  4.4 3.2 5.3 3.8 0.7 0.2 2.2 2.3 
Communications and utilities 0.8 1.0 0.8 1.1 0.6 1.2 0.7 0.8  0.7 1.0 0.9 1.1 0.6 1.4 0.5 0.6 
Depreciation and amortization 7.7 8.4 9.3 10.1 0.8 0.3 4.1 4.1  7.0 8.6 8.6 10.7 0.8 0.3 3.2 3.4 
Gain on disposition of property and equipment, net 0.0  (0.0) 0.0  (0.0) 0.0 0.0 0.0 0.0   (0.1)  (0.6)  (0.1)  (0.8)  (0.0)  (0.0) 0.0 0.1 
Other 1.4 1.7 1.1 1.1 0.2 2.0 3.6 4.6  1.4 1.5 1.3 0.9 0.7 0.7 2.7 3.8 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total operating expenses 97.4 99.0 98.1 98.7 90.6 94.7 97.7 102.0  95.1 95.9 96.1 95.8 91.5 97.1 92.9 95.7 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating (loss) income 2.6 1.0 1.9 1.3 9.4 5.3 2.3  (2.0)
Operating income 4.9 4.1 3.9 4.2 8.5 2.9 7.1 4.3 
Interest expense, net  (0.7)  (1.0)  (1.1)  (1.5) 0.0  (0.0) 0.8 0.5   (0.7)  (0.9)  (1.0)  (1.3)  (0.0) 0.0 0.2 0.2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Loss) income before income taxes 1.9 0.0 0.8  (0.2) 9.4 5.3 3.1  (1.5)
Income before income taxes 4.2 3.2 2.9 2.9 8.5 2.9 7.3 4.5 
Income taxes 0.8 0.0 0.7 0.1 0.0 0.0 1.4  (0.5) 1.7 1.3 1.5 1.3 0.0 0.0 3.0 1.9 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income  1.1%  0.0%  0.1%  (0.3)%  9.4%  5.3%  1.7%  (1.0)%
Net income  2.5%  1.9%  1.4%  1.6%  8.5%  2.9%  4.3%  2.6%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                        
 Company
 Boyd
 WTI
 Company
 Boyd
 WTI
 Average Tractor Counts For the Quarter Ended March 31,
 Average counts for the quarter ended June 30,
 2004
 2003
 2004
 2003
 2004
 2003
 2004
 2003
 2004
 2003
 2004
 2003
Company operated tractors 585 575 545 540 40 35  581 552 539 518 42 34 
Owner-operated tractors 330 337 155 160 175 177  308 357 140 176 168 181 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
Total tractors 915 912 700 700 215 212  889 909 679 694 210 215 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
Company operated tractor %  64%  63%  78%  77%  19%  17%  65%  61%  79%  75%  20%  16%
Owner-operated tractor %  36%  37%  22%  23%  81%  83%  35%  39%  21%  25%  80%  84%
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
Total %  100%  100%  100%  100%  100%  100%  100%  100%  100%  100%  100%  100%
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 

Quarterly Results of Operations

The Company’s total operating revenues increased $2,039,914$3,528,185 or 6.3%10.3% to $34,617,390$37,896,315 for the quarter ended March 31,June 30, 2004, compared with $32,577,476$34,368,130 for the same period in 2003. This change reflected an increase of $1,435,684$2,379,114 or 5.9%9.4% in the Boyd division, an increase of $89,188$445,295 or 3.26%18.4% in the Logistics division and an increase of $515,042$703,776 or 9.3%10.7% in the WTI division. These changes are reflective of diversification outside of the steel and building materials industries and also reflective of an increase in revenue resulting from increased rates charged to customers. Revenue per mile increased by approximately $0.09$0.13 per mile for Boyd and approximately $0.11$0.12 per mile for WTI. Included in revenues are fuel surcharges in the amount of $1,429,115$1,821,558 and $991,564$1,023,291 for the quarter ended March 31,June 30, 2004 and 2003, respectively. Average revenue per total mile for the firstsecond quarter of 2004 was $1.30$1.48 while average revenue per total mile was $1.20$1.34 for the same period in 2003.

Total operating expenses increased $1,478,585$3,103,496 or 4.6%9.4% to $33,718,072$36,057,600 for the firstsecond quarter ended March 31,June 30, 2004, compared to $32,239,487$32,954,104 for the same period last year. Of this dollar increase, $2,363,915 was attributable the Boyd division while the WTI division accounted for $469,082. The Logistics division accounted for an increase of $270,499 in total operating expenses. As a percentage of revenues, total operating expenses decreased from 99.0%95.9% in 2003 to 97.4%95.1% in 2004. Of this increase in total operating expenses, $1,241,425 was attributable the Boyd division

14


and the WTI division accounted for $266,880. The Logistics division accounted for a decrease of $29,720. As discussed below, the net increase in operating expenses is primarily a result of increases in salaries, wages, and employee benefits, fuel expense, and operating supplies expense, insurance expense, and decreased gains on disposition of property and equipment offset by decreases in depreciation expense.

14


Owner-operators are responsible for payment of the expenses they incur including fuel, operating supplies, and taxes and licenses, while the Company incurs these expenses related to Company drivers. Consequently, the amount paid per mile (shown as salaries and wages for Company drivers and within cost of independent contractors for owner-operators) for owner-operators is greater than that of Company drivers.

As a percentage of revenues, salaries, wages and employee benefits increased to 30% during the second quarter of 2004 compared to 28.5% of revenue in the same period in 2003. This increase is attributable primarily to the Boyd division resulting from pay increases to drivers. Boyd increased Company driver pay by a total of $0.05 per mile during the first half of 2004. Increases were given in $0.01 increments per month during each of the first three months of the year, and $0.01 each in May and June. Additionally, Company drivers drove approximately 400,000 more miles during the second quarter of 2004 compared to the second quarter of 2003.

Included in cost of independent contractors are costs for which owner-operators are responsible, costs incurred/earned by the Company related to the lease purchase of tractors to owner-operators, and costs related to the Logistics division. Cost of independent contractors for the Company increased $52,598, or 0.5%, for the quarter ended June 30, 2004 compared to the same period last year. The Boyd division accounted for a decrease of $446,066. This decrease was primarily a result of a decrease in the amounts paid to owner-operators due to fewer miles driven. Though owner-operators received the same pay per mile increases as described above for Company drivers (a total of $0.05 in increments of $0.01), owner-operators drove approximately 578,000 fewer total miles in the three months ended June 30, 2004 compared to the same period in 2003. During the fourth quarter of 2003, the Boyd division implemented a new program whereby new owner-operators entering the lease purchase program with less than one year of previous experience as a successful owner-operator are required to be a Company driver for a minimum of four weeks prior to becoming a Boyd owner-operator. This program has helped to decrease driver turnover and enabled owner-operators to become more profitable by allowing owner-operators to become familiar with the Company and its operations. The Logistics division accounted for an increase of $228,583 of the total net increase in cost of independent contractors. This increase was directly related to Logistics increase in revenue. The WTI division accounted for $276,079 of the increase in cost of independent contractors. The increase of costs contributed by WTI was a direct result of WTI’s 2.1% increase in operating revenue, as discussed above.

Fuel expense, also associated with Company drivers and included in the line item “Operating supplies” in the consolidated statement of income, increased $803,181 or 19.2% from 2003. The significant portion of the increase, $693,530, was recognized by the Boyd division because the Boyd division has a larger percentage of Company drivers. The Company generally has been able to partially offset significant increases in fuel costs through increased rates and through a fuel surcharge that increases incrementally as the price of fuel increases. Total miles driven by Company drivers increased by approximately 400,000 miles for the second quarter of 2004 compared to the same period in 2003.

Insurance and claims increased to 4.4% of revenues in the second quarter of 2004, compared to 3.2% of revenues during the second quarter of 2003. The Company reserved an additional $400,000 during the second quarter of 2004 related to increases in workers compensation claims and an increase in reserves related to one accident during the second quarter of 2004 which resulted in serious injury to a third party. During the second quarter of 2004, the Company was not involved in any accidents involving fatalities. See “Insurance and Liability Claims” for further information regarding the Company’s insurance program and claims exposure.

Other operating supplies included with fuel within the item “Operating Supplies” increased $260,897 during the second quarter of 2004. The increase was primarily due to less income generated from repairs performed by Boyd personnel and charged to owner-operators. The repairs Boyd makes to owner-operator equipment is charged to the owner-operator and reduces the expense recognized for repairs. With approximately 578,000 fewer miles driven by owner-operators, fewer repairs were required on these vehicles. Also, repair costs were higher in the second quarter of 2004 due to increased miles driven on Company owned vehicles.

Depreciation expense decreased by $296,058 for the quarter ended June 30, 2004, as compared to the same period in 2003. This decrease was primarily due to the decrease in total fleet size.

Gain on disposition of property and equipment decreased due to fewer equipment trades during the second quarter of 2004 compared to the same period in 2003.

15


Provisions for income tax for the quarter ended June 30, 2004 resulted in a provision of $411,303 and an effective tax rate of 40.3%. The effective tax rate was higher than the U.S. federal statutory rate primarily due to state income taxes and the non-deductibility of certain expenses for tax purposes.

Year to Date Review:

The following tables set forth, by segment, the percentage relationship of expense items to operating revenues and certain other operating statistics for the periods indicated

                                 
  Company
 Boyd
 Logistics
 WTI
  Year to Date Ended June 30,
  2004
 2003
 2004
 2003
 2004
 2003
 2004
 2003
Operating revenues  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%
Operating expenses                                
Salaries, wages, and employee benefits  29.8   28.5   36.4   34.4   8.0   8.1   12.4   12.9 
Cost of independent contractors  29.8   32.1   16.9   19.6   78.1   82.2   60.9   61.9 
Fuel  13.6   13.1   17.1   16.5   0.1   0.3   5.4   4.8 
Operating supplies  8.0   7.5   9.3   8.8   2.3   2.2   5.1   4.4 
Operating taxes and licenses  1.7   1.9   1.9   2.1   0.0   0.0   1.8   1.7 
Insurance and claims  3.8   3.7   4.5   3.9   0.8   0.0   2.3   4.3 
Communications and utilities  0.8   1.0   0.9   1.1   0.6   1.3   0.6   0.7 
Depreciation and amortization  7.4   8.4   9.0   10.3   0.8   0.3   3.6   3.8 
Gain on disposition of property and equipment, net  0.0   (0.3)  0.0   (0.4)  (0.0)  (0.0)  0.0   0.0 
Other  1.4   1.5   1.0   1.0   0.4   1.4   3.0   4.1 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total operating expenses  96.3   97.4   97.3   97.3   91.1   95.8   95.1   98.6 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Operating income  3.7   2.6   3.0   2.7   8.9   4.2   4.9   1.4 
Interest expense, net  (0.7)  (1.0)  (1.1)  (1.4)  (0.0)  0.0   0.5   0.3 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Income before income taxes  3.0   1.6   1.9   1.3   8.9   4.2   5.4   1.7 
Income taxes  1.2   0.6   1.1   0.7   0.0   0.0   2.3   0.8 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Net income  1.8%  1.0%  0.8%  0.6%  8.9%  4.2%  3.1%  0.9%
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
                         
  Company
 Boyd
 WTI
  Average counts for the six months ended June 30,
  2004
 2003
 2004
 2003
 2004
 2003
Company operated tractors  575   545   533   511   42   34 
Owner-operated tractors  329   356   147   176   182   180 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total tractors  904   901   680   687   224   214 
   
 
   
 
   
 
   
 
   
 
   
 
 
Company operated tractor %  64%  60%  78%  74%  19%  16%
Owner-operated tractor %  36%  40%  22%  26%  81%  84%
   
 
   
 
   
 
   
 
   
 
   
 
 
Total %  100%  100%  100%  100%  100%  100%
   
 
   
 
   
 
   
 
   
 
   
 
 

Year to Date Results of Operations

The Company’s total operating revenues increased $5,299,598 or 7.9% to $72,245,206 for the six months ended June 30, 2004, compared with $66,945,608 for the same period in 2003. This change reflected an increase of $3,546,298 or 7.1% in the Boyd division, an increase of $534,483 or 10.4% in the Logistics division and an increase of $1,218,817 or 10.1% in the WTI division. These changes are reflective of diversification outside of the steel and building materials industries and also are reflective of an increase in revenue resulting from increased rates charged to customers. Revenue per mile increased by approximately $0.10 per mile for Boyd and WTI. Included in revenues are fuel surcharges in the amount of $2,982,175 and $2,014,855 for the six months ended June 30, 2004 and 2003, respectively. Average revenue per total mile for the first half of 2004 was $1.44 while average revenue per total mile was $1.33 for the same period in 2003.

Total operating expenses increased $4,320,863 or 6.6% to $69,514,454 for the six months ended June 30, 2004, compared to $65,193,591 for the same period last year. Of this increase, $3,336,841 was attributable the Boyd division and the WTI division accounted for $743,243. The Logistics division accounted for an increase of $240,779 in total operating expenses. As a percentage of revenues, total operating expenses decreased from 97.4% in 2003 to

16


96.2% in 2004. As discussed below, the net increase in operating expenses is primarily a result of increases in salaries, wages, and employee benefits, fuel expense, operating supplies expense, and insurance expense combined with decreases in insurancedepreciation expense and claimsdecreased gains on disposition of property and equipment expense.

Owner-operators are responsible for payment of the expenses they incur including fuel, operating supplies, and taxes and licenses, while the Company incurs these expenses related to Company drivers. Consequently, the amount paid per mile (shown as salaries and wages for Company drivers and within cost of independent contractors for owner-operators) for owner-operators is greater than that of Company drivers.

As a percentage of revenues, salaries, wages and employee benefits increased 9.0%to 29.8% during the first quartersix months of 2004 compared to 28.5% of revenue in the same period in 2003. This increase is attributable primarily to the Boyd division resulting from pay increases to drivers. Boyd increased Company driver pay by a total of $0.03$0.05 per mile during the first quarterhalf of 2004. Increases were given in $0.01 increments per month during each of the first three months of the year.year, and an additional $0.01 each in May and June. Additionally, Company drivers drove approximately 400,000720,000 more miles during the first quartersix months of 2004 compared to the first quartersix months of 2003.

Included in cost of independent contractors are costs for which owner-operators are responsible, costs incurred/earned by the Company related to the lease purchase of tractors to owner-operators, and costs related to the Logistics division. Cost of independent contractors for the Company increased $9,640,$62,240, or 0.1%0.3%, for the quartersix months ended March 31,June 30, 2004 compared to the same period last year. The Boyd division accounted for a decrease of $298,538.$764,984. This decrease was primarily a result of a decrease in the amounts paid to owner-operators.owner-operators due to fewer miles driven. Though owner-operators received the same pay per mile increases as described above for Company drivers (a total of $0.03$0.05 in increments of $0.01 per month)$0.01), owner-operators drove approximately 420,0001.1 million fewer total miles in the first threesix months ofended June 30, 2004 compared to the same period in 2003. During the forthfourth quarter of 2003, the Boyd division implemented a new program whereby new owner-operators entering the lease purchase program with less than one year of previous experience as a successful owner-operator must becomeare required to be a Company driver for a minimum of four weeks prior to becoming a Boyd owner-operator. This program has helped to decrease driver turnover and enabled owner-operators to become more profitable. The Logistics division accounted for a slight decreasean increase of $17,241$205,344 of the total net increase in cost of independent contractors. This increase was directly related to Logistics increase in revenue. The WTI division accounted for $345,801an increase of the increase$621,880 in cost of independent contractors. The increase of costs contributed by WTI was a direct result of the WTI contribution of increasedWTI’s 10.1% increase in operating revenue, of 9.3%, as discussed above.

Fuel expense, also associated with Company drivers and included in the line item “Operating supplies” in the consolidated statement of income, increased $520,483$1,055,168, or 11.3%12.0%, from 2003. The significant portion of the increase, $488,294,$913,329, was recognized by the Boyd division because the Boyd division has a larger percentage of Company drivers. The Company generally has been able to partially offset significant increases in fuel costs through increased rates and through a fuel surcharge that increases incrementally as the price of fuel increases. Total miles driven by Company drivers increased by approximately 400,000720,000 miles for the first quartersix months of 2004 compared to the same period in 2003.

Insurance and claims decreasedincreased to 3.1%3.8% of revenues in the first quarterhalf of 2004, compared to 3.9%3.7% of revenues during the first quarterhalf of 2003. The Company reserved approximately $250,000an additional $400,000 during the firstsecond quarter of 20032004 related to increases in workers compensation claims and an increase in reserves related to one accident involving a fatality during the quarter.second quarter of 2004 which resulted in serious injury to a third party. During the first quarterhalf of 2004, the Company was not involved in any accidents involving fatalities. See “Insurance and Liability Claims” for further information regarding the Company’s insurance program and claims exposure.

Other operating supplies included with fuel within the item “Operating Supplies” increased $450,899$711,792 over the first quarterhalf of 2004 as compared to the first half of 2003. The increase was primarily due to less income generated from repairs doneperformed by Boyd personnel and charged to owner-operators. The repairs Boyd makes to owner-operator equipment is charged to the owner-operator and reduces the expense recognized for repairs. With approximately 420,0001.1 million fewer miles driven by owner-operators, fewer repairs were required on these vehicles. Also, repair costs were higher in the first quarterhalf of 2004, compared to 2003, due to increased miles driven on Company owned vehicles.

15Depreciation expense decreased by $280,713 for the six months ended June 30, 2004, as compared to the same period in 2003. This decrease was primarily due to the decrease in total fleet size.

17


Gain on disposition of property and equipment decreased due to fewer equipment trades during the first half of 2004 compared to the same period in 2003.

Provisions for income tax for the quartersix months ended March 31,June 30, 2004 resulted in a provision of $263,666$894,552 and an effective tax rate of 40.7%40.6%. The effective tax rate was higher than the U.S. federal statutory rate primarily due to state income taxes and the non-deductibility of certain expenses for tax purposes.

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, and the payment of current debt maturities. Historically, the Company’s primary sources of cash have been continuing operations, bank borrowings and dealer financings.

Cash Flows from Operating Activities

Cash flowflows from operations provided $1.8$5.5 million for the first quartersix months of 2004 and $2.8compared to $5.4 million for the first quartersix months of 2003. Net income adjusted for non-cash income and expense items provided cash of $2.8$5.9 million and $2.5$5.8 million for the first quarter of 2004 and 2003 year-to-date periods, respectively. Non-cash income and expense items include depreciation and amortization, provisions for bad debt losses, losses on disposals of property and equipment, income related to owner-operator sales-type leases, and deferred income taxes. Working capital items used cash of $1.0 million in the first quarter of 2004 and provided $0.4 million in the first quarterhalf of 2004 and 2003.

The increase in net income adjusted for non-cash items from 2003 to 2004 of $0.3$0.1 million was due primarily to increased net income and increased net gains on sales type leases with independent contractors during 2004.

The increase in working capital items used in cash flows of $1.4 million in the first quarter of 2004 was a result of increasesIncreases in accounts receivable due toduring the first half of 2004 resulted from increased revenue. The Company lengthened its payment cycle for accounts payable, which increased trade and interline payables in the amount of $1.2 million since December 31, 2003. Additionally, accrualsAccruals for salaries payable increased approximately $0.5$0.6 million since December 31, 2003, due to increases in driver pay rates during the first quarterhalf of 2004. Self-insurance claims increased approximately $1.0 million due primarily to increases in workers compensation claims accruals and one accident in the first six months that involved serious injury to a third party.

Cash Flows from Investing Activities

The growth of the Company’s business and maintenance of its modern fleet has required significant investments in new tractors and trailers, which has been financed largely through long-term debt. Historically, the Company financed its major capital equipment purchases consisting primarily of revenue equipment and, to a lesser extent, construction of terminals, through bank financings. Dealer financed purchases in the first quarterhalf of 2004 amounted to $1.6$3.3 million, while no dealer-financed purchases were made during the first quarterhalf of 2003.

The Company invested $0.7$1.1 million and $0.8$4.7 million for revenue equipment and other property and equipment during the first quarterhalf of 2004 and 2003, respectively. The 2004 amount excludes $3.3 million of dealer -financed purchases of revenue equipment, which are recognized as non-cash investing activities. Total investment for equipment and other property, which includes capital expenditures and dealer-financed purchases, remained stable year over year. The proceeds from property dispositions exclude revenue equipment traded on new equipment.

Cash Flows from Financing Activities

During the first quarterhalf of 2004, the Company paid $3.6$6.5 million towards the reduction of its long-term debt. At March 31,June 30, 2004, the Company had debt (including current maturities) of $27.8$26.9 million. In the first quarterhalf of 2004, new debt of approximately $1.6$3.3 was incurred through dealer-financed purchases for revenue equipment. During the first quarterhalf of 2003, $0.4$4.0 million of new debt was incurred to purchase equipment.

The Company drewpaid approximately $1.0$0.2 million, net, fromon its line of credit during the firstsecond quarter of 2004. Proceeds were used primarily to support operations.

The Company has entered into a commitment letter with a third party lenderDempsey Boyd dated August 4, 2004, pursuant to which the lenderMr. Boyd has committed, subject to satisfactory completionthe absence of due diligenceany material adverse change in the financial condition of the Company and various other closing conditions, to provide up to $9.2 million of the financing necessary to complete the Company’s going private transaction. This financingMerger. The term loan will also replace allbear interest at a fixed rate of the Company’s current outstanding financing,5.5% per annum, and will consist of (i)have a revolving line of credit facility of approximately $13 million, and (ii) a term loan in36-month term. Mr. Boyd has the amount of $37 million. The Company will grant a first priority security interest in substantially all of the Company’s assets. Each of the revolving credit facility andoption to secure the term loan will require thewith available Company assets, but Mr. Boyd has agreed to comply with affirmative, negative and financial covenants customarily found in creditsubordinate

1618


agreementsthe repayment of this type, including restrictions on the Company’s abilityterm loan to incur additional indebtedness, restrictions on asset sales, restrictions on change in controlthe loans of other Company creditors who require subordination and limitations on capital expenditureswhose consent is required to proceed forward with the Merger and dividend payments.the term loan. A portion of the amount committed by Mr. Boyd may be replaced by other term or revolving debt from a third party lender prior to or following the closing of the Merger.

The Company anticipates generating sufficient cash from operations in 2004 to cover planned capital expenditures and servicing current maturities of long-term debt. AsThrough the first six months of March 31, 2004, the Company purchased twenty-fiveseventy-five new tractors, offset by the same number of trade-ins. Historically, the Company has relied on cash generated from operations to fund its working capital requirements. Over the long term, the Company will continue to have significant capital needs that may require it to seek additional borrowings or equity capital. The availability of debt financing or equity capital will depend on prevailing market conditions, the market price of its common stock, and other factors over which the Company has no control, as well as the Company’s financial condition and results of operations.

Factors That May Affect Future Results

The Company’s future results may be affected by a number of factors over which the Company has little or no control. Fuel prices, insurance and claims costs, liability claims, interest rates, the availability of qualified drivers, fluctuations in the resale value of revenue equipment, economic and customer business cycles, and shipping demands are economic factors over which the Company has little or no control. Significant increases or rapid fluctuations in fuel prices, interest rates, insurance costs or liability claims, to the extent not offset by increases in freight rates, and the resale value of revenue equipment could result in Company losses. Weakness in the general economy, including a weakness in consumer demand for goods and services, could adversely affect customers and result in customers reducing their demand for transportation services, which, in turn, could adversely affect the Company’s growth and revenues. Weakness in customer demand for the Company’s services or in the general rate environment also may restrain the Company’s ability to increase rates or obtain fuel surcharges.

The following issues and uncertainties, along with the other issues and uncertainties discussed in this report and the Company’s 2003 Form
10-K, should be considered in evaluating the Company’s outlook:

Fuel Price Trend

Many of the Company’s operating expenses, including fuel costs and fuel taxes, are sensitive to the effects of inflation, which could result in higher operating costs. Throughout the first quarterhalf of 2004, the Company experienced fluctuations in fuel costs as a result of conditions in the petroleum industry. Increases in fuel costs may affect operating income, unless the Company is able to pass those increased costs to customers through rate increases and fuel surcharges.

The Company has initiated a program to obtain rate increases and fuel surcharges from customers in order to cover increased costs due to these increases in fuel prices, driver compensation, and other expenses and has been successful in implementing some fuel surcharges and certain rate increases. Competitive conditions in the transportation industry, including lower demand for transportation services, could limit the Company’s ability to obtain rate increases or fuel surcharges in the future. As of March 31,June 30, 2004, the Company had no derivative financial instruments to reduce its exposure to fuel price fluctuations. The Company also has periodically experienced some wage increases for drivers. Increases in driver compensation may affect operating income, unless the Company is able to pass those increased costs to customers through rate increases and fuel surcharges.increases.

Fuel shortages or increases in fuel taxes or fuel costs have adversely affected, and may in the future adversely affect, the financial condition and results of operations of the Company. Fuel prices have fluctuated greatly, and fuel taxes have generally increased in recent years. The Company has not experienced difficulty in maintaining necessary fuel supplies and, in the past, the Company generally has been able to partially offset significant increases in fuel costs and fuel taxes through increased freight rates and through a fuel surcharge which increases incrementally as the price of fuel increases. However, there can be no assurance that the Company will be able to recover any future increases in fuel costs and fuel taxes through increased rates. If fuel prices continue to increase or are sustained at these higher levels for a continuing period of time, the higher fuel costs may have a materially adverse effect on the financial condition and business operations of the Company. Additionally, the increased fuel costs may continue to have a materially adverse effect on the Company’s efforts to attract and retain owner-operators, expand its pool of available trucks, and diversify its operations.

1719


Insurance and Liability Claims

The Company’s future insurance and claims expenses could exceed historical levels, which could have a material adverse effect on the financial condition of the Company. Effective July 1, 2004, the Company obtained new insurance coverage from two carriers. Under the first policy, the Company is insured for claims of personal injury and property damage combined up to $1 million per occurrence, with a $500,000 deductible. The second policy provides an additional $1 million in coverage over the first policy, but the Company is responsible for the first $1 million in claims that exceed the coverage limits of the first policy. The Company currently self-insurespreviously self-insured for a portion of the claims exposure resulting from cargo loss, personal injury, and property damage, combined up to $750,000 per occurrence. In addition, the Company will shareshared costs above the $750,000 self-insured amount at a rate of thirty three percent, up to the Company’s coverage amount of two million dollars. Costs and claims in excess of the Company’s coverage amount of two million dollars will be borne solely by the Company. The Company’s workers’ compensation self-insurance level is a maximum of $500,000, and the health insurance self-insurance level is $175,000 per person per year. If the number or dollar amount of claims for which the Company is self-insured increases, the financial condition of the Company could be adversely affected.

A Company driver was involved in an accident in the first quarter of 2002 that resulted in a third party fatality. Company drivers were also involved in five accidents resulting in fatalities during 2003, one of which involved personal injury to three individuals. During the first quarter of 2002, the self-insured amount for cargo loss, personal injury and property damage, combined was $500,000 per occurrence, which would be the amount applicable to the accident during the first quarter of 2002. The self-insured amount for the two accidents in the first half of 2003 was $750,000, with the Company also responsible for its shared amount of 50% of any amounts between $750,000 and the $2 million insurance coverage and all amounts in excess of the insured amount. The Company was involved in three accidents involving fatalities during the third quarter of 2003. During the second quarter of 2004, the company was involved in an accident, which involved serious injury to a third party. The self-insured amount relating to these accidents is $750,000, with the Company also responsible for its shared amount of 33% of any amounts in excess of $750,000 up to the $2 million insurance coverage and all amounts in excess of the insured amount.

Each of these accidents, taken separately, has the potential to cause the Company to reach its total per occurrence retention amount for insurance purposes. To date, five lawsuits have been filed against the Company with respect to the fatalities arising from these accidents. If the Company is ultimately found to have some liability for one or more of these accidents, the Company would seek to pay or structure payments of the amount due from its operating cash flows and, if needed, additional bank financing. Although the Company does not expect this to occur, it is possible that liability resulting from these accidents could exceed the Company’s operating cash flows and available financing. Therefore, there can be no assurance that the Company’s operations and financial condition would not be materially affected if the Company were found to have liability for one or more of these accidents. If insurance expenses continue to increase, and the Company is unable to offset the increase with higher freight rates, the Company’s operations and financial condition could be adversely affected. The Company has provided for its best estimate of losses on these claims at March 31,June 30, 2004 in the accompanying unaudited consolidated balance sheet.

Revenue Equipment

The Company’s growth has been made possible through the addition of new revenue equipment. Difficulty in financing or obtaining new revenue equipment (for example, delivery delays from manufacturers or the unavailability of independent contractors) could have an adverse effect on the Company’s operations and financial condition.

In the past, the Company has acquired new tractors and trailers at favorable prices and has entered into agreements with the manufacturers to repurchase the tractors from the Company at agreed prices. Current developments in the secondary tractor and trailer resale market have resulted in a large supply of used tractors and trailers on the market. This has depressed the market value of used equipment to levels significantly below the prices at which the manufacturers have agreed to repurchase the equipment. Accordingly, some manufacturers may refuse or be financially unable to keep their commitments to repurchase equipment according to their repurchase agreement terms.

Critical Accounting Policies

The methods, estimates and judgments the Company’s management uses in applying Company accounting policies may have a significant effect on the results the Company reports in its financial statements. The estimates and judgments in applying those accounting policies which may have the most significant effect on the Company’s financial statements and operating results include: allowance for doubtful accounts for tractors leased to owner-owner-operators; determinations of

1820


operators; determinations of impairment of long-lived assets; estimates of accrued liabilities for insurance claims for liability and both physical and property damage and workers’ compensation; estimates of useful lives and salvage values for the depreciation of tractors and trailers; allowance for doubtful accounts receivable; and evaluation of impairment of goodwill. Our review of these accounting items and the resulting accounting positions taken by the Company are based upon certain assumptions and conditions and reflect our management’s best assumptions and estimates; however, estimates of these types of accounting items, particularly impairment and accrued liabilities, involve inherent uncertainties as described above, that are beyond management’s control. As a result, the accounting for such items could result in different amounts if management uses different assumptions or if different conditions occur in future periods. Please refer to “Management’s Discussion and Analysis of Financial Condition — Critical Accounting Policies” in the Company’s Form 10-K for the year ended December 31, 2003 for a more complete description of the Company’s critical accounting policies.

Forward-looking Statements

With the exception of historical information, the matters discussed and statements made in this report constitute forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Specifically, this report contains forward-looking statements regarding the Company’s marketing efforts and initiative to broaden its customer base; the Company’s emphasis on safety and efforts to reduce insurance claims and costs; the Company’s belief that the availability of credit under its line of credit, together with internally generated cash, will be adequate to finance its operations through fiscal year 2004 and will also be adequate to cover any liability with respect to the accidents that occurred during 2002 and 2003; expectations regarding the freight business and the economy; and results in future quarters and for the year. Whenever possible, the Company has identified these forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934) by words such as “anticipates,” “may,” “believes,” “estimates,” “projects,” “expects,” “intends,” and words of similar import. Forward-looking statements contained in this report involve certain assumptions, risks and uncertainties that could cause actual results to differ materially from those included in or contemplated by the statements. In particular, there can be no assurance that the Company’s marketing efforts and initiatives to broaden its customer base will be successful; that the Company’s emphasis on safety and efforts to reduce insurance claims and costs will be successful; that business conditions and the economy will improve, including the transportation and construction sectors in particular; that costs associated with increased insurance and claims costs, and liability claims for which the Company is self-insured will not have a material adverse effect on the Company; that the Company will be able to recruit and retain qualified drivers; that the Company will be able to control internal costs, particularly rising fuel costs that may or may not be passed on to the Company’s customers; that departures and defaults by owner-operators will not have a material adverse affecteffect on the Company; that the cost of complying with governmental regulations that are applicable to the Company will not have a material adverse affecteffect on the Company; that the financing for the proposed going private transaction and continuing operations following the closing of the transaction provided for in the financing commitment will be consummated; or that the proposed merger of BBT Acquisition Corporation with and into the Company will be successfully completed. These assumptions, risks and uncertainties include, but are not limited to, those discussed or indicated in all documents filed by the Company with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. The Company expressly disclaims any obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

1921


Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The Company is exposed to interest rate risk due to its long-term debt, which at March 31,June 30, 2004 bore interest at rates ranging from 1.25% to 2.85% above the applicable bank’s LIBOR rate. Under the provisions of SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”, the Company has estimated that 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 one percent increase in interest rates would decrease pre-tax income by approximately $261,000.$269,000. Management believes that current working capital funds are sufficient to offset any adverse effects caused by changes in these interest rates.

Commodity Price Risk

The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, and other market factors. The geopolitical situation in the Middle East caused oil prices to rise dramatically in the first quarter of 2003.2003, which has continued through the first six months of 2004. Historically, the Company has been able to recover a majority of fuel price increases from customers in the form of fuel surcharges. The Company cannot predict the extent to which high fuel price levels will continue in the future or the extent to which fuel surcharges could be collected to offset such increases. As of March 31,June 30, 2004, the Company had no derivative financial instruments to reduce its exposure to fuel price fluctuations. The Company will consider possible opportunities to hedge fuel costs in the future.

Item 4. Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on such evaluation, such officers have concluded that, as of March 31,(a)Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on such evaluation, such officers have concluded that, as of June 30, 2004, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to our Company (including our consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.
(b)Changes in Internal Controls. During the period covered by this quarterly report, there have not been any significant changes in our internal controls that have materially affected or are reasonably likely to materially affect, our internal controls over financial reporting.

20(b)Changes in Internal Controls. During the period covered by this quarterly report, there have not been any significant changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

22


PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Reference is made to the legal proceedings previously reported in the Company’s Form 10-K for the fiscal year ended December 31, 2003, under the heading “Item 3 — Legal Proceedings.” The description of legal proceedings in the Company’s Form 10-K remains unchanged.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.

Not applicable.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

 
10.1 Security Agreement dated April 1,May 24, 2004 by and between the Company and Navistar Financial Corporation.
31.1 Section 302 Certification of the CEO
31.2 Section 302 Certification of the CFO
32.0 Section 906 Certification of the CEO & CFO

(b) Reports on Form 8-K

On February 20, 2004, the Company furnished on Form 8-K a Regulation FD disclosure, which included the earnings release for the fourth quarter and year ended December 31, 2003.     None.

On May 5, 2004, the Company furnished on Form 8-K a copy of a press release announcing unaudited first quarter 2004 earnings, the amendment of the merger agreement and the Company’s receipt of a financing commitment in connection with the proposed merger.

2123


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: May 17,August 16, 2004 /s/ Richard C. Bailey   
 Richard C. Bailey, Chief Financial Officer  
 (Principal Accounting Officer)  
 

2224