16
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-23210
TRISM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3491658
(State or other jurisdiction of incorporation or
organization)
(I.R.S. Employer Identification No.)
4174 Jiles Road, Kennesaw, Georgia 30144
(Address of principal executive offices) (Zip Code)
(770) 795-4600
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
As of June 30, 1998, 5,702,337 shares of TRISM, Inc.'s common
stock, par value $.01 per share, were outstanding.
TRISM, INC
TABLE OF CONTENTS
ITEM PAGE
Part I FINANCIAL INFORMATION
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Part II OTHER INFORMATION
Item 1 Legal Proceeding 7
Item 6 Exhibits and Reports on Form 8-K 13
ITEM 1. Financial Statements
TRISM, Inc.
Consolidated Balance Sheets
As of June 30, 1998 and December 31, 1998
(In thousands, unaudited)
June 30, December 31,
1998 1997
ASSETS
Current assets:
Cash and cash equivalents $ 5,230 6,271
Restricted cash and insurance deposits 916 1,010
Accounts receivable, net of allowance
for doubtful accounts of $1,248 and
$2,070 for 1998 and 1997, respectively $42,883 44,076
Materials and supplies 1,526 1,643
Prepaid expenses 19,131 18,418
Deferred income taxes 2,929 3,789
Total current assets 72,615 75,207
Property and equipment, at cost 178,580 184,232
Less: accumulated depreciation and
amortization (66,100) (62,428)
Net property and equipment 112,480 121,804
Intangibles, net 18,550 18,685
Other 2,345 3,128
Total assets 205,990 218,824
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,496 11,859
Bank overdraft 4,536 4,796
Accrued expenses and insurance reserves 12,770 13,733
Current maturities of long-term debt:
Principal payments 10,008 13,025
Residual obligations on equipment debt 7,415 8,696
Total current liabilities 46,225 52,109
Long-term debt, less current maturities 132,844 135,833
Insurance reserves 5,090 5,423
Deferred income taxes 515 2,314
Total liabilities 184,674 195,679
Commitments and contingencies
Stockholders' equity:
Common stock; $.01 par; 10,000 shares
authorized; issued 5,903 shares 59 59
Additional paid-in capital 37,233 37,327
Loans to stockholders (273) (368)
Accumulated deficit (14,066) (12,324)
Treasury stock, at cost, 201 and 166 shares
at 1998 and 1997, respectively (1,637) (1,549)
Total stockholders' equity 21,316 23,145
Total liabilities and stockholders' equity $205,990 218,824
See accompanying notes to consolidated financial statements.
TRISM, Inc.
Consolidated Statements of Operations
For the three months and six months ended June 30, 1998 and 1997
(In thousands, except per share amounts, unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues $ 77,193 81,340 149,322 159,073
Operating expenses:
Salaries, wages and fringe benefits 28,894 28,706 56,918 57,045
Operating supplies and expenses 10,493 11,684 21,408 23,768
Operating taxes and licenses 6,951 7,120 13,542 14,177
Contractor equipment 5,877 4,922 11,178 9,061
Depreciation and amortization 5,006 4,732 10,056 9,532
Brokerage carrier expense 4,512 6,673 9,136 13,477
General supplies and expenses 3,792 4,205 7,353 8,549
Revenue equipment rents 3,454 3,748 6,664 7,525
Claims and insurance 2,259 2,953 4,685 5,815
Communications and utilities 1,366 1,265 2,640 2,660
Restructuring and non-recurring expenses 402 - 402 3,000
Loss on disposition of assets 121 214 538 397
Total operating expenses 73,127 76,222 144,520 155,006
Operating income 4,066 5,118 4,802 4,067
Interest expense and other, net 3,751 3,739 7,483 7,554
Income (loss) before income tax expense
(benefit) 315 1,379 (2,681) (3,487)
Income tax expense (benefit) 110 482 (939) (978)
Net earnings (loss) $205 897 (1,742) (2,509)
Basic earnings (loss) per share $0.04 0.16 (0.30) (0.44)
Diluted earnings (loss) per share $0.04 0.16 (0.30) (0.44)
Weighted average number of shares used
in computation of basic and diluted
earnings (loss) per share 5,724 5,737 5,724 5,737
See accompanying notes to consolidated financial statements.
TRISM, Inc.
Consolidated Statements of Cash Flows
For the six months ended June 30, 1998 and 1997
(In thousands, unaudited)
1998 1997
Cash flows from operating activities:
Net loss $ (1,742) (2,509)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 10,441 9,866
Loss on disposition of assets 538 397
Provision for losses on accounts receivable 404 645
Deferred gain on sale-leaseback (129) 516
Restructuring and non-recurring charge, net 115 1,675
Deferred income taxes (939) (978)
Changes in assets and liabilities:
Accounts receivable 789 6,536
Prepaid expenses (713) (774)
Accrued expenses and insurance reserves (1,282) 1,114
Accounts payable (363) 175
Other (186) 187
Net cash provided by
operating activities 6,933 16,850
Cash flows from investing activities:
Proceeds from sale of assets 4,773 2,648
Purchases of property and equipment (1,923) (2,014)
Proceeds from sale-leaseback - 7,881
Collection of notes receivable 701 514
Refund of restricted deposits 94 241
Contingent acquisition payments (200) -
Net cash provided by investing activities 3,445 9,270
Cash flows from financing activities:
Net proceeds (repayment) under revolving
credit agreement 826 (11,417)
Repayment of long-term debt and capital
lease obligations (11,898) (8,574)
Decrease in bank overdrafts (260) (187)
Purchase of treasury stock (87) -
Payment of deferred loan costs - (80)
Net cash used in financing activities (11,419) (20,258)
(Decrease) increase in cash and cash equivalents (1,041) 5,862
Cash and cash equivalents, beginning of period 6,271 1,468
Cash and cash equivalents, end of period $ 5,230 7,330
Supplemental cash flow information:
Cash paid during the period for:
Interest ($43 capitalized in 1998) $ 7,679 7,420
Income taxes $ 62 57
Capital lease equipment purchases
and borrowings $ 3,785 3,279
See accompanying notes to the consolidated financial statements.
TRISM, Inc.
Notes to Consolidated Financial Statements
Accounting Policies
The 1997 Annual Report on Form 10-K for Trism, Inc. includes a
summary of significant accounting policies and should be read in
conjunction with this Form 10-Q. The statements for the periods
presented are condensed and do not contain all information
required by generally accepted accounting principles to be
included in a full set of financial statements. In the opinion
of management, all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial
position as of June 30, 1998 and December 31, 1997 and the
results of operations and cash flows for the periods ended June
30, 1998 and 1997, respectively have been included. The results
of operations for any interim period are not necessarily
indicative of the results of operations to be expected for the
entire year.
Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components
in the financial statements. SFAS No. 130 is effective for the
Company's fiscal year beginning January 1, 1998.
Reclassification of financial statements for earlier periods
presented for comparative purposes is required. The adoption of
SFAS No. 130 had no impact on the Company's consolidated results
of operations, financial position or cash flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131
establishes standards for the way that public business
enterprises report information about operating segments in annual
and interim financial statements. It also establishes standards
for related disclosures about products, services, and geographic
areas. SFAS No. 131 is required beginning with the Company's
1998 annual financial statements and prior period disclosures are
required to be restated. The Company is in the process of
evaluating the disclosure requirements. The adoption of SFAS No.
131 will have no material impact on the Company's consolidated
results of operations, financial position or cash flows.
In February 1998, the FASB issued SFAS No. 132, Employers'
Disclosure about Pensions and Other Post Retirement Benefits.
SFAS No. 132 standardized the disclosure requirements for
pensions and other post retirement benefits to the extent
practical. This standard is effective beginning with the
Company's 1998 annual financial statements, and prior period
disclosures are required to be restated. Management is currently
reviewing the provisions of SFAS No. 132 and does not believe
that the Company's financial statements will be materially
impacted by the adoption.
On June 15, 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities
(FAS 133). FAS 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999 (January 1, 2000 for
the Company). FAS 133 requires that all derivative instruments
be recorded on the balance sheet at their fair value. Changes in
the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if
it is, the type of hedge transaction. Management of the Company
anticipates that, due to its limited use of derivative instruments,
the adoption of FAS 133 will not have a significant effect on the
Company's results of operations or its financial position.
Corporate Restructuring and Non-Recurring Expenses
During the second quarter of 1998, the Company recorded a pre-tax
charge of $402,000 for a separation and consulting agreement.
In February 1997, the Company announced an organizational
restructuring to consolidate certain sales, operations, and
administrative functions and reengineer business processes to
reduce overhead and increase operational efficiency. During
1997, the Company recorded total charges of $3.2 million
associated with the organizational restructuring.
Long Term Debt
Revolving Credit Facility
On July 15, 1997, the Company refinanced its revolving credit
facility ("Facility") with a $45 million credit line (the
"Revolver"). The proceeds of the Revolver were used to retire
the Facility loan and are available for the Company's working
capital needs. The Revolver matures July 15, 2000 and contains
provisions for a letter of credit subline of $15 million, bears
interest at the Prime rate plus .25% or LIBOR plus 2.25%, and is
secured by accounts receivable. The Revolver also includes
covenants applicable once Availability under the Revolver falls
below $8 million for 10 consecutive business days. Availability
under the Revolver was approximately $12.7 million at June 30,
1998, net of a reduction for outstanding letters of credit of
approximately $11.9 million. The foregoing letters of credit and
deposits totaling $.9 million are furnished to insurance carriers
as collateral for the estimated cost of claim payments as of June
30, 1998. In August 1998, the agreement was amended to modify
and redefine a financial convenant.
Senior Subordinated Notes
The Company's Senior Subordinated Notes ("Notes") bear interest
at 10.75 % payable on June 15th and December 15th of each year
through December 15, 2000. The Notes are redeemable at the
option of the Company, in whole or in part, on or after December
15, 1998, at a redemption price of 105% through December 1999 and
102.5 % thereafter. Through June 30, 1998, the Company has
repurchased $5.3 million of the Notes at approximately face value
of which $1.0 million of the notes were repurchased in the first
quarter of 1998.
Contingencies
Under the Comprehensive Environmental Responses, Compensation and
Liability Act ("CERCLA") and similar state laws, a transporter of
hazardous substances may be liable for the costs of responding to
the release or threatened release of hazardous substances from
disposal sites if such transporter selected the site for
disposal. Because it is the Company's practice not to select the
sites where hazardous substances and wastes will be disposed, the
Company does not believe it will be subject to material liability
under CERCLA and similar laws.
Although the Company has been identified as a "potentially
responsible party" (PRP) at three sites, solely because of its
activities as a transporter of hazardous substances, the Company
does not believe it will be subject to material liabilities at
such sites.
The Company is a party to certain legal proceedings incidental to
its business, primarily involving claims for personal injury or
property damage arising from the transportation of freight. The
Company does not believe that these legal proceedings, or any
other claims or threatened claims of which it is aware, are
likely to materially and adversely affect the Company's financial
conditions. With regard to personal injury, property damage,
workers' compensation claims, and cargo claims, the Company is
and has been covered by insurance. Such matters may include
claims for punitive damages. It is an open question in some
jurisdictions in which the Company does business as to whether or
not punitive damages awards are covered by insurance.
The Company is a defendant in one additional litigation in the
Circuit Court of Jefferson County, Alabama. The case is
captioned Roy A. Reese v. Trism Specialized Carriers, Inc. and
Tri-State Motor Transit Co. It arises from a lease, transfer and
consulting agreement between the Company and plaintiff (Mr. Reese
and his wholly owned corporation) dated August 24, 1992.
Plaintiff alleges breach of contract, promissory fraud,
conversion and conspiracy claims arising from the Company's
termination of the contract. He seeks compensatory and punitive
damages. The Company maintains that it properly terminated the
contract because of misrepresentations and non-performance by
plaintiff and his company, and has asserted certain
counterclaims.
The case was tried in August 1996, and plaintiff was awarded
$47,000 in rental fees admitted by the Company to be due for the
use of plaintiff's trailer equipment after cancellation of the
original contract. All other claims for damages were found in
favor of the defendant (the "Company"). Plaintiff appealed to
the Alabama Court of Civil Appeals which reversed and remanded
the case on the legal argument that the jury had found both
defendants liable to plaintiff but only awarded damages ($47,000)
to one defendant. Both parties appealed the matter to the
Alabama Supreme Court which granted a certiorari, but
subsequently (June 19, 1998) quashed its writ, effectively
sending the case back to the Alabama Court of Civil Appeals which
has ordered a new trial. The Company is aware of no reason that
it cannot again prevail in a second trial.
In addition to matters referred to above, the Company is a party
to certain additional lawsuits, none of which is believed to
involve a significant risk of materially and adversely affecting
the Company's financial condition.
Management's Discussion and Analysis of Financial Conditions and
Results of Operations
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking statements. Certain statements
in this Form 10-Q include information that is forward-looking,
such as the Company's opportunities to reduce overhead costs and
increase operational efficiency, its anticipated liquidity and
capital requirements and the results of legal proceedings.
The matters referred to in forward-looking statements could be
affected by the risks and uncertainties involved in the Company's
business. Subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary
statements in this paragraph.
The following discussion and analysis should be read in
conjunction with the Company's Consolidated Financial Statements
and notes for the year ended December 31, 1997 and quarter ended
June 30, 1998.
The following table summarizes certain financial information on a
percentage of revenue basis for the three and six months ended
June 30, 1998 and 1997.
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Percentage of Revenue Basis:
Operating Revenue: 100.0 100.0 100.0 100.0
Operating Expenses:
Salaries, wages and fringe benefits 37.4 35.3 38.1 35.7
Operating supplies and expenses 13.6 14.4 14.3 14.9
Operating taxes and licenses 9.0 8.8 9.1 8.9
Contractor equipment 7.6 6.0 7.5 5.7
Depreciation and amortization 6.5 5.8 6.7 6.0
Brokerage carrier expense 5.8 8.2 6.1 8.5
General supplies and expenses 4.9 5.2 4.9 5.4
Revenue equipment rents 4.5 4.6 4.5 4.7
Claims and insurance 2.9 3.6 3.1 3.7
Communications and utilities 1.8 1.6 1.8 1.7
Restructuring expenses and
non-recurring charge 0.5 - 0.3 1.9
Loss on disposition of assets 0.2 0.2 0.4 0.3
Total operating expenses 94.7 93.7 96.8 97.4
Income from operations 5.3 6.3 3.2 2.6
Interest and other, net 4.9 4.6 5.0 4.8
Income (loss) before income taxes 0.4 1.7 (1.8) (2.2)
Income tax expense (benefit) 0.1 0.6 (0.6) (0.6)
Net earnings (loss) 0.3 1.1 (1.2) (1.6)
Summary of Second Quarter 1998 Results
Net earnings for the quarter ended June 30, 1998, amounted to
$205,000 or $.04 per basic share compared to net earnings of
$897,000 or $.16 per basic share in the second quarter of 1997.
The second quarter 1998 results include a non-recurring pre-tax
charge of approximately $.4 million or $.04 per share for a
separation and consulting agreement.
Second quarter operating results were positively impacted by
improved performance in the Heavy Haul market offset by
competitive market conditions in the munitions and hazardous
waste markets that negatively impacted pricing, load ratio and
asset productivity. The Company reduced its average monthly
vacant tractors during the second quarter of 1998 to 173 units
compared to the first quarter's average vacant units of 189,
primarily through a reduction in the fleet size. The Company
anticipates further improvement in the ratio of active tractor
capacity to total tractor capacity into the third quarter of
1998.
Operating Revenue
Operating revenue decreased $4.1 million, or 5.1% from the second
quarter 1997 to 1998 and $9.8 million, or 6.1% for the six months
ended June 30, 1997 to 1998. Revenue per loaded mile amounted to
$1.79 for the quarter ended June 30, 1998 and $1.78 for the six
months ended June 30, 1998 compared to $1.75 for the second
quarter of 1997 and $1.73 for the six months ended June 30,
1997. The foregoing rate improvements were offset by a decline
in the load ratio of .7% and total miles driven of approximately
2.0 million from the second quarter of 1997 to 1998. The load
ratio and total miles driven also declined by 1.1% and 5.0
million miles, respectively for the six months ended June 30,
1997 to 1998.
External factors influencing the quarterly and six-month period
results were primarily related to the Company's improvement in
pricing at Heavy Haul and the exit from the Commercial Flatbed
market in 1997. These improvements were offset by more
competitive market conditions in the munitions and hazardous
waste markets which negatively impacted pricing and load ratio at
Secured. In addition, asset productivity was negatively
influenced by high driver turnover during these periods.
For the six months ended June 1998 to 1997, the Secured Materials
market was primarily impacted by a decline in higher margined
government munitions and hazardous waste business of
approximately $3.0 million and $2.0 million, respectively. The
foregoing revenue declines were partially offset by an increase
in general freight business that traditionally has lower profit
margins. Increased competition from regional truck carriers and
consolidation in the marketplace of hazardous waste business also
negatively impacted Secured revenues.
Operating revenues between the periods includes the following (in
thousands):
Three Months Ended Six Months Ended
June 30, June 30,
Market 1998 1997 1998 1997
Heavy Haul (1) $ 53,865 53,336 102,645 104,456
Secured Materials 24,878 28,324 49,205 54,756
Trism Logistics 1,816 2,665 4,129 5,840
Eliminations and other (3,366) (2,985) (6,657) (5,979)
$ 77,193 81,340 149,322 159,073
(1) Includes Commercial Flatbed results as if the
consolidation into Heavy Haul occurred as of January 1,
1997. Operating revenue for the Commercial Flatbed market
amounted to approximately $4.2 million during the second
quarter of 1997 and $11.5 million for the six months ended
June 30, 1997.
Operating Income
Operating income was impacted by certain external business
factors described in the Operating Revenue Section of this
discussion.
Second Quarter 1998 to 1997
Operating income for the three months ended June 30, 1998 was
affected by positive profit contributions in comparison to 1997
on a per mile basis as follows: (a) lower fuel costs of $1.0
million primarily due to a reduction in the per gallon cost of
fuel from $1.21 in 1997 to $1.06 in 1998; (b) lower claims and
insurance costs of $.6 million as a result of favorable accident
and claims experience; and (c) lower fixed freight expenses of
approximately $.1 million relating to reduced personnel and
administrative expenses.
Offsets to the positive profit contribution variances
impacting second quarter 1998 operating income compared to
1997 resulted from (a) higher driver and lease operator
costs of $1.4 million due to an increase in driver compensation
rates, lease operator miles of 1.0 million, and higher
driver recruiting and advertising expenses; (b) higher
maintenance charges of $.3 million resulting from an
increase in the overall age of the tractor fleet;
(c) higher escort and permit charges of $.4 million due to a
freight commodity mix change; (d) non-recurring charge of $.4
million for a separation and consulting agreement; and, (e)
other, net expenditure increases of $.4 million.
Six Months Ended June 30, 1998 to 1997
Operating income for the six months ended June 30, 1998 was
affected by positive profit contributions in comparison to 1997
on a per mile basis as follows: (a) restructuring charge of $3.0
million recorded in 1997 with no corresponding adjustment in
1998; (b) lower fuel costs of $2.3 million primarily due to a
reduction in the per gallon cost of fuel from $1.24 in 1997 to
$1.09 in 1998; (c) lower claims and insurance costs of $1.0
million as a result of favorable accident and claims experience;
and (d) lower fixed freight expenses of approximately $1.5
million relating to reduced personnel and administrative
expenses.
Offsets to the positive profit contribution variances impacting
operating income for the six months ended June 30, 1998 compared
to 1997 resulted from: (a) higher driver and lease operator costs
of $3.9 million due to an increase in driver compensation rates,
lease operator miles of 1.8 million, and higher driver recruiting
and advertising expenses; (b) higher maintenance charges of $1.0
million resulting from an increase in the overall age of the
tractor fleet; (c) higher escort and permit charges of $.9
million due to a freight commodity mix change; (d) non-recurring
charge of $.4 million for a separation and consulting agreement
with the Company's former Chairman and Chief Executive Officer;
and (e) other, net expenditure increases of $1.0 million.
Operating income between the periods includes the following (in
thousands):
Three Months Ended Six Months Ended
June 30 June 30,
Market 1998 1997 1998 1997
Heavy Haul (a) $ 3,272 2,528 3,479 3,205
Secured Materials 1,172 2,502 1,503 3,662
Logistics 24 88 222 200
Restructuring and
non-recurring charges (402) - (402) (3,000)
Operating income $ 4,066 5,118 4,802 4,067
Operating expense ratio (b) 94.7% 93.7% 96.8% 97.4%
(a) Includes Commercial Flatbed results as if the consolidation
into Heavy Haul occurred as of January 1, 1997. The operating
loss for the Commercial Flatbed market amounted to $.7 million
during the second quarter of 1997 and $1.5 million for the
six months ended June 30, 1997.
(b) The operating ratio represents operating expenses as a
percentage of operating revenue.
Operating and Other Expenses
Total operating expenses were approximately $73.1 million for the
three months ended June 30, 1998 and $144.5 million for the six
months ended June 30, 1998 compared to $76.2 million for the
three months ended June 30, 1997 and $155.0 million for the six
months ended June 30, 1997. The following expense categories
increased or decreased significantly as a percentage of revenue
between the periods:
Salaries, wages and fringe benefits increased 2.1% and 2.4% of
revenue from the quarter and six-month period ended June 30, 1997
to the corresponding periods in 1998, respectively. The
increases are primarily due to driver compensation increases, net
of a reduction in non-driver compensation as a result of the 1997
restructuring effort.
Operating supplies decreased .8% and .6% of revenue from the
quarter and six-month period ended June 30, 1997 to the
corresponding periods in 1998, respectively. The improvement
resulted from reduced fuel expenditures partially offset by an
increase in maintenance expenses due to the increasing age of the
tractor fleet.
Contractor equipment expenses increased by 1.6% of revenue for
the quarter ended June 30, 1998 to 1997, and 1.8% of revenue for
the six months ended June 30, 1998 to 1997. The percentage of
revenue fluctuations is attributable to an overall increase in
lease operator rates and miles.
Revenue equipment as a percentage of revenue declined in 1998 as
compared to 1997 due to the maturity of certain tractor equipment
leases replaced with new equipment financed with capital leases
throughout 1997 and 1998. The change in mix of owned tractor
equipment versus leased equipment created an increase in
depreciation and interest charges as a percentage of revenue in
1998 compared to 1997.
Brokerage expenses decreased 2.4% for the quarter and six month
period ended June 30, 1998 to 1997 consistent with the decline in
brokerage revenue of $2.7 million and $5.0 million for the
quarter and six month period ended June 1998 to 1997,
respectively.
General supplies and expenses decreased .3% and .5% of revenue
from the quarter and six-month period ended June 30, 1997 to the
corresponding period in 1998, respectively. The percentage of
revenue fluctuations are due to lower professional fees and
provision for losses on accounts receivable partially offset by
an increase in driver recruiting and advertising expenditures.
Claims and insurance costs decreased by .7% of revenue for the
quarter ended June 30, 1998 to 1997 and .6% of revenue for the
six months ended June 30, 1998 to 1997 as a result of favorable
accident and claims experience trends in 1998.
Restructuring charges of $3.0 million were recorded in the first
quarter of 1997 with no corresponding adjustment in 1998.
Conversely, a non-recurring charge of $.4 million for a
separation and consulting agreement with the Company's former
Chairman and Chief Executive Officer was recorded in the second
quarter of 1998 with no corresponding adjustment in 1997.
Income tax expense (benefit) was based upon an effective tax rate
of 35% for the three months ended June 30, 1998 and 1997. The
effective tax rate for the six months ended June 30, 1998 was 35%
compared to 28% in 1997.
Liquidity and Capital Resources
Net cash provided by operating activities was $6.9 million in
1998 compared to $16.9 million in 1997. The decrease is
primarily due to lower operating income, net of the restructuring
and non-recurring charges, significant payment of certain insurance
reserve claims as well as an overall decline in accident trends
in 1998, and reduced gross collection amounts on accounts
receivable due to lower sales. The accounts receivable turnover
improved to 48 days in 1998 compared to 52 days in 1997.
Net cash provided by investing activities was $3.4 million in
1998 compared to $9.3 million in 1997. The decrease in investing
activity cash is primarily attributed to a reduction in sale-
leaseback proceeds of $7.3 million used to repay existing
indebtedness.
Net cash used in financing activities was $11.4 million in 1998
compared to $20.3 million in 1997. The decrease in cash used in
financing activities related to net borrowings under the
Company's revolving credit line of $.8 million in 1998 versus net
repayments under the credit line of $11.4 million in 1997.
Furthermore, the Company repaid long-term debt, capital lease
obligations, and note payments of approximately $11.9 million in
1998 compared to $8.6 million in 1997.
Capital Requirements
The Company estimates 1998 capital expenditures for tractor and
trailer equipment of approximately $43 million, net of $2 million
from the sale of replaced equipment. The Company has obtained
finance commitments for the majority of its needs during 1998. In
addition, residual obligations of approximately $7.4 million
primarily relating to certain capital lease obligations will
mature in the next twelve months, and the Company will have the
option to either purchase the revenue equipment for the residual
amount, sell the equipment and repay the residual, or return the
equipment to the lessor at the end of the lease term.
The Company believes that it will be able to meet its on-going
capital requirements, scheduled principal payments and working
capital needs from cash flow from operations, availability under
its working capital line, proceeds from the sale of equipment and
additional borrowing commitments. The Company also has
additional borrowing capacity supported by unencumbered tangible
assets.
Year 2000 Computer Preparedness
During the Second Quarter of 1998, the Company began the testing
of the Company's core freight, administrative and management
computer systems. The Company structured a series of tests that
were performed to verify that its systems are fully year 2000
compliant. Preliminary test results indicate that the Company is
on track towards having addressed the year 2000 issue by the end
of the Fourth Quarter of 1998.
The Company is also concerned about its computer interface with
certain suppliers and customers and will take steps to isolate
Company systems from year 2000 problems arising from such
interfaces, but cannot predict the compliance of those other
systems. Because of this risk, the Company has requested its
primary suppliers to certify that their systems either are now or
will be year 2000 compliant by third quarter 1999. Through June
30, 1998, approximately 80% of the Company's primary suppliers
have responded positively to the Company's certification request.
The Company estimates that there are 100 personal computer
devices that are currently in service throughout the Company and
approximately 100 communications and tracking units on Company
tractors that are not year 2000 compliant. The Company has a
formal plan to either replace these devices or obtain an upgrade
unit from certain vendors.
Inflation and Fuel Costs
Inflation can be expected to have an impact on the Company's
earnings; however, the effect of inflation has been minimal over
the past three years. An extended period of inflation or
increase in fuel costs would adversely affect the Company's
results of operations without a corresponding freight rate
increase from customers.
The Company uses forward purchase commitments to reduce its
exposure to fluctuations in fuel prices by entering into short-
term fuel price agreements for the actual delivery of fuel.
These agreements, which settle monthly, fix the price of fuel for
approximately 2.6 million gallons or approximately 35% of the
Company's estimated usage during each of the fourth quarter of
1998 and the first quarter of 1999. The Company recognizes an
expense or benefit on these agreements in the period in which the
fuel is used.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
The following exhibit is filed as part of this report.
Designation Nature of Exhibit
11 Computation of Basic and Diluted earnings
(loss) per share
B. Reports on Form 8-K
During the quarter covered by this report there were no
reports on Form 8-K filed. Items 2, 3, and 5 of Part
II were not applicable and have been omitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRISM, INC.
By:/s/Edward L.McCormick
Edward L.McCormick
Director, President and
Chief Executive Officer
By:/s/James G. Overley
James G. Overley
Senior Vice President of
Finance, Chief Financial
Officer and Treasurer
Date: August 14, 1998
TRISM, INC.
Exhibit Index
Exhibit Number Description Page Number
11 Computation of basic and
diluted earnings per common share 16
EXHIBIT 11
TRISM, INC.
Computation of Basic and Diluted Earnings Per Common Share
(In thousands, except per share amounts, unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Net earnings (loss) $ 205 897 (1,742) (2,509)
Weighted average number of shares
Basic:
Average common shares
outstanding 5,724 5,737 5,724 5,737
Diluted:
Average common shares
outstanding 5,724 5,737 5,724 5,737
Common share equivalents
resulting from assumed
exercise of stock options - - - -
5,724 5,737 5,724 5,737
Earnings (loss) per share:
Basic $ .04 .16 (.30) (.44)
Diluted $ .04 .16 (.30) (.44)
Earnings (Loss) Per Share
Basic earnings (loss) per share excludes dilution and is computed
by dividing net earnings (loss) by the weighted average number of
common shares outstanding. Common shares outstanding include
issued shares less shares held in treasury. Diluted earnings per
share reflect the potential dilution that could occur if
securities or other contracts to issue common stock were
exercised or converted into common stock (common stock
equivalents). Diluted earnings per share is calculated by
dividing net income by the sum of the weighted average number of
common shares outstanding and dilutive common stock equivalents
at the end of each reporting period. Common stock equivalents
are excluded from the diluted calculation if a net loss was
incurred for the period as these transactions are anti-dilutive.