1
EXHIBIT 13
SELECTED FINANCIAL DATA
The following tables set forth selected financial data and selected pro forma
financial data of the Company. The selected financial data presented below for
the five year period ended December 31, 1996, are derived from the Company's
audited financial statements. The data presented below should be read in
conjunction with "Management's Discussion and Analysis," the Financial
Statements and Notes thereto.
Year Ended December 31,
----------------------------------------------------
(in thousands, except per share data) 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA:
OPERATING REVENUES $ 65,523 $ 61,866 $ 59,132 $ 50,340 $ 42,403
Operating expenses:
Salaries, wages and employee benefits 28,420 27,573 24,800 20,610 17,152
Non-cash compensation expense(1) 947 806
Operating supplies 19,550 17,156 15,042 13,180 11,551
Taxes and licenses 2,222 1,823 1,922 1,934 1,664
Insurance and claims 3,379 3,210 3,669 3,065 2,396
Communications and utilities 1,186 1,022 927 776 706
Depreciation and amortization 8,261 7,296 6,451 5,516 4,792
Rent 202 154 136 136 94
Gain on disposition of property
and equipment, net (805) (648) (410) (272) (347)
Environmental remediation(2) 19 (294) 800 -- --
Other 439 474 523 544 485
-------- -------- -------- -------- --------
Total operating expenses 62,873 57,765 53,860 46,436 39,299
-------- -------- -------- -------- --------
Operating income 2,650 4,101 5,272 3,904 3,104
Interest income 164 82 54 106 135
Interest expense (1,408) (781) (806) (901) (871)
Other -- -- 70 -- (223)
-------- -------- -------- -------- --------
Income before income taxes 1,406 3,402 4,590 3,109 2,145
Income taxes 579 1,227 6,544 47 31
-------- -------- -------- -------- --------
Income (loss) before cumulative
effect of accounting change 828 2,125 (1,954) 3,062 2,114
Cumulative effect of accounting change -- -- -- 157 --
-------- -------- -------- -------- --------
Net income (loss) $ 828 $ 2,125 $ (1,954) $ 3,219 $ 2,114
======== ======== ======== ======== ========
Net income (loss) per share $ .22 $ .56 $ (.55) $ 1.07 $ .70
======== ======== ======== ======== ========
Dividends paid(3) $ -- $ -- $ 2,525 $ 1,253 $ 502
======== ======== ======== ======== ========
PRO FORMA INCOME DATA (Unaudited)(4):
Income before income taxes $ 4,590 $ 3,109 $ 2,145
Pro forma income taxes 1,762 1,313 965
-------- -------- --------
Pro forma net income $ 2,828 $ 1,796 $ 1,180
======== ======== ========
Pro forma net income per share $ .80 $ .60 $ .39
======== ======== ========
2
SELECTED FINANCIAL DATA
(1) Reflects non-cash compensation expense attributable to stock options
previously granted to the Chairman of the Board and the President of
the Company.
(2) Reflects an operating expense (credit) accrued for environmental
remediation during 1995. See Note 6 to Financial Statements.
(3) Distributions primarily to fund tax liabilities resulting from the
Company's S Corporation status were made to the Company's stockholders
in each year between 1990 and 1994, prior to the termination of the
Company's S Corporation status on March 30, 1994. See Note 8 to
Financial Statements.
(4) Between January 1, 1987 and March 30, 1994, the Company was treated as
an S Corporation for federal and certain state income tax purposes. As
a result, the Company's taxable earnings for 1989 through 1993, and the
first quarter of 1994, were taxed for federal and certain state income
tax purposes directly to the Company's then-existing stockholders. On
March 30, 1994, the Company terminated its S Corporation status and
became subject to federal and certain additional state income taxes.
For informational purposes, unaudited pro forma net income data is
provided to reflect an adjustment for a provision for federal and state
income taxes as if the Company had not been treated as an S Corporation
during those periods. The pro forma net income data do not give effect
to the non-cash charge of approximately $5.5 million in recognition of
deferred income taxes that resulted from the termination of the
Company's S Corporation status. See Note 8 to Financial Statements.
December 31,
---------------------------------------------
(in thousands) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Working capital (deficit) $ 2,495 $ 2,676 $ 768 $ (107) $(2,557)
Net property and equipment 44,593 37,188 33,184 30,452 26,308
Total assets 57,262 48,892 41,480 38,888 32,365
Long-term debt, less
current maturities 15,198 9,228 6,143 11,875 9,639
Total liabilities 33,374 24,903 19,616 20,403 16,872
Stockholders' equity 23,888 23,989 21,864 18,405 15,493
SELECTED OPERATING DATA:
The following table sets forth certain operating data regarding the
Company.
December 31,
------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------
Operating ratio 95.95% 93.37% 91.08% 92.24% 92.68%
Average length of haul in miles 677 694 687 671 681
Average number of truckloads per week 1,607 1,470 1,457 1,252 1,055
Average revenues per total mile $ 1.14 $ 1.14 $ 1,15 $ 1.13 $ 1.11
Equipment at period end:
Tractors 575 522 480 415 370
Trailers 916 875 830 723 540
3
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is a discussion of the financial condition and results of
operations of the Company for each of the years in the three year period ended
December 31, 1996. This discussion should be read in conjunction with the
Financial Statements and Notes thereto included elsewhere herein.
GENERAL
The Company was founded in 1956 by Dempsey Boyd and his brothers as a small
regional flatbed trucking operation with three tractors. Since that time, the
Company has grown to one that operates over 575 tractors and 916 trailers in the
eastern two-thirds of the United States. The Company's historical strategy has
been to own all of its revenue equipment and to operate through employee
drivers. The Company's expansion, therefore, has required significant capital
expenditures which have been funded through secured borrowings.
The Company operated as an S Corporation from January 1, 1987 through March 30,
1994. As a result, the net taxable income of the Company during such period was
taxed directly to the Company's stockholders rather than to the Company.
The termination of the Company's S Corporation status on March 30, 1994,
resulted in a one-time non-cash charge of approximately $5.5 million in
recognition of deferred income taxes and a corresponding reduction in
stockholders' equity.
The pro forma income data of the Company has been prepared to reflect the
termination of S Corporation status. See Note 8 to Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of the expense items
to operating revenues for the periods indicated.
PERCENTAGE OF OPERATING REVENUES
YEARS ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------
Operating revenues 100.00% 100.00% 100.00%
------ ------ ------
Operating expenses
Salaries, wages, and employee benefits 43.37 44.58 41.94
Operating supplies 29.84 27.73 25.44
Taxes and licenses 3.39 2.95 3.25
Insurance and claims 5.16 5.19 6.20
Depreciation and amortization 12.61 11.79 10.91
Gain on disposition of property and equipment, net (1.23) (1.05) (.69)
Other 2.81 2.18 4.03
------ ------ ------
Total operating expenses 95.95 93.37 91.08
Operating income 4.04 6.63 8.92
Interest expense, net (1.90) (1.13) (1.27)
Other -- -- .12
------ ------ ------
Income before income taxes 2.14 5.50 7.76
Income taxes* .88 2.06 2.98
------ ------ ------
Net income* 1.26% 3.43% 4.78%
------ ------ ------
* Amounts for 1994 are pro forma.
4
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Operating revenues for 1996 increased $3.7 million or 5.91% to $65.5 million as
compared to $61.9 million for 1995. The increase resulted primarily from
additional tractors in use. The Company's operating ratio increased from 93.37%
in 1995 to 95.95% in 1996. The increased operating ratio was due primarily to
increases in fuel costs, maintenance and lower utilization of equipment.
Operating supplies expense for 1996 increased $2.4 million or 14.0% due
primarily to higher fuel costs. Additionally, maintenance and related costs were
higher. Salaries, wages and employee benefit expenses for 1996 increased by
$847,268 or 3.1%, to $28.4 million as compared to $27.6 million for 1995. The
increase was less than the percentage increase in revenue due to a reduction in
non-driver personnel costs and headcount.
Insurance and claims expense for 1996 increased $169,115 or 5.3% to $3.4 million
as compared to $3.2 million in 1995. The increase was less than the percentage
increase in revenue due primarily to a reduction in insurance premiums.
Taxes and licenses increased $398,429 or 21.9% due to having a newer fleet of
tractors. Depreciation and amortization expense increased $965,582 or 13.2% due
primarily to lower utilization and the increase in tractor prices.
Environmental remediation expense was $19,408 in 1996 compared with a credit of
$293,652 in 1995. The initial estimate of remediation expense in 1994 was
substantially reduced in 1995.
Gain on sale of equipment increased $157,739 or 24.3% in 1996 over 1995 due to
the sale of more equipment in 1996 as opposed to 1995.
Interest expense, net increased $545,290 or 78.0% in 1996 over 1995. Long-term
debt increased substantially due to the purchase and trade-in of an increased
number of tractors.
Net income for 1996 was $827,617 compared with $2,124,658 for 1995.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
Operating revenues for 1995 increased $2.73 million or 4.62% to $61.9 million as
compared to $59.1 million for 1994. The increase resulted primarily from
additional tractors in use. The Company's operating ratio increased from 91.08%
in 1994 to 93.37% in 1995. The increased operating ratio was due primarily to
increases in driver wages, fuel costs, and maintenance expenses, which were
partially offset by a $294,000 credit against environmental expenses previously
accrued.
Salaries, wages and employee benefit expenses for 1995 increased by $2.8 million
or 11.2%, to $27.6 million as compared to $24.8 million for 1994, and also
increased as a percentage of operating revenues. The increase in salaries,
wages, and employee benefit expenses as a percentage of operating revenues is
due primarily to increases in the number of employees and increases in overall
compensation for drivers in order to enhance driver recruitment and retention.
Operating supplies expense for 1995 increased $2.1 million or 14.1% to $17.2
million as compared to $15.0 million for 1994, and also increased as a
percentage of revenues due to increased maintenance and fuel costs. Insurance
and claims expenses for 1995 decreased by $459,047 or 12.5% to $3.2 million as
compared to $3.7 million for 1994. The decrease was due to reduced reserves for
pending claims and a reduction in liability premiums.
Depreciation and amortization expense for 1995 increased $844,000 or 13.1%, to
$7.3 million as compared to $6.5 million for 1994. This increase was a result of
the net increase in fleet size, lower utilization and the purchase of higher
priced new tractors. Management believes that the additional cost of owning
better equipped tractors can be offset by lower driver turnover and maintenance
expenses.
Environmental remediation expenses produced a credit of $294,000 in 1995
compared to an expense of $800,000 in 1994. The initial estimate of remediation
expense in 1994 was substantially reduced in 1995 due to a reduced estimate of
anticipated remediation expenses.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS
Gain on sale of equipment increased $238,404 or 58.2%, to $648,061 in 1995
compared to $409,657 in 1994. The gain on sale of equipment was due to the sale
of more equipment in 1995 compared to 1994.
Net income for 1995 was $2.1 million compared with pro forma net income of $2.8
million for 1994.
LIQUIDITY AND CAPITAL RESOURCES
The growth of the Company's business and maintenance of its modern fleet have
required significant investments in new tractors and trailers, and has been
financed largely through long-term debt. Capital expenditures, net of proceeds
from disposals of property and equipment, were approximately $14.9 million in
1996, compared to $10.7 million in 1995. At December 31, 1996, the Company had
long-term debt (including current portions) of $19.8 million, primarily incurred
to purchase revenue equipment. Management anticipates increasing the Company's
fleet by approximately 50 tractors in 1997, net of replacements, at an
anticipated cost of approximately $10.1 million. Management expects to finance
such equipment purchases through equipment financing arrangements with various
lenders.
Historically, the Company has relied on cash generated from operations to fund
its working capital requirements. However, the Company has a bank line of credit
permitting short term borrowings of up to $1.5 million. The revolving line of
credit is collateralized by accounts receivable and inventory. Interest on the
borrowings is at the prime rate less .125%.
In May 1994 the Company completed an initial public offering of 823,000 shares
of Common Stock. Net proceeds from the offering totaled $7,937,332, all of which
were used to repay indebtedness incurred by the Company to purchase revenue
equipment. In addition, in May 1994 the Company received approximately $600,000
upon repayment of a note from the Company's principal stockholder, all of which
proceeds were also applied to repayment of outstanding indebtedness.
In January 1996, the Company implemented a stock repurchase program based on
management's belief that, at then current market prices, the common stock
represented a sound investment for the Company's corporate funds. Pursuant to
the repurchase program, the Company purchased 122,300 shares of the common stock
in open market and negotiated transactions, for an aggregate purchase price of
$928,500. The Company funded such purchases using working capital and borrowings
under its line of credit.
The Company currently has outstanding letters of credit, totaling $1,607,000 at
December 31, 1996, to cover liability insurance claims and self-insured workers'
compensation programs. Annual commitment fees relating to those letters of
credit do not exceed 1.5% of the face amounts thereof.
In connection with the termination of its S Corporation status and the initial
public offering of Common Stock, the Company distributed approximately
$2,525,000 to its stockholders of record on March 30, 1994. The distributions
represented the previously undistributed taxable earnings of the Company
included in the taxable income of such stockholders as a result of the Company's
S Corporation status.
Management believes that cash flow from future operations and borrowings
available under its line of credit will be sufficient to meet its needs for
working capital for the foreseeable future. Over the long term, the Company will
continue to have significant capital requirements which may require the Company
to seek additional borrowings or equity capital. The availability of debt
financing or equity capital will depend upon prevailing market conditions, the
market price of the Common Stock and other factors over which the Company has no
control, as well as the Company's financial condition and results of operations.
SEASONALITY
In the trucking industry, results of operations show a seasonal pattern because
customers generally reduce shipments during the winter season, and the Company
does experience some seasonality due to the open, flatbed nature of its
trailers. The Company has at times experienced delays in meeting its shipping
schedules as a result of severe weather conditions, particularly during the
winter months. In addition, the Company's operating expenses have historically
been higher in the winter months due to decreased fuel efficiency and increased
maintenance costs in colder weather.
6
BALANCE SHEETS
DECEMBER 31,
-------------------------
1996 1995
- ----------------------------------------------------------------------------------------
ASSETS
CURRENTS ASSETS:
Cash and cash equivalents (Note 1) $ 3,593,206 $ 1,481,910
Short-term investments 100,000 100,000
Accounts receivable (less allowance for doubtful accounts
of $125,000 in 1996
and 1995):
Trade and interline 5,541,471 5,779,409
Other 274,876 842,508
Refundable income taxes 579,573 1,161,311
Inventories (Note 1) 230,920 397,062
Prepaid tire expense (Note 1) 711,208 558,750
Other prepaid expenses 761,324 737,690
Deferred income taxes (Note 8) 530,623 328,678
----------- -----------
Total current assets 12,323,201 11,387,318
----------- -----------
PROPERTY AND EQUIPMENT (Notes 1 and 5):
Land and land improvements 1,082,510 1,055,606
Buildings 3,240,496 3,174,363
Revenue equipment 51,513,665 46,139,369
Other equipment 8,111,012 7,481,290
Leasehold improvements 406,577 373,561
----------- -----------
Total 64,354,260 58,224,189
Less accumulated depreciation and amortization 19,761,532 21,035,800
----------- -----------
Property and equipment, net 44,592,728 37,188,389
----------- -----------
DEPOSITS AND OTHER ASSETS 346,050 316,012
----------- -----------
TOTAL $57,261,979 $48,891,719
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 5) $ 4,625,204 $ 4,090,561
Accounts payable - trade and interline 2,122,561 932,524
Accrued liabilities:
Self-insurance claims (Note 6) 2,203,999 1,664,465
Salaries and wages 465,665 1,297,116
Other 411,206 726,416
----------- -----------
Total current liabilities 9,828,635 8,711,082
LONG-TERM DEBT (Note 5) 15,197,840 9,227,851
DEFERRED INCOME TAXES (Note 8) 8,347,757 6,964,156
----------- -----------
Total liabilities 33,374,232 24,903,089
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (Notes 5 and 7):
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; 3,700,688 and 3,823,000 shares issued
and outstanding in 1996 and 1995, respectively 3,701 3,823
Additional paid-in capital 13,780,616 14,708,994
Retained earnings 10,103,430 9,275,813
----------- -----------
Total stockholders' equity 23,887,747 23,988,630
----------- -----------
TOTAL $57,261,979 $48,891,719
=========== ===========
See notes to financial statements.
7
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
OPERATING REVENUES (Note 9) $ 65,523,412 $ 61,865,851 $ 59,132,066
------------ ------------ ------------
OPERATING EXPENSES:
Salaries, wages and employee benefits (Note 3) 28,419,881 27,572,613 24,799,963
Operating supplies 19,549,827 17,155,929 15,042,198
Taxes and licenses 2,221,710 1,823,281 1,922,172
Insurance and claims 3,378,815 3,209,700 3,668,747
Communications and utilities 1,186,131 1,021,927 926,816
Depreciation and amortization 8,261,253 7,295,671 6,451,402
Rent (Note 4) 202,489 153,944 135,771
Gain on disposition of property and equipment, net (805,800) (648,061) (409,657)
Environmental remediation (Note 6) 19,408 (293,652) 800,000
Other 439,213 473,723 522,226
------------ ------------ ------------
Total operating expenses 62,872,927 57,765,075 53,859,638
------------ ------------ ------------
OPERATING INCOME 2,650,485 4,100,776 5,272,428
------------ ------------ ------------
OTHER INCOME (EXPENSES):
Interest income 164,363 82,018 53,613
Interest expense (1,408,489) (780,854) (805,580)
Other -- -- 70,066
------------ ------------ ------------
Other expenses, net (1,244,126) (698,836) (681,901)
------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,406,359 3,401,940 4,590,527
------------ ------------ ------------
PROVISION (BENEFIT) FOR INCOME TAXES
(Note 8):
Current (602,915) 145,529 1,300,612
Deferred 1,181,657 1,131,753 5,243,687
------------ ------------ ------------
Total provision for income taxes 578,742 1,277,282 6,544,299
------------ ------------ ------------
NET INCOME (LOSS) $ 827,617 $ 2,124,658 $ (1,953,772)
============ ============ ============
NET INCOME (LOSS) PER SHARE $ 0.22 $ 0.56 $ (0.55)
============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 3,726,496 3,823,000 3,523,677
============ ============ ============
PRO FORMA INCOME DATA (UNAUDITED), (Note 2):
HISTORICAL INCOME BEFORE INCOME TAXES $ 4,590,527
============
PRO FORMA INCOME TAXES (Note 8) 1,762,600
------------
PRO FORMA NET INCOME $ 2,827,927
============
PRO FORMA NET INCOME PER SHARE $ 0.80
============
WEIGHTED AVERAGE SHARES OUTSTANDING 3,523,677
============
SEE NOTES TO FINANCIAL STATEMENTS.
8
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
--------------------------------------------------------------
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
- ------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 1, 1994 $ 3,000 $ 6,772,485 $ 11,629,927 $ 18,405,412
Proceeds from public offering of
common stock, net of offering costs 823 7,936,509 -- 7,937,332
Dividends paid (Note 7) (2,525,000) (2,525,000)
Net loss -- -- (1,953,772) (1,953,772)
----------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1994 3,823 14,708,994 7,151,155 21,863,972
Net income -- -- 2,124,658 2,124,658
----------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1995 3,823 14,708,994 9,275,813 23,988,630
Purchase and retirement of
common stock (122) (928,378) -- (928,500)
Net income -- -- 827,617 827,617
----------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1996 $ 3,701 $ 13,780,616 $ 10,103,430 $ 23,887,747
=========== ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS.
9
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income (loss) $ 827,617 $ 2,124,658 $ (1,953,772)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 8,261,253 7,295,671 6,451,402
Provision for bad debts -- (28,000) --
Gain on disposal of property and equipment, net (805,800) (648,061) (409,657)
Provision for deferred income taxes 1,181,657 1,131,753 5,243,687
Changes in assets and liabilities provided
(used) cash:
Accounts receivable 805,570 (2,184,454) (212,331)
Refundable income taxes 581,738 (860,543) --
Other current assets (9,950) (156,920) (175,130)
Deposits and other assets (30,038) (54,012) --
Accounts payable - trade and interline 1,190,036 165,309 64,614
Accrued liabilities (607,128) (643,341) 1,532,666
------------ ------------ ------------
Net cash provided by operating activities 11,394,955 6,142,060 10,541,479
------------ ------------ ------------
INVESTING ACTIVITIES:
Capital expenditures:
Revenue equipment (20,981,024) (11,452,497) (8,084,406)
Other property and equipment (838,881) (1,882,879) (2,434,448)
Proceeds from disposals of property and equipment 6,959,399 2,663,850 1,745,300
Collections on note receivable from stockholder -- -- 1,000,000
------------ ------------ ------------
Net cash used in investing activities (14,860,506) (10,671,526) (7,773,554)
------------ ------------ ------------
FINANCING ACTIVITIES:
Purchase of common stock (928,500)
Net proceeds from initial public offering of
common stock 7,937,332
Net payments under line of credit (400,000)
Proceeds from long-term debt 18,411,485 10,457,052 6,730,712
Principal payments on long-term debt (11,906,138) (5,731,221) (14,740,629)
Dividends paid -- -- (2,525,000)
------------ ------------ ------------
Net cash provided by (used in)
financing activities 5,576,847 4,725,831 (2,997,585)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,111,296 196,365 (229,660)
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR 1,481,910 1,285,545 1,515,205
------------ ------------ ------------
END OF YEAR $ 3,593,206 $ 1,481,910 $ 1,285,545
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid (received) during the year for:
Interest $ 1,350,568 $ 775,495 $ 825,580
============ ============ ============
Income taxes, net of refunds $ (943,351) $ 1,043,207 $ 1,664,976
============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS.
10
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Boyd Bros. Transportation Inc. (the "Company") is a
flatbed carrier,transporting a variety of products, primarily steel and building
materials. The Company has authority to operate in the continental United
States; however, its market generally encompasses the eastern two-thirds of the
United States. The Company is headquartered in Clayton, Alabama, and operates
regional and satellite terminals in locations near interstate highways or
customer facilities.
ACCOUNTING ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on hand, cash
on deposit and highly liquid investments with a maturity of three months or less
at purchase date.
SHORT-TERM INVESTMENTS - Short-term investments, which consist of certificates
of deposit with maturities of three to twelve months, are stated at cost, which
approximates market.
TIRES IN SERVICE - Tires placed in service on newly purchased revenue equipment
are carried at cost and depreciated over their useful lives, estimated to be
eighteen months. The undepreciated cost of tires is included in prepaid tire
expense.
INVENTORIES - Parts and supplies are stated at the lower of cost or market.
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost. Depreciation
is computed using the straight-line method at rates intended to distribute the
cost of the assets over their estimated service lives as follows:
Land improvements 15 years
Buildings 5-25 years
Revenue equipment 5-7 years
Other equipment 3-10 years
Leasehold improvements 5-20 years
Expenditures which significantly increase values or extend useful lives of
property and equipment are capitalized, whereas those for normal maintenance and
repairs are expensed. Gains and losses on disposal of property and equipment are
reflected in operations in the year of disposal.
CLAIMS - The Company accrues estimates for the uninsured portion of claims
relating to the Company's insurance programs (see Note 6).
REVENUE RECOGNITION - Operating revenue and related costs are recognized on the
date shipments are delivered by the Company.
NET INCOME (LOSS) PER SHARE - Net income (loss) per share is based on the
weighted average number of shares of common stock outstanding during the year,
adjusted to reflect the reincorporation described in Note 7.
RECLASSIFICATIONS - Certain reclassifications have been made to the 1995 and
1994 financial statements to conform to the 1996 presentation.
11
NOTES TO FINANCIAL STATEMENTS
2. PRO FORMA INFORMATION (UNAUDITED)
PRO FORMA INCOME TAXES - As described in Note 8, through March 30, 1994, the
Company was treated as an S Corporation pursuant to the Internal Revenue Code.
As such, for all periods prior to March 30, 1994, the Company was not subject to
federal income taxes and certain state income taxes. For informational purposes,
the statements of operations include an unaudited pro forma adjustment for
income taxes which would have been recorded if the Company had not been an S
Corporation, computed in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109.
PRO FORMA NET INCOME PER SHARE - Pro forma net income per share is based on the
weighted average number of shares of common stock outstanding during the year,
adjusted to reflect the reincorporation described in Note 7.
3. EMPLOYEE BENEFIT PLAN
The Company has a contributory 401(k) retirement plan, which covers employees
who elect to participate and meet certain eligibility requirements. The amounts
charged to operations related to this plan for the years ended December 31,
1996, 1995, and 1994 were $233,444, $218,496, and $226,501, respectively.
There are no significant post-retirement benefits provided for retired employees
of the Company.
4. LEASES
The Company leases certain terminal buildings, land and equipment under various
agreements, which expire at various dates through 1999. The lease agreements
generally include renewal options and the Company is required to pay taxes,
insurance and normal maintenance for the facilities.
Future minimum lease payments under all operating leases with an initial or
remaining noncancellable lease term of more than one year are as follows:
YEAR
------------------------------------------------------------------
1997 $27,048
1998 27,048
1999 6,762
-------
Total $60,858
=======
Total rental expense for all operating leases totaled $98,648, $96,300, and
$97,686 for the years ended December 31, 1996, 1995 and 1994, respectively.
5. LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 is summarized as follows:
1996 1995
- ----------------------------------------------------------------------------------------
Revenue equipment obligations repaid in 1996 $ -- $ 3,650,715
Revenue equipment obligations at LIBOR plus 1.25%
(6.81% - 1996 and 7.31% - 1995) payable in monthly
installments through August 2001 19,823,044 9,667,697
----------- -----------
Total 19,823,044 13,318,412
Less current maturities 4,625,204 4,090,561
----------- -----------
Long-term debt, exclusive of current maturities $15,197,840 $ 9,227,851
=========== ===========
12
NOTES TO FINANCIAL STATEMENTS
Revenue equipment obligations are collateralized by revenue equipment.
Long-term debt is scheduled to mature as follows:
Year
------------------------------------------------------------------------
1997 $ 4,625,204
1998 4,625,204
1999 4,625,204
2000 4,330,309
2001 1,617,123
-----------
Total $19,823,044
===========
The Company has a $1,500,000 line of credit agreement with a bank which was
not utilized at December31, 1996 and December 31, 1995. The interest rate
available on borrowings under the line of credit is prime less .125%.
The covenants of loan agreements require the Company, among other things, to
maintain a tangible net worth of $14,800,000, as defined, and to maintain
certain financial ratios. The Company was in compliance with these financial
covenants at December 31, 1996.
The fair value of long-term debt was estimated using a discounted cash flow
analysis, based on the borrowing rate currently available to the Company for
bank loans with similar terms and average maturities and approximates its
carrying value.
6. COMMITMENTS AND CONTINGENCIES
The Company is currently self-insured as follows:
RETENTION AMOUNT
PER OCCURRENCE
-----------------------------------------------------------------------------
Workers' compensation $300,000
Liability - bodily injury and property damage 100,000
Employee medical and hospitalization 90,000
Cargo loss and damage 10,000
Collision and environmental losses No limit
The Company has excess primary coverage on a per claim and aggregate basis
beyond the deductible levels and also maintains umbrella policies to supplement
the primary liability coverage.
The liabilities for self-insurance are accrued based on claims incurred, with
liabilities for unsettled claims and claims incurred but not yet reported being
estimated based on management's evaluation of the nature and severity of
individual claims and the Company's past claims experience.
The Company has outstanding letters of credit at December 31, 1996, totaling
$1,607,000 to cover liability insurance claims and self-insured workers'
compensation programs, and to purchase revenue equipment.
There are sundry claims and suits pending against the Company in the ordinary
course of business. In the opinion of the Company's management, any ultimate
liability in these matters will have no material adverse effect on the
operations or financial position of the Company.
During 1994, the Company retained an environmental consulting firm to conduct an
audit of its compliance with applicable federal, state and local laws and
regulations concerning the environment. The environmental consulting firm
detected the presence of soil contamination and potential groundwater
contamination related primarily to the use of underground storage tanks,
including tanks used by a prior owner of the property, at the Company's terminal
in Birmingham, Alabama. The Company notified the Alabama Department of
Environmental Management of this contamination. The Company completed the
13
NOTES TO FINANCIAL STATEMENTS
process of removing and replacing all currently known underground storage tanks
at the Birmingham terminal. The Company also replaced all underground storage
tanks at the Clayton, Alabama, terminal. Based upon cost estimates provided by
its environmental consulting firm and contractors in 1994, the Company recorded
an $800,000 charge to establish a reserve for the removal and replacement of
underground storage tanks at the Company's terminals. Based on subsequent
reviews of this project by management and its independent consultants, the
Company reduced this reserve during 1995 by $293,652 and again during 1996 by
$54,878, reflecting a decline in the current estimated costs of remediating the
sites. The environmental remediation liability included in the accompanying
balance sheet at December31, 1996 is $145,122. There can be no assurance that
material liabilities or expenditures will not arise from these or additional
environmental matters that may be discovered, or from future requirements of
law. The Company does not believe that these expenditures will have a material
adverse effect on the Company's financial condition.
7. STOCKHOLDERS' EQUITY
REINCORPORATION - Originally incorporated in Alabama in 1956 under the name of
Boyd Brothers Transportation Company, Incorporated, the Company reincorporated
as a Delaware corporation on March 23, 1994, and changed its name to Boyd Bros.
Transportation Inc. As a result of the merger that effected the reincorporation,
each share of common stock outstanding in the Alabama corporation was converted
into 12,000 shares of common stock, resulting in a total of 3,000,000 shares of
common stock outstanding prior to the offering. All common shares and per share
amounts in the accompanying financial statements have been adjusted
retroactively to give effect to the reincorporation.
PREFERRED STOCK - The Board of Directors is authorized to issue, at its
discretion, up to 1,000,000 shares of preferred stock at par value of $.001. The
terms and conditions of the preferred stock are to be determined by the Board of
Directors.
STOCK OPTION PLAN - The Company has a stock option plan ("the Plan") that
provides for the granting of stock options to key employees, executive officers
and directors. 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 exercised in 1994, 1995, or 1996.
Information regarding the Plan is summarized below:
Option
Shares Price
----------------------------------------------------------------------------------
Shares under option:
Options granted in 1994 260,000 $ 11.00
Options terminated (16,100)
-------
Outstanding at December 31, 1994 243,900
Options granted in 1995 73,000 $ 11.00
Options terminated (25,950)
-------
Outstanding at December 31, 1995 290,950
Options granted in 1996 64,500 $7.75-11.00
Options terminated (97,050)
-------
Outstanding at December 31, 1996 258,400
=======
Stock options exercisable and shares available for future grants at December 31,
1996, were 77,960 and 75,650, respectively, under the Plan.
SFAS No. 123, Accounting for Stock-Based Compensation, 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 fair value of the stock at the grant date. As such, no compensation
expense is recorded in the accompanying financial statements.
14
NOTES TO FINANCIAL STATEMENTS
Had compensation cost for the Company's stock option plans been determined based
upon the fair value at the grant date for options awarded in 1996 and 1995 under
these plans 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:
As Reported Pro Forma
----------------------- ----------------------
1996 1995 1996 1995
- ------------------------------------------------------- ----------------------
Net income $827,617 $2,124,658 $696,085 $2,079,365
Net income per share $ 0.22 $ 0.56 $ 0.19 $ 0.54
The weighted average fair value of the options granted during 1996 and 1995 is
estimated as $6.24 and $8.63, respectively, on the date of grant using the
Black-Scholes option-pricing model with the following assumptions: dividend
yield 0%, volatility of 82.6%, risk-free interest rate of 6.5% and an expected
life of 7 years.
PUBLIC OFFERING - The Company completed the initial public offering of its
common stock in May 1994, under which 823,000 shares of stock were sold. Net
proceeds from the offering totaled $7,937,332.
DISTRIBUTIONS TO S CORPORATION STOCKHOLDERS - In connection with the termination
of its S Corporation status and its initial public offering of common stock, the
Company distributed $2,525,000 to the S Corporation stockholders. The
distributions represented the previously undistributed taxable earnings of the
Company included in the taxable income of the S Corporation stockholders as a
result of the Company's S Corporation status.
8. INCOME TAXES
The Company terminated its S Corporation status on March 30, 1994, and became
subject to corporate income taxes on that date. Upon termination of the S
Corporation election, deferred income taxes became a liability of the Company
and were recorded in the balance sheet with a corresponding charge to the income
statement. The liability as of March 30, 1994, computed under the provisions of
SFAS No. 109, was approximately $5,478,000 and is included in the 1994 provision
for deferred income taxes.
The provision (credit) for income taxes for the years ended December 31, 1996,
1995 and 1994 consisted of the following
(in thousands):
1996 1995 1994
-----------------------------------------------------------------------------
Current:
Federal $ (545) $ 125 $ 1,029
State (58) 20 272
------- ------ -------
Total current (603) 145 1,301
------- ------ -------
Deferred:
Federal 1,019 979 5,322
State 163 153 (79)
------- ------ -------
Total deferred 1,182 1,132 5,243
------- ------ -------
Total provision for income taxes $ 579 $1,277 $ 6,544
======= ====== =======
Income tax expense for the years ended December 31, 1996, 1995 and 1994 differs
from the amounts computed by applying the federal statutory rate of 34% to
income before income taxes as follows (in thousands):
1996 1995 1994
-------------------------------------------------------------------------------
Tax expense at the statutory rate $ 478 $1,157 $ 1,561
Deferred taxes recorded upon termination of
S Corporation status -- -- 5,478
Tax benefit of pro-rata allocation of items between
C Corporation and S Corporation -- -- (737)
State income taxes, net of federal benefit 69 94 184
Other 32 26 58
------ ------ -------
$ 579 $1,277 $ 6,544
====== ====== =======
15
NOTES TO FINANCIAL STATEMENTS
The Company has approximately $2,400,000 of state net operating loss
carryforwards for tax purposes available to offset future state taxable income
through 2011. The Company also has approximately $244,000 of alternative minimum
tax credit carryforwards available to offset future federal income tax.
PRO FORMA INCOME TAXES - The following unaudited pro forma information reflects
income tax expense that the Company would have incurred if it had been subject
to federal and state income taxes for all of 1994, computed in accordance with
SFAS No. 109 (in thousands).
1994
---------------------------------------------------------------------------
Pro forma income tax expense:
Current:
Federal $1,424
State 296
Deferred federal and state 43
------
$1,763
======
The unaudited pro forma income tax expense differs from the amounts
computed by applying the federal statutory rate of 34% to income before income
taxes as follows (in thousands):
1994
-----------------------------------------------------------------
Tax expense at the statutory rate $1,561
State income taxes, net of federal benefit 184
Meals and entertainment 7
Other 11
------
$1,763
======
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1996 and
1995 are as follows (in thousands):
1996 1995
---------------------------------------------------------------------------
Deferred tax liabilities:
Tax over book depreciation $8,746 $6,907
Prepaid expenses deductible when paid 247 273
Capitalized tires 265 206
Cash basis to accrual basis adjustment -- 84
Other 31 58
------ ------
Total deferred tax liabilities 9,289 7,528
------ ------
Deferred tax assets:
Environmental remediation reserve 55 74
Accrued self insurance claims 865 639
Other accrued expenses not deductible until paid 87 86
Allowance for doubtful accounts 47 46
State NOL carryforward 118 --
Alternative minimum tax credit carryforward 234 --
Other 66 48
------ ------
Total deferred tax assets 1,472 893
------ ------
Net deferred tax liabilities $7,817 $6,635
====== ======
16
NOTES TO FINANCIAL STATEMENTS
The above amounts are reflected in the accompanying balance sheets as:
1996 1995
---------------------------------------------------------------------------
Current assets $ 531 $ 329
Noncurrent liabilities 8,348 6,964
------ ------
$7,817 $6,635
====== ======
9. MAJOR CUSTOMERS
The Company does not believe that it is dependent upon any single customer.
Sales to the Company's largest customer amounted to 13%, 14% and 14% of
operating revenues during 1996, 1995 and 1994, respectively.
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1996 and 1995:
1996
-----------------------------------------------
(In Thousands, except per share data) March 31 June 30 September 30 December 31
---------------------------------------------------------------------------------------
Operating revenues $ 14,929 $16,350 $17,529 $16,715
Operating income (loss) (101) 890 1,243 618
Net income (loss) (234) 307 507 248
Net income (loss) per share (.06) .08 .14 .07
1995
-----------------------------------------------
(In Thousands, except per share data) March 31 June 30 September 30 December 31
---------------------------------------------------------------------------------------
Operating revenues $ 14,638 $15,987 $15,827 $15,414
Operating income 1,429 1,241 761 670
Net income 778 680 312 355
Net income per share .20 .18 .08 .09