April 2, 2000
TRAILER BRIDGE INC (TRBR)
Annual Report (SEC form 10-K)
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations
RESULTS OF OPERATIONS
Year ended December 31, 2000 Compared to Year ended December 31, 1999
Operating revenues increased $3.2 million, or 3.6%, to $91.7 million during
2000 from $88.6 million during 1999. This increase was due to a $2.9 million or
3.4% increase in total Puerto Rico revenue to $87.0 million through the
utilization of additional capacity in the Puerto Rico market. Non-Puerto Rico
domestic revenue increased $349,717 or 9.7% compared to 1999. Core trailer
volume to Puerto Rico increased 14.1% in 2000 compared to 1999, and total car
and other volume decreased 6.7% compared to 1999. As a result, core trailer
revenue to Puerto Rico increased 9.6% and car and other revenue decreased 12.9%
compared to 1999. Revenue from shipper owned or leased equipment moving to
Puerto Rico decreased 27.9% from 1999. Revenue from northbound shipments from
Puerto Rico decreased 7.0% from 1999.
While overall volume to and from Puerto Rico increased 13.2% in 2000, related
revenue increased only $639,466 million or .8% compared to 1999, implying an
overall yield reduction of 11.0%. Vessel capacity deployed on the core
continental U.S. to Puerto Rico traffic lane increased 20.9% during 2000
compared to 1999. Vessel capacity utilization on the core continental U.S. to
Puerto Rico traffic lane was 78.9% during 2000, compared to 83.3% during 1999.
The market to and from Puerto Rico in 2000 was characterized by increasing
competitive activity throughout the year. The excess vessel capacity in the
market was exacerbated by market volume reductions that resulted in overall
market volume declining 4.0% in 2000. While the Company increased its overall
market share of freight moving in trailers or containers to 13.6% in 2000 from
11.6% in 1999, the highly competitive market conditions resulted in an 11.0%
reduction in yield. On March 21, 2001, the largest participant in the Puerto
Rico market, NPR/Navieras, which had a 29.0% market share in 2000, in
conjunction with its parent and affiliates, filed for Chapter 11 bankruptcy
protection in the Delaware Bankruptcy Court in Wilmington, Delaware.
At the beginning of the fourth quarter of 2000 a fourth Triplestack Box
Carrier was utilized to provide weekly service between Newark, New Jersey and
San Juan, Puerto Rico.
Operating expenses for 2000 increased $7.4 million or 8.3% from $88.7 million
in 1999 to $96.0 million in 2000. This increase was due to an increase in
expenses associated with an overall 13.2% increase in Puerto Rico volume,
including the expansion of the Company's northeast service, resulting in a $4.3
million increase in operating and maintenance expenses and a $4.5 million
increase in fuel expense, partially offset by a $2.9 million increase in fuel
surcharges included in revenue, and a $2.4 million reduction in other operating
expenses. As a result, the Company's operating ratio increased to 104.8% during
2000 from 100.1% during 1999.
Interest expense (net) increased to $3.4 million in 2000 from $3.3 million in
1999.
The Company has recorded various deferred tax assets in prior years.
Realization is dependent on generating sufficient taxable income in future
years. As a result of the net losses incurred in recent years, a 100% valuation
allowance has been established based on the provisions of SFAS No. 109. The
establishment of this reserve resulted in income tax expense in 2000 of $3.1
million compared to an income tax benefit of $1.2 million in 1999.
As a result of the factors described above the Company reported a net loss of
$10.3 million for 2000 compared to net loss of $2.1 million in 1999.
Year ended December 31, 1999 Compared to Year ended December 31, 1998
Operating revenues increased $11.4 million, or 14.6%, to $88.6 million during
1999 from $77.2 million during 1998. This increase was due to a $10.7 million or
14.8% increase in total Puerto Rico revenue to $83.5 million through the
utilization of additional capacity in the Puerto Rico market. Non-Puerto Rico
revenue increased $575,627 or 12.9% compared to 1998. Core trailer volume to
Puerto Rico increased 25.9% in 1999 compared to 1998, and total car and other
volume increased 47.5% compared to 1998. As a result, core trailer revenue to
Puerto Rico increased $9.3 million or 21.3% and car and other revenue increased
$6.3 million or 40.7% compared to 1998. Revenue from shipper owned or leased
equipment moving to Puerto Rico decreased $411,776 or 8.4% from 1998. Revenue
from northbound shipments from Puerto Rico increased $853,386 or 10.2% from
1998.
While overall volume to and from Puerto Rico increased 16.4% in 1999, related
revenue increased only $10.7 million or 14.8% compared to 1998 implying, an
overall yield reduction of 1.4%. Vessel capacity deployed on the core
continental U.S. to Puerto Rico traffic lane increased 7.6% during 1999 compared
to 1998. Vessel capacity utilization on the core continental U.S. to Puerto Rico
traffic lane was 83.3% during 1999, compared to 77.4% during 1998.
In September 1998, Hurricane Georges struck Puerto Rico causing extensive
damage on the island. During this storm, the Company's floating loading ramp was
damaged. The Company contracted for the ramp to be re-floated and repaired. The
top section of the structure was partially removed. In January 1999 the ramp was
successfully re-floated. The ramp was repaired and returned to active cargo
operations for the first two decks in March 1999 and the third deck in May 1999
at which time normal operations resumed. The cost of re-floating the ramp
structure and its repair was insured and the Company received reimbursement of
these expenses, less a $50,000 deductible.
The inability to utilize the San Juan ramp necessitated alternative methods
of discharging and re-loading the two roll-on, roll-off vessels that nearly
quadrupled cargo operations time while at the same time reducing available
vessel space. The resulting schedule tightness and uncertainty exacerbated costs
beyond those directly related to San Juan cargo operations, including trucking
costs on the mainland. The Company's goal during this period of disruption was
to continue to provide a high level of service to customers despite certain
adverse cost consequences. Such additional operating cost in the first quarter
of 1999 was $2.4 million and in the second quarter of 1999 $700,000. The $3.1
million of estimated additional costs related to the hurricane situation
included $1.6 million in operating and maintenance costs (comprised primarily of
stevedoring and port related items), $1.3 million in rent and purchased
transportation (comprised primarily of terminal equipment rental, trucking
expense in San Juan and the U.S. and revenue equipment rental), $150,852 in
salaries and wages, $17,449 in insurance and claims and $61,885 in
communications and other operating expenses.
During the third quarter of 1999 the Company had one less voyage than
scheduled of its large roll-on, roll-off vessels due to Hurricane Floyd. The
tugboat that was towing the Company's vessel the week of the storm suffered a
casualty and needed to be replaced. While neither the Company's vessel nor its
cargo was damaged by this marine casualty, the time and recovery efforts of
substituting a new tug caused a major schedule disruption that resulted in one
less roll-on, roll-off voyage.
During the fourth quarter of 1999 the Company recognized a recovery of
certain operating and maintenance expenses from an affiliate in the amount of
$3,710,000 related to non-recurring excess costs associated with the
unavailability of the floating ramp system that the Company utilizes pursuant to
the charter of its large roll-on, roll-off vessels from that affiliate.
During the first nine months of 1999 three of the Company's Triplestack Box
Carrier vessels were utilized in a Newark, New Jersey - Jacksonville, Florida -
San Juan, Puerto Rico service. As two vessels can provide weekly service between
Jacksonville, Florida and San Juan, Puerto Rico, the addition of the third
vessel permitted the addition of a Newark, New Jersey/Jacksonville, Florida leg.
At the beginning of the fourth quarter of 1999 this deployment was realigned
with two of the vessels providing direct service between Jacksonville, Florida
and San Juan, Puerto Rico. The third Triplestack Box Carrier was utilized to
provide a sailing on alternate weeks directly between Newark, New Jersey and San
Juan, Puerto Rico.
Operating expenses for 1999 increased $8.4 million or 10.4% from 1998 to
$88.7 million. This increase was due to an increase in expenses associated with
an overall 21.8% increase in Puerto Rico volume, and the $3.1 million in
additional costs related to the inefficiency of servicing the ro/ro vessels
while the San Juan ramp structure was out of service and/or being repaired,
partially offset by the $3.7 million non-recurring reimbursement of floating
ramp system expenses. As a result, the Company's operating ratio decreased to
100.1% during 1999 from 103.9% during 1998.
Interest expense (net) increased $2.3 million or 222.4% in 1999 to $3.3
million in 1998 from $1.0 million in 1998 due to increased average long- term
debt outstanding, increased amounts outstanding under the Company's revolving
line of credit, a reduction of capitalized interest related to Title XI debt,
higher interest rates and less interest income earned on short-term investments.
As a result of the factors described above and after application of income
taxes, the Company reported a net loss of $2.1 million for 1999 compared to net
loss of $2.5 million in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operations was $3.4 million in 2000 compared to net cash
used by operations of $1.0 million in 1999. This represented a deterioration of
$2.4 million from 1999. Net cash used in investing activities of $3.1 million in
2000 reflects $5.6 million of capital expenditures, which were primarily
attributable to payments for the purchase of containers and chassis, partially
offset by $1.8 million in proceeds from the sale of older equipment. Net cash
provided from financing activities was $5.0 million compared to $2.9 million in
1999 representing an increase of $2.1 million. Net cash provided from financing
activities of $5.0 million consisted of $12.0 million in borrowing on notes
payable under the Company's borrowing facility; $5.3 million under the revolving
line of credit portion of that facility; $9.0 million in notes payable to an
affiliate, partially offset by payments of $15.6 million under a previous
revolving line of credit and $5.3 million of notes payable.
At December 31, 2000 cash amounted to $865,167, working capital was $3.2
million, and stockholders' equity amounted to $18.9 million. The Company's
projected cash flows from operations indicate that there is sufficient available
liquidity to maintain its current level of operations through calendar 2001.
Such projections include certain agreements with by an affiliate to assist the
Company in meeting its 2001 cash flow requirements.
The Company has also identified additional sources of liquidity. The Company
has contracted to sell excess 48' trailer equipment and expects to realize
proceeds of approximately $650,000 in April 2001. The Company owns additional
equipment, with a carrying value of approximately $6.0 million at December 31,
2000, that is lien free and potentially available for additional asset based
financing. In addition, the Company is exploring the possible sale/leaseback of
its Jacksonville office building/truck terminal.
Management believes that, as a result of cash flow from operations, the
Company will meet all of its working capital requirements, anticipated capital
expenditures and other obligations at least through calendar 2001.
INFLATION
Inflation has had a minimal effect upon the Company's profitability in recent
years. Most of the Company's operating expenses are inflation-sensitive, with
inflation generally producing increased costs of operation. The Company expects
that inflation will affect its costs no more than it affects those of other
truckload and marine carriers.
SEASONALITY
The Company's marine operations are subject to the seasonality of the Puerto
Rico freight market where shipments are generally reduced during the first
calendar quarter and increased during the fourth calendar quarter of each year
in anticipation of Christmas. This seasonality was not as pronounced in 1999 and
2000 as it had been in previous years.
The following table sets forth certain unaudited financial information for
the Company for each of the last eight quarters (in thousands except per share
amounts):
1999 2000
---- ----
By Quarter
First Second Third Fourth First Second Third Fourth
----- ------ ----- ------ ----- ------ ----- ------
Operating revenues........... $22,751 $22,686 $20,626 $22,489 $21,333 $23,765 $23,152 $23,456
Operating (loss) income...... (2,078) 140 (2,246) 4,063(1) (903) 1,303 340 (5,132)
Net (loss) income........... (1,684) (399) (1,955) 1,901 (1,151) 628 (210) (9,608)(1)
____________________________ (1) See Note 14 to the Financial Statements.
This 10-K contains statements that constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. The
matters discussed in this Report include statements regarding the intent, belief
or current expectations of the Company, its directors or its officers with
respect to the future operating performance of the Company. Investors are
cautioned that any such forward looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those in the forward looking statements as a result of
various factors. Without limitation, these risks and uncertainties include the
risks of economic recessions, severe weather, changes in demand for
transportation services offered by the Company, and changes in rate levels for
transportation services offered by the Company.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest rates. For its
debt instruments, a change in interest rates affects the amount of interest
expense incurred.
The Company entered into an interest rate contract to manage its exposure to
changes in interest rates and to make fixed the overall cost of one of its
variable rate financing agreements. The contract has no carrying value with
gains and losses recognized as a component of interest expense.
The following tables summarize the Company's debt obligations at December 31,
2000 and 1999, presenting principal cash flows and related interest rates by
expected fiscal year of maturity. Variable interest rates represent the
weighted-average rates of the portfolio at December 31, 2000 and 1999. The
Company estimates that the carrying value of its debt instruments is not
materially different from its fair value. Details regarding these financial
instruments are described in Note 4 of the 2000 Annual Report, which Note is
incorporated herein by reference.
Expected Fiscal Year of Maturity at December 31, 2000 (Dollars in thousands)
2001 2002 2003 2004 2005 Thereafter
--------------------------------------------------------------------
Fixed Rate $ 1,723 1,097 1,097 1,097 1,097 $ 18,993
Average Interest Rate 8.0% 6.8% 6.8% 6.8% 6.8% 6.8%
Variable Rate $ 1,454 1,882 1,882 12,715 168 $ 140
Average Interest Rate 9.1% 9.1% 9.1% 9.3% 8.0% 8.0%
Expected Fiscal Year of Maturity at December 31, 1999 (Dollars in thousands)
2000 2001 2002 2003 2004 Thereafter
--------------------------------------------------------------------
Fixed Rate $ 4,458 2,390 1,097 1,097 1,097 $ 20,090
Average Interest Rate 8.5% 8.4% 6.8% 6.8% 6.8% 6.8%
Variable Rate $ 2,112 13,774 168 168 168 $ 308
Average Interest Rate 9.5% 9.5% 8.0% 8.0% 8.0% 8.0%
Item 8. Financial Statements and Supplementary Data
TRAILER BRIDGE, INC.
Financial Statements for the Three Years in the Period Ended December 31,
2000 and Independent Auditors' Report
* * * * * *
TRAILER BRIDGE, INC.
Financial Statements for the Three Years in the Period Ended December 31,
2000 and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders Trailer Bridge, Inc. Jacksonville,
Florida
We have audited the accompanying balance sheets of Trailer Bridge, Inc. (the
"Company") as of December 31, 2000 and 1999, and the related
statements of operations, changes in stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Trailer Bridge, Inc. as of December 31, 2000
and 1999, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for periodic vessel dry-docking in 2000.
DELOITTE & TOUCHE LLP
Jacksonville, Florida March 30, 2001
TRAILER BRIDGE, INC.
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
2000 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 865,167 $ 2,445,750
Trade receivables, less allowance for doubtful
accounts of $1,713,825 and $1,368,514 15,083,235 12,535,138
Other receivables 104,271 76,498
Due from affiliate 2,007 2,750,200
Prepaid expenses 1,673,117 1,202,443
----------- ------------
Total current assets 17,727,797 19,010,029
PROPERTY AND EQUIPMENT, net 62,572,147 63,086,924
GOODWILL, less accumulated amortization of
$404,880 and $358,101 764,062 810,841
RESTRICTED CASH AND INVESTMENTS 691,419
DEFERRED INCOME TAXES, NET 3,227,332
OTHER ASSETS 1,576,059 1,236,093
----------- ------------
TOTAL ASSETS $ 82,640,065 $ 88,062,638
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,494,174 $ 7,460,770
Accrued liabilities 3,514,657 3,793,885
Current portion of long-term debt 3,266,755 6,642,622
Unearned revenue 292,795 499,506
----------- ------------
Total current liabilities 14,568,381 18,396,783
DUE TO AFFILIATE 9,038,075
LONG-TERM DEBT, less current portion 40,167,855 40,458,347
----------- ------------
TOTAL LIABILITIES 63,774,311 58,855,130
----------- ------------
COMMITMENTS (Notes 3, 5 and 10)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares authorized; no shares issued
or outstanding Common stock, $.01 par value, 20,000,000 authorized
shares; 9,777,500 shares outstanding 97,775 97,775
Additional paid-in capital 37,982,818 37,982,818
Accumulated deficit (19,214,839) (8,873,085)
----------- ------------
Total stockholders' equity 18,865,754 29,207,508
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 82,640,065 $ 88,062,638
=========== ============
See notes to financial statements.
TRAILER BRIDGE, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
OPERATING REVENUES $ 91,706,164 $ 88,552,088 $ 77,240,644
OPERATING EXPENSES:
Salaries, wages, and benefits 16,648,581 16,222,059 16,343,786
Rent and purchase transportation:
Related party 7,356,600 7,336,500 6,736,500
Other 26,487,467 26,148,311 18,791,731
Fuel 11,157,500 6,659,189 5,701,701
Operating and maintenance (exclusive of
depreciation shown separately below) 21,503,909 17,230,798 19,135,312
Taxes and licenses 497,016 596,241 539,672
Insurance and claims 2,373,186 1,962,541 2,061,199
Communications and utilities 662,026 820,735 825,309
Depreciation and amortization 4,840,965 4,731,153 3,527,662
Other operating expenses 4,570,616 6,964,911 6,623,421
------------ ------------ ------------
96,097,866 88,672,438 80,286,293
------------ ------------ ------------
OPERATING LOSS (4,391,702) (120,350) (3,045,649)
NONOPERATING INCOME (EXPENSE):
Interest expense, net (3,357,936) (3,339,382) (1,035,769)
Gain on sale of equipment, net:
Related party 336,818
Other 93,398 81,499 207,255
------------ ------------ ------------
(2,927,720) (3,257,883) (828,514)
------------ ------------ ------------
LOSS BEFORE BENEFIT FOR INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (7,319,422) (3,378,233) (3,874,163)
INCOME TAX (EXPENSE) BENEFIT (3,149,432) 1,241,814 1,358,133
------------ ------------ ------------
LOSS BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (10,468,854) (2,136,419) (2,516,030)
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE, NET OF TAX OF $77,900 (Note 1) 127,100
------------
NET LOSS $ (10,341,754) $ (2,136,419) $ (2,516,030)
============ ============ ============
LOSS PER COMMON SHARE:
Loss before cumulative effect of accounting change $ (1.07) $ (0.22) $ (0.26)
Cumulative effect of accounting change 0.01
------------
Net loss per common share $ (1.06) $ (0.22) $ (0.26)
============ ============ ============
See notes to financial statements.
TRAILER BRIDGE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Retained
Additional Earnings
Common Stock Paid-in (Accumulated
Shares Amount Capital Deficit) Total
--------------- -------------- ---------------- ----------------- ----------------
BALANCE, JANUARY 1, 1998 9,777,500 $ 97,775 $ 37,982,818 $ (4,220,636) $ 33,859,957
Net loss (2,516,030) (2,516,030)
------------ -----------
BALANCE, DECEMBER 31, 1998 9,777,500 97,775 37,982,818 (6,736,666) 31,343,927
Net loss (2,136,419) (2,136,419)
------------ -----------
BALANCE, DECEMBER 31, 1999 9,777,500 97,775 37,982,818 (8,873,085) 29,207,508
Net loss (10,341,754) (10,341,754)
------------- ------------
BALANCE, DECEMBER 31, 2000 9,777,500 $ 97,775 $ 37,982,818 $ (19,214,839) $ 18,865,754
========== ========= ============= ============= ===========
See notes to financial statements.
TRAILER BRIDGE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
OPERATING ACTIVITIES:
Net loss $ (10,341,754) $ (2,136,419) $ (2,516,030)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 4,840,965 4,731,153 3,527,662
Provision for uncollectible accounts 1,805,130 2,001,439 1,040,721
Gain on sale of equipment (430,216) (81,499) (207,255)
Deferred income taxes 3,227,332 (1,241,814) (1,332,642)
Change in assets and liabilities:
(Increase) decrease in:
Trade receivables (4,353,227) (1,045,126) (6,784,572)
Other receivables (27,773) 1,300,078 (1,235,237)
Due from affiliate 2,748,193 (2,198,066) (612,434)
Prepaid expenses (470,674) (361,556) (75,912)
Other assets 41,184 81,258 106,406
Increase (decrease) in:
Accounts payable 33,404 119,629 5,203,890
Accrued liabilities (279,228) (2,223,223) 2,618,250
Unearned revenue (206,711) 28,822 307,600
------------ ----------- -----------
Net cash (used in) provided by operating activities (3,413,375) (1,025,324) 40,447
------------ ----------- -----------
INVESTING ACTIVITIES:
Purchases and construction of property and equipment (5,648,398) (6,548,900) (36,172,044)
Proceeds from the sale of equipment 1,799,205 1,039,370 1,126,390
Decrease in restricted cash and investments 691,419 499,499 19,718,986
------------ ----------- -----------
Net cash used in investing activities (3,157,774) (5,010,031) (15,326,668)
------------ ----------- -----------
FINANCING ACTIVITIES:
Proceeds from borrowings on notes payables 12,000,000 1,746,591
Proceeds from borrowings on revolving line of credit 5,261,287 7,000,000 8,550,000
Payments on revolving line of credit (15,550,000)
Payments on notes payable (5,294,636) (4,008,880) (3,476,069)
Proceeds from borrowings from affiliate 9,038,075
Debt issue costs (381,150) (210,450)
Payments on capital lease obligations (83,010) (72,011) (39,300)
------------ ----------- -----------
Net cash provided by financing activities 4,990,566 2,919,109 6,570,772
------------ ----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,580,583) (3,116,246) (8,715,449)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,445,750 5,561,996 14,277,445
------------ ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 865,167 $ 2,445,750 $ 5,561,996
============ =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH
INVESTING AND FINANCING ACTIVITIES:
Cash paid for state income taxes $ 11,055 $ 25,673 $ 134,127
============ =========== ===========
Cash paid for interest, net of amount capitalized $ 4,097,954 $ 2,982,349 $ 2,249,445
============ =========== ===========
Book value of like kind assets exchanged $ 610,041
===========
Equipment acquired under capital lease agreements $ 125,631
===========
See notes to financial statements.
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Trailer Bridge, Inc. (the "Company") is a domestic
trucking and marine transportation company with contract and common carrier
authority. Highway transportation services are offered in the continental United
States, while marine transportation is offered primarily between Newark, New
Jersey, Jacksonville, Florida and San Juan, Puerto Rico.
Cash and Cash Equivalents - The Company considers cash on hand and amounts on
deposit with financial institutions with original maturities of three months or
less to be cash equivalents.
Allowance for Doubtful Accounts - The Company provides an allowance for
doubtful accounts on trade receivables based upon estimated collectibility and
collection experience.
Property and Equipment - Property and equipment are stated at cost and the
capitalized interest costs associated with significant capital additions less
accumulated depreciation. Property and equipment are depreciated on a
straight-line method based on the following estimated useful lives:
Years
Buildings and structures 40
Office furniture and equipment 6-10
Freight equipment 4-25
Leasehold improvements 2-5
Equipment under capital leases 5
Tires on revenue equipment purchased are capitalized as part of the equipment
cost and depreciated over the life of the vehicle. Replacement tires are
expensed when placed in service.
Leasehold improvements and equipment under capital leases are amortized over
the lesser of the estimated lives of the asset or the lease terms. Maintenance
and repairs which do not materially extend useful life and minor replacements
are charged to earnings as incurred.
The Company periodically reviews property and equipment for potential
impairment. If this review indicates that the carrying amount of these assets
may not be recoverable, the Company estimates the future cash flows expected
with regards to the asset and its eventual disposition. If the sum of these
future cash flows (undiscounted and without interest charges) is less than the
carrying amounts of the assets, the Company records an impairment loss based on
the fair value of the asset.
Goodwill - Goodwill is being amortized on a straight-line basis over
twenty-five years.
Other Assets - Other assets consist mainly of debt issuance costs which are
amortized on a straight-line basis over the life of the associated debt.
Restricted Cash and Investments - Restricted cash and investments consist of
cash and investments held by a letter of credit for the continued use of a
land-based ramp. These funds have been invested in highly liquid interest
bearing deposits, U.S. Treasury bills and money market accounts and are carried
at cost which approximates market.
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Continued)
Insurance - The Company is self-insured for employee medical coverage above
deductible amounts. Reinsurance is obtained to cover losses in excess of certain
limits. Provisions for losses are determined on the basis of claims reported and
an estimate of claims incurred but not reported.
Revenue Recognition - Common carrier operations revenue is recorded on the
percentage-of-completion basis and direct costs are expensed as incurred.
Income Taxes - Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities. Valuation allowances are provided in
accordance with the provisions of FASB Statement No. 109, "Accounting for
Income Taxes" ("SFAS No. 109"). The valuation allowances are
attributable to federal and state deferred tax assets.
Earnings Per Share - Basic earnings per share ("EPS") is computed
by dividing earnings available to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution of securities that could share in the earnings.
Stock-Based Compensation - In accordance with SFAS No. 123, "Accounting
for Stock-Based Compensation", ("SFAS No. 123") the Company has
elected to continue to account for its employee stock compensation plans under
APB Opinion No. 25 with pro-forma disclosures of net earnings and earnings per
share, as if the fair value based method of accounting defined in SFAS No. 123
had been applied. Under the intrinsic value based method, compensation cost is
the excess, if any, of the quoted market price of the stock at the grant date or
other measurement date over the amount an employee must pay to acquire the
stock. Under the fair value based method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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.
New Accounting Standards - In June 1998, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities". In June 2000, the FASB issued SFAS No. 138, which
amends certain provisions of SFAS 133 to clarify four areas causing difficulties
in implementation. The amendment included expanding the normal purchase and sale
exemption for supply contracts, permitting the offsetting of certain
intercompany foreign currency derivatives and thus reducing the number of third
party derivatives, permitting hedge accounting for foreign-currency denominated
assets and liabilities, and redefining interest rate risk to reduce sources of
ineffectiveness. The Company adopted SFAS 133, and the corresponding amendments
under SFAS 138 on January 1, 2001. SFAS 133, as amended by SFAS 138, did not
have a material impact on the Company's results of operations, financial
position or cash flows.
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Continued)
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") 101 "Revenue Recognition in Financial
Statements." The objective of SAB 101 is to provide further guidance on
revenue recognition issues in the absence of authoritative literature addressing
a specific arrangement or a specific industry. The Company adopted SAB 101
during the fourth quarter of fiscal year 2000. Adoption of the guidance did not
have a material impact on the Company's financial position or results of
operations.
Accounting Change - During the year ended December 31, 2000, the Company
changed its method of accounting for periodic vessel dry-docking. Prior to the
change, the Company accrued estimates of future vessel dry-docking costs. The
Company now will expense these costs as incurred. This change resulted in a gain
of $127,100, net of income taxes of $77,900 for the year ended December 31,
2000.
Reclassifications - Certain reclassifications have been made to the 1999 and
1998 financial statements to conform with the presentation adopted in 2000.
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2000 and 1999 consist of the
following:
2000 1999
Land $ 504,703 $ 917,885
Construction in progress 4,816,057 182,993
Buildings and structures 2,578,361 2,575,070
Office furniture and equipment 3,771,584 2,842,401
Freight equipment 64,060,307 65,515,215
Leasehold improvements 1,644,539 1,939,969
Equipment under capital leases 388,736 388,736
Less accumulated depreciation and amortization (15,192,140) (11,275,345)
------------- ------------
Fixed assets, net $ 62,572,147 $ 63,086,924
============= ============
Depreciation and amortization expense on property and equipment and equipment
under capital leases was $4,794,186, $4,684,374 and $3,480,882 in 2000, 1999 and
1998, respectively. Interest cost of $0, $108,866 and $918,838 was capitalized
during 2000, 1999 and 1998, respectively.
3. TRANSACTIONS WITH AFFILIATED COMPANY
The Company leases two roll-on/roll-off barge vessels and the use of a ramp
system from an affiliate under operating lease agreements. The lease payments
are $10,050 per day for each vessel. The leases expire September 1, 2010. The
leases provide the Company the option to extend the leases through September 1,
2018 for total payments of $11,000 per vessel per day or, alternatively, the
Company may purchase the vessels at their then fair market values. Total lease
expense under these leases from affiliate totaled $7,356,600, $7,336,500 and
$6,736,500 in 2000, 1999 and 1998, respectively. In the third quarter of 1998,
the lease payments to affiliate were reduced by a $600,000 non-recurring
forgiveness in recognition of the impact of Hurricane George and in
consideration of the efforts of the Company to recover and repair the San Juan
triple-deck ramp structure utilized by the two triple-deck barges.
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Continued)
Throughout 2000, the Company received advances from an affiliate totaling
$9,038,075. These advances were used to meet the Company's cash flow
requirements. These advances have been classified as non-current.
During 2000, the Company sold an affiliate a piece of land for $750,000. A
gain of $336,818 was recognized on this transaction.
In December 1999, the Company recovered from the affiliate $3,710,000 of
excess operating and maintenance expenses incurred during the period that the
Company had limited use of the floating ramp system. In return, the Company
waived any right to any insurance proceeds from the casualty to the floating
ramp system. The Company received $1,000,000 in December 1999 and the balance
was received in February and March 2000. Additional amounts included in due from
affiliate in 1999 and 1998 include prepaid barge charter hire lease rent and
reimbursable miscellaneous repair payments made by the Company related to assets
of the affiliate.
4. LONG-TERM DEBT
Following is a summary of long-term debt at December 31, 2000 and 1999:
2000 1999
Ship-financing bonds and notes (Title XI) totaling
$16,918,000 maturing on March 30, 2023; payable in 50
semi-annual installments of principal and interest;
interest is fixed at 6.52%; collateralized by vessels
with a carrying value of $18,634,153 at December 31, 2000;
amount is guaranteed by The United States of America
under the Title XI Federal Ship Financing Program $ 15,226,200 $ 15,902,920
Ship-financing bonds and notes (Title XI) totaling
$10,515,000 maturing on September 30, 2022; payable in
50 semi-annual installments of principal and interest;
interest is fixed at 7.07%; collateralized by vessels
with a carrying value of $12,080,068 at December 31,
2000; amount is guaranteed by The United States of
America under the Title XI Federal Ship Financing Program 9,253,200 9,673,800
Term loan under $29 million credit facility maturing
between April 1, 2001 and January 31, 2004; payable in
quarterly installments of principal and interest; interest
at a rate of 3.50% above the 30-day dealer commercial paper
rate (10.15% at December 31, 2000); collateralized by
trailers with a carrying value of $14,246,600 at
December 31, 2000 12,000,000
Revolving line of credit under $29 million credit
facility; interest at a rate of 3.00% above the 30-day
dealer commercial paper rate (9.65% at December 31,
2000); collateralized by accounts receivable 5,261,287
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Continued)
Notes payable to finance company totaling $4,957,569
maturing from June to October 2001; payable in 60
monthly installments of principal and interest; interest
at fixed rates ranging from 8.87% to 9.29%; collateralized
by trailers with a carrying value of $2,575,007 at
December 31, 2000 624,266 1,810,383
Note payable to bank totaling $1,680,000 maturing October
2006; payable in 120 monthly installments of principal and
interest; interest is fixed at 7.95%; collateralized by
land and buildings and structures with a carrying value of
$2,213,946 at December 31, 2000 980,000 1,148,000
Revolving line of credit under $25 million credit facility;
quarterly principal payments of $971,875 beginning September
2000 and maturing April 1, 2001; variable interest as defined
by the credit facility agreement (11.00% at December 31, 1999) 15,550,000
Borrowings under a $25 million revolving credit and term
loan agreement maturing between April 1, 2000 and April 1,
2001; payable in monthly installments of principal and
interest; interest at fixed rates ranging from 7.38% to 8.08% 2,757,975
Notes payable to finance company totaling $1,032,500 maturing
June 2000; payable in 60 monthly installments of principal
and interest; interest at a rate of 3.50% above LIBOR (9.32%
at December 31, 1999) 85,224
Capital lease obligations maturing in 2001; payable in
monthly installments of principal and interest; interest
at 10.00%; collateralized by computer equipment 89,657 172,667
----------- -----------
43,434,610 47,100,969
Less current portion (3,266,755) (6,642,622)
----------- -----------
$ 40,167,855 $ 40,458,347
=========== ===========
In December 2000, the Company entered into a loan and security agreement
consisting of a $15 million revolving credit facility, a $12 million term loan
and a $2 million capital expenditure loan. The revolving credit facility is
limited to 85% of eligible accounts receivable, as defined in the agreement, not
to exceed $15 million. Additional borrowings available under the revolving
credit facility and the capital expenditure loan at December 31, 2000 amounted
to $2.37 million and $2 million, respectively.
The loan and security agreement contains certain restrictive covenants,
including, but not limited to, requirements to maintain tangible net worth, as
defined in the credit agreement, and a fixed charge coverage ratio.
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Continued)
Following are maturities of long-term debt at December 31, 2000:
2001 $ 3,266,755
2002 2,979,606
2003 2,979,606
2004 13,812,322
2005 1,265,320
Thereafter 19,131,001
-----------
$ 43,434,610
===========
5. OPERATING LEASES
The Company has various operating lease agreements, principally for tug
charter, office facilities, terminals and equipment. Certain of the leases
contain provisions calling for additional contingent rentals based on volume of
transportation activity.
Future minimum rental payments required under operating leases that have
initial or remaining noncancellable lease terms in excess of one year as of
December 31, 2000 are as follows:
2001 $ 25,113,078
2002 24,369,638
2003 22,231,169
2004 13,631,582
2005 11,519,164
Thereafter 40,185,567
------------
Total minimum payments required $ 137,050,198
============
Lease expense for all operating leases, including leases with terms of less
than one year, was $23,540,198, $23,484,809 and $19,027,272 for 2000, 1999 and
1998.
6. ACCRUED LIABILITIES
Accrued liabilities consists of the following at December 31, 2000 and 1999:
2000 1999
Fringe benefits $ 473,196 $ 903,661
Marine expense 1,470,151 689,293
Salaries and wages 388,114 324,372
Other 1,183,196 1,876,559
------------ ----------
$ 3,514,657 $ 3,793,885
============ ==========
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Continued)
7. INCOME TAXES
The provision for income tax (expense) benefit is comprised of the following
as of December 31, 2000, 1999 and 1998:
2000 1999 1998
Current:
Federal $ 22,808
State 2,683
----------
25,491
----------
Deferred:
Federal $ 2,437,415 $ 1,111,051 1,192,364
State 286,755 130,763 140,278
----------- ---------- ----------
2,724,170 1,241,814 1,332,642
Valuation allowance (5,873,602)
----------- ---------- ----------
$ (3,149,432) $ 1,241,814 $ 1,358,133
=========== ========== ==========
Income tax (expense) benefit for the years ended December 31, 2000, 1999 and
1998 differ from the amounts computed by applying the statutory Federal
corporate rate to loss before income taxes and cumulative effect of accounting
change. The differences are reconciled as follows:
2000 1999 1998
Tax benefit at statutory Federal rate $ 2,488,605 $ 1,148,599 $ 1,317,216
Increase in deferred tax asset
valuation allowance (5,873,602)
Nondeductible expenses (57,212) (41,914) (51,136)
State income taxes, net of federal benefit 292,777 135,129 154,966
Other (62,913)
---------- ---------- ----------
Total income tax (expense) benefit $ (3,149,432) $ 1,241,814 $ 1,358,133
=========== ========== ==========
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Continued)
The components of the Company's net deferred tax asset at December 31, 2000
and 1999 is as follows:
2000 1999
Deferred tax assets:
Employee stock option $ 3,240,895 $ 3,240,895
Net operating loss 13,001,552 8,347,920
Accrued expense 165,091
Allowance for bad debts 651,253 520,035
------------ ------------
Gross deferred assets 16,893,700 12,273,941
Deferred tax liabilities:
Fixed asset basis 10,017,395 8,055,753
Other 102,703 90,856
------------ ------------
Gross deferred tax liabilities 10,120,098 8,146,609
Deferred tax asset valuation allowance 6,773,602 900,000
------------ ------------
Net deferred tax asset $ - $ 3,227,332
============ ============
The Company has recorded various deferred tax assets as reflected above.
Realization is dependent on generating sufficient taxable income in future
years. As a result of the net losses incurred in recent years, a valuation
allowance has been established ($5,873,602 in 2000) based on the provisions of
SFAS No. 109.
At December 31, 2000, the Company had available net operating loss ("NOL")
carryforwards for federal income tax purposes of approximately $34,330,000 which
expire beginning in 2018.
8. COMMON STOCKHOLDERS' EQUITY
Earnings Per Share:
For the years ended December 31, 2000, 1999 and 1998, no outstanding options
to purchase shares of common stock were included in the computation to arrive at
diluted EPS because the options' exercise prices exceeded the average market
price of the common shares.
In 1997, the Company's Board of Directors and stockholders authorized the
establishment of an Incentive Stock Plan (the "Plan"). The purpose of
the Plan is to promote the interests of the Company and its shareholders by
retaining the services of outstanding key management members and employees and
encouraging them to have a greater financial investment in the Company and
increase their personal interest in its continued success. The Company initially
reserved 785,000 shares of common stock for issuance pursuant to the Plan to
eligible employees under the Plan. In July 2000, the Board of Directors
authorized an increase of 515,000 shares of common stock reserved under the
Plan. Awarded options that expire unexercised or are forfeited become available
again for issuance under the Plan. The options vest equally over a period of
five years.
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Continued)
In July 2000, the Company's Board of Directors and its stockholders
authorized the establishment of the Non-Employee Director Stock Incentive Plan
(the "Director Plan"). The purpose of the Director Plan is to assist
the Company in attracting and retaining highly competent individuals to serve as
non-employee directors. The Company has reserved 50,000 shares of common stock
for issuance pursuant to the Director Plan. Awarded options that expire
unexercised or are forfeited become available again for issuance under the
Director Plan. The exercise price per share of options granted under the
Director Plan shall not be less than 100% of the fair market value of the common
stock on the date of grant.
A summary of the status of options under the Company's stock-based
compensation plans at December 31, 2000, 1999 and 1998 is presented below:
2000 1999 1998
------------------------------ ---------------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
Outstanding at beginning of year 711,258 $ 7.70 521,182 $ 10.00 468,126 $10.00
Granted 437,500 2.84 212,600 2.25 130,000 10.00
Forfeited (48,071) 3.45 (22,524) 9.60 (76,944) 10.00
---------- -------- --------
Outstanding at end of year 1,100,687 5.95 711,258 7.70 521,182 10.00
========== ======== ========
Grants exercisable at year-end 318,216 178,923 93,262
Weighted-average fair value of
options granted during the year $ 2.32 $ 1.87 $ 7.36
The following table summarizes information about the outstanding grants at
December 31, 2000:
Weighted-Average
Exercise Options Remaining Options
Price Outstanding Contractual Life Exercisable
----- ----------- ---------------- -----------
$ 10.00 495,527 6.8 years 276,316
2.25 209,500 8.2 years 41,900
2.84 395,660 9.6 years
--------- --------
1,100,687 318,216
========== ========
Remaining non-exercisable options as of December 31, 2000 become exercisable
as follows:
2001 220,137
2002 220,137
2003 142,032
2004 121,032
2005 79,133
--------
782,471
========
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Continued)
Had compensation expense for stock options been determined based upon the
fair value at the grant date, consistent with the methodology prescribed under
SFAS No. 123, the Company's net earnings and net earnings per share would have
changed to the pro forma amounts indicated below.
2000 1999 1998
As reported
Net loss $ (10,341,754) $ (2,136,419) $ (2,516,030)
Net loss per share - basic and diluted (1.06) (0.22) (0.26)
Pro forma for SFAS No. 123
Net loss $ (10,863,118) $ (2,649,307) $ (2,930,148)
Net loss per share - basic and diluted (1.11) (0.27) (0.30)
The Company used the Black-Scholes option-pricing model to determine the fair
value of grants made. The following assumptions were applied in determining the
pro forma compensation cost:
Years ended December 31 2000 1999 1998
Risk-free interest rate 6.20% 5.34% 5.76%
Expected dividend yield 0% 0% 0%
Expected option life 7 years 7 years 7 years
Expected stock price volatility 91.01% 96.17% 81.93%
9. EMPLOYEE BENEFIT PLANS
The Company has a 401(k) Plan which covers substantially all employees in the
United States. Participants are allowed to make contributions of up to 15% of
their compensation not to exceed certain limits. The Company makes matching
contributions to the Plan at a rate not in excess of 3.0% of compensation. The
Company contributed approximately $213,000, $175,000 and $214,000 to the Plan
during 2000, 1999 and 1998.
In addition, the Company has a 165(e) Plan that covers substantially all
employees in Puerto Rico. The Company made contributions of approximately
$20,000, $18,000 and $15,000 to the Plan during 2000, 1999, and 1998.
In March 1998, the Board of Directors authorized an Employee Stock Purchase
Plan which covers substantially all employees. The Plan allows employees to
invest up to 10% of their base compensation through payroll deductions. The
purchase price will be 15% less than the fair market value on the last day of
the purchase period. The Company made contributions of approximately $15,000,
$15,000 and $6,000 to the Plan during 2000, 1999 and 1998, respectively.
The Company has a Profit Sharing Plan in which they contributed approximately
$0, $0 and $24,000 to the Plan during 2000, 1999, and 1998, respectively.
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Continued)
10. CONTINGENCIES
Legal:
The Company is involved in litigation on a number of matters and is subject
to certain claims which arise in the normal course of business, none of which,
in the opinion of management, are expected to have a materially adverse effect
on the Company's financial statements.
Company Liquidity and Management's Further Contingency Plans:
The Company's projected cash flows from operations indicate that there is
sufficient available liquidity to maintain its current level of operations
through calendar 2001. Such projections include certain agreements with an
affiliate to assist the Company in meeting its 2001 cash flow requirements
including those listed in Note 13.
The Company has also identified additional sources of liquidity. The Company
has contracted to sell excess 48' trailer equipment and expects to realize
proceeds of approximately $650,000 in April 2001. The Company owns additional
equipment, with a carrying value of approximately $6 million at December 31,
2000, that is lien free and potentially available for additional asset based
financing. In addition, the Company is exploring the possible sale/leaseback of
its Jacksonville office building/truck terminal.
The Company believes it can obtain additional borrowing capacity under its
current credit facility; receive additional borrowing capacity from an affiliate
and arrange other transactions with an affiliate to provide liquidity. The
Company anticipates minimal capital expenditures in 2001.
Management believes that the Company will meet all of its working capital
requirements, anticipated capital expenditures, debt service requirements and
other obligations at least through calendar 2001.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and Cash Equivalents - For those short-term instruments, the carrying
amount is a reasonable estimate of fair value.
Restricted Cash and Investments - For those interest bearing deposits and
short-term investments, the carrying amount is a reasonable estimate of fair
value.
Notes Payable - Interest rates that are currently available to the Company
for issuance of debt with similar terms and remaining maturities are used to
estimate fair value for debt instruments. The Company believes the carrying
amount is a reasonable estimate of such fair value.
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Continued)
In the normal course of business, the Company uses an interest rate swap
agreement, to manage its interest rate risk for purposes other than trading. The
Company does not use derivative financial instruments for speculative purposes.
As is customary for these types of instruments, the Company does not require
collateral or other security from other parties to these instruments. By their
nature all such instruments involve risk, including the credit risk of
nonperformance by counterparties. However, at December 31, 2000, in management's
opinion there was no significant risk of loss in the event of nonperformance of
the counterparties to these financial instruments.
Interest Rate Swap Agreement - The Company entered into an interest rate
contract to manage its exposure to changes in interest rates and to make fixed
the overall cost of one of its variable rate financings. The contract has no
carrying value with gains and losses recognized as a component of interest
expense.
The contract/notional amount and estimated fair value of the Company's
off-balance-sheet financial instrument are as follows:
2000 1999
------------------------------------ ------------------------------------
Contact/Notional Fair Contact/Notional Fair
Amount Value Amount Value
------------------- --------------- ------------------ ---------------
Interest rate swap agreement $ 980,000 $ (5,127) $ 1,148,000 $ 26,737
12. SEGMENTS
The Company's primary business is to transport freight from its origination
point in the continental United States to San Juan, Puerto Rico and from San
Juan, Puerto Rico to its destination point in the continental United States. The
Company provides a domestic trucking system and a barge vessel system, which
work in conjunction with each other to service its customers. The Company would
not employ either system separately; therefore segment reporting was not
necessary.
13. SUBSEQUENT EVENTS
In March 2001, the Company contracted for the sale of excess 48' trailer
equipment for $650,000.
During the first quarter of 2001, the Company received $3,172,135 in advances
from an affiliate in order to meet the Company's cash flow requirements. The
advance is payable April 1, 2002.
During the first quarter of 2001, the Company was provided $1,809,000 in
charter hire relief from an affiliate.
On March 28, 2001, the Company entered into an agreement with an affiliate to
defer the second quarter of 2001 charter hire lease payments until no later than
the second quarter of 2002 and defer one-half of the third quarter of 2001
charter hire lease payments until no later than the third quarter of 2003.
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Concluded)
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
March 31, June 30, September 30, December 31,
Quarter Ended 2000 2000 2000 2000
--------------------- -------------------- --------------------- --------------------
Operating revenues $ 21,333,405 $ 23,764,889 $ 23,151,664 $ 23,456,206
Operating (loss) income (903,031) 1,302,713 340,337 (5,131,721)
Net (loss) income before
income tax and cumulative
effect of accounting change (1,836,265) 824,551 (440,600) (5,867,108)
Net (loss) income before
cumulative effect of
accounting change (1,150,927) 500,624 (210,257) (9,608,294)(1)
Net (loss) income (1,150,927) 627,724 (210,257) (9,608,294)
Net (loss) income
per share before
cumulative effect of
accounting change (0.12) 0.05 (0.02) (0.98)
March 31, June 30, September 30, December 31,
Quarter Ended 1999 1999 1999 1999
--------------------- -------------------- --------------------- --------------------
Operating revenues $ 22,750,604 $ 22,686,417 $ 20,625,799 $ 22,489,268
Operating (loss) income (2,078,435) 140,417 (2,245,826) 4,063,494(2)
Net (loss) income before
income tax (2,700,811) (627,412) (3,131,241) 3,081,231
Net (loss) income (1,683,679) (399,377) (1,954,583) 1,901,220
Net (loss) income
per share - basic (0.17) (0.04) (0.20) 0.19
_______________________
(1) Net loss includes a $5.95 million valuation allowance recorded for
deferred income taxes.
(2) Operating income was favorably impacted by a $3.71 million recovery from an
affiliate of excess operating and maintenance costs incurred and expensed during
the period that the Company had limited use of the floating ramp system.
* * * * * *
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 2000
BALANCE AT CHARGED TO
BEGINNING COSTS AND DEDUCTIONS BALANCE AT
YEAR OF YEAR EXPENSES (CHARGEOFFS) END OF YEAR
---- ------- -------- ------------ -----------
Allowance for Doubtful Accounts -
1998 1,165,874 1,040,721 (1,113,192) 1,093,403
1999 1,093,403 2,001,439 (1,726,328) 1,368,514
2000 1,368,514 1,805,130 (1,459,819) 1,713,825
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Not Applicable
©1998 Trailer Bridge, Inc.
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