-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qb1VJM3sVixq3Xo5WCeqrVvPBe+KZyk4/6y8ruxzbK3qXozyGTla1qnHBTcFRS81 S1ADZ8EW5tcNDTfYY4d2LQ== 0000950115-98-001784.txt : 19981118 0000950115-98-001784.hdr.sgml : 19981118 ACCESSION NUMBER: 0000950115-98-001784 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JEVIC TRANSPORTATION INC CENTRAL INDEX KEY: 0001044066 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 222373402 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23095 FILM NUMBER: 98751629 BUSINESS ADDRESS: STREET 1: 600 CREEK RD P O BOX 5157 CITY: DELANCO STATE: NJ ZIP: 08075 BUSINESS PHONE: 6094617111 10-Q 1 QUARTERLY REPORT - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 Or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1998 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission file number 000-23095 JEVIC TRANSPORTATION, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New Jersey 22-2373402 - ---------------------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 600 Creek Road, Delanco, NJ 08075 - ---------------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) 609-461-7111 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes ___ No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Equity, no par value, 10,697,258 shares outstanding as of October 30, 1998, consisting of two series: Class A Common Stock, no par value, 5,739,544 shares outstanding as of October 30, 1998 Common Stock, no par value, 4,957,714 shares outstanding as of October 30, 1998 - -------------------------------------------------------------------------------- JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES INDEX Page ---- Part I. Financial Information Item 1. Consolidated Financial Statements (unaudited) Consolidated Balance Sheets--September 30, 1998 and December 31, 1997 1 Consolidated Statements of Income--Three and nine months ended September 30, 1998 and 1997 2 Consolidated Statements of Cash Flows-- Nine months ended September 30, 1998 and 1997 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 12 Item 1. Consolidated Financial Statements JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1998 1997 ------------- ------------ (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents.......................................... $ 150 $ 7,185 Accounts receivable, less allowance for doubtful accounts of $1,506 and $1,527 ......................... 24,584 21,792 Prepaid expenses and other ........................................ 4,938 3,172 Deferred income taxes ............................................. 2,102 1,862 --------- --------- Total current assets ..................................... 31,774 34,011 PROPERTY AND EQUIPMENT, net ........................................... 102,215 77,894 OTHER ASSETS .......................................................... 1,436 1,463 --------- --------- $ 135,425 $ 113,368 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt and capital lease obligations ..................................................... $ 8,054 $ 1,976 Accounts payable and accrued expenses ............................. 18,670 12,514 Claims and insurance reserves ..................................... 3,709 3,917 Deferred freight revenues ......................................... 2,353 1,752 --------- --------- Total current liabilities ............................... 32,786 20,159 --------- --------- LONG-TERM DEBT ........................................................ 15,390 15,679 --------- --------- DEFERRED INCOME TAXES ................................................. 13,908 11,782 --------- --------- OTHER LIABILITIES ..................................................... 19 211 --------- --------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, no par value, 10,000,000 shares authorized; none issued and outstanding .......................................... -- -- Common stock, no par value, 40,000,000 shares authorized; 4,957,714 and 4,918,656 issued and outstanding, respectively .............. -- -- Class A common stock, no par value, 10,000,000 shares authorized; 5,739,544 shares issued and outstanding ......................... -- -- Additional paid-in capital ........................................ 72,146 71,816 Retained earnings (accumulated deficit) ........................... 1,176 (6,279) --------- --------- Total shareholders' equity .............................. 73,322 65,537 --------- --------- $ 135,425 $ 113,368 ========= =========
The accompanying notes are an integral part of these statements. 1 JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share information) (unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 1998 1997 1998 1997 --------- --------- --------- --------- OPERATING REVENUES ................. $ 57,037 $ 48,871 $ 166,517 $ 139,288 --------- --------- --------- --------- OPERATING EXPENSES: Salaries, wages and benefits ... 28,101 24,238 83,467 70,821 Supplies and other expenses .... 10,212 8,858 28,904 26,229 Purchased transportation ....... 7,220 4,603 20,055 13,198 Depreciation and amortization .. 3,684 2,890 10,864 8,272 Operating taxes and licenses ... 2,570 2,449 7,594 6,751 Insurance and claims ........... 1,011 876 3,032 2,852 (Gain) loss on sale of equipment (3) 24 (421) 123 --------- --------- --------- --------- 52,795 43,938 153,495 128,246 --------- --------- --------- --------- Operating income .......... 4,242 4,933 13,022 11,042 INTEREST EXPENSE, net .............. 341 864 881 2,493 OTHER INCOME, net .................. (57) (36) (148) (91) --------- --------- --------- --------- Income before income taxes 3,958 4,105 12,289 8,640 INCOME TAXES ....................... 1,597 170 4,835 350 --------- --------- --------- --------- NET INCOME ......................... $ 2,361 $ 3,935 $ 7,454 $ 8,290 ========= ========= ========= ========= Basic net income per share ..... $ 0.22 $ 0.57 $ 0.70 $ 1.21 ========= ========= ========= ========= Diluted net income per share ... $ 0.22 $ 0.56 $ 0.69 $ 1.18 ========= ========= ========= =========
The accompanying notes are an integral part of these statements. 2 JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Nine Months Ended September 30, ----------------- 1998 1997 ------ ------ OPERATING ACTIVITIES: Net income .......................................................... $ 7,454 $ 8,290 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization ................................. 10,864 8,272 (Gain) loss on sale of equipment .............................. (421) 123 Provision for bad debts ....................................... 177 745 Deferred income tax provision ................................. 1,886 149 Changes in assets and liabilities-- Increase in accounts receivable ........................... (2,969) (4,472) Increase in prepaid expenses and other .................... (1,766) (995) (Increase) decrease in other assets ...................... 26 (474) Increase in accounts payable and accrued expenses ......... 6,397 2,985 Decrease in claims and insurance reserves ................. (208) (375) Increase (decrease) in accrued income taxes ............... (432) 167 Increase in deferred freight revenues...................... 601 514 -------- -------- Net cash provided by operating activities ........... 21,609 14,929 -------- -------- INVESTING ACTIVITIES: Proceeds from sale of equipment ..................................... 1,572 382 Capital expenditures ................................................ (36,334) (17,102) -------- -------- Net cash used in investing activities ............... (34,762) (16,720) -------- -------- FINANCING ACTIVITIES: Net borrowings on line of credit..................................... 7,000 -- Payments of long-term debt .......................................... (1,212) (7,315) Proceeds from issuance of long-term debt ............................ -- 15,539 Payments of capital lease obligations ............................... -- (450) Distributions to shareholder ........................................ -- (1,522) Proceeds from Employee Stock Purchase Plan .......................... 330 -- -------- -------- Net cash provided by financing activities ........... 6,118 6,252 -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................................................ (7,035) 4,461 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................................................. 7,185 2,403 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD ................................ $ 150 $ 6,864 ======== ========
The accompanying notes are an integral part of these statements. 3 JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of Presentation The accompanying unaudited consolidated financial statements of Jevic Transportation, Inc. and subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1998, are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 2. Earnings Per Share Basic and diluted net income per share have been computed under the guidelines of Statement of Financial Accounting Standards No. 128, "Earnings per Share." Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period. Diluted net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period, adjusted for the dilutive effect of common stock equivalents, consisting of dilutive common stock options using the treasury stock method. The table below sets forth the reconciliation of basic to diluted net income per share (in thousands, except per share amounts):
Three Months Ended September 30, --------------------------------------------------------------- 1998 1997 ------------------------------ ----------------------------- Per Per Net Share Net Share Income Shares Amount Income Shares Amount ------- ------ ------ ------ ------ ------ Basic net income per share ............ $2,361 10,688 $0.22 $3,935 6,858 $ 0.57 Effect of dilutive securities ........ -- 45 0.00 -- 185 (0.01) ------ ------ ----- ------ ----- ------ Diluted net income per share ............. $2,361 10,733 $0.22 $3,935 7,043 $ 0.56 ====== ====== ===== ====== ====== ======
4 JEVIC TRANSPORTATION, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Nine Months Ended September 30, --------------------------------------------------------------- 1998 1997 ------------------------------ ----------------------------- Per Per Net Share Net Share Income Shares Amount Income Shares Amount ------- ------ ------ ------ ------ ------ Basic net income per share ............ $7,454 10,673 $0.70 $8,290 6,858 $ 1.21 Effect of dilutive securities ........ -- 143 (0.01) -- 172 (0.03) ------ ------ ----- ------ ----- ------ Diluted net income per share ............. $7,454 10,816 $0.69 $8,290 7,030 $ 1.18 ====== ====== ===== ====== ====== ======
3. Computer Software Costs In the period ended September 30, 1998, the Company early adopted the provisions of AICPA Statement of Position 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." During the three months ended September 30, 1998, the Company capitalized $279,000 of internally developed software costs related to an ongoing systems project. Such costs included $194,000 of wages and benefits for software developers employed by the Company and $85,000 paid to outside consultants. These costs will be amortized over the estimated useful life of the software beginning when the new system is placed in service. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Jevic was founded in 1981 after the deregulation of the trucking industry, and has developed an operating system which combines the high revenue yield characteristics of a typical LTL carrier with the operating flexibility and low fixed costs of a truckload carrier. Most other motor carriers have continued to specialize as either truckload, moving one shipment at a time, or less-than-truckload, moving multiple small shipments through networks of up to 500 terminals. The Company's system uses a small number of regional facilities which serve as origination points for consolidation of both small and large shipments. The shipments are then loaded onto line-haul trailers in a sequence which permits direct unloading at each shipment's destination, eliminating the need to rehandle individual shipments at one or more breakbulk terminals. Management focuses on adjusting freight mix to maximize asset utilization. The Company maintains a high percentage of variable costs in order to minimize the impact of short-term swings in demand. Because of the distinct nature of Jevic's operating system, the Company believes that profitability measures and expense ratios traditionally used to evaluate truckload or less-than-truckload carriers are generally not meaningful. Jevic's results of operations have been impacted by two key trends. First, Jevic has been increasing the percentage of its shipments transported by owner-operators, who supply their own tractor and bear all associated expenses in return for a contracted rate. As a result, purchased transportation has increased as a percentage of operating revenues, offset by a reduction, as a percentage of operating revenues, of drivers' salaries, wages and benefits, depreciation, fuel, operating taxes and licenses and other supplies and operating expenses. Additionally, Jevic has shifted from a policy of leasing revenue equipment to purchasing revenue equipment. As a result, depreciation and interest expense has increased as a percentage of operating revenues while lease expense, which is included in supplies and other expenses, has decreased. 6 Results of Operations The following table sets forth for the periods indicated the percentage of operating revenues represented by certain items in the Company's statements of income: Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------ 1998 1997 1998 1997 ------ ------ ------ ------ Operating revenues 100.0% 100.0% 100.0% 100.0% ------ ------ ------ ------ Operating expenses: Salaries, wages and benefits ... 49.3 49.6 50.1 50.8 Supplies and other expenses .... 17.9 18.1 17.4 18.8 Purchased transportation ....... 12.7 9.4 12.0 9.5 Depreciation and amortization .. 6.4 5.9 6.5 6.0 Operating taxes and licenses ... 4.5 5.0 4.6 4.9 Insurance and claims ........... 1.8 1.8 1.8 2.0 (Gain) loss on sale of equipment 0.0 0.1 (0.2) 0.1 ---- ---- ---- ---- 92.6 89.9 92.2 92.1 ---- ---- ---- ---- Operating income ................... 7.4 10.1 7.8 7.9 Interest expense, net .............. 0.6 1.8 0.5 1.8 Other income, net .................. (0.1) (0.1) (0.1) (0.1) ---- ---- ---- ---- Income before income taxes ......... 6.9% 8.4% 7.4% 6.2% ==== ==== ==== ==== Three Months Ended September 30, 1998 Compared to Three Months Ended September 30, 1997 Operating Revenues Operating revenues increased 16.6% for the three months ended September 30, 1998 to $57.0 million from $48.9 million for the comparable period of 1997. The increase resulted primarily from a 13.5% increase in total shipments. In addition, revenue per shipment increased 2.9% to $285 for the three months ended September 30, 1998 from $277 during the three months ended September 30, 1997. Operating Expenses Operating expenses increased 20.3% to $52.8 million for the three months ended September 30, 1998 from $43.9 million for the comparable period of 1997. As a percentage of operating revenues, operating expenses increased to 92.6% for the three months ended September 30, 1998 from 89.9% for the comparable period of 1997. This increase in operating expenses is primarily due to increased revenues, as the majority of the Company's operating expenses are variable in nature. The percentage increase was the result of the Company's increased use of outside line-haul purchased transportation and local cartage. Salaries, wages and benefits increased 16.1% to $28.1 million for the three months ended September 30, 1998 from $24.2 million for the comparable period of 1997. As a percentage of operating revenues, salaries, wages and benefits decreased to 49.3% for the three months ended September 30, 1998 from 49.6% for the comparable period of 1997. This percentage decrease was primarily due to the Company's increased use of outside line-haul transportation in 1998. 7 Supplies and other expenses, which primarily consist of operating leases, fuel, tolls, tires, parts and bad debt expense, increased 14.6% to $10.2 million for the three months ended September 30, 1998 from $8.9 million for the comparable period of 1997. As a percentage of operating revenues, supplies and other expenses decreased to 17.9% for the three months ended September 30, 1998 from 18.1% for the comparable period of 1997. This percentage decrease was primarily due to the Company's continuing shift toward the purchase of revenue equipment rather than leasing such equipment under operating leases and lower fuel prices, as well as the Company's increased use of outside line-haul purchased transportation in 1998. Purchased transportation increased 56.5% to $7.2 million for the three months ended September 30, 1998 from $4.6 million for the comparable period of 1997. As a percentage of operating revenues, purchased transportation increased to 12.7% for the three months ended September 30, 1998 from 9.4% for the comparable period of 1997. The increase was due to the increased use of outside line-haul transportation and local cartage to supplement the Company's fleet. Depreciation and amortization expense increased 27.6% to $3.7 million for the three months ended September 30, 1998 from $2.9 million for the comparable period of 1997. As a percentage of operating revenues, depreciation and amortization increased to 6.4% for the three months ended September 30, 1998 from 5.9% for the comparable period of 1997. The increase was primarily attributable to the Company's continuing shift toward the purchase of additional and replacement revenue equipment rather than leasing such equipment under operating leases and the Company's purchase of computer hardware. Operating taxes and licenses increased 8.3% to $2.6 million for the three months ended September 30, 1998 from $2.4 million for the comparable period of 1997. As a percentage of operating revenues, operating taxes and licenses decreased to 4.5% for the three months ended September 30, 1998 from 5.0% for the comparable period of 1997. This percentage decrease was primarily attributable to a decrease in fuel taxes due to the Company's increased use of outside line-haul transportation providers, who pay for their own taxes and licenses. Insurance and claims increased 11.1% to $1.0 million for the three months ended September 30, 1998 from $900,000 for the comparable period of 1997. As a percentage of operating revenues, insurance and claims remained unchanged at 1.8%. Increases in cargo claims and environmental expenses were offset by reduced premiums on renegotiated public liability and property damage insurance coverages that were effective April 1, 1998. In addition, the Company experienced favorable development of claims in the public liability and property damage segment. Interest Expense Interest expense decreased 66.7% to $300,000 for the three months ended September 30, 1998 from $900,000 for the comparable period of 1997. As a percentage of operating revenues, interest expense decreased to 0.6% for the three months ended September 30, 1998 from 1.8% for the comparable period of 1997. Interest expense decreased due to the Company having paid off debt with part of the proceeds of the initial public offering in October 1997. Income Taxes Income taxes increased to $1.6 million for the three months ended September 30, 1998 from $170,000 for the comparable period of 1997. In the third quarter of 1998 the Company was subject to corporate federal and state income taxes. Prior to the Company's initial public offering in October 1997 the Company was an S corporation, and, accordingly, was not subject to corporate income taxes, except for certain states for certain periods. 8 Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30, 1997 Operating Revenues Operating revenues increased 19.5% for the nine months ended September 30, 1998 to $166.5 million from $139.3 million for the comparable period of 1997. The increase resulted primarily from a 14.6% increase in total shipments. In addition, revenue per shipment increased 4.3% to $288 for the nine months ended September 30, 1998 from $276 during the nine months ended September 30, 1997. Operating Expenses Operating expenses increased 19.7% to $153.5 million for the nine months ended September 30, 1998 from $128.2 million for the comparable period of 1997. As a percentage of operating revenues, operating expenses increased to 92.2% for the nine months ended September 30, 1998 from 92.1% for the comparable period of 1997. This increase in operating expenses is primarily due to increased revenues, as the majority of the Company's operating expenses are variable in nature. The percentage increase was the result of the Company's increased use of owner-operators, which was partially offset by a reduction in fuel prices and a reduction in insurance and claims expense. Salaries, wages and benefits increased 17.9% to $83.5 million for the nine months ended September 30, 1998 from $70.8 million for the comparable period of 1997. As a percentage of operating revenues, salaries, wages and benefits decreased to 50.1% for the nine months ended September 30, 1998 from 50.8% for the comparable period of 1997. This percentage decrease was primarily due to the Company's increased use of owner-operators and outside line-haul transportation in 1998. Supplies and other expenses, which primarily consist of operating leases, fuel, tolls, tires, parts and bad debt expense, increased 10.3% to $28.9 million for the nine months ended September 30, 1998 from $26.2 million for the comparable period of 1997. As a percentage of operating revenues, supplies and other expenses decreased to 17.4% for the nine months ended September 30, 1998 from 18.8% for the comparable period of 1997. This percentage decrease was due to the Company's continuing shift toward the purchase of revenue equipment rather than leasing such equipment under operating leases, lower fuel prices, the Company's increased use of owner-operators and outside line-haul purchased transportation in 1998. Purchased transportation increased 52.3% to $20.1 million for the nine months ended September 30, 1998 from $13.2 million for the comparable period of 1997. As a percentage of operating revenues, purchased transportation increased to 12.0% for the nine months ended September 30, 1998 from 9.5% for the comparable period of 1997. The percentage increase was primarily due to the increased use of owner-operators to supplement the Company's fleet and the increased use of outside line-haul transportation. Depreciation and amortization expense increased 31.3% to $10.9 million for the nine months ended September 30, 1998 from $8.3 million for the comparable period of 1997. As a percentage of operating revenues, depreciation and amortization increased to 6.5% for the nine months ended September 30, 1998 from 6.0% for the comparable period of 1997. The percentage increase was primarily attributable to the Company's continuing shift toward the purchase of additional and replacement revenue equipment rather than leasing such equipment under operating leases and the Company's purchase of computer hardware. 9 Operating taxes and licenses increased 11.8% to $7.6 million for the nine months ended September 30, 1998 from $6.8 million for the comparable period of 1997. As a percentage of operating revenues, operating taxes and licenses decreased to 4.6% for the nine months ended September 30, 1998 from 4.9% for the comparable period of 1997. The percentage decrease was primarily attributable to a decrease in fuel taxes due to the Company's increased use of outside line-haul transportation and owner-operators, who pay for their own taxes and licenses. Insurance and claims increased 3.4% to $3.0 million for the nine months ended September 30, 1998 from $2.9 million for the comparable period of 1997. As a percentage of operating revenues, insurance and claims decreased to 1.8% for the nine months ended September 30, 1998 from 2.0% for the comparable period of 1997. The percentage decrease was attributable to favorable development of claims and reduced premiums on renegotiated insurance coverages that were effective April 1, 1998. Interest Expense Interest expense decreased 64.0% to $900,000 for the nine months ended September 30, 1998 from $2.5 million for the comparable period of 1997. As a percentage of operating revenues, interest expense decreased to 0.5% for the nine months ended September 30, 1998 from 1.8% for the comparable period of 1997. Interest expense decreased due to the Company having paid off debt with part of the proceeds of the initial public offering in October 1997. Income Taxes Income taxes increased to $4.8 million for the nine months ended September 30, 1998 from $350,000 for the comparable period of 1997. In the first nine months of 1998 the Company was subject to corporate federal and state income taxes. Prior to the Company's initial public offering in October 1997 the Company was an S corporation, and, accordingly, was not subject to corporate income taxes, except for certain states for certain periods. Liquidity and Capital Resources The Company's primary sources of liquidity have been funds provided by operations, equipment leases and bank borrowings. Net cash provided by operating activities was approximately $21.6 million for the first nine months of 1998 compared to $14.9 million for the corresponding period in 1997. The increase in cash provided by operations is primarily attributable to the Company's increased income before depreciation and amortization expense in 1998, a smaller increase in accounts receivable in 1998 compared to 1997, and the timing of certain payments, resulting in increased accounts payable in 1998. Capital expenditures, net of trade-in allowances, totaled approximately $36.3 million during the first nine months of 1998 compared to $17.1 million in the comparable period of 1997. For the nine months ended September 30, 1998, the $36.3 million of capital expenditures were comprised of $18.7 million of revenue equipment, $13.9 million for facilities and $3.7 million of other equipment. The Company generally purchases new line-haul tractors and replaces them after three years. Regional and local tractors are replaced after five years, depending on levels of use. The Company generated cash proceeds from sales of used tractors of $1.6 million in the nine months ended September 30, 1998 versus $382,000 in the comparable period of the prior year. Net cash provided by financing activities was approximately $6.1 million for the nine months ended September 30, 1998 compared to net cash provided of $6.3 million for the comparable period of 1997. At September 30, 1998, total borrowings under long-term debt totaled $23.4 million, maturing 10 through 2007, and obligations relating to operating leases totaled $10.4 million through 2013, of which $1.7 million related to a facility lease with the Company's founders. Jevic is a party to a $35 million credit facility with First Union National Bank. The credit facility includes a $10 million working capital revolving line of credit, with borrowings limited to 80% of the Company's eligible accounts receivable, as defined, and a $25 million equipment revolving line of credit used to purchase or refinance revenue equipment. At September 30, 1998, there was $4.6 million outstanding under the equipment revolver, $7.0 million outstanding under the working capital revolver and an additional $525,000 of outstanding standby letters of credit under the working capital revolver. The equipment revolving line of credit is secured by a first priority, perfected security interest in the revenue equipment purchased or refinanced. The rate of interest on both lines of credit is, at the Company's election, either the Bank's base rate (higher of the Federal Funds Rate plus 1/2 of 1% or the prime commercial lending rate of First Union) or a rate based on the London Interbank Offered Rate (LIBOR). The working capital line of credit expires in June 2003; the equipment line of credit expires in June 2000. The agreement allows the Company to convert outstanding amounts under the equipment revolver to term loans if the line of credit is not renewed. The credit facility contains covenants made by the Company which limit its ability to make business acquisitions and pay dividends on its capital stock, including the Common Stock, among other things. The Company believes that its cash and cash equivalents, funds generated from operations and available borrowings under its current or future credit facilities will be sufficient to fund the Company's activities at least through 1999. While the Company intends to selectively pursue acquisitions of companies that are complementary with its operations, the Company currently does not have any commitments or agreements for any business acquisitions. Inflation The Company does not believe that inflation has had a material impact on its results of operations for the past three years. Seasonality In the trucking industry, revenues generally follow a seasonal pattern as customers reduce shipments during and after the winter holiday season. In addition, highway transportation can be adversely affected depending upon the severity of the weather in various sections of the country during the winter months. The Company's operating expenses have historically been higher in winter months, due primarily to decreased fuel efficiency and increased maintenance costs for revenue equipment in colder weather. Accordingly, the Company's results of operations may fluctuate to reflect such seasonality. Year 2000 Compliance Many computer systems were not designed to handle dates beyond the year 1999, and, therefore, computer hardware and software will need to be modified prior to the year 2000 in order to remain functional. If the hardware and software are not Year 2000 compliant, system failures could occur which could prevent the Company from conducting business. The Company has established a Year 2000 team consisting of management and information technology employees to identify and address Year 2000 issues. This team is responsible for ascertaining the Year 2000 compliance of the Company's own computer systems, as well as 11 determining the compliance level of the Company's vendors and customers. The team is also responsible for establishing contingency plans in the event that mission critical systems, vendors or customers are not able to reach Year 2000 compliance. The Company is in the process of upgrading its primary computer platform in order to provide increased enterprise computing and additional disaster recovery capabilities. This new system was designed to be Year 2000 compliant and is anticipated to be fully operational as of June 1, 1999. The Company's Year 2000 team has assessed the level of Year 2000 compliance of the Company's other computer hardware and software components. The assessment included analyzing the compatibility of all personal computers and their operating systems, as well as all third party software packages currently used by the Company. The Company is currently determining the actions required to bring all personal computers and software packages into Year 2000 compliance. Management does not expect the costs associated with any required conversions of such other systems to ensure Year 2000 compliance to be significant. The Company has contacted its mission critical vendors requesting information regarding their Year 2000 compliance. Significant customers have also been contacted to determine the extent of their Year 2000 compliance. The Company has not received sufficient information to properly assess whether vendors and customers will be Year 2000 compliant in time to avoid business interruptions. In the event that any of the Company's significant vendors or customers do not successfully achieve Year 2000 compliance on a timely basis, the Company's business or operations could be adversely affected. Assuming substantial Year 2000 compliance by the Company's significant vendors and customers, the Company does not expect Year 2000 related expenditures to have a material adverse impact on its financial condition or results of operations. Cautionary Statement for Forward Looking Information Statements included in this Management's Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements. There are a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made above. These include, but are not limited to, general economic factors, availability of employee drivers and owner-operators, capital requirements, competition, acquisition of revenue equipment, unionization, fuel, seasonality, claims exposure and insurance costs, difficulty in managing growth, regulation, environmental hazards and dependence on key personnel. Further information on these and other factors which could affect the Company's financial results can be found in the Company's periodic reports on forms 10-K and 10-Q. Part II. Other Information Item 6. Exhibits and Reports on Form 8-K a. Exhibits * Exhibit 27.1 - Financial Data Schedule b. Reports on Form 8-K - None 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on behalf by the undersigned, thereunto duly authorized, on the 14th day of November, 1998. JEVIC TRANSPORTATION, INC. By: _____________________________ Harry J. Muhlschlegel Chief Executive Officer By: _____________________________ Brian J. Fitzpatrick Senior Vice President and Chief Financial Officer 13 EX-27 2 FDS
5 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 150 0 26,090 1,506 0 31,774 138,763 36,548 135,425 32,786 0 0 0 72,146 1,176 120,634 166,517 166,517 0 153,495 (148) 0 881 12,289 4,835 7,454 0 0 0 7,454 0.70 0.69
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