e10vq

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. Yes x No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


		PAGE

	PART I. FINANCIAL INFORMATION
ITEM 1: Financial Statements
	Condensed Consolidated Balance Sheets
	September 30, 2003 and December 31, 2002	3
	Condensed Consolidated Statements of Operations
	Quarter and Nine months Ended September 30, 2003 and 2002	4
	Condensed Consolidated Statements of Cash Flows
	Nine months Ended September 30, 2003 and 2002	5
	Notes to Condensed Consolidated Financial Statements	6-9
ITEM 2: Management’s Discussion and Analysis of Results of Operations and Financial Condition		9-15
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk		16
ITEM 4: Controls and Procedures		16-17
	PART II. OTHER INFORMATION
ITEM 1: Legal Proceedings		18
ITEM 2: Changes in Securities and Use of Proceeds		18
ITEM 3: Defaults Upon Senior Securities		18
ITEM 4: Submission of Matters to a Vote of Security Holders		18
ITEM 5: Other Information		18
ITEM 6: Exhibits and Reports on Form 8-K		18
Signature		19
Exhibit Index		E-1

SCS Transportation, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)


			September 30,			December 31,
			2003			2002

Assets
Current Assets:
	Cash and cash equivalents		$	31,280		$	21,872
	Accounts receivable			98,079			86,908
	Prepaid expenses and other			31,149			30,709

		Total current assets		160,508			139,489
Property and Equipment, at cost				508,884			487,803
	Less-accumulated depreciation			223,143			200,645

		Net property and equipment		285,741			287,158
Goodwill and Other Assets				17,344			17,696

		Total assets	$	463,593		$	444,343

Liabilities and Shareholders’ Equity
Current Liabilities:
	Accounts payable and checks outstanding		$	28,590		$	26,009
	Wages, vacations and employees’ benefits			34,990			27,870
	Other current liabilities			33,698			30,682

		Total current liabilities		97,278			84,561
Other Liabilities:
	Long-term debt			116,485			116,410
	Deferred income taxes			49,185			54,087
	Claims, insurance and other			15,749			15,008

		Total other liabilities		181,419			185,505
Commitments and Contingencies
Shareholders’ Equity:
	Preferred stock, $0.001 par value, 50,000 shares authorized, none issued and outstanding			—			—
	Common stock, $0.001 par value, 50,000,000 shares authorized, 14,760,016 and 14,655,303 shares issued and outstanding at September 30, 2003 and December 31, 2002, respectively			15			15
	Additional paid-in-capital			201,589			200,611
	Deferred compensation trust, 62,407 and zero shares of common stock at cost at September 30, 2003 and December 31, 2002, respectively			(738	)		—
	Retained earnings (deficit)			(15,970	)		(26,349	)

		Total shareholders’ equity		184,896			174,277

		Total liabilities and shareholders’ equity	$	463,593		$	444,343

SCS Transportation, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the quarter and nine months ended September 30, 2003 and 2002
(in thousands, except per share data)
(unaudited)


			Third Quarter					Nine Months

			2003			2002		2003			2002

Operating Revenue			$	211,530		$	201,155	$	619,903		$	581,181
Operating Expenses:
	Salaries, wages and employees’ benefits			119,054			112,604		348,201			330,516
	Purchased transportation			20,927			20,854		62,427			58,861
	Operating expenses and supplies			35,166			34,792		108,171			97,382
	Operating taxes and licenses			8,127			7,778		24,186			23,265
	Claims and insurance			5,979			5,439		19,321			17,201
	Depreciation and amortization			11,074			11,359		32,915			33,717
	Operating (gains) and losses			45			233		104			495

		Total operating expenses		200,372			193,059		595,325			561,437

Operating Income				11,158			8,096		24,578			19,744
Nonoperating Expenses:
	Interest expense			2,385			1,201		7,062			3,913
	Other, net			(90	)		77		(319	)		153

		Nonoperating expenses, net		2,295			1,278		6,743			4,066

Income Before Income Taxes and Cumulative Effect of Accounting Change				8,863			6,818		17,835			15,678
Income Tax Provision				3,733			2,813		7,456			6,652

Income Before Cumulative Effect of Accounting Change				5,130			4,005		10,379			9,026
Cumulative Effect of Change in Accounting for Goodwill				—			—		—			(75,175	)

Net Income (Loss)			$	5,130		$	4,005	$	10,379		$	(66,149	)

Average common shares outstanding — basic				14,750			14,565		14,722			14,565

Average common shares outstanding — diluted				15,147			14,565		15,108			14,565

Basic Earnings (Loss) Per Share:
	Income before cumulative effect of accounting change		$	0.35		$	0.27	$	0.70		$	0.62
	Cumulative effect of change in accounting for goodwill			—			—		—			(5.16	)

	Net income (loss)		$	0.35		$	0.27	$	0.70		$	(4.54	)

Diluted Earnings (Loss) Per Share:
	Income before cumulative effect of accounting change		$	0.34		$	0.27	$	0.69		$	0.62
	Cumulative effect of change in accounting for goodwill			—			—		—			(5.16	)

	Net income (loss)		$	0.34		$	0.27	$	0.69		$	(4.54	)

SCS Transportation, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2003 and 2002
(in thousands)
(unaudited)


			Nine Months

			2003			2002

Operating Activities:
		Net cash from operating activities	$	41,031		$	17,232
Investing Activities:
	Acquisition of property and equipment			(35,501	)		(29,359	)
	Proceeds from disposal of property and equipment			3,387			4,987

		Net cash used in investing activities		(32,114	)		(24,372	)
Financing Activities:
	Proceeds from issuance of long-term debt			—			110,789
	Repayment of long-term debt			—			(22,525	)
	Proceeds from stock option exercises			491			—
	Net change in notes to former Parent			—			(80,221	)

		Net cash provided by financing activities		491			8,043

Net Increase in Cash and Cash Equivalents				9,408			903
Cash and cash equivalents, beginning of period				21,872			1,480

Cash and cash equivalents, end of period			$	31,280		$	2,383

Supplemental Cash Flow Information:
	Income taxes paid, net		$	9,980		$	14,713
	Interest paid			6,748			3,409

SCS Transportation, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

The accompanying unaudited condensed consolidated financial statements include the accounts of SCS Transportation, Inc. and its two wholly owned regional transportation subsidiaries (the Company or SCST), Saia Motor Freight Line, Inc. and Jevic Transportation, Inc.

The condensed consolidated financial statements have been prepared by the Company, without audit by independent public accountants. In the opinion of management, all normal recurring adjustments necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods included herein have been made. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these statements. These interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, the instructions to Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Operating results for the quarter ended September 30, 2003, are not necessarily indicative of the results of operations that may be expected for the year ended December 31, 2003.

The Company provides regional overnight and second-day less-than-truckload (LTL) and selected inter-regional LTL and truckload (TL) transportation services through two subsidiaries, Saia Motor Freight Line, Inc. (Saia) and Jevic Transportation, Inc. (Jevic). For the quarter ended September 30, 2003 Saia generated 64 percent and Jevic 36 percent of total revenue.

Certain of SCST’s long-term debt is guaranteed by its subsidiaries. The guarantees are full and unconditional, joint and several, and any subsidiaries that are not guarantors are minor as defined by Securities and Exchange Commission (SEC) regulations. SCST, as the parent company issuer of this debt, has no independent assets or operations. There are no significant restrictions on the Company’s ability or the ability of any guarantor to obtain funds from its subsidiaries by such means as a dividend or loan.

For all stock option grants prior to January 1, 2003, stock-based compensation to employees is accounted for based on the intrinsic value method under Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” and related interpretations, including Financial Accounting Standards Board (FASB) Interpretation No. 44 “Accounting for Certain Transactions involving Stock Compensation”. Accordingly, no stock-based compensation expense related to stock option awards was recorded in the quarter or nine months ended September 30, 2002.

In connection with the spin-off effective October 1, 2002, all former parent company stock options issued and outstanding to employees of SCST were replaced with SCST stock options with equivalent vesting, contract terms and an intrinsic value identical to the value of the former parent company options being replaced.

There were no SCST stock options outstanding during the quarter and nine months ended September 30, 2002, and therefore, no comparative information is presented.

The following table illustrates the effect on net income and earnings per share during the quarter and nine months ended September 30, 2003 if the Company had applied the fair value recognition provisions of SFAS No. 123 “Accounting for Stock-Based Compensation” for all stock option grants prior to January 1, 2003, the date the Company adopted SFAS No. 123 (in thousands, except per share data).


		Third Quarter			Nine Months
		2003			2003

Net income, as reported		$	5,130		$	10,379
	Add: Stock-based compensation expense included in reported net income, net of tax		44			77
	Deduct: Total stock-based compensation expense determined using fair value based method for all awards, net of tax		(245	)		(976	)

Pro forma net income		$	4,929		$	9,480

Earnings per share:
	As reported — Basic earnings per share	$	0.35		$	0.70

	Pro forma — Basic earnings per share	$	0.33		$	0.64

	As reported — Diluted earnings per share	$	0.34		$	0.69

	Pro forma — Diluted earnings per share	$	0.33		$	0.63

There are no new accounting pronouncements pending adoption as of September 30, 2003, which the Company believes would have a significant impact on its consolidated financial position or results of operations.

The calculation of basic and diluted earnings per share for the quarter and nine months ended September 30, 2002 was based upon the shares outstanding as of the date of the spin-off from our former parent company, which was September 30, 2002. Effective October 1, 2002, diluted earnings per share includes the dilutive impact of outstanding stock options as shown below.

The calculation of basic earnings per common share and diluted earnings per common share was as follows (in thousands except per share amounts):


		Third Quarter				Nine Months

		2003		2002		2003		2002

Numerator:
Income before cumulative effect of accounting change		$	5,130	$	4,005	$	10,379	$	9,026
Cumulative effect of change in accounting for goodwill			—		—		—		(75,175	)

Net income (loss)		$	5,130	$	4,005	$	10,379	$	(66,149	)

Denominator:
Denominator for basic earnings per share — weighted average common shares			14,750		14,565		14,722		14,565
Effect of dilutive stock options			397		—		386		—

Denominator for diluted earnings per share — adjusted weighted average common shares			15,147		14,565		15,108		14,565

Basic Earnings (Loss) Per Share:
	Income before cumulative effect of accounting change	$	0.35	$	0.27	$	0.70	$	0.62
	Cumulative effect of change in accounting for goodwill		—		—		—		(5.16	)

	Net income (loss)	$	0.35	$	0.27	$	0.70	$	(4.54	)

Diluted Earnings (Loss) Per Share:
	Income before cumulative effect of accounting change	$	0.34	$	0.27	$	0.69	$	0.62
	Cumulative effect of change in accounting for goodwill		—		—		—		(5.16	)

	Net income (loss)	$	0.34	$	0.27	$	0.69	$	(4.54	)

On March 6, 2003, the SCST Executive Capital Accumulation Plan (the Capital Accumulation Plan) was amended to allow for the plan participants to invest in the Company’s common stock. The Company’s Rabbi Trust, which holds the investments for the Capital Accumulation Plan, purchased 3,020 and 62,407 shares of the Company’s common stock at an aggregate purchase price of $46,000 and $738,000 during the quarter and nine months ended September 30, 2003, respectively. The Rabbi Trust shares are recorded by the Company in a manner similar to treasury stock at cost until either a change in investment election by a plan participant or a participant’s withdrawal from the Capital Accumulation Plan.

The Company has two operating subsidiaries (Saia and Jevic) that are reportable segments. Each of these segments is a strategic business unit offering different products and services.

The segments are managed separately because each requires different operating, technology and marketing strategies. The Company evaluates financial performance primarily on operating income and return on capital.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Management fees and other corporate services are charged to segments based on direct benefit received or allocated indirect benefit based on revenue. The following table summarizes the Company’s operations by business segment (in thousands):


						Corporate
						and
		Saia		Jevic		Other			Consolidated

As of September 30, 2003
	Identifiable assets	$	287,834	$	145,724	$	30,035		$	463,593
As of December 31, 2002
	Identifiable assets	$	274,403	$	148,851	$	21,089		$	444,343
Quarter ended September 30, 2003
	Operating revenue	$	134,347	$	77,183	$	—		$	211,530
	Operating income (loss)		8,105		3,773		(720	)		11,158
Quarter ended September 30, 2002
	Operating revenue	$	127,580	$	73,575	$	—		$	201,155
	Operating income (loss)		6,526		1,851		(281	)		8,096
Nine months ended September 30, 2003
	Operating revenue	$	391,076	$	228,827	$	—		$	619,903
	Operating income (loss)		20,305		6,448		(2,175	)		24,578
Nine months ended September 30, 2002
	Operating revenue	$	366,636	$	214,545	$	—		$	581,181
	Operating income		16,176		3,650		(82	)		19,744

The Company is subject to legal proceedings that arise in the ordinary course of its business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not materially adversely affect our financial position, results of operations or cash flows.

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

The following management’s discussion and analysis describes the principal factors affecting the results of operations, liquidity and capital resources, as well as the critical accounting policies, of SCS Transportation, Inc. (SCST or the Company). This discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and our 2002 audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. These financial statements include additional information about our significant accounting policies, practices and the transactions that underlie our financial results.

SCST is a leading transportation company providing regional overnight and second-day less-than-truckload (LTL) and selected inter-regional LTL and truckload (TL) service solutions to more than 71,000 customers across the United States. SCST’s operating subsidiaries are Saia Motor Freight Line, Inc. (Saia), based in Duluth, Georgia, and Jevic Transportation, Inc. (Jevic), based in Delanco, New Jersey.

The key factors that affect our operating results are the volumes of shipments transported through our networks, as measured by our average daily shipments and tonnage; the prices we obtain for our services, as measured by revenue per hundred weight (yield) and revenue per shipment, both excluding the impact of fuel surcharge; our ability to manage our cost structure for capital expenditures and operating expenses such as salaries, wages and benefits, purchased transportation, insurance claims and expense and fuel and maintenance; and our ability to match operating costs to shifting volume levels.

SCST makes estimates and assumptions in preparing the consolidated financial statements that affect reported amounts and disclosures therein. In the opinion of management, the accounting policies that generally have the most significant impact on the financial position and results of operations of SCST include:

•

Claims and Insurance Accruals. SCST has self-insured retention limits generally ranging from $250,000 to $1,000,000 per claim for medical, workers’ compensation, auto liability, casualty and cargo claims with an additional $2,000,000 annual aggregate exposure for auto liability. Policy years prior to March 1, 2000 have per claim retention limits up to $2,000,000. The liabilities associated with the risk retained by SCST are estimated in part based on historical experience, third-party actuarial analysis, demographics, nature and severity, past experience and other assumptions. However, these estimated accruals could be significantly affected if the actual costs of SCST differ from these assumptions.

•

Depreciation and Capitalization of Assets. Under the SCST accounting policy for property and equipment, management establishes appropriate depreciable lives and salvage values for SCST’s revenue equipment (tractors and trailers) based on their estimated useful lives and estimated fair values to be received when the equipment is sold or traded in. These estimates are continuously evaluated and updated when circumstances warrant. However, actual depreciation and salvage values could differ from these assumptions based on market conditions and other factors.

•

Recovery of Goodwill. On January 1, 2002, SCST adopted Financial Accounting Standards Board Statement No. 142, “Goodwill and Other Intangible Assets”. The statement requires that, upon adoption and at least annually thereafter, SCST assess goodwill impairment by applying a fair value based test. This fair value based test involves assumptions regarding the long-term future performance of the operating subsidiaries of SCST, fair value of the assets and liabilities of SCST, cost of capital rates and other assumptions. However, actual recovery of remaining goodwill could differ from these assumptions based on market conditions and other factors. In the event remaining goodwill is determined to be impaired, a charge to earnings may be required.

•

Revenue Recognition and Related Allowances. Revenue is recognized on a percentage-of-completion basis for shipments in transit while expenses are recognized as incurred. In addition, estimates included in the recognition of revenue and accounts receivable include estimates of shipments in transit and estimates of future adjustments to revenue and accounts receivable for billing adjustments and collectibility.

Revenue is recognized in a systematic process whereby estimates of shipments in transit are based upon actual shipments picked up, scheduled day of delivery and current trend in average rates charged to customers. Since the cycle for pick up and delivery of shipments is generally 1-3 days, typically less than 5 percent of a total month’s revenue is in transit at the end of any month. Estimates for credit losses and billing adjustments are based upon historical experience of credit losses, adjustments processed and trends of collections as well as specific customer situations. Billing adjustments are primarily made for discounts and billing corrections. These estimates are periodically evaluated and updated; however changes in economic conditions, pricing arrangements and other factors can significantly impact these estimates.

These accounting policies, and others, are described in further detail in the notes to our audited consolidated financial statements included in the Company’s Annual Report on Form 10-K.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to adopt accounting policies and make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the financial statements. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information.

Quarter and nine months ended September 30, 2003 vs. quarter and nine months ended September 30, 2002

Operating revenue of SCST for the quarter ended September 30, 2003 was $211.5 million, up 5.2 percent on a per day basis from $201.2 million for the quarter ended September 30, 2002. Fuel surcharge revenue, which is intended to reduce the Company’s exposure to rising diesel prices, significantly affected the Company’s revenue trend for the quarter. Operating revenue excluding fuel surcharge was up 3.7 percent on a per day basis compared to the prior-year quarter. Saia experienced tonnage and shipment increases over the prior-year quarter. While Jevic’s shipments were up, tonnage was down versus the prior-year quarter due to a shift to more LTL shipments, which have lower weights. For the nine months ended September 30, 2003, operating revenues were $619.9 million versus $581.2 million for the nine months ended September 30, 2002, primarily due to increases in market share and a $13.1 million increase in fuel surcharge revenue.

Saia had operating revenue of $134.3 million for the quarter ended September 30, 2003, up 5.3 percent on a per day basis from $127.6 million for the quarter ended September 30, 2002. Saia’s operating revenue excluding fuel surcharge was $129.9 million for the quarter ended September 30, 2003, up 3.9 percent on a per day basis from $125.0 million for the quarter ended September 30, 2002. Including the effects of mix changes, Saia’s LTL revenue per hundredweight excluding fuel surcharge (a measure of yield) decreased 0.3 percent from the prior year quarter to $9.53 per hundredweight for the quarter ended September 30, 2003. The pricing environment, especially in regional markets, remains stable, but very competitive. LTL tonnage increased 4.0 percent to 626,000 tons and LTL shipments were up 2.0 percent to 1.2 million shipments. Management believes that Saia continues to grow volumes by providing high quality service for its customers.

For the nine months ended September 30, 2003, Saia had operating revenue of $391.1 million versus $366.6 million for the nine months ended September 30, 2002 for a 6.7 percent increase. Operating revenue, excluding fuel surcharge, was $377.1 million for the nine months ended September 30, 2003, up 4.6 percent on a per day basis from $360.5 million for the nine months ended September 30, 2002. The increase, exclusive of fuel surcharge, over the nine-month period was primarily due to increased volumes. Additionally, Saia implemented a 6.2 percent general rate increase effective June 9, 2003 on non-contractual accounts, which represent approximately 30 percent of its revenue base.

Jevic had operating revenue of $77.2 million for the quarter ended September 30, 2003, up 4.9 percent on a per day basis from operating revenue of $73.6 million for the quarter ended September 30, 2002. Jevic’s operating revenue excluding fuel surcharge was $74.6 million for the quarter ended September 30, 2003, up 3.5 percent on a per day basis from $72.1 million for the quarter ended September 30, 2002. Jevic’s revenue increase is due to increased LTL volume, improved yields and increased brokerage revenue, partially offset by lower TL volumes. Jevic’s yield increased 2.5 percent to $6.36 per hundredweight, excluding fuel surcharge revenue. On a per day basis, tonnage was down 1.6 percent versus the prior-year quarter to 558,000 tons and shipments were up 3.3 percent to 252,000 shipments. The increase in yield is a result of a mix shift toward higher yielding LTL business.

For the nine months ended September 30, 2003, Jevic had operating revenue of $228.8 million versus $214.5 million for the nine months ended September 30, 2002 for a 6.7 percent increase. Operating revenue, excluding fuel surcharge, was $220.3 million for the nine months ended September 30, 2003, up 4.3 percent on a per day basis from $211.2 million for the nine months ended September 30, 2002. The increase in revenue excluding fuel surcharge for the nine-month period is primarily a result of the mix shift toward higher yielding LTL business. Additionally, Jevic implemented a 5.9 percent general rate increase on LTL business and a 3.0 percent increase on truckload business on June 1, 2003, which affected approximately 40 percent of Jevic’s revenue base.

Operating income of SCST for the quarter ended September 30, 2003 was $11.2 million versus $8.1 million for the quarter ended September 30, 2002 with both business segments reporting improved operating results. Volume gains, cost controls and productivity improvements contributed to the improved operating results. Higher fuel prices, in conjunction with volume changes, caused $1.8 million of the increase in operating expenses and supplies. These fuel cost increases were more than offset by increased revenues from the fuel surcharge programs. Structural cost increases, primarily in wages and health care, were offset by cost controls in other areas and improved productivity. The third quarter of 2003 includes unallocated holding company costs of $0.7 million versus $0.3 million of unallocated costs in the third quarter of 2002. Holding company costs in 2002 are not indicative of post

spin-off operations. The third quarter 2003 operating ratio (operating expenses divided by operating revenue) for SCST was 94.7 compared to the third quarter 2002 operating ratio of 96.0. For the nine months ended September 30, 2003, operating income was $24.6 million with an operating ratio of 96.0 compared to operating income of $19.7 million with an operating ratio of 96.6 for the nine months ended September 30, 2002.

Saia’s third quarter 2003 operating income was $8.1 million compared to operating income of $6.5 million for the third quarter of 2002. Saia’s continued focus on cost controls and operating efficiencies contributed to its operating income improvement. Saia benefited from labor productivity gains, safety initiatives, which have reduced workers compensation claim frequency and other expense reductions that have offset structural cost increases in wages, benefits and healthcare costs. Wages increased an average of 4.2 percent versus the prior-year quarter due to scheduled wage rate increases and other pay adjustments. In addition, Saia’s healthcare costs increased $1.6 million over the third quarter of 2002. During the third quarter of 2003, Saia had an unfavorable adjustment in auto liability reserves for prior period claims of approximately $0.5 million that was more than offset by a $0.8 million favorable adjustment to allowance for doubtful accounts for prior period estimates, based on recent experience related to bad debts. Saia’s operating ratio was 94.0 for the third quarter of 2003 compared to 94.9 in the third quarter of 2002.

For the nine months ended September 30, 2003, Saia had operating income of $20.3 million and an operating ratio of 94.8 compared to operating income of $16.2 million and an operating ratio of 95.6 for the nine months ended September 30, 2002. Management believes the operating income improvement is a result of volume gains combined with effective cost and yield management.

Jevic’s third quarter 2003 operating income was $3.8 million compared to $1.9 million for the third quarter in 2002. Jevic’s operating ratio was 95.1 for the third quarter of 2003, an improvement over the 97.5 for the third quarter of 2002. The third quarter of 2002 included a $0.9 million charge to adjust workers compensation reserves to an actuarial estimate, while the third quarter of 2003 included a $0.4 million favorable adjustment to workers compensation reserves reflecting Jevic’s improved year-to-date injury frequency trends. Additionally, Jevic had net favorable adjustments to revenue and other claims reserves of $0.5 million during the quarter offset by $0.4 million in claims expense for one severe accident. Jevic’s results were also negatively impacted during the quarter by the Northeast Blackout. Jevic’s quarter-over-quarter yield improvement was offset by the impact of operational challenges related to a continuing driver shortage requiring the use of higher cost purchased transportation. The third quarter of 2003 was also impacted by an approximately 2 percent average increase over wages from the third quarter of 2002 and increased healthcare costs.

For the nine months ended September 30, 2003, Jevic had operating income of $6.4 million and an operating ratio of 97.2 compared to operating income of $3.7 million and an operating ratio of 98.3 for the nine months ended September 30, 2002. The increase in operating income for the nine months ended September 30, 2003 over the nine months ended September 30, 2002 was primarily a result of the third quarter activities discussed in the previous paragraph and a $1.5 million charge for workers compensation reserves in the second quarter of 2002, which was $1.2 million above Jevic’s experience for second quarter of 2003.

Holding company operating expenses for the quarter ended September 30, 2003 were $0.7 million in excess of costs allocated to the operating companies, which includes a $0.2 million charge related to the appreciation of SCST stock accounted for in the Capital Accumulation Plan. For the nine months ended September 30, 2003 holding company costs were $2.2 million, which includes $0.4 million of costs for a consulting project and insurance reserve adjustments plus $0.2 million related to the appreciation of SCST stock discussed above. The holding company had $0.3 million and $0.1 million in operating expenses in excess of costs allocated to the operating companies in the three months and nine months ended September 30, 2002, respectively, which are not indicative of post spin-off operations.

SCST had nonoperating expenses of $2.3 million in the third quarter of 2003 compared to nonoperating expenses of $1.3 million in the third quarter of 2002. SCST had nonoperating expenses of $6.7 million in the first nine months of 2003 compared to nonoperating expenses of $4.1 million in the first nine months of 2002. Substantially all SCST post spin-off nonoperating expenses represent interest expense. The increase in interest cost is a result of the Company’s new capital structure consisting of predominantly longer term higher fixed rate instruments versus the principally shorter term floating rate structure with the former parent company. The increase in interest rates was partially offset by lower debt in 2003 versus 2002. The effective tax rate for the first nine months of 2003 was 41.8 percent compared to an effective tax rate of 42.4 percent in the first nine months of 2002. Net income was $5.1 million in the third quarter of 2003 compared to net income of $4.0 million in the third quarter of 2002. Net income was $10.4 million in the nine months ended September 30, 2003 compared to a net loss of $66.1 million in the nine months ended September 30, 2002. The first quarter of 2002 included a non-cash charge for the cumulative effect of change in accounting for goodwill of $75.2 million. Net income before cumulative effect of change in accounting was $9.0 million for nine months ended September 30, 2002.

SCST’s working capital increased from $54.9 million at December 31, 2002 to $63.2 million at September 30, 2003. The change in working capital is predominantly a result of a higher invested cash balance and seasonal increases in accounts receivable offset by increases in wage and employee benefits accruals. These accruals are both seasonal and affected by the day of the week on which the accounting period ends. Cash flows from operating activities increased to $41.0 million for the nine months ended September 30, 2003 from $17.2 million for the nine months ended September 30, 2002, due to improved profitability and collections of accounts receivable. Net capital expenditures were $32.1 million for the nine months ended September 30, 2003 compared to $24.4 million for the nine months ended September 30, 2002. Capital investments during the first nine months of 2003 primarily represent replacement of revenue equipment. The Company anticipates that it will spend an additional $18 million in capital, net of dispositions, over the remainder of the year, resulting in total annual net capital expenditures of $50 million for 2003.

Our business is highly correlated to the general economy. Our outlook assumes a relatively low year-over-year growth in the industrial economy during the fourth quarter. We plan to continue to apply technology, training and accountability to improve productivity, while maintaining top-quality service. We believe we are positioned to improve earnings even in a slow-growth economy.

In the short-term, we plan to continue to focus on cost and yield management efforts, while further seeking to improve productivity and positioning the Company for longer-term growth. Actual results for 2003 will depend upon a number of factors, including the timing, speed and magnitude of the economic recovery or downturn, our ability to match capacity with shifting volume levels, competitive pricing pressures and self-insurance claims. We also look to increase market share in our existing geography and to explore geographic expansion pending the right opportunities.

See “Forward-Looking Statements” for a more complete discussion of potential risks and uncertainties that could materially affect our future performance.

See Note 1 to the accompanying financial statements for further discussion of recent accounting pronouncements.

Effective January 1, 2003, the Company adopted the fair value method of recording stock option expense under SFAS No. 123, “Accounting for Stock-Based Compensation.” Under SFAS No. 123 the Company will recognize stock option expense prospectively for all stock awards granted after January 1, 2003, resulting in an estimated negative impact on earnings per share of less than $.01 for the year ended December 31, 2003 as the Company’s current long-term incentive plans are predominantly cash based plans, with the only expected stock option grants for outside directors. Stock option grants will be expensed over the stock option vesting period based on the fair value at the date the options are granted. Previously, the Company applied the intrinsic value method permitted under SFAS No. 123, as defined in APB No. 25, “Accounting for Stock Issued to Employees”, in accounting for stock options issued prior to January 1, 2003, and accordingly, no compensation expense has been or will be recognized for such stock awards granted.

SCST liquidity needs arise primarily from capital investment in new equipment, land and structures and information technology, as well as funding working capital requirements. In addition, the Company may pursue selective growth initiatives, such as geographic expansion, that would require capital funding.

In connection with the spin-off effective October 1, 2002, SCST issued $100 million in Senior Notes under a $125 million Master Shelf Agreement with Prudential Investment Management, Inc. and certain of its affiliates. SCST

also entered into a $50 million Agented Revolving Credit Agreement (the Credit Agreement) with Bank of Oklahoma, N.A., as agent. Proceeds from the Senior Notes and a portion of the Credit Agreement were used for payments due the former parent company. In addition, SCST has third party borrowings of approximately $16.5 million in subordinated notes. SCST had approximately $120.5 million outstanding under the line-of-credit agreements with the former parent company immediately prior to the spin-off, of which $113.6 million was repaid to the former parent company under the terms of the spin-off. The remaining $6.9 million reduction in the line-of-credit with the former parent company was a capital contribution to SCST from the former parent company.

The $100 million Senior Notes are unsecured with a fixed interest rate of 7.38% and an average maturity of eight years. Payments due under the Senior Notes are interest only until June 30, 2006 and at that time semi-annual principal payments begin, with the final payment due December 2013. Under the terms of the Senior Notes, SCST must maintain several financial covenants including a maximum ratio of total indebtedness to earnings before interest, taxes, depreciation, amortization and rent (EBITDAR), a minimum interest coverage ratio and a minimum tangible net worth, among others. At September 30, 2003, SCST was in compliance with these covenants.

The $50 million Credit Agreement is unsecured with an interest rate based on LIBOR or prime at the Company’s option, plus an applicable spread, in certain instances, and matures in September 2005. The availability under the Credit Agreement is limited to SCST’s qualified receivables (as defined in the Credit Agreement). At September 30, 2003, SCST had no borrowings under the Credit Agreement, $22.5 million in letters of credit outstanding under the Credit Agreement and availability of $27.5 million. The remaining portion of the Credit Agreement is available for future capital expenditures, working capital and letter of credit requirements as needed. Under the terms of the Credit Agreement, SCST must maintain several financial covenants including a maximum ratio of total indebtedness to EBITDAR, a minimum interest coverage ratio and a minimum tangible net worth, among others. At September 30, 2003, SCST was in compliance with these covenants.

At September 30, 2003, the former parent company provided on behalf of SCST approximately $4.3 million in outstanding surety bonds. These bonds, issued by insurance companies, serve as collateral support primarily for workers compensation programs in states where SCST is self-insured. The price and availability of surety bonds fluctuates over time with general conditions in the insurance market. A lack of availability of surety bonds could result in the need for the former parent company to issue additional letters of credit. At September 30, 2003, the former parent company provided on behalf of SCST $13.6 million in outstanding letters of credit. Under the terms of the Master Separation and Distribution Agreement, the former parent company will continue to provide SCST with this amount of collateral to support SCST’s various insurance programs for which SCST reimburses the former parent for their cost which is subject to market variability and the former parent’s credit position. The collateral support by the former parent company is not limited to any length of time. However, the agreement does provide for significant increases in the cost to SCST for the collateral support by the former parent company after September 30, 2006.

Projected net capital expenditures for 2003 are approximately $50 million, an increase from 2002 net capital expenditures of $24.8 million. Net capital expenditures pertain primarily to replacement of revenue equipment at both subsidiaries and additional investments in information technology, land and structures.

The Company believes it has adequate sources of capital to meet short-term and longer-term liquidity and capital expenditure requirements through cash balances, future operating cash flows and availability under its long-term debt facilities. Future operating cash flows are primarily dependent upon the Company’s profitability and working capital requirements. The Company has the ability to adjust its capital expenditures in the event of a shortfall in anticipated operating cash flows.

In accordance with accounting principles generally accepted in the United States of America, our operating leases are not recorded on our balance sheet; however, the minimum lease payments related to these leases are disclosed in the notes to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2002, and in “Contractual Cash Obligations” below.

The following tables set forth a summary of our contractual cash obligations and other commercial commitments as of September 30, 2003 (in millions):


				Payments due by year

				2003 (1)		2004		2005		2006		2007		Thereafter		Total

Contractual cash obligations:
	Recorded obligations:
		Revolving line of credit		$	—	$	—	$	—	$	—	$	—	$	—	$	—
		Long-term debt			—		—		1.3		6.4		11.4		97.4		116.5
	Operating leases				2.4		9.4		7.3		4.6		2.4		0.9		27.0

			Total contractual obligations	$	2.4	$	9.4	$	8.6	$	11.0	$	13.8	$	98.3	$	143.5


			Amount of commitment expiration by year

			2003 (1)		2004		2005		2006		2007		Thereafter		Total

Other commercial commitments:
	Available line of credit		$	—	$	—	$	27.5	$	—	$	—	$	—	$	27.5
	Letters of credit			—		36.1		—		—		—		—		36.1
	Surety bonds			0.1		5.4		0.1		—		—		—		5.6
	Noncancellable purchase commitments			12.6		3.8		—		—		—		—		16.4

		Total commercial commitments	$	12.7	$	45.3	$	27.6	$	—	$	—	$	—	$	85.6

Certain statements in this Report, including those contained in “Outlook” and “Financial Condition”, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of SCST. Forward-looking statements include those preceded by, followed by, or that include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “predict,” “believe” and similar words or expressions. All forward-looking statements reflect the present expectation of future events of our management and are subject to a number of important factors, risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. These factors include, but are not limited to, general economic conditions; labor relations; cost and availability of qualified drivers; governmental regulations, including but not limited to Hours of Service, engine emissions and Homeland Security; cost and availability of fuel; inclement weather; competitive initiatives and pricing pressures; self insurance claims and other expense volatility; and other financial, operational and legal risks and uncertainties detailed from time to time in other filings with the Securities and Exchange Commission.

As a result of these and other factors, no assurance can be given as to our future results and achievements. Accordingly, a forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on the forward-looking statements, which speak only as of the date of this Report. We are under no obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

SCST is exposed to a variety of market risks, including the effects of interest rates and fuel prices. The detail of SCST’s debt structure, which presently has limited exposure to floating interest rate risks, is more fully described in the notes to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Saia and Jevic each maintain fuel surcharge programs that are designed to mitigate our risk to rising fuel prices. These programs are well established within the industry and customer acceptance of fuel surcharges remains high. Since the amount of fuel surcharge is based on average national diesel fuel prices and is reset weekly, exposure of SCST to fuel price volatility is significantly reduced.

The following table provides information about SCST third-party financial instruments as of September 30, 2003. The table presents principal cash flows (in millions) and related weighted average interest rates by contractual maturity dates. Weighted average variable rates are based on the prime rate as of September 30, 2003.

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company conducted an evaluation of the effectiveness of the design and operation of its “disclosure controls and procedures” (Disclosure Controls). The controls evaluation was done under the supervision and with the participation of management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO).

Based upon the controls evaluation, the Company’s CEO and CFO have concluded that, subject to the limitations noted below, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Disclosure Controls were effective to provide reasonable assurance that material information relating to SCST and its consolidated subsidiaries is made known to management, including the CEO and CFO, particularly during the period when SCST’s periodic reports are being prepared.

As of the end of the period covered by this Quarterly Report, there have been no significant changes in internal control over financial reporting or in other factors that could significantly affect internal control over financial reporting, including any corrective actions with regard to significant deficiencies and material weaknesses.

Attached as Exhibits 31.1 and 31.2 to this Quarterly Report are certifications of the CEO and the CFO, which are required in accord with Rule 13a-14 of the Securities Exchange Act of 1934 (the Exchange Act). This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications.

Disclosure Controls are controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported timely. Disclosure Controls are also designed to ensure that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. The Company’s Disclosure Controls include components of its internal control over financial reporting, which consists of control processes designed to provide reasonable assurance regarding the reliability of SCST’s financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles.

The Company’s management, including the CEO and CFO, does not expect that its Disclosure Controls or its internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.


Exhibit
Number		Description of Exhibit

3.1		Amended and Restated Certificate of Incorporation of SCS Transportation, Inc. (incorporated herein by reference to Exhibit 3.1 of SCS Transportation, Inc.’s Form 10-Q (File No. 0-49983) for the quarter ended September 30, 2002)

3.2		Amended and Restated By-laws of SCS Transportation, Inc. (incorporated herein by reference to Exhibit 3.2 of SCS Transportation, Inc.’s Form 10-Q (File No. 0-49983) for the quarter ended September 30, 2002)

4.1		Rights Agreement between SCS Transportation, Inc. and Mellon Investor Services LLC dated as of September 30, 2002 (incorporated herein by reference to Exhibit 4.1 of SCS Transportation, Inc.’s Form 10-Q (File No. 0-49983) for the quarter ended September 30, 2002)

31.1		Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-15(e)

31.2		Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-15(e)

32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

The registrant furnished a current report on Form 8-K, dated July 17, 2003, reporting under Item 9, announcing its second quarter results.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Exhibit
Number		Description of Exhibit

3.1		Amended and Restated Certificate of Incorporation of SCS Transportation, Inc. (incorporated herein by reference to Exhibit 3.1 of SCS Transportation, Inc.’s Form 10-Q (File No. 0-49983) for the quarter ended September 30, 2002)

3.2		Amended and Restated By-laws of SCS Transportation, Inc. (incorporated herein by reference to Exhibit 3.2 of SCS Transportation, Inc.’s Form 10-Q (File No. 0-49983) for the quarter ended September 30, 2002)

4.1		Rights Agreement between SCS Transportation, Inc. and Mellon Investor Services LLC dated as of September 30, 2002 (incorporated herein by reference to Exhibit 4.1 of SCS Transportation, Inc.’s Form 10-Q (File No. 0-49983) for the quarter ended September 30, 2002)

31.1		Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-15(e)

31.2		Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-15(e)

32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


Delaware (State of incorporation)		48-1229851 (I.R.S. Employer Identification No.)

4435 Main Street, Suite 930 Kansas City, Missouri (Address of principal executive offices)		64111 (Zip Code)


Common Stock	Outstanding Shares at October 27, 2003
Common Stock, par value $.001 per share		14,763,016


PART I. FINANCIAL INFORMATION
	Item 1: Financial Statements
	Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings — None
	Item 2. Changes in Securities and Use of Proceeds — None
	Item 3. Defaults Upon Senior Securities — None
	Item 4. Submission of Matters to a Vote of Security Holders — None
	Item 5. Other Information — None
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
EXHIBIT INDEX
EX-31.1 Certification-Principal Executive Officer
EX-31.2 Certification-Prinicpal Financial Officer
EX-32.1 Certification-Principal Executive Officer
EX-32.2 Certification-Principal Financial Officer


		SCS TRANSPORTATION, INC.

		/s/ James J. Bellinghausen

Date: October 30, 2003		James J. Bellinghausen Vice President of Finance and Chief Financial Officer

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x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		Expected Maturity Date																		2003

																						Fair
		2003			2004			2005			2006			2007			Thereafter			Total		Value

Fixed Rate Debt		$	—		$	—		$	1.3		$	6.4		$	11.4		$	97.4		$	116.5	$	126.1
	Average Interest Rate		0.00	%		0.00	%		7.00	%		7.24	%		7.32	%		7.34	%
Variable Rate Debt		$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	—