-----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, GDa4UBYJwTDVVvBbS4etoeOuwACf0r+BU0A1jfVvzlGUCU6eaKgIpkZPUNU/IM/M c9B4CuJieeiYz0ThhdzM6w== 0000914480-98-000016.txt : 19980813 0000914480-98-000016.hdr.sgml : 19980813 ACCESSION NUMBER: 0000914480-98-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRISM INC /DE/ CENTRAL INDEX KEY: 0000914480 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 133491658 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23210 FILM NUMBER: 98683766 BUSINESS ADDRESS: STREET 1: 4174 JILES ROAD STREET 2: P O BOX 9000 CITY: KENNESAW STATE: GA ZIP: 30144 BUSINESS PHONE: 7707954621 MAIL ADDRESS: STREET 1: CITY CENTER TOWER 2 STE 1101 STREET 2: 301 COMMERCE STREET CITY: FORT WORTH STATE: TX ZIP: 76102-5384 10-Q 1 16 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-23210 TRISM, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-3491658 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 4174 Jiles Road, Kennesaw, Georgia 30144 (Address of principal executive offices) (Zip Code) (770) 795-4600 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ X ] Yes [ ] No As of June 30, 1998, 5,702,337 shares of TRISM, Inc.'s common stock, par value $.01 per share, were outstanding. TRISM, INC TABLE OF CONTENTS ITEM PAGE Part I FINANCIAL INFORMATION Item 1 Financial Statements 3 Item 2 Management's Discussion and Analysis of 8 Financial Condition and Results of Operations Part II OTHER INFORMATION Item 1 Legal Proceeding 7 Item 6 Exhibits and Reports on Form 8-K 13 ITEM 1. Financial Statements TRISM, Inc. Consolidated Balance Sheets As of June 30, 1998 and December 31, 1998 (In thousands, unaudited) June 30, December 31, 1998 1997 ASSETS Current assets: Cash and cash equivalents $ 5,230 6,271 Restricted cash and insurance deposits 916 1,010 Accounts receivable, net of allowance for doubtful accounts of $1,248 and $2,070 for 1998 and 1997, respectively $42,883 44,076 Materials and supplies 1,526 1,643 Prepaid expenses 19,131 18,418 Deferred income taxes 2,929 3,789 Total current assets 72,615 75,207 Property and equipment, at cost 178,580 184,232 Less: accumulated depreciation and amortization (66,100) (62,428) Net property and equipment 112,480 121,804 Intangibles, net 18,550 18,685 Other 2,345 3,128 Total assets 205,990 218,824 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 11,496 11,859 Bank overdraft 4,536 4,796 Accrued expenses and insurance reserves 12,770 13,733 Current maturities of long-term debt: Principal payments 10,008 13,025 Residual obligations on equipment debt 7,415 8,696 Total current liabilities 46,225 52,109 Long-term debt, less current maturities 132,844 135,833 Insurance reserves 5,090 5,423 Deferred income taxes 515 2,314 Total liabilities 184,674 195,679 Commitments and contingencies Stockholders' equity: Common stock; $.01 par; 10,000 shares authorized; issued 5,903 shares 59 59 Additional paid-in capital 37,233 37,327 Loans to stockholders (273) (368) Accumulated deficit (14,066) (12,324) Treasury stock, at cost, 201 and 166 shares at 1998 and 1997, respectively (1,637) (1,549) Total stockholders' equity 21,316 23,145 Total liabilities and stockholders' equity $205,990 218,824 See accompanying notes to consolidated financial statements. TRISM, Inc. Consolidated Statements of Operations For the three months and six months ended June 30, 1998 and 1997 (In thousands, except per share amounts, unaudited) Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 Revenues $ 77,193 81,340 149,322 159,073 Operating expenses: Salaries, wages and fringe benefits 28,894 28,706 56,918 57,045 Operating supplies and expenses 10,493 11,684 21,408 23,768 Operating taxes and licenses 6,951 7,120 13,542 14,177 Contractor equipment 5,877 4,922 11,178 9,061 Depreciation and amortization 5,006 4,732 10,056 9,532 Brokerage carrier expense 4,512 6,673 9,136 13,477 General supplies and expenses 3,792 4,205 7,353 8,549 Revenue equipment rents 3,454 3,748 6,664 7,525 Claims and insurance 2,259 2,953 4,685 5,815 Communications and utilities 1,366 1,265 2,640 2,660 Restructuring and non-recurring expenses 402 - 402 3,000 Loss on disposition of assets 121 214 538 397 Total operating expenses 73,127 76,222 144,520 155,006 Operating income 4,066 5,118 4,802 4,067 Interest expense and other, net 3,751 3,739 7,483 7,554 Income (loss) before income tax expense (benefit) 315 1,379 (2,681) (3,487) Income tax expense (benefit) 110 482 (939) (978) Net earnings (loss) $205 897 (1,742) (2,509) Basic earnings (loss) per share $0.04 0.16 (0.30) (0.44) Diluted earnings (loss) per share $0.04 0.16 (0.30) (0.44) Weighted average number of shares used in computation of basic and diluted earnings (loss) per share 5,724 5,737 5,724 5,737 See accompanying notes to consolidated financial statements. TRISM, Inc. Consolidated Statements of Cash Flows For the six months ended June 30, 1998 and 1997 (In thousands, unaudited) 1998 1997 Cash flows from operating activities: Net loss $ (1,742) (2,509) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 10,441 9,866 Loss on disposition of assets 538 397 Provision for losses on accounts receivable 404 645 Deferred gain on sale-leaseback (129) 516 Restructuring and non-recurring charge, net 115 1,675 Deferred income taxes (939) (978) Changes in assets and liabilities: Accounts receivable 789 6,536 Prepaid expenses (713) (774) Accrued expenses and insurance reserves (1,282) 1,114 Accounts payable (363) 175 Other (186) 187 Net cash provided by operating activities 6,933 16,850 Cash flows from investing activities: Proceeds from sale of assets 4,773 2,648 Purchases of property and equipment (1,923) (2,014) Proceeds from sale-leaseback - 7,881 Collection of notes receivable 701 514 Refund of restricted deposits 94 241 Contingent acquisition payments (200) - Net cash provided by investing activities 3,445 9,270 Cash flows from financing activities: Net proceeds (repayment) under revolving credit agreement 826 (11,417) Repayment of long-term debt and capital lease obligations (11,898) (8,574) Decrease in bank overdrafts (260) (187) Purchase of treasury stock (87) - Payment of deferred loan costs - (80) Net cash used in financing activities (11,419) (20,258) (Decrease) increase in cash and cash equivalents (1,041) 5,862 Cash and cash equivalents, beginning of period 6,271 1,468 Cash and cash equivalents, end of period $ 5,230 7,330 Supplemental cash flow information: Cash paid during the period for: Interest ($43 capitalized in 1998) $ 7,679 7,420 Income taxes $ 62 57 Capital lease equipment purchases and borrowings $ 3,785 3,279 See accompanying notes to the consolidated financial statements. TRISM, Inc. Notes to Consolidated Financial Statements Accounting Policies The 1997 Annual Report on Form 10-K for Trism, Inc. includes a summary of significant accounting policies and should be read in conjunction with this Form 10-Q. The statements for the periods presented are condensed and do not contain all information required by generally accepted accounting principles to be included in a full set of financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of June 30, 1998 and December 31, 1997 and the results of operations and cash flows for the periods ended June 30, 1998 and 1997, respectively have been included. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the entire year. Accounting Pronouncements In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in the financial statements. SFAS No. 130 is effective for the Company's fiscal year beginning January 1, 1998. Reclassification of financial statements for earlier periods presented for comparative purposes is required. The adoption of SFAS No. 130 had no impact on the Company's consolidated results of operations, financial position or cash flows. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 establishes standards for the way that public business enterprises report information about operating segments in annual and interim financial statements. It also establishes standards for related disclosures about products, services, and geographic areas. SFAS No. 131 is required beginning with the Company's 1998 annual financial statements and prior period disclosures are required to be restated. The Company is in the process of evaluating the disclosure requirements. The adoption of SFAS No. 131 will have no material impact on the Company's consolidated results of operations, financial position or cash flows. In February 1998, the FASB issued SFAS No. 132, Employers' Disclosure about Pensions and Other Post Retirement Benefits. SFAS No. 132 standardized the disclosure requirements for pensions and other post retirement benefits to the extent practical. This standard is effective beginning with the Company's 1998 annual financial statements, and prior period disclosures are required to be restated. Management is currently reviewing the provisions of SFAS No. 132 and does not believe that the Company's financial statements will be materially impacted by the adoption. On June 15, 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (FAS 133). FAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for the Company). FAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Management of the Company anticipates that, due to its limited use of derivative instruments, the adoption of FAS 133 will not have a significant effect on the Company's results of operations or its financial position. Corporate Restructuring and Non-Recurring Expenses During the second quarter of 1998, the Company recorded a pre-tax charge of $402,000 for a separation and consulting agreement. In February 1997, the Company announced an organizational restructuring to consolidate certain sales, operations, and administrative functions and reengineer business processes to reduce overhead and increase operational efficiency. During 1997, the Company recorded total charges of $3.2 million associated with the organizational restructuring. Long Term Debt Revolving Credit Facility On July 15, 1997, the Company refinanced its revolving credit facility ("Facility") with a $45 million credit line (the "Revolver"). The proceeds of the Revolver were used to retire the Facility loan and are available for the Company's working capital needs. The Revolver matures July 15, 2000 and contains provisions for a letter of credit subline of $15 million, bears interest at the Prime rate plus .25% or LIBOR plus 2.25%, and is secured by accounts receivable. The Revolver also includes covenants applicable once Availability under the Revolver falls below $8 million for 10 consecutive business days. Availability under the Revolver was approximately $12.7 million at June 30, 1998, net of a reduction for outstanding letters of credit of approximately $11.9 million. The foregoing letters of credit and deposits totaling $.9 million are furnished to insurance carriers as collateral for the estimated cost of claim payments as of June 30, 1998. In August 1998, the agreement was amended to modify and redefine a financial convenant. Senior Subordinated Notes The Company's Senior Subordinated Notes ("Notes") bear interest at 10.75 % payable on June 15th and December 15th of each year through December 15, 2000. The Notes are redeemable at the option of the Company, in whole or in part, on or after December 15, 1998, at a redemption price of 105% through December 1999 and 102.5 % thereafter. Through June 30, 1998, the Company has repurchased $5.3 million of the Notes at approximately face value of which $1.0 million of the notes were repurchased in the first quarter of 1998. Contingencies Under the Comprehensive Environmental Responses, Compensation and Liability Act ("CERCLA") and similar state laws, a transporter of hazardous substances may be liable for the costs of responding to the release or threatened release of hazardous substances from disposal sites if such transporter selected the site for disposal. Because it is the Company's practice not to select the sites where hazardous substances and wastes will be disposed, the Company does not believe it will be subject to material liability under CERCLA and similar laws. Although the Company has been identified as a "potentially responsible party" (PRP) at three sites, solely because of its activities as a transporter of hazardous substances, the Company does not believe it will be subject to material liabilities at such sites. The Company is a party to certain legal proceedings incidental to its business, primarily involving claims for personal injury or property damage arising from the transportation of freight. The Company does not believe that these legal proceedings, or any other claims or threatened claims of which it is aware, are likely to materially and adversely affect the Company's financial conditions. With regard to personal injury, property damage, workers' compensation claims, and cargo claims, the Company is and has been covered by insurance. Such matters may include claims for punitive damages. It is an open question in some jurisdictions in which the Company does business as to whether or not punitive damages awards are covered by insurance. The Company is a defendant in one additional litigation in the Circuit Court of Jefferson County, Alabama. The case is captioned Roy A. Reese v. Trism Specialized Carriers, Inc. and Tri-State Motor Transit Co. It arises from a lease, transfer and consulting agreement between the Company and plaintiff (Mr. Reese and his wholly owned corporation) dated August 24, 1992. Plaintiff alleges breach of contract, promissory fraud, conversion and conspiracy claims arising from the Company's termination of the contract. He seeks compensatory and punitive damages. The Company maintains that it properly terminated the contract because of misrepresentations and non-performance by plaintiff and his company, and has asserted certain counterclaims. The case was tried in August 1996, and plaintiff was awarded $47,000 in rental fees admitted by the Company to be due for the use of plaintiff's trailer equipment after cancellation of the original contract. All other claims for damages were found in favor of the defendant (the "Company"). Plaintiff appealed to the Alabama Court of Civil Appeals which reversed and remanded the case on the legal argument that the jury had found both defendants liable to plaintiff but only awarded damages ($47,000) to one defendant. Both parties appealed the matter to the Alabama Supreme Court which granted a certiorari, but subsequently (June 19, 1998) quashed its writ, effectively sending the case back to the Alabama Court of Civil Appeals which has ordered a new trial. The Company is aware of no reason that it cannot again prevail in a second trial. In addition to matters referred to above, the Company is a party to certain additional lawsuits, none of which is believed to involve a significant risk of materially and adversely affecting the Company's financial condition. Management's Discussion and Analysis of Financial Conditions and Results of Operations The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain statements in this Form 10-Q include information that is forward-looking, such as the Company's opportunities to reduce overhead costs and increase operational efficiency, its anticipated liquidity and capital requirements and the results of legal proceedings. The matters referred to in forward-looking statements could be affected by the risks and uncertainties involved in the Company's business. Subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and notes for the year ended December 31, 1997 and quarter ended June 30, 1998. The following table summarizes certain financial information on a percentage of revenue basis for the three and six months ended June 30, 1998 and 1997. Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 Percentage of Revenue Basis: Operating Revenue: 100.0 100.0 100.0 100.0 Operating Expenses: Salaries, wages and fringe benefits 37.4 35.3 38.1 35.7 Operating supplies and expenses 13.6 14.4 14.3 14.9 Operating taxes and licenses 9.0 8.8 9.1 8.9 Contractor equipment 7.6 6.0 7.5 5.7 Depreciation and amortization 6.5 5.8 6.7 6.0 Brokerage carrier expense 5.8 8.2 6.1 8.5 General supplies and expenses 4.9 5.2 4.9 5.4 Revenue equipment rents 4.5 4.6 4.5 4.7 Claims and insurance 2.9 3.6 3.1 3.7 Communications and utilities 1.8 1.6 1.8 1.7 Restructuring expenses and non-recurring charge 0.5 - 0.3 1.9 Loss on disposition of assets 0.2 0.2 0.4 0.3 Total operating expenses 94.7 93.7 96.8 97.4 Income from operations 5.3 6.3 3.2 2.6 Interest and other, net 4.9 4.6 5.0 4.8 Income (loss) before income taxes 0.4 1.7 (1.8) (2.2) Income tax expense (benefit) 0.1 0.6 (0.6) (0.6) Net earnings (loss) 0.3 1.1 (1.2) (1.6) Summary of Second Quarter 1998 Results Net earnings for the quarter ended June 30, 1998, amounted to $205,000 or $.04 per basic share compared to net earnings of $897,000 or $.16 per basic share in the second quarter of 1997. The second quarter 1998 results include a non-recurring pre-tax charge of approximately $.4 million or $.04 per share for a separation and consulting agreement. Second quarter operating results were positively impacted by improved performance in the Heavy Haul market offset by competitive market conditions in the munitions and hazardous waste markets that negatively impacted pricing, load ratio and asset productivity. The Company reduced its average monthly vacant tractors during the second quarter of 1998 to 173 units compared to the first quarter's average vacant units of 189, primarily through a reduction in the fleet size. The Company anticipates further improvement in the ratio of active tractor capacity to total tractor capacity into the third quarter of 1998. Operating Revenue Operating revenue decreased $4.1 million, or 5.1% from the second quarter 1997 to 1998 and $9.8 million, or 6.1% for the six months ended June 30, 1997 to 1998. Revenue per loaded mile amounted to $1.79 for the quarter ended June 30, 1998 and $1.78 for the six months ended June 30, 1998 compared to $1.75 for the second quarter of 1997 and $1.73 for the six months ended June 30, 1997. The foregoing rate improvements were offset by a decline in the load ratio of .7% and total miles driven of approximately 2.0 million from the second quarter of 1997 to 1998. The load ratio and total miles driven also declined by 1.1% and 5.0 million miles, respectively for the six months ended June 30, 1997 to 1998. External factors influencing the quarterly and six-month period results were primarily related to the Company's improvement in pricing at Heavy Haul and the exit from the Commercial Flatbed market in 1997. These improvements were offset by more competitive market conditions in the munitions and hazardous waste markets which negatively impacted pricing and load ratio at Secured. In addition, asset productivity was negatively influenced by high driver turnover during these periods. For the six months ended June 1998 to 1997, the Secured Materials market was primarily impacted by a decline in higher margined government munitions and hazardous waste business of approximately $3.0 million and $2.0 million, respectively. The foregoing revenue declines were partially offset by an increase in general freight business that traditionally has lower profit margins. Increased competition from regional truck carriers and consolidation in the marketplace of hazardous waste business also negatively impacted Secured revenues. Operating revenues between the periods includes the following (in thousands): Three Months Ended Six Months Ended June 30, June 30, Market 1998 1997 1998 1997 Heavy Haul (1) $ 53,865 53,336 102,645 104,456 Secured Materials 24,878 28,324 49,205 54,756 Trism Logistics 1,816 2,665 4,129 5,840 Eliminations and other (3,366) (2,985) (6,657) (5,979) $ 77,193 81,340 149,322 159,073 (1) Includes Commercial Flatbed results as if the consolidation into Heavy Haul occurred as of January 1, 1997. Operating revenue for the Commercial Flatbed market amounted to approximately $4.2 million during the second quarter of 1997 and $11.5 million for the six months ended June 30, 1997. Operating Income Operating income was impacted by certain external business factors described in the Operating Revenue Section of this discussion. Second Quarter 1998 to 1997 Operating income for the three months ended June 30, 1998 was affected by positive profit contributions in comparison to 1997 on a per mile basis as follows: (a) lower fuel costs of $1.0 million primarily due to a reduction in the per gallon cost of fuel from $1.21 in 1997 to $1.06 in 1998; (b) lower claims and insurance costs of $.6 million as a result of favorable accident and claims experience; and (c) lower fixed freight expenses of approximately $.1 million relating to reduced personnel and administrative expenses. Offsets to the positive profit contribution variances impacting second quarter 1998 operating income compared to 1997 resulted from (a) higher driver and lease operator costs of $1.4 million due to an increase in driver compensation rates, lease operator miles of 1.0 million, and higher driver recruiting and advertising expenses; (b) higher maintenance charges of $.3 million resulting from an increase in the overall age of the tractor fleet; (c) higher escort and permit charges of $.4 million due to a freight commodity mix change; (d) non-recurring charge of $.4 million for a separation and consulting agreement; and, (e) other, net expenditure increases of $.4 million. Six Months Ended June 30, 1998 to 1997 Operating income for the six months ended June 30, 1998 was affected by positive profit contributions in comparison to 1997 on a per mile basis as follows: (a) restructuring charge of $3.0 million recorded in 1997 with no corresponding adjustment in 1998; (b) lower fuel costs of $2.3 million primarily due to a reduction in the per gallon cost of fuel from $1.24 in 1997 to $1.09 in 1998; (c) lower claims and insurance costs of $1.0 million as a result of favorable accident and claims experience; and (d) lower fixed freight expenses of approximately $1.5 million relating to reduced personnel and administrative expenses. Offsets to the positive profit contribution variances impacting operating income for the six months ended June 30, 1998 compared to 1997 resulted from: (a) higher driver and lease operator costs of $3.9 million due to an increase in driver compensation rates, lease operator miles of 1.8 million, and higher driver recruiting and advertising expenses; (b) higher maintenance charges of $1.0 million resulting from an increase in the overall age of the tractor fleet; (c) higher escort and permit charges of $.9 million due to a freight commodity mix change; (d) non-recurring charge of $.4 million for a separation and consulting agreement with the Company's former Chairman and Chief Executive Officer; and (e) other, net expenditure increases of $1.0 million. Operating income between the periods includes the following (in thousands): Three Months Ended Six Months Ended June 30 June 30, Market 1998 1997 1998 1997 Heavy Haul (a) $ 3,272 2,528 3,479 3,205 Secured Materials 1,172 2,502 1,503 3,662 Logistics 24 88 222 200 Restructuring and non-recurring charges (402) - (402) (3,000) Operating income $ 4,066 5,118 4,802 4,067 Operating expense ratio (b) 94.7% 93.7% 96.8% 97.4% (a) Includes Commercial Flatbed results as if the consolidation into Heavy Haul occurred as of January 1, 1997. The operating loss for the Commercial Flatbed market amounted to $.7 million during the second quarter of 1997 and $1.5 million for the six months ended June 30, 1997. (b) The operating ratio represents operating expenses as a percentage of operating revenue. Operating and Other Expenses Total operating expenses were approximately $73.1 million for the three months ended June 30, 1998 and $144.5 million for the six months ended June 30, 1998 compared to $76.2 million for the three months ended June 30, 1997 and $155.0 million for the six months ended June 30, 1997. The following expense categories increased or decreased significantly as a percentage of revenue between the periods: Salaries, wages and fringe benefits increased 2.1% and 2.4% of revenue from the quarter and six-month period ended June 30, 1997 to the corresponding periods in 1998, respectively. The increases are primarily due to driver compensation increases, net of a reduction in non-driver compensation as a result of the 1997 restructuring effort. Operating supplies decreased .8% and .6% of revenue from the quarter and six-month period ended June 30, 1997 to the corresponding periods in 1998, respectively. The improvement resulted from reduced fuel expenditures partially offset by an increase in maintenance expenses due to the increasing age of the tractor fleet. Contractor equipment expenses increased by 1.6% of revenue for the quarter ended June 30, 1998 to 1997, and 1.8% of revenue for the six months ended June 30, 1998 to 1997. The percentage of revenue fluctuations is attributable to an overall increase in lease operator rates and miles. Revenue equipment as a percentage of revenue declined in 1998 as compared to 1997 due to the maturity of certain tractor equipment leases replaced with new equipment financed with capital leases throughout 1997 and 1998. The change in mix of owned tractor equipment versus leased equipment created an increase in depreciation and interest charges as a percentage of revenue in 1998 compared to 1997. Brokerage expenses decreased 2.4% for the quarter and six month period ended June 30, 1998 to 1997 consistent with the decline in brokerage revenue of $2.7 million and $5.0 million for the quarter and six month period ended June 1998 to 1997, respectively. General supplies and expenses decreased .3% and .5% of revenue from the quarter and six-month period ended June 30, 1997 to the corresponding period in 1998, respectively. The percentage of revenue fluctuations are due to lower professional fees and provision for losses on accounts receivable partially offset by an increase in driver recruiting and advertising expenditures. Claims and insurance costs decreased by .7% of revenue for the quarter ended June 30, 1998 to 1997 and .6% of revenue for the six months ended June 30, 1998 to 1997 as a result of favorable accident and claims experience trends in 1998. Restructuring charges of $3.0 million were recorded in the first quarter of 1997 with no corresponding adjustment in 1998. Conversely, a non-recurring charge of $.4 million for a separation and consulting agreement with the Company's former Chairman and Chief Executive Officer was recorded in the second quarter of 1998 with no corresponding adjustment in 1997. Income tax expense (benefit) was based upon an effective tax rate of 35% for the three months ended June 30, 1998 and 1997. The effective tax rate for the six months ended June 30, 1998 was 35% compared to 28% in 1997. Liquidity and Capital Resources Net cash provided by operating activities was $6.9 million in 1998 compared to $16.9 million in 1997. The decrease is primarily due to lower operating income, net of the restructuring and non-recurring charges, significant payment of certain insurance reserve claims as well as an overall decline in accident trends in 1998, and reduced gross collection amounts on accounts receivable due to lower sales. The accounts receivable turnover improved to 48 days in 1998 compared to 52 days in 1997. Net cash provided by investing activities was $3.4 million in 1998 compared to $9.3 million in 1997. The decrease in investing activity cash is primarily attributed to a reduction in sale- leaseback proceeds of $7.3 million used to repay existing indebtedness. Net cash used in financing activities was $11.4 million in 1998 compared to $20.3 million in 1997. The decrease in cash used in financing activities related to net borrowings under the Company's revolving credit line of $.8 million in 1998 versus net repayments under the credit line of $11.4 million in 1997. Furthermore, the Company repaid long-term debt, capital lease obligations, and note payments of approximately $11.9 million in 1998 compared to $8.6 million in 1997. Capital Requirements The Company estimates 1998 capital expenditures for tractor and trailer equipment of approximately $43 million, net of $2 million from the sale of replaced equipment. The Company has obtained finance commitments for the majority of its needs during 1998. In addition, residual obligations of approximately $7.4 million primarily relating to certain capital lease obligations will mature in the next twelve months, and the Company will have the option to either purchase the revenue equipment for the residual amount, sell the equipment and repay the residual, or return the equipment to the lessor at the end of the lease term. The Company believes that it will be able to meet its on-going capital requirements, scheduled principal payments and working capital needs from cash flow from operations, availability under its working capital line, proceeds from the sale of equipment and additional borrowing commitments. The Company also has additional borrowing capacity supported by unencumbered tangible assets. Year 2000 Computer Preparedness During the Second Quarter of 1998, the Company began the testing of the Company's core freight, administrative and management computer systems. The Company structured a series of tests that were performed to verify that its systems are fully year 2000 compliant. Preliminary test results indicate that the Company is on track towards having addressed the year 2000 issue by the end of the Fourth Quarter of 1998. The Company is also concerned about its computer interface with certain suppliers and customers and will take steps to isolate Company systems from year 2000 problems arising from such interfaces, but cannot predict the compliance of those other systems. Because of this risk, the Company has requested its primary suppliers to certify that their systems either are now or will be year 2000 compliant by third quarter 1999. Through June 30, 1998, approximately 80% of the Company's primary suppliers have responded positively to the Company's certification request. The Company estimates that there are 100 personal computer devices that are currently in service throughout the Company and approximately 100 communications and tracking units on Company tractors that are not year 2000 compliant. The Company has a formal plan to either replace these devices or obtain an upgrade unit from certain vendors. Inflation and Fuel Costs Inflation can be expected to have an impact on the Company's earnings; however, the effect of inflation has been minimal over the past three years. An extended period of inflation or increase in fuel costs would adversely affect the Company's results of operations without a corresponding freight rate increase from customers. The Company uses forward purchase commitments to reduce its exposure to fluctuations in fuel prices by entering into short- term fuel price agreements for the actual delivery of fuel. These agreements, which settle monthly, fix the price of fuel for approximately 2.6 million gallons or approximately 35% of the Company's estimated usage during each of the fourth quarter of 1998 and the first quarter of 1999. The Company recognizes an expense or benefit on these agreements in the period in which the fuel is used. Item 6. Exhibits and Reports on Form 8-K A. Exhibits The following exhibit is filed as part of this report. Designation Nature of Exhibit 11 Computation of Basic and Diluted earnings (loss) per share B. Reports on Form 8-K During the quarter covered by this report there were no reports on Form 8-K filed. Items 2, 3, and 5 of Part II were not applicable and have been omitted. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRISM, INC. By:/s/Edward L.McCormick Edward L.McCormick Director, President and Chief Executive Officer By:/s/James G. Overley James G. Overley Senior Vice President of Finance, Chief Financial Officer and Treasurer Date: August 14, 1998 TRISM, INC. Exhibit Index Exhibit Number Description Page Number 11 Computation of basic and diluted earnings per common share 16 EXHIBIT 11 TRISM, INC. Computation of Basic and Diluted Earnings Per Common Share (In thousands, except per share amounts, unaudited) Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 Net earnings (loss) $ 205 897 (1,742) (2,509) Weighted average number of shares Basic: Average common shares outstanding 5,724 5,737 5,724 5,737 Diluted: Average common shares outstanding 5,724 5,737 5,724 5,737 Common share equivalents resulting from assumed exercise of stock options - - - - 5,724 5,737 5,724 5,737 Earnings (loss) per share: Basic $ .04 .16 (.30) (.44) Diluted $ .04 .16 (.30) (.44) Earnings (Loss) Per Share Basic earnings (loss) per share excludes dilution and is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding. Common shares outstanding include issued shares less shares held in treasury. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock (common stock equivalents). Diluted earnings per share is calculated by dividing net income by the sum of the weighted average number of common shares outstanding and dilutive common stock equivalents at the end of each reporting period. Common stock equivalents are excluded from the diluted calculation if a net loss was incurred for the period as these transactions are anti-dilutive. EX-27 2
5 6-MOS DEC-31-1998 JUN-30-1998 5,230 0 42,883 1,248 1,526 72,615 178,580 66,100 205,990 46,225 94,700 0 0 59 21,257 205,990 77,193 77,193 73,127 73,127 (46) 0 3,797 315 110 205 0 0 0 205 .04 .04
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