-----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, SRt8Ywspi6oweUxf/Seg4p5RvDqriJkDaZsfoCSsgIwUfVfO6Si6flPSrVUzPUY1 oRBNMLxjP6gbJN8sQg0xtQ== 0000950144-98-003828.txt : 19980401 0000950144-98-003828.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950144-98-003828 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOYD BROS TRANSPORTATION INC CENTRAL INDEX KEY: 0000920907 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 636006515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-23948 FILM NUMBER: 98581301 BUSINESS ADDRESS: STREET 1: 3275 HIGHWAY 30 CITY: CLAYTON STATE: AL ZIP: 36016 BUSINESS PHONE: 3347753261 MAIL ADDRESS: STREET 1: 3275 HWY 30 CITY: CLAYTON STATE: AL ZIP: 36016 10-K 1 BOYD BROS. FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-K (Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1997 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934 For the transition period from _______ to _______ COMMISSION FILE NO. 0-23948 BOYD BROS. TRANSPORTATION INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 63-6006515 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 3275 HIGHWAY 30 36016 CLAYTON, ALABAMA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (334) 775-1400 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------------ ---------------------------- NONE NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR VALUE $.001 PER SHARE (TITLE OF CLASS) 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 [ ] Aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant: $9,382,824 as of March 12, 1998 Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date. 4,094,628 shares of Common Stock, par value $.001 per share, outstanding as of March 12, 1998. DOCUMENTS INCORPORATED BY REFERENCE Documents incorporated by reference in this Annual Report on Form 10-K are as follows: Portions of the definitive proxy statement relating to the 1998 Annual Meeting of Stockholders in Part III, Items 10 (as related to Directors), 11, 12 and 13. Portions of the Annual Report to Stockholders for the year ended December 31, 1997 in Parts II and IV. 2 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] 2 3 TABLE OF CONTENTS
PAGE ---- PART I..............................................................................................1 ITEM 1. BUSINESS..........................................................................6 ITEM 2. PROPERTIES........................................................................6 ITEM 3. LEGAL PROCEEDINGS.................................................................6 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............................6 PART II.............................................................................................7 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............7 ITEM 6. SELECTED FINANCIAL DATA...........................................................8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............................................................8 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................................8 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..........................................................8 PART III............................................................................................8 ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT ...................................8 ITEM 11 EXECUTIVE COMPENSATION ...........................................................8 ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ...................8 ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...................................8 PART IV.............................................................................................8 ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K......................................................................8
4 PART I ITEM 1. BUSINESS THE COMPANY Boyd Bros. Transportation Inc. ("Boyd") is a truckload carrier that operates exclusively in the flatbed segment of the industry and hauls primarily steel products and building materials. Since its founding in 1956, Boyd has grown into what management believes is one of the largest exclusively flatbed carriers in the United States. Giving effect to Boyd's acquisition of Welborn Transport, Inc. (described immediately below), Boyd owns and operates over 950 tractors and over 1,200 flatbed trailers. On December 8, 1997 Boyd acquired Welborn Transport, Inc. ("Welborn") located in Tuscaloosa, Alabama (the "Welborn Acquisition"). The acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the assets acquired, and liabilities assumed, based upon their estimated fair market values at the acquisition date. Welborn is operated by Boyd as a stand-alone subsidiary. References to the "Company" contained herein refer to the combined operations of Boyd and Welborn. References hereinafter to "Boyd" or "Welborn" describe the distinct operations of the parent and subsidiary, respectively. In general, Welborn provides transportation services over shorter routes than traditionally provided by Boyd. Welborn operates primarily in the southeastern United States, with an average length of haul of less than 400 miles. Management believes this enhances Welborn's ability to retain quality drivers, as drivers' time away from home is thereby minimized. Welborn operates approximately 330 tractors and over 350 flatbed trailers. Owner-operators own 280 of the 330 tractors utilized by Welborn, while Welborn owns the rest. The owner-operators of these units are compensated by Welborn based upon a percentage of revenue. Over 50% of Welborn's loads are booked through commissioned agents, whereas Boyd has traditionally attempted to develop relationships with its customers directly. The Company's strategy is to offer high-quality flatbed transportation services to high-volume, time-sensitive shippers. Because much of the freight hauled by the Company consists of steel products and building materials, time-definite delivery is required. A late delivery can result in a shutdown of a production line at a plant or a delay in a construction project. Management focuses its marketing efforts on those shippers who require time-definite delivery because it believes that service, rather than price, generally will be the primary factor that will dictate their choice of carrier. Management believes that its ability to recruit and retain drivers has been critical to its success, and Boyd has sought to attract and retain drivers by using only high-quality, late-model tractors equipped with its two-way satellite communication equipment, and offering financial and other incentives to drivers. Management recognizes that getting drivers home frequently is critical to driver retention. Accordingly, Boyd makes load assignments to drivers that enable each driver to attain his or her goals with respect to both miles driven as well as time at home. Additionally, during June of 1997 Boyd began contracting with independent owner-operators to provide service to its customers. Boyd has also implemented a lease-purchase program, providing Boyd's drivers with both career opportunities at Boyd and the opportunity to own their own tractor. Under the program, the driver leases the tractor from Boyd, along with an option to purchase the tractor. In turn, the driver leases the use of the tractor and the driver's services back to Boyd. Management believes that Boyd's newly implemented owner-operator program, along with the owner-operator program already in place at Welborn, will aid in reducing driver turnover and better enable the Company to meet its growth projections. STRATEGY The Company's business strategy is to offer high quality flatbed transportation services in the truckload carrier market primarily to high-volume, time-sensitive customers. The key components of the Company's strategy are as follows: Time-Sensitive Shippers. The Company focuses its marketing efforts on high-volume, time-sensitive shippers that are involved primarily in the steel and building materials businesses and require time-definite delivery. Management believes that many large volume shippers in this segment of the industry have reduced the number of carriers they use so as to use only those "core carriers" that offer consistently superior service. The Company intends to continue its focus on developing relationships as a core-carrier for high-volume, time-sensitive shippers. 5 Technology. Boyd's strategy has been to utilize technology to provide better service to its customers and to improve operating efficiency. Boyd became the first major flatbed carrier in the country to install a satellite tracking system, manufactured by QUALCOMM, in its tractors. The tracking system enables Boyd to monitor equipment locations and schedules more effectively and to communicate with both drivers and customers. Currently, Welborn does not utilize satellite tracking technology; however, management is considering implementing such technology in Welborn's operations in the future. Boyd has also installed computers on board each of its tractors to monitor fuel efficiency and other operational data. Boyd will continue to monitor and implement technological developments that will enable Boyd to improve customer service and operating efficiency. Premium Quality Tractors. Boyd continuously upgrades its fleet of tractors. Maintaining a young, high quality fleet of tractors facilitates Boyd's ability to recruit and retain drivers, achieve maximum on-time reliability, maximize fuel economy and convey an image of quality to existing and potential customers. While Welborn maintains a fleet of high quality tractors, the shorter routes over which its vehicles are dispatched enables these units to be serviced more frequently. Accordingly, it has not been necessary for Welborn to replace its fleet as frequently as Boyd. CUSTOMERS AND MARKETING The Company markets itself on the basis of quality service and employees, its satellite communication system, the capabilities of its information system to interface with the information systems of its customers, its record of on-time deliveries, and its efficient and well-maintained tractors and trailers. The Company's marketing efforts concentrate on attracting customers that require time-definite delivery and ship multiple loads to and from locations that complement the Company's existing traffic flows. Boyd has written contracts with most of its customers. The contracts generally require the customer to use Boyd for a specified minimum amount of shipments each year and may be terminated by either party upon 30 to 60 days' written notice. The largest 25, 10 and 5 customers accounted for approximately 63.5%, 47% and 34%, respectively, of Boyd's revenues during 1997. Many of Boyd's largest 25 customers are large, publicly-held companies. During 1997, the only customer that accounted for more than 10% of Boyd's revenues was USG Interiors, Inc. ("USG"), which together with certain of its affiliates accounted for approximately 12.8% of Boyd's revenues. Boyd's contract with USG specifies that USG will permit Boyd to transport at least 100 tons of USG's goods each year, has no minimum term, and is terminable by either party upon sixty days' written notice. The loss of any of Boyd's major customers could adversely affect the Company's profitability. OPERATIONS The Company's operations are designed to maximize efficiency and provide quality service to customers. All of Boyd's fleet operations, routing and scheduling are centrally coordinated through a satellite tracking system from its corporate headquarters in Clayton, Alabama. Through the use of Boyd's satellite-based communication system, which is complemented by its fully-integrated mainframe computer system, dispatchers monitor the location and delivery schedules of all shipments and equipment to coordinate routes and maximize utilization of Boyd's drivers and equipment. See "-- Transportation Technology." Boyd conducts its operations through a network of 10 regional and satellite service centers in strategic locations in the eastern two-thirds of the United States. See "Item 2 - Properties." Boyd operates regional service centers in Clayton and Birmingham, Alabama; Springfield, Ohio; and Greenville, Mississippi. These regional service centers are supported by smaller satellite service centers, each having between one to three employees, located in Calvert City, Kentucky; Danville, Virginia; Lisbon Falls, Maine; Blytheville, Arkansas; Baltimore, Maryland; and Walworth, Wisconsin. These service centers allow Boyd to re-dispatch equipment terminating in a given area, enhance driver recruiting and return drivers to their homes more regularly. Boyd also has arrangements to deposit trailers near various major customers or shipping locations to facilitate pre-loading of shipments and thereby increase efficiency. Welborn's corporate offices are located in Tuscaloosa, Alabama. Welborn's terminal locations include Memphis, TN; Decatur, AL; and Columbia, SC. Welborn utilizes independent agents located in Birmingham, AL; Atlanta, GA; and Jackson, MS. All of Welborn's terminal locations are utilized for dispatching purposes, including the home office in Tuscaloosa. Welborn currently does not use satellite tracking systems in its operations. 2 6 DRIVERS AND EMPLOYEES Recruiting and retaining professional, well-trained drivers is critical to the Company's success, and all of the Company's drivers must meet specific guidelines relating primarily to safety record, driving experience and personal evaluation, including drug testing. To maintain high equipment utilization, particularly during periods of growth, the Company strongly emphasizes continuous driver and owner-operator recruiting and training. Drivers are recruited at all regional terminal locations and at the Company's corporate headquarters. Drivers are trained in Company policies and operations, safety techniques and fuel efficient operation of equipment, and must pass a rigorous road test prior to assignment to a vehicle. The Company's training programs range from two to eight weeks of concentrated schooling, depending on a driver's level of prior experience. In addition, all drivers are required to participate in annual safety training and defensive driving courses for recertification by the Company. Recognizing the importance of driver contact while drivers are on the road for extended periods, the Company maintains toll-free telephone lines and publishes a newsletter containing Company information, in addition to maintaining daily contact between dispatchers and drivers. Competition for qualified drivers is intense. The short- to medium-haul truckload segment of the trucking industry, including the Company, experiences significant driver and owner-operator turnover, and the Company anticipates that the intense competition for qualified drivers in the trucking industry will continue. In order to attract quality drivers, management is actively pursuing the services of independent owner-operators to complement the fleet. At December 31, 1997, Welborn and Boyd combined employed 905 persons, of whom approximately 698 were drivers and driver-trainees and the balance of whom were mechanics, other equipment maintenance personnel and support personnel, including management and administration. In addition, owner-operators accounted for the operation of approximately 355 tractors. None of the Company's employees is subject to a collective bargaining agreement, and the Company has never experienced a work stoppage. Management believes that its relations with its employees are excellent. REVENUE EQUIPMENT The Company's philosophy is to purchase premium quality tractors to help attract and retain drivers and to promote safe operations, and management believes the higher initial cost of such equipment is recovered through better resale marketability. Each of Boyd's tractors is equipped with a sleeper cab to permit all drivers to comply conveniently and cost-effectively with the United States Department of Transportation ("DOT") hours of service guidelines and to facilitate team operations when necessary. At December 31, 1997, the Company owned 950 tractors and 1,220 flatbed trailers. The tractors are manufactured by Freightliner, Kenworth and International, and the trailers are manufactured by Utility, Dorsey, Fruehauf, Fontaines and Great Dane. TRANSPORTATION TECHNOLOGY Management believes that the application of technology is an ongoing part of providing high quality service at competitive prices, and further believes that Boyd has enhanced its strong reputation for customer satisfaction through the early, fleet-wide implementation of two computer systems. Boyd was the first major flatbed carrier to be fully equipped with the two-way satellite communication system produced by QUALCOMM. The satellite-based OMNITRACS(C) system ("Omnitracs") was installed and operational in the entire Boyd fleet by the end of 1990. Omnitracs has improved the quality and efficiency of Boyd's operations by allowing drivers and dispatchers to have instant, on-the-road communication ability and by enabling Boyd to provide its customers with accurate information on the status and estimated delivery time of cargo shipments. Omnitracs permits more efficient transmission of load assignments to drivers, as well as an enhanced capability to monitor loads in transit and rapidly bill customers for completed deliveries. Once a load is assigned by a load planner, the assignment is transmitted to Boyd's operations department where it is reviewed by a dispatcher who then relays the assignment to the appropriate driver through the Omnitracs display unit in each of Boyd's vehicles. The driver can respond to the dispatcher through Omnitracs in a matter of seconds, thereby eliminating waiting time and inefficient dependence on truck stop telephones or other methods of communication between drivers and dispatchers. Through Omnitracs, Boyd can electronically record a load assignment, report the load to the billing department and generate customer invoices. 3 7 In addition, Boyd uses Omnitracs to automatically transmit location and equipment information and other data to the dispatcher, thereby reducing the need for drivers to stop to communicate with dispatchers in the event of a problem. The system continually tracks every cargo load with accuracy within one-tenth of a mile. This information, along with information concerning available loads, is constantly updated on Boyd's on-line computer. Load planners use this information to match available equipment with available loads, meet delivery schedules and respond more quickly to customer inquiries. Boyd has also equipped its entire fleet of tractors with the SENSORTRACS(C) on-board computer system ("Sensortracs"), which is also produced by QUALCOMM and which monitors fuel efficiency and other operational data. Information from Sensortracs is periodically processed by one of Boyd's computers, which generates reports on vehicle efficiency and driver performance. Reports generated by this system enhance Boyd's ability to counsel its drivers on strengths and deficiencies in their driving habits and fuel efficiency and to monitor the effectiveness of driver training programs. Management is currently contemplating the implementation of similar satellite and on-board computer technology in the operations of the Welborn fleet. As there are further technological developments or enhancements in the computer systems currently utilized by Boyd, management intends to remain committed to investing in and utilizing such advanced technology to better serve its customers. SAFETY AND INSURANCE Both Welborn and Boyd's respective safety departments are responsible for training and supervising personnel to keep safety awareness at its highest level. The Company has implemented an active safety and loss prevention program. The emphasis on safety begins in the hiring and training process, where prospective employees and owner-operators are given physical examinations and drug tests, and newly hired drivers and owner-operators, regardless of experience level, must participate in an intensive training program. See "-- Drivers and Employees." The respective Directors of Safety for both Boyd and Welborn continuously monitor driver performance and have final authority regarding employment and retention of drivers. The Company is committed to securing appropriate insurance coverage at cost-effective rates. The primary claims that arise in the trucking industry consist of cargo loss and damage, personal injury, property damage and workers' compensation. Boyd currently retains liability up to $100,000 for each claim for personal injury and property damage, $100,000 for each claim for employee medical and hospitalization, and $10,000 for each claim for cargo damage. Boyd also maintains full coverage for workers' compensation claims. The Company currently purchases excess primary and umbrella insurance coverage in amounts that management believes are adequate to supplement its retained liabilities. FUEL Motor carrier service is dependent upon the availability of diesel fuel. Boyd's fuel expense comprised 15.0% and 16.5% of revenues in 1997 and 1996, respectively. Through on-board computers, Boyd continually monitors fuel usage, miles per gallon, cost per mile and cost per gallon. The Company has not experienced any difficulty in maintaining fuel supplies sufficient to support its operations. Shortages of fuel, increases in fuel prices or fuel tax rates or rationing of petroleum products could have a material adverse effect on the operations and profitability of the Company. COMPETITION The trucking industry is highly competitive and fragmented. The Company competes primarily with other short-to medium-haul, flatbed truckload carriers, internal shipping conducted by existing and potential customers and, to a lesser extent, railroads. Deregulation of the trucking industry during the 1980s created an influx of new truckload carriers which, along with certain other factors, continues to create substantial downward pressure on the industry's rate structure. Competition for the freight transported by the Company is based primarily on service and efficiency and, to a lesser degree, on freight rates. There are other trucking companies, including truckload carriers that have flatbed divisions, that have substantially greater financial resources, operate more equipment or carry a larger volume of freight than the Company. The existence of these other motor carriers has also resulted in increased competition for qualified drivers. 4 8 REGULATION The trucking industry is subject to regulatory oversight and legislative changes that can affect the economics of the industry by requiring certain operating practices or influencing the demand for, and the costs of providing, services to shippers. The Intermodal Surface Transportation Board (the "ISTB"), as well as various state agencies that have jurisdiction over the Company, have broad powers, generally governing such matters as authority to engage in motor carrier operations, rates and charges, accounting systems, certain mergers, consolidations and acquisitions, and periodic financial reporting. The federal Motor Carrier Act of 1980 commenced a program to increase competition among motor carriers and to diminish the level of regulation in the industry. Following this deregulation, applicants have more easily been able to obtain operating authority, and interstate motor carriers such as the Company have been able to implement certain rate changes without federal approval. The Motor Carrier Act also removed many route and commodity restrictions on transportation of freight. In 1995, the Interstate Commerce Commission (the "ICC") was eliminated and the ISTB was established within the Department of Transportation (the "DOT"). The ISTB performs all functions previously performed by the ICC. Since 1981, Boyd has held authority to carry general commodities throughout the 48 contiguous states, as both a common and contract carrier. Interstate motor carrier operations are subject to safety requirements prescribed by the DOT. Such matters as weight and dimensions of equipment are also subject to federal and state regulation. All of the Company's drivers were required to obtain national commercial driver's licenses by April 1, 1992 pursuant to the regulations promulgated by the DOT. Also, effective in 1989, DOT regulations imposed mandatory drug testing of drivers. In addition, Boyd has completed the implementation of its own ongoing drug-testing program. The DOT's national commercial driver's license and drug testing requirements have not to date adversely affected the availability to the Company of qualified drivers. DOT alcohol testing rules require certain tests, random and otherwise, for alcohol levels in drivers and other safety personnel. See " -- Safety and Insurance." ENVIRONMENTAL MATTERS The Company's operations are subject to federal, state and local laws and regulations concerning the environment. Certain of Boyd's facilities are located in historically industrial areas and, therefore, there is the possibility of environmental liability as a result of operations by prior owners as well as Boyd's use of fuels and underground storage tanks at its regional service centers. During 1994, Boyd retained an environmental consulting firm to conduct an audit of its compliance with applicable federal, state and local laws and regulations concerning the environment. The environmental consulting firm detected the presence of soil contamination and potential groundwater contamination related primarily to the use of underground storage tanks, including tanks used by a prior owner of the property, at Boyd's terminal in Birmingham, Alabama. Boyd notified the Alabama Department of Environmental Management of this contamination and subsequently removed and replaced all currently known underground storage tanks at the Birmingham terminal. Boyd also replaced all underground storage tanks at the Clayton, Alabama terminal. Based upon cost estimates provided by its environmental consulting firm and contractors in 1994, Boyd recorded an $800,000 charge to establish a reserve for the removal and replacement of underground storage tanks at Boyd's service centers. Based on subsequent reviews of this project by management and its independent consultants, Boyd reduced this reserve during 1995 to $293,652, reflecting a decline in the current estimated costs of remedying the sites. The environmental remediation liability in the accompanying balance sheet at December 31, 1996 is $145,122 and $74,512 at December 31, 1997. There can be no assurance that material liabilities or expenditures will not arise from these or additional environmental matters that may be discovered, or from future requirements of law. Management does not believe these expenditures will have a material adverse effect on the Company's financial condition. FORWARD LOOKING STATEMENTS Certain statements incorporated by reference from the information under the caption "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in the Company 's Annual Report to Stockholders for the year ended December 31, 1997 contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, business conditions and growth in the economy, including the transportation and construction sectors in particular, competitive factors, including price pressures and the ability 5 9 to recruit and retain qualified drivers, the ability to control internal costs as well as fuel costs, that are not passed on to the Company's customers, and other factors referenced elsewhere herein. ITEM 2. PROPERTIES The Company's corporate headquarters and principal service center are located on a 17.9 acre tract in Clayton, Alabama, which Boyd purchased during 1993. Such facilities consist of approximately 22,000 square feet of office space, 12,000 square feet of equipment repair facilities and approximately 3 acres of parking space. The following table sets forth information regarding the location and ownership of each of Boyd's service center and shuttle facilities: Clayton, AL......................... Owned Springfield, OH..................... Owned Birmingham, AL...................... Owned Greenville, MS...................... Owned Calvert City, KY.................... Leased Danville, VA........................ Leased Lisbon Falls, ME.................... Leased Baltimore, MD....................... Leased Walworth, WI........................ Leased Blytheville, AR..................... Leased
Additionally, Welborn owns its corporate offices in Tuscaloosa, Alabama and leases service centers located as follows: Memphis, TN......................... Leased Decatur, AL......................... Leased Columbia, SC........................ Leased
ITEM 3. LEGAL PROCEEDINGS The Company is routinely a party to litigation incidental to its business, primarily involving claims for personal injury and property damage incurred in the transportation of freight. The Company maintains insurance that it believes is adequate to cover its liability risks. See "Item 1 - Business -- Safety and Insurance." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 31, 1997, either through the solicitation of proxies or otherwise. EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below is information concerning the Executive Officers of the Company as of March 12, 1998. Dempsey Boyd, age 71, founded Boyd in 1956, and has been Chairman of the Board since April 1980. Mr. Boyd served as President of Boyd from December 1962 until April 1980. Mr. Boyd is the father of Gail B. Cooper and Ginger B. Tibbs. Donald G. Johnston, age 61, has served as President and Chief Executive Officer of Boyd since April 1980, and as a Director since December 1979. Prior to that time, he served as Vice President and General Manager since joining Boyd in 1979. Mr. Johnston has a background in industrial management and sales, and is active in, and has previously served as chairman of, the Alabama Trucking Association and the University of Georgia Trucking Profitability Strategies Conference. Mr. Johnston received a B.S. in industrial management from Auburn University. Richard C. Bailey, age 47, has served as Senior Vice President and Chief Financial Officer since joining Boyd in August 1992, and has served as a Director since February 1995. He served as president and director of Eastern Inter-Trans Services, Inc., a dry van truckload carrier based in Columbus, Georgia, from December 1989 to August 1992. Mr. Bailey is a certified public accountant with a B.S. in accounting from Georgia State University. He was previously employed in various financial positions by Ernst & Young, Intermet Corporation and Snapper Products (a division of The Actava Group Inc.). Mr. Bailey has served on the Advisory Board of the University of Georgia Trucking Profitability Strategies Conference. 6 10 Gail B. Cooper, age 47, has been the Secretary of Boyd since December 1969, and served as a Director of Boyd from December 1969 until March 1994. Ms. Cooper received a B.S. in business administration from Troy State University. She has served Boyd in numerous administrative and accounting positions since joining Boyd full-time in June 1972. Ms. Cooper is the daughter of Mr. Boyd and the sister of Ms. Tibbs. Ginger B. Tibbs, age 44, has been the Treasurer of Boyd since December 1979, and served as a Director from December 1978 until March 1994. Ms. Tibbs is primarily responsible for collection of Boyd's accounts receivable and has served as Credit Manager since September 1980. Ms. Tibbs received a degree in elementary education from Auburn University. She is the daughter of Mr. Boyd and the sister of Ms. Cooper. Gary Robinson, age 49, has been the Vice President of Operations of Boyd since May 1997. From February of 1989 to August 1997, Mr. Robinson served as Director of Sales and Marketing for the flatbed division of Prime, Inc., a truckload carrier based in Springfield, Missouri. Miller Welborn, age 39, co-founded Welborn Transport, Inc., an Alabama-based flatbed trucking company, in 1989 and has served as its Chief Executive Officer since such date. Steven Rumsey, age 34, co-founded Welborn Transport, Inc., an Alabama-based flatbed trucking company, in 1989 and has served as its President since such date. He holds a B.A. in communications from the University of Alabama. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock of the Company is listed on the Nasdaq National Market under the symbol "BOYD." As of March 12, 1998, the Common Stock was held by approximately 100 holders of record. The table below sets forth the reported high and low sales price per share for the Common Stock as reported by the Nasdaq National Market for each fiscal quarter during 1997.
Price Range ----------------- 1997 High Low ---- ------- ------- First Quarter .................................... $ 8 $ 4-1/4 Second Quarter ................................... 7-3/4 4-3/8 Third Quarter .................................... 10-3/8 6-3/4 Fourth Quarter ................................... 10-3/4 6 Price Range ----------------- 1996 High Low ---- ------- ------- First Quarter .................................... $ 8-1/2 $ 7 Second Quarter ................................... 9 7 Third Quarter .................................... 8-3/4 7-1/2 Fourth Quarter ................................... 9 7
Management currently anticipates that all of its earnings will be retained for development of the Company's business, and does not anticipate paying any cash dividends in the foreseeable future. Furthermore, certain of the Company's financing arrangements contain covenants that may restrict the payment of cash dividends for the foreseeable future. Future cash dividends, if any, will be at the discretion of the Company's Board of Directors and will depend upon, among other things, the Company's future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions, and other factors as the Board of Directors may deem relevant. In connection with the Welborn Acquisition consummated on December 8, 1997, an aggregate of 393,940 shares of the Company's Common Stock were issued to Miller Welborn and Steven Rumsey, the sole shareholders of Welborn, as a part of the consideration pursuant to the plan of merger. Such shares were not registered under the Securities Act of 1933 (the "1933 Act") and were issued to Messrs. Welborn and Rumsey in reliance upon Section 4(2) of the 1933 Act and Regulation D of the General Rules and Regulations promulgated thereunder. 7 11 ITEM 6. SELECTED FINANCIAL DATA The information required by this item is incorporated by reference from the information under the caption "Selected Financial Data" in the Company's Annual Report to Stockholders for the year ended December 31, 1997. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is incorporated by reference from the information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report to Stockholders for the year ended December 31, 1997. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is incorporated by reference from the Financial Statements contained in the Company's Annual Report to Stockholders for the year ended December 31, 1997. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III With the exception of information relating to the executive officers of the Company, which is provided in Part I hereof, all information required by Part III (Items 10, 11, 12 and 13) is incorporated by reference to the Company's definitive Proxy Statement relating to the 1997 Annual Meeting of Stockholders, which is scheduled to be filed on or before April 30, 1997. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND CURRENT REPORTS ON FORM 8-K (a) Exhibits, Financial Statements and Schedules. 1. Financial Statements. The following financial statements for the Company and Independent Auditors' Report are incorporated by reference from the Company's Annual Report to Stockholders for the year ended December 31, 1997: Independent Auditors' Report Balance Sheets at December 31, 1997 and 1996 Statements of Operations for the years ended December 31, 1997, 1996 and 1995 Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995 Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 Notes to Financial Statements 2. Financial Statement Schedules. None. Financial Statement Schedules are omitted because of the absence of conditions under which they are required or because the information is included in the financial statements or notes thereto. 3. Exhibits required by Item 601 of Regulation S-K. The following exhibits are included in this Form 10-K: 8 12
EXHIBIT NO. DESCRIPTION ------- ----------- 10.1* First Amendment to Boyd Bros. Transportation Inc. 1994 Stock Option Plan 10.2* Employment Agreement between the Company and Miller Welborn dated December 8, 1997 10.3* Employment Agreement between the Company and Steven Rumsey dated December 8, 1997 13 Those portions of the Company's Annual Report to Stockholders for the year ended December 31, 1997 that are specifically incorporated herein by reference 21 Subsidiaries of the Registrant 23 Consent of Deloitte & Touche LLP 27 Financial Data Schedule
The following exhibits are incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 33-76756), declared effective on May 9, 1994:
EXHIBIT NO. DESCRIPTION - ------- ----------- 3.1 Certificate of Incorporation of the Company 3.2 By-laws of the Company 10.1* Boyd Bros. Transportation Inc. 1994 Stock Option Plan 10.2* Form of the Company's Nonstatutory Stock Option Agreement 10.3* Form of the Company's Nonstatutory Stock Option Agreement for Nonemployee Directors 10.4* Description of Senior Management Bonus Plan 10.5* Description of Key Employee Bonus Program 10.11 Master Note for Business and Commercial Loans dated July 22, 1992 providing for a $1,500,000 line of credit from AmSouth Bank N.A. to the Company 10.13 Note for Business and Commercial Loans dated August 2, 1993 by the Company in favor of AmSouth Bank N.A. in the principal amount of $5,122,702.70 10.14 Security Agreement for Tangible Personal Property dated February 15, 1994 by the Company in favor of AmSouth Bank N.A. 10.15 Note for Business and Commercial Loans dated February 15, 1994 for a $5,000,000 non-revolving draw note by the Company in favor of AmSouth Bank N.A. 10.22 Modification of the Continuation of Credit and Security Agreement and Loan Modification Agreement dated March 4, 1994 by and between the Company and Compass Bank 10.26 Credit and Security Agreement dated February 1, 1994 by and between the Company and Compass Bank
- -------------------- * Identifies each exhibit that is a "management contract or compensatory plan or arrangement" required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c) of Form 10-K. 9 13
EXHIBIT NO. DESCRIPTION - ------- ----------- 10.27 Security Agreement dated February 1, 1994 by the Company in favor of Compass Bank 10.37 Credit Agreement dated April 1, 1994 by and between the Company and AmSouth Bank N.A. 10.38 Trucking Contract dated May 2, 1988 by and between the Company and USG Interiors, Inc.
The following exhibits are incorporated by reference to the Company's Amendment to Quarterly Report on Form 10-Q filed on August 5, 1997:
EXHIBIT NO. DESCRIPTION - ------- ----------- 10.33 OMNITRACS contract dated February 5, 1997, by and between the Company and QUALCOMM, Inc.
The following exhibits are incorporated by reference to the Company's Current Report on Form 8-K filed on December 19, 1997:
EXHIBIT NO. DESCRIPTION - ------- ----------- 2.1 Acquisition Agreement dated December 8, 1997, by and among the Company, W-T Acquisition Company, Welborn Transport, Inc., Miller Welborn and Steven Rumsey (b) Current Reports on Form 8-K 1. In connection with the Welborn Acquisition, the Company filed a Report on Form 8-K on December 19, 1997 announcing the merger.
10 14 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. BOYD BROS. TRANSPORTATION INC. By: /s/ DONALD G. JOHNSTON -------------------------------------- Donald G. Johnston President and Chief Executive Officer Date: March 30, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURES TITLE DATE ---------- ----- ---- /s/ DONALD G. JOHNSTON President, Chief Executive March 30, 1998 - ---------------------------------- Officer and Director (Principal Donald G. Johnston Executive Officer) /s/ RICHARD C. BAILEY Chief Financial Officer and March 30, 1998 - ---------------------------------- Director (Principal Financial Richard C. Bailey and Accounting Officer) /s/ DEMPSEY BOYD Chairman and Director March 30, 1998 - ---------------------------------- Dempsey Boyd /s/ GLYN E. NEWTON Director March 30, 1998 - ---------------------------------- Glyn E. Newton /s/ W. WYATT SHORTER Director March 30, 1998 - ---------------------------------- W. Wyatt Shorter /s/ PAUL G. TAYLOR Director March 30, 1998 - ---------------------------------- Paul G. Taylor /s/ BOYD WHIGHAM Director March 30, 1998 - ---------------------------------- Boyd Whigham /s/ STEPHEN J. SILVERMAN Director March 30, 1998 - ---------------------------------- Stephen J. Silverman
EX-10.1 2 FIRST AMENDMENT TO 1994 STOCK OPTION PLAN 1 EXHIBIT 10.1 FIRST AMENDMENT TO THE BOYD BROS. TRANSPORTATION, INC. 1994 STOCK OPTION PLAN THIS FIRST AMENDMENT to the Boyd Bros. Transportation, Inc. 1994 Stock Option Plan (the "Plan") made this ________ day of May, 1997, by Boyd Bros. Transportation, Inc. (the "Company"). W I T N E S S E T H : WHEREAS, the Company maintains the Plan to advance the interests of the Company and its stockholders by affording selected Employees and Nonemployee Directors an opportunity to acquire or increase their proprietary interests in the Company by granting such persons Options to purchase Stock in the Company, and WHEREAS, pursuant to Article XI of the Plan, the Board of Directors, upon recommendation of the Compensation Committee, may amend the Plan with the approval of the stockholders of the Company; and WHEREAS, the Company wishes to amend the Plan at this time for the purpose of eliminating the provision which sets the maximum number of shares of the Company's 2 Common Stock that may be issued and sold thereunder to any one employee at 50,000 shares of stock; and WHEREAS, the Board of Directors of the Company and the stockholders of the Company have approved such amendment of the Plan: NOW, THEREFORE, the Plan is hereby amended as follows: I. Section 5.1 of the Plan is amended by deleting the first sentence and inserting in its place the following: "5.1 Limitations. Subject to adjustments pursuant to Section 5.2 hereof, the maximum number of shares of stock that may be issued and sold hereunder shall not exceed an aggregate of 350,000 shares of stock." II. All other provisions of the Plan not inconsistent herewith are confirmed and ratified. IN WITNESS WHEREOF, this First Amendment has been executed on the day and year first above written. EX-10.2 3 EMPLOYMENT AGREEMENT (MILLER WELBORN) 1 EXHIBIT 10.2 EMPLOYMENT AGREEMENT THIS AGREEMENT, made and entered into this 8th day of December, 1997, and effective as of the "Effective Date" as defined below, by and between BOYD BROS. TRANSPORTATION, INC., a Delaware corporation ("Boyd"), and MILLER WELBORN, an individual resident of Alabama ("Employee"); W I T N E S S E T H: WHEREAS, Employee was a shareholder and a manager of Welborn Transport, Inc. ("Welborn"), an Alabama corporation that on this day has been acquired by Boyd by means of a merger of Welborn with and into W.T. Acquisition Corp., a wholly-owned subsidiary of Boyd; WHEREAS, Boyd desires to employ Employee in a managerial capacity for the period of time set forth herein; WHEREAS, Employee desires to enter into this Agreement with respect to Employee's employment upon the terms and conditions hereinafter set forth; and WHEREAS, Employee, because of his managerial duties described herein, will directly and indirectly have access to manufacturing, marketing, pricing and other confidential information of Boyd, which, if exploited by the Employee in contravention of this Agreement, would seriously, adversely and irreparably affect the business of Boyd; NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, Boyd and Employee agree as follows: 1. Term of Employment. Boyd hereby employs Employee and Employee hereby accepts such employment upon the terms and conditions set forth in this Agreement. The term ("Term") of Employee's employment under this Agreement shall be for a period commencing from the date hereof (the "Effective Date") and terminating on the third anniversary of the Effective Date (the "Termination Date"), unless such employment is terminated or extended prior to the expiration of said period as hereinafter provided. Boyd shall have the right to extend the Term for up to two (2) additional one year periods by providing notice to Employee, in the case of the first such extension, within thirty (30) days prior to the Termination Date and, in the case of the second such extension, within thirty (30) days prior to the anniversary of the Termination Date. 2 2. Duties of Employee. Employee agrees, during the term of this Agreement, to devote his full professional and business-related time, skills and best efforts, in accordance with Boyd policies and procedures, to the performance of all reasonable duties as may be assigned to Employee from time to time by Boyd, which duties shall include acting as Chairman of the Board of Boyd. Employee shall devote all of his full professional and business-related skills solely to the affairs of Boyd and shall not, during the term of this Agreement, unless otherwise agreed to in advance in writing by Boyd, engage in other employment or become self-employed in any other capacity during the term of this Agreement. Employee may engage in personal investment activities provided such activities do not interfere with Employee's performance of his full-time employment duties under this Agreement. Employer acknowledges that Employee owns an interest in (i) TWR, Inc., a garbage collection company, (ii) in Moorland Properties, LLC, a rental properties company and (iii) S&L Outdoor Advertising, Inc., an outdoor advertising company. 3. Compensation for Employment. (a) Base Salary. In consideration of the employment services to be rendered by Employee under this Agreement, Boyd shall pay or cause to be paid to Employee an initial base salary of $2,884.61 per week ($150,000.00 per year), payable at the times and in the installments consistent with Boyd payroll practices in effect from time to time, but in no event, less than on a monthly basis. The initial base salary may be increased by Boyd based upon growth of Boyd's business and other performance-based objectives comparable to those used to review compensation of other management employees of Boyd. (b) Bonus. In addition to the base salary payable to Employee, Employee shall be eligible to receive an annual incentive bonus based upon growth of Boyd's business and comparable to those bonus programs authorized from time to time by Boyd for management employees of Boyd and its subsidiaries. (c) Expenses. Boyd shall reimburse Employee, in accordance with Boyd standard policies and procedures, for reasonable travel and business related expenses incurred in the performance of his duties. 4. Fringe Benefits. Employee shall be entitled to participate in such fringe benefit programs as may be authorized and adopted from time to time by Boyd, for employees who are similarly situated, which programs shall be comparable to such programs authorized from time to time by Boyd and shall include a car allowance of Seven Thousand Dollars ($7,000.00) per year; provided, however, that Employee must meet any and all eligibility provisions required under said programs. Boyd reserves the right to alter, modify or revoke such benefits at any time with or without notice. 2 3 5. Disability. Employee shall be entitled during the term of his employment to disability pay, if any, for an amount of time as is consistent with the policies established by Boyd for an employee of Employee's position. 6. Death During Employment. If Employee dies while employed hereunder, Boyd shall pay to the estate of Employee the compensation which would otherwise be payable to Employee under Sections 3(a) and 3(c) hereof, up to the end of the month in which Employee's death occurs, and Boyd shall have no further obligation under Section 3 hereof whatsoever. 7. Termination of Employment. (a) Employee and Boyd shall have the right to terminate the employment relationship described herein at any time by mutual agreement in writing. Termination of Employee's employment with Boyd for any reason shall automatically constitute Employee's immediate resignation from its Board of Directors. (b) Boyd shall have the right to terminate the employment relationship hereunder, and shall be under no further obligation hereunder (except as specifically provided in this Section 7(a)), for "Cause," as such term is defined below, by serving notice on Employee. In the event Employee is terminated for Cause, Employee shall be entitled to compensation and benefits, if any, only through the date of the notice of termination as described in this Section 7(a). (c) Boyd shall have the right to terminate the employment relationship hereunder and this Agreement without Cause by serving notice on Employee. In such event, Boyd shall be obligated to continue to pay Employee until the Termination Date those payments described in Section 3(a), and Boyd shall otherwise have no further obligation under this Agreement. In addition, ninety (90) days after the date of termination of Employee's employment under this Section 7(c), Employee shall have the right to sell the shares of Boyd Common Stock owned by him without regard to the restrictions set forth in Section 4.5.1 of that certain Acquisition Agreement dated as of December 1, 1997 between Boyd, W.T. Acquisition Corp., Welborn Transport, Inc. and the Shareholders (as defined therein). Any sale of such shares will, however, remain subject to any limitations imposed by the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. (d) For purposes of this Agreement, the term "Cause" shall mean (i) conviction of a felony, misappropriation of any material funds or property of Boyd, commission of fraud or embezzlement with respect to Boyd, or any act or acts of dishonesty relating to Employee's employment by Boyd resulting or intended to result in direct or indirect personal gain or enrichment at the expense of Boyd; [(ii) committing any breach of this Agreement or the Covenant Not to Compete dated the date hereof among Employee, Boyd and W.T. Acquisition Corp. (which breach is not cured by Employee within ten (10) days' notice of violation from Boyd);] (iii) failing to perform his obligations under this Agreement due to alcoholism that makes Employee unable to 3 4 perform the essential functions of his job and with respect to which Boyd is unable to provide accommodations without undue hardship; (iv) illicit drug use or any drug (other than alcohol) addiction; (v) committing any material act or omission of a material act involving willful malfeasance or gross negligence in the performance of Employee's duties under this Agreement; (vi) deviating from the written policies or directives of Boyd, provided the same policies and directives are applied consistently to all management of Boyd, if Employee fails to cure such deviation within ten (10) days after written notice to Employee; (vii) material failure by the Employee to perform his duties hereunder or other reasonable directions from the Board of Directors of Boyd if Employee fails to cure such failure within ten (10) days written notice to Employee; or (viii) Boyd's reasonable dissatisfaction with the quality of Employee's performance which continues after Boyd has notified the Employee of such dissatisfaction setting forth obtainable objectives to correct such dissatisfaction and has given the Employee a reasonable time to obtain such objectives. 8. Noncompetition. Employee covenants and agrees that during the Restricted Period, Employee will not, within the territories listed on Exhibit A attached hereto, directly or indirectly, compete with Boyd by carrying on a business which is substantially similar to the Business (as defined in Section 11). "Restricted Period," for purposes of this Section 8, shall mean that period commencing with the date of this Agreement and ending on the earlier of (i) five years from the date of this Agreement and (ii) two years from the date of termination of Employee's employment with Boyd. 9. Definition of "Compete." For the purposes of this Agreement, the term "compete" shall mean with respect to the Business: (i) managing, supervising, or otherwise participating in a management or supervisory capacity in flatbed truckload carrier for hire operations (ii) calling on, soliciting, taking away, accepting as a customer or attempting to call on, solicit, take away or accept as a customer any individual, partnership, corporation, limited liability company or association that is or was a customer of Boyd during the twelve calendar month period immediately preceding such act with whom the Employee had contact, either directly or indirectly in Employee's managerial capacity, (iii) soliciting, taking away or attempting to solicit or take away any employee of the Business, either on the Employee's behalf or on behalf of any other person or entity, who was an employee of the Business during the twelve calendar month period immediately preceding such act, or (iv) entering into or attempting to enter into any business substantially similar to the Business, either alone or with any individual, partnership, corporation, limited liability company or association. 10. Direct or Indirect Competition. For the purposes of this Agreement, the words "directly or indirectly" as used herein shall mean (i) acting as an agent, representative, consultant, officer, director, member, independent contractor, or employee of any entity or enterprise which is competing with the Business, (ii) participating in any such competing entity or enterprise as an owner, partner, limited partner, joint venturer, member, creditor or stockholder (except as a stockholder holding less than one percent (1%) interest in a corporation whose shares are actively traded on a regional or national securities exchange or in the over-the-counter market), and (iii) 4 5 communicating to any such competing entity or enterprise the names or addresses or any other information concerning any past, present, or identified prospective customer of Boyd. 11. Business. For purposes of this Agreement, the term "Business" shall mean the operations of Welborn conducted immediately prior to the date hereof relating to flatbed truckload carrier for hire operations. 12. Confidential Data. Employee further agrees that, for a period of five (5) years following the Effective Date, Employee will keep confidential and not directly or indirectly divulge to anyone nor use or otherwise appropriate for Employee's own benefit, any pricing information, marketing information, sales technique of Boyd any other of the following confidential information or documents of or relating to Boyd: confidential records, client and customer lists, information about client requirements, terms of contracts with clients and customers, and planning and financial information of Boyd (hereinafter referred to as the "Confidential Data"). Employee hereby acknowledges and agrees that the prohibitions against disclosure of Confidential Data recited herein are in addition to, and not in lieu of, any rights or remedies which Boyd may have available pursuant to the laws of any jurisdiction or at common law to prevent the disclosure of trade secrets or proprietary information, and the enforcement by Boyd of its rights and remedies pursuant to this Agreement shall not be construed as a waiver of any other rights or available remedies which it may possess in law or equity absent this Agreement. Notwithstanding the foregoing, the term "Confidential Data" does not include any information which (i) at the time of disclosure or thereafter is generally available to and known by the public (other than as a result of a disclosure directly or indirectly by you or your representatives in breach of this Agreement), (ii) was available to you on a nonconfidential basis from a source other than Boyd or its directors, officers, employees, agents or advisors, or (iii) has been independently acquired or developed by you without violating any of your obligations under this agreement. In the event that you or any of your representatives become legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand, any similar process or otherwise) to disclose any of the Confidential Data, you shall provide Boyd with prompt prior written notice of such requirement so that Boyd may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this agreement. In the event that such protective order or other remedy is not obtained, or that Boyd waives compliance with the provisions hereof, you agree to furnish only that portion of the Confidential Data which is required to be disclosed in the written opinion of your counsel, and to use reasonable efforts to obtain confidential treatment of such of the disclosed information which Boyd so designates. 13. Non-Solicitation of Employees of Boyd. Employee covenants that during the periods for which Employee is entitled to compensation or other payment hereunder, and until the earlier of (i) the expiration of the two year period immediately following the last of such periods and 5 6 (ii) five years from the date of execution of this Agreement, Employee will neither directly nor indirectly induce or attempt to induce any employee of Boyd to terminate his or her employment to go to work for any other Boyd. 14. Property of Boyd. Employee acknowledges that from time to time in the course of providing services pursuant to this Agreement, Employee will have the opportunity to inspect and use certain property, both tangible and intangible, of Boyd, and Employee hereby agrees that said property shall remain the exclusive property of Boyd and that Employee shall have no right or proprietary interest in such property, whether tangible or intangible, including, without limitation, Boyd's customer and supplier lists, contract forms, books of account, computer programs and similar property. 15. Equitable Relief. Employee acknowledges that the services to be rendered by Employee are of a special, unique, unusual, extraordinary and intellectual character, which gives them a peculiar value, the loss of which cannot reasonably or adequately be compensated in damages in an action at law and that a breach by Employee of any of the provisions contained in this Agreement will cause Boyd irreparable injury and damage. Employee further acknowledges that Employee possesses unique skills, knowledge and ability and that any material breach of the provisions of this Agreement would be extremely detrimental to Boyd. By reason thereof, Employee agrees that Boyd shall be entitled, in addition to any of the remedies it may have under this Agreement or otherwise, to injunctive and other equitable relief to prevent or curtail any breach of this Agreement by Employee; provided, however, that no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or prohibition against the pursuing of other legal or equitable remedies in the event of a breach. 16. Successors Bound; Assignability. This Agreement shall be binding upon Employee, Boyd and their successors in interest, including without limitation, any corporation into which Boyd may be merged or by which it or all or any substantial portion of its assets or business may be acquired. This Agreement is nonassignable except that the rights, duties and obligations of Boyd under this Agreement may be assigned to any affiliate of it and to any acquiror of the business conducted by Boyd, in the event Boyd is merged, liquidated, acquired or sells substantially all of the assets used in such business. 17. Severability. In the event that any one or more of the provisions of this Agreement or any word, phrase, clause, sentence, or other portion thereof shall be deemed to be illegal or unenforceable for any reason, such provision or portion thereof shall be modified or deleted in such manner so as to make this Agreement as modified legal and enforceable to the fullest extent permitted under applicable laws. 18. Entire Agreement. Except for the Covenant Not to Compete dated the date hereof between Boyd, Employee and W.T. Acquisition Corp. (the "Covenant Not to Compete"), this Agreement constitutes the entire agreement between the parties hereto with regard to the subject 6 7 matter hereof and supersedes all other agreements relating to the subject matter hereof, including any previous employment agreement. There are no agreements, understandings, specific restrictions, warranties or representations relating to said subject matter between the parties other than those set forth herein or herein provided. The parties agree that the covenants set forth in this Agreement are in addition to, and not in limitation of, the covenants set forth in the Covenant Not to Compete. 19. Counterparts. This Agreement may be executed in two or more counterparts, each of which will take effect as an original, and all of which shall evidence one and the same Agreement. 20. Amendment and Modification. This Agreement may only be amended, modified or terminated prior to the end of its term by the mutual written agreement of the parties. 21. Governing Law. The terms of this Agreement shall be governed by and construed in accordance with the laws of the State of Alabama. 7 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BOYD BROS. TRANSPORTATION INC. "Boyd" By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- MILLER WELBORN "Employee" ------------------------------------------ Printed Name: ---------------------------- 9 EXHIBIT A LIST STATES IN WHICH BOYD IS PRESENTLY CONDUCTING BUSINESS Louisiana Michigan Mississippi Virginia Alabama West Virginia Georgia Pennsylvania Florida New York South Carolina Maryland North Carolina District of Columbia Tennessee Vermont Kentucky New Hampshire Illinois Maine Indiana Massachusetts Ohio Connecticut Wisconsin Rhode Island 9 EX-10.3 4 EMPLOYMENT AGREEMENT (STEVEN RUMSEY) 1 EXHIBIT 10.3 EMPLOYMENT AGREEMENT THIS AGREEMENT, made and entered into this 8th day of December, 1997, and effective as of the "Effective Date" as defined below, by and between BOYD BROS. TRANSPORTATION, INC., a Delaware corporation ("Boyd"), and STEVEN RUMSEY, an individual resident of Alabama ("Employee"); W I T N E S S E T H: WHEREAS, Employee was a shareholder and a manager of Welborn Transport, Inc. ("Welborn"), an Alabama corporation that on this day has been acquired by Boyd by means of a merger of Welborn with and into W.T. Acquisition Corp., a wholly-owned subsidiary of Boyd; WHEREAS, Boyd desires to employ Employee in a managerial capacity for the period of time set forth herein; WHEREAS, Employee desires to enter into this Agreement with respect to Employee's employment upon the terms and conditions hereinafter set forth; and WHEREAS, Employee, because of his managerial duties described herein, will directly and indirectly have access to manufacturing, marketing, pricing and other confidential information of Boyd, which, if exploited by the Employee in contravention of this Agreement, would seriously, adversely and irreparably affect the business of Boyd; NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, Boyd and Employee agree as follows: 1. Term of Employment. Boyd hereby employs Employee and Employee hereby accepts such employment upon the terms and conditions set forth in this Agreement. The term ("Term") of Employee's employment under this Agreement shall be for a period commencing from the date hereof (the "Effective Date") and terminating on the first anniversary of the Effective Date (the "Termination Date"), unless such employment is terminated or extended prior to the expiration of said period as hereinafter provided. Employee shall have the right to extend the Term for up to two (2) additional one year periods by providing notice to Boyd, in the case of the first such extension, within thirty (30) days prior to the Termination Date and, in the case of the second such extension, within thirty (30) days prior to the anniversary of the Termination Date. 2 2. Duties of Employee. Employee agrees, during the term of this Agreement, to devote his full professional and business-related time, skills and best efforts, in accordance with Boyd policies and procedures, to the performance of all reasonable duties as may be assigned to Employee from time to time by Boyd, which duties shall include acting as President of Welborn. Employee shall devote all of his full professional and business-related skills solely to the affairs of Boyd and shall not, during the term of this Agreement, unless otherwise agreed to in advance in writing by Boyd, engage in other employment or become self-employed in any other capacity during the term of this Agreement. Employee may engage in personal investment activities provided such activities do not interfere with Employee's performance of his full-time employment duties under this Agreement. Employer acknowledges that Employee owns an interest in (i) TWR, Inc., a garbage collection company, (ii) in Moorland Properties, LLC, a rental properties company and (iii) S&L Outdoor Advertising, Inc., an outdoor advertising company. 3. Compensation for Employment. (a) Base Salary. In consideration of the employment services to be rendered by Employee under this Agreement, Boyd shall pay or cause to be paid to Employee an initial base salary of $2,884.61 per week ($150,000.00 per year), payable at the times and in the installments consistent with Boyd payroll practices in effect from time to time, but in no event, less than on a monthly basis. The initial base salary may be increased by Boyd based upon growth of Boyd's business and other performance based objectives comparable to those used to review compensation of other management employees of Boyd. (b) Bonus. In addition to the base salary payable to Employee, Employee shall be eligible to receive an annual incentive bonus comparable to those bonus programs authorized from time to time by Boyd for management employees of Boyd and its subsidiaries. (c) Expenses. Boyd shall reimburse Employee, in accordance with Boyd standard policies and procedures, for reasonable travel and business related expenses incurred in the performance of his duties. 4. Fringe Benefits. Employee shall be entitled to participate in such fringe benefit programs as may be authorized and adopted from time to time by Boyd for employees who are similarly situated, which programs shall be comparable to such programs authorized from time to time by Boyd and shall include a car allowance of Seven Thousand Dollars ($7,000.00) per year; provided, however, that Employee must meet any and all eligibility provisions required under said programs. Boyd reserves the right to alter, modify or revoke such benefits at any time with or without notice. 5. Disability. Employee shall be entitled during the term of his employment to disability pay, if any, for an amount of time as is consistent with the policies established by Boyd for an employee of Employee's position. 2 3 6. Death During Employment. If Employee dies while employed hereunder, Boyd shall pay to the estate of Employee the compensation which would otherwise be payable to Employee under Sections 3(a) and 3(c) hereof, up to the end of the month in which Employee's death occurs, and Boyd shall have no further obligation under Section 3 hereof whatsoever. 7. Termination of Employment. (a) Employee and Boyd shall have the right to terminate the employment relationship described herein at any time by mutual agreement in writing. In the event that Employee should be elected to Boyd's Board of Directors, termination of Employee's employment with Boyd for any reason shall automatically constitute Employee's immediate resignation from its Board of Directors. (b) Boyd shall have the right to terminate the employment relationship hereunder, and shall be under no further obligation hereunder (except as specifically provided in this Section 7(b)), for "Cause," as such term is defined below, by serving notice on Employee. In the event Employee is terminated for Cause, Employee shall be entitled to compensation and benefits, if any, only through the date of the notice of termination as described in this Section 7(b). (c) Boyd shall have the right to terminate the employment relationship hereunder and this Agreement without Cause by serving notice on Employee. In such event, Boyd shall be obligated to continue to pay Employee until the Termination Date those payments described in Section 3(a), and Boyd shall otherwise have no further obligation under this Agreement. In addition, ninety (90) days after the date of termination of Employee's employment with Boyd under this Section 7(c), Employee shall have the right to sell the shares of Boyd Common Stock owned by him without regard to the restrictions set forth in Section 4.5.2 of that certain Acquisition Agreement dated as of December 1, 1997 between Boyd, W.T. Acquisition Corp., Welborn Transport, Inc. and the Shareholders (as defined herein). Any sale of such shares will, however, remain subject to any limitations imposed by the Federal Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. (d) For purposes of this Agreement, the term "Cause" shall mean (i) conviction of a felony, misappropriation of any material funds or property of Boyd, commission of fraud or embezzlement with respect to Boyd, or any act or acts of dishonesty relating to Employee's employment by Boyd resulting or intended to result in direct or indirect personal gain or enrichment at the expense of Boyd; (ii) committing any breach of this Agreement or the Covenant Not to Compete dated the date hereof among Employee, Boyd and W.T. Acquisition Corp. (which breach is not cured by Employee within ten (10) days' notice of violation from Boyd); (iii) failing to perform his obligations under this Agreement due to alcoholism that makes Employee unable to perform the essential functions of his job and with respect to which Boyd is unable to provide accommodations without undue hardship; (iv) illicit drug use or any drug (other than alcohol) addiction; (v) committing any material act or omission of a material act involving willful 3 4 malfeasance or gross negligence in the performance of Employee's duties under this Agreement; (vi) deviating from the written policies or directives of Boyd, provided the same policies and directives are applied consistently to all management of Boyd, if Employee fails to cure such deviation within ten (10) days after written notice to Employee; (vii) material failure by the Employee to perform his duties hereunder or other reasonable directions from the Board of Directors of Boyd, if Employee fails to cure such failure within ten (10) days after written notice to Employee; or (viii) Boyd's reasonable dissatisfaction with the quality of Employee's performance which continues after Boyd has notified the Employee of such dissatisfaction setting forth obtainable objectives to correct such dissatisfaction and has given the Employee a reasonable time to obtain such objectives. 8. Noncompetition. Employee covenants and agrees that during the Restricted Period, Employee will not, within the territories listed on Exhibit A attached hereto, directly or indirectly, compete with Boyd by carrying on a business which is substantially similar to the Business (as defined in Section 11). "Restricted Period," for purposes of this Section 8, shall mean that period commencing with the date of this Agreement and ending on the earlier of (i) five years from the date of this Agreement and (ii) two years from the date of termination of Employee's employment with Boyd. 9. Definition of "Compete." For the purposes of this Agreement, the term "compete" shall mean with respect to the Business: (i) managing, supervising, or otherwise participating in a management or supervisory capacity in flatbed truckload carrier for hire operations (ii) calling on, soliciting, taking away, accepting as a customer or attempting to call on, solicit, take away or accept as a customer any individual, partnership, corporation, limited liability company or association that is or was a customer of Boyd during the twelve calendar month period immediately preceding such act with whom the Employee had contact, either directly or indirectly in Employee's managerial capacity, (iii) soliciting, taking away or attempting to solicit or take away any employee of the Business, either on the Employee's behalf or on behalf of any other person or entity, who was an employee of the Business during the twelve calendar month period immediately preceding such act, or (iv) entering into or attempting to enter into any business substantially similar to the Business, either alone or with any individual, partnership, corporation, limited liability company or association. 10. Direct or Indirect Competition. For the purposes of this Agreement, the words "directly or indirectly" as used herein shall mean (i) acting as an agent, representative, consultant, officer, director, member, independent contractor, or employee of any entity or enterprise which is competing with the Business, (ii) participating in any such competing entity or enterprise as an owner, partner, limited partner, joint venturer, member, creditor or stockholder (except as a stockholder holding less than one percent (1%) interest in a corporation whose shares are actively traded on a regional or national securities exchange or in the over-the-counter market), and (iii) communicating to any such competing entity or enterprise the names or addresses or any other information concerning any past, present, or identified prospective customer of Boyd. 4 5 11. Business. For purposes of this Agreement, the term "Business" shall mean the operations of Welborn conducted immediately prior to the date hereof relating to flatbed truckload carrier for hire operations. 12. Confidential Data. Employee further agrees that, for a period of five (5) years following the Effective Date, Employee will keep confidential and not directly or indirectly divulge to anyone nor use or otherwise appropriate for Employee's own benefit, any pricing information, marketing information, sales technique of Boyd any other of the following confidential information or documents of or relating to Boyd: confidential records, client and customer lists, information about client requirements, terms of contracts with clients and customers, and planning and financial information of Boyd (hereinafter referred to as the "Confidential Data"). Employee hereby acknowledges and agrees that the prohibitions against disclosure of Confidential Data recited herein are in addition to, and not in lieu of, any rights or remedies which Boyd may have available pursuant to the laws of any jurisdiction or at common law to prevent the disclosure of trade secrets or proprietary information, and the enforcement by Boyd of its rights and remedies pursuant to this Agreement shall not be construed as a waiver of any other rights or available remedies which it may possess in law or equity absent this Agreement. Notwithstanding the foregoing, the term "Confidential Data" does not include any information which (i) at the time of disclosure or thereafter is generally available to and known by the public (other than as a result of a disclosure directly or indirectly by you or your representatives in breach of this Agreement), (ii) was available to you on a nonconfidential basis from a source other than Boyd or its directors, officers, employees, agents or advisors, or (iii) has been independently acquired or developed by you without violating any of your obligations under this agreement. In the event that you or any of your representatives become legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand, any similar process or otherwise) to disclose any of the Confidential Data, you shall provide Boyd with prompt prior written notice of such requirement so that Boyd may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this agreement. In the event that such protective order or other remedy is not obtained, or that Boyd waives compliance with the provisions hereof, you agree to furnish only that portion of the Confidential Data which is required to be disclosed in the written opinion of your counsel, and to use reasonable efforts to obtain confidential treatment of such of the disclosed information which Boyd so designates. 13. Non-Solicitation of Employees of Boyd. Employee covenants that during the periods for which Employee is entitled to compensation or other payment hereunder and until the earlier of (i) the expiration of the two year period immediately following the last of such periods and (ii) five years from the date of execution of this Agreement, Employee will neither directly nor indirectly induce or attempt to induce any employee of Boyd to terminate his or her employment to go to work for any other employer. 5 6 14. Property of Boyd. Employee acknowledges that from time to time in the course of providing services pursuant to this Agreement, Employee will have the opportunity to inspect and use certain property, both tangible and intangible, of Boyd, and Employee hereby agrees that said property shall remain the exclusive property of Boyd and that Employee shall have no right or proprietary interest in such property, whether tangible or intangible, including, without limitation, Boyd's customer and supplier lists, contract forms, books of account, computer programs and similar property. 15. Equitable Relief. Employee acknowledges that the services to be rendered by Employee are of a special, unique, unusual, extraordinary and intellectual character, which gives them a peculiar value, the loss of which cannot reasonably or adequately be compensated in damages in an action at law and that a breach by Employee of any of the provisions contained in this Agreement will cause Boyd irreparable injury and damage. Employee further acknowledges that Employee possesses unique skills, knowledge and ability and that any material breach of the provisions of this Agreement would be extremely detrimental to Boyd. By reason thereof, Employee agrees that Boyd shall be entitled, in addition to any of the remedies it may have under this Agreement or otherwise, to injunctive and other equitable relief to prevent or curtail any breach of this Agreement by Employee; provided, however, that no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or prohibition against the pursuing of other legal or equitable remedies in the event of a breach. 16. Successors Bound; Assignability. This Agreement shall be binding upon Employee, Boyd and their successors in interest, including without limitation, any corporation into which Boyd may be merged or by which it or all or any substantial portion of its assets or business may be acquired. This Agreement is nonassignable except that the rights, duties and obligations of Boyd under this Agreement may be assigned to any affiliate of it and to any acquiror of the business conducted by Boyd, in the event Boyd is merged, liquidated, acquired or sells substantially all of the assets used in such business. 17. Severability. In the event that any one or more of the provisions of this Agreement or any word, phrase, clause, sentence, or other portion thereof shall be deemed to be illegal or unenforceable for any reason, such provision or portion thereof shall be modified or deleted in such manner so as to make this Agreement as modified legal and enforceable to the fullest extent permitted under applicable laws. 18. Entire Agreement. Except for the Covenant Not to Compete dated the date hereof between Boyd, Employee and [Boyd Sub] (the "Covenant Not to Compete"), this Agreement constitutes the entire agreement between the parties hereto with regard to the subject matter hereof and supersedes all other agreements relating to the subject matter hereof, including any previous employment agreement. There are no agreements, understandings, specific restrictions, warranties or representations relating to said subject matter between the parties other than those set forth herein 6 7 or herein provided. The parties agree that the covenants set forth in this Agreement are in addition to, and not in limitation of, the covenants set forth in the Covenant Not to Compete. 19. Counterparts. This Agreement may be executed in two or more counterparts, each of which will take effect as an original, and all of which shall evidence one and the same Agreement. 20. Amendment and Modification. This Agreement may only be amended, modified or terminated prior to the end of its term by the mutual written agreement of the parties. 21. Governing Law. The terms of this Agreement shall be governed by and construed in accordance with the laws of the State of Alabama. 7 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BOYD BROS. TRANSPORTATION INC. "Boyd" By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- STEVE RUMSEY "Employee" ------------------------------------------ Printed Name: ---------------------------- 9 EXHIBIT A LIST STATES IN WHICH BOYD IS PRESENTLY CONDUCTING BUSINESS Louisiana Michigan Mississippi Virginia Alabama West Virginia Georgia Pennsylvania Florida New York South Carolina Maryland North Carolina District of Columbia Tennessee Vermont Kentucky New Hampshire Illinois Maine Indiana Massachusetts Ohio Connecticut Wisconsin Rhode Island 9 EX-13 5 1997 ANNUAL REPORT TO SHAREHOLDERS 1 Boyd Bros. Transportation Inc. and Subsidiary Selected Financial Data The following tables set forth selected financial data and selected pro forma financial data of the Company. The selected financial data presented below for the five-year period ended December 31, 1997, are derived from the Company's audited financial statements. The data presented below should be read in conjunction with "Management's Discussion and Analysis," the Consolidated Financial Statements and Notes thereto.
Year Ended December 31, 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------ (in thousands, except per share data) Statement of Operations Data: Operating revenues $ 77,215 $ 65,523 $ 61,866 $ 59,132 $ 50,340 Operating expenses: Salaries, wages and employee benefits 32,427 28,420 27,573 24,800 20,610 Non-cash compensation expense(1) -- -- -- -- 947 Operating supplies 20,832 19,550 17,156 15,042 13,180 Taxes and licenses 2,306 2,222 1,823 1,922 1,934 Insurance and claims 3,439 3,379 3,210 3,669 3,065 Communications and utilities 1,305 1,186 1,022 927 776 Depreciation and amortization 9,181 8,261 7,296 6,451 5,516 Rent 163 202 154 136 136 Cost of independent contractors 2,500 -- -- -- -- Gain on disposition of property and equipment, net (577) (805) (648) (410) (272) Environmental remediation(2) (23) 19 (294) 800 -- Other 571 439 474 523 544 Total operating expenses 72,124 62,873 57,765 53,860 46,436 - ------------------------------------------------------------------------------------------------------------------------------ Operating income 5,091 2,650 4,101 5,272 3,904 Interest income 136 164 82 54 106 Interest expense (1,391) (1,408) (781) (806) (901) Other -- -- -- 70 -- - ------------------------------------------------------------------------------------------------------------------------------ Income before income taxes 3,836 1,406 3,402 4,590 3,109 Income taxes 1,519 579 1,227 6,544 47 - ------------------------------------------------------------------------------------------------------------------------------ Income (loss) before cumulative effect of accounting change 2,317 828 2,125 (1,954) 3,062 Cumulative effect of accounting change -- -- -- -- 157 - ------------------------------------------------------------------------------------------------------------------------------ Net income (loss) $ 2,317 $ 828 $ 2,125 $ (1,954) $ 3,219 Basic and diluted net income (loss) per share $ .62 $ .22 $ .56 $ (.55) $ 1.07 Dividends paid(3) $ -- $ -- $ -- $ 2,525 $ 1,253 ============================================================================================================================== Pro Forma Income Data (Unaudited)(4): Income before income taxes $ 4,590 $ 3,109 Pro forma income taxes 1,762 1,313 Pro forma net income $ 2,828 $ 1,796 Pro forma net income per share $ .80 $ .60 ==============================================================================================================================
(1) Reflects non-cash compensation expense attributable to stock options previously granted to the Chairman of the Board and the President of the Company. (2) Reflects an operating expense (credit) accrued for environmental remediation during 1995. (3) Distributions primarily to fund tax liabilities resulting from the Company's S Corporation status were made to the 2 Company's stockholders in each year between 1990 and 1994, prior to the termination of the Company's S Corporation status on March 30, 1994. (4) Between January 1, 1987 and March 30, 1994, the Company was treated as an S Corporation for federal and certain state income tax purposes. As a result, the Company's taxable earnings for 1989 through 1993, and the first quarter of 1994, were taxed for federal and certain state income tax purposes directly to the Company's then-existing stockholders. On March 30, 1994, the Company terminated its S Corporation status and became subject to federal and certain additional state income taxes. For informational purposes, unaudited pro forma net income data is provided for 1990 through 1994 to reflect an adjustment for a provision for federal and state income taxes as if the Company had not been treated as an S Corporation during those periods. The pro forma net income data do not give effect to the non-cash charge of approximately $5.5 million in recognition of deferred income taxes that resulted from the termination of the Company's S Corporation status. 3 Boyd Bros. Transportation Inc. and Subsidiary Selected Financial Data
December 31, 1997 1996 1995 1994 1993 - --------------------------------------------------------------------------------------------------------- (in thousands) Balance Sheet Data: Working capital (deficit) $ 3,785 $ 2,495 $ 2,676 $ 768 $ (107) Net property and equipment 48,859 44,593 37,188 33,184 30,452 Total assets 71,526 57,262 48,892 41,480 38,888 Long-term debt, less current maturities 19,252 15,198 9,228 6,143 11,875 Total liabilities 42,071 33,374 24,903 19,616 20,403 Stockholders' equity 29,455 23,888 23,989 21,864 18,405
Selected Operating Data: The following table sets forth certain operating data regarding the Company.
Year Ended December 31, 1997 1996 1995 1994 1993 - --------------------------------------------------------------------------------------------------------- Operating ratio 93.41% 95.95% 93.37% 91.08% 92.24% Average length of haul in miles 663 677 694 687 671 Average number of truckloads per week 1,908 1,607 1,470 1,457 1,252 Average revenues per total mile $ 1.17 $ 1.14 $ 1.14 $ 1.15 $ 1.13 Equipment at period end: Tractors 950 575 522 480 415 Trailers 1,227 916 875 830 723
4 Boyd Bros. Transportation Inc. and Subsidiary Management's Discussion and Analysis The following is a discussion of the financial condition and results of operations of the Company for each of the years in the three-year period ended December 31, 1997. This discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included elsewhere herein. General The Company was founded in 1956 by Dempsey Boyd and his brothers as a small regional flatbed trucking operation with three tractors. Since that time, the Company has grown to one with 950 tractors and 1,227 trailers operating in the eastern two-thirds of the United States. Historically, the Company has owned its revenue equipment and operated through employee drivers. The Company's expansion in the past, therefore, has required significant capital expenditures which have been funded through secured borrowings. During 1997, as a strategy to expand the Company's potential for growth without the concomitant increase in capital expenditures typically related to owned equipment, the Company began adding owner/operators to its fleet. The Company then accelerated the implementation of this strategy in December 1997 with the acquisition of Welborn Transport, Inc., which specializes in short-haul routes using largely an owner/operated fleet. The Company operated as an S Corporation from January 1, 1987 through March 30, 1994. As a result, the net taxable income of the Company during such period was taxed directly to the Company's stockholders rather than to the Company. The Company terminated its S Corporation status on March 30, 1994, resulting in a one-time non-cash charge of approximately $5.5 million in recognition of deferred income taxes and a corresponding reduction in stockholders' equity. Results of Operations The following table sets forth the percentage relationship of the expense items to operating revenues for the periods indicated.
Percentage of Operating Revenues Year Ended December 31, 1997 1996 1995 Operating revenues 100.00% 100.00% 100.00% --------------------------------------------------------------------------------------------------------- Operating expenses Salaries, wages, and employee benefits 42.00 43.37 44.58 Operating supplies 28.67 29.84 27.73 Taxes and licenses 2.99 3.39 2.95 Insurance and claims 4.45 5.16 5.19 Depreciation and amortization 11.89 12.61 11.79 Purchased transportation 3.34 -- -- Gain on disposition of property and equipment, net (.78) (1.23) (1.05) Other .95 2.81 2.18 --------------------------------------------------------------------------------------------------------- Total operating expenses 93.41 95.95 93.37 Operating income 6.59 4.04 6.63 Interest expense, net (1.62) (1.90) (1.13) --------------------------------------------------------------------------------------------------------- Income before income taxes 4.97 2.14 5.50 Pro forma income taxes 1.97 .88 2.06 --------------------------------------------------------------------------------------------------------- Pro forma net income 3.00% 1.26% 3.43% =========================================================================================================
5 COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996 Operating revenues for 1997 increased $11.7 million, or 17.8%, to $77.2 million compared with $65.5 million for 1996. The increase resulted because of better equipment utilization, the addition of 27 tractors, and the inclusion of Welborn revenues for one month. The Company's operating ratio improved from 95.95% in 1996 to 93.41% in 1997. The lower operating ratio was due primarily to better utilization of equipment and moderating fuel costs. Operating supplies expense for 1997 increased $1.3 million, or 6.6%, to $20.8 million compared with $19.5 million for 1996. Operating supplies expense increased at a slower rate than revenue because of lower fuel prices. Maintenance costs on a per mile basis were down $.01, or 9.6%, due to lowering the average age of the fleet. Taxes and licenses expense for 1997 increased only $83,796, or 3.8%, over 1996. Taxes and licenses increased at a slower rate than revenue because of the addition during 1997 of owner/operators, who pay their own taxes and licenses. Insurance and claims expense was up $59,946, or only 1.8%, from 1996 to 1997. Lower insurance rates and positive claims experience contributed to the small rate of increase. Communications and utilities were up $119,317, or 10.1%, from 1996 to 1997. Improved cost management contributed to the slower rate of increase compared with revenue growth. Depreciation and amortization expense was up $920,146, or 11.1%, from 1996 to 1997. The slower rate of growth compared with revenue was due to higher utilization of equipment and the startup of the owner/operator program. The Company had approximately 50 owner/operators at December 31, 1997. Additionally, approximately 35 of these owner/operators entered into lease-purchase arrangements with the Company, which resulted in these assets being removed from the Company's depreciation records. Gain on disposition of property and equipment was $576,750, down $229,050, or 28.4%, from 1996 to 1997. There were fewer equipment trades in 1997 compared with 1996. Other expenses were up $49,488, or 7.6%, over 1996, a slower rate than revenue growth. Interest expense (net of interest income) was up only $10,510, or 0.8%, a negligible increase considering the Company's revenue growth rate. A significant portion of the Company's debt is LIBOR-rate based, which has been significantly lower during most of 1997. Net income for 1997 was $2,316,847 compared with $827,617 for 1996. COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995 Operating revenues for 1996 increased $3.7 million, or 5.9%, to $65.5 million compared with $61.9 million for 1995. The increase resulted primarily from additional tractors in use. The Company's operating ratio increased from 93.4% in 1995 to 96.0% in 1996. The increased operating ratio was due primarily to increases in fuel costs, maintenance and lower utilization of equipment. Operating supplies expense for 1996 increased $2.4 million, or 14.0%, due primarily to higher fuel costs. Additionally, maintenance and related costs were higher. Salaries, wages and employee benefit expenses for 1996 increased by $847,268, or 3.1%, to $28.4 million compared with $27.6 million for 1995. The increase was less than the percentage increase in revenue due to a reduction in non-driver personnel costs and headcount. Insurance and claims expense for 1996 increased $169,115, or 5.3%, to $3.4 million compared with $3.2 million in 1995. The increase was less than the percentage increase in revenue due primarily to a reduction in insurance premiums. Taxes and licenses increased $398,429, or 21.9%, due to having a newer fleet of tractors. Depreciation and amortization expense increased $965,582, or 13.2%, due primarily to lower utilization and the increase in tractor prices. 6 Environmental remediation expense was $19,408 in 1996 compared with a credit of $293,652 in 1995. The initial estimate of remediation expense in 1994 was substantially reduced in 1995. Gain on sale of equipment increased $157,739, or 24.3%, in 1996 over 1995 due to the sale of more equipment in 1996 as opposed to 1995. Interest expense, net increased $545,290, or 78.0%, in 1996 over 1995. Long-term debt increased substantially due to the purchase and trade-in of an increased number of tractors. Net income for 1996 was $827,617 compared with $2,124,658 for 1995. Liquidity and Capital Resources The growth of the Company's business and maintenance of its modern fleet have required significant investments in new tractors and trailers, and has been financed largely through long-term debt. Capital expenditures, net of proceeds from disposals of property and equipment, were approximately $11.5 million in 1997, compared with $14.9 million in 1996. At December 31, 1997, the Company had long-term debt (including current portions) of $25.2 million, which was primarily incurred to purchase revenue equipment. Approximately $3.3 million of this debt was incurred in connection with the Welborn acquisition. Management anticipates increasing the Company's fleet by approximately 75 tractors in 1998, net of replacements, at an anticipated cost of approximately $11.8 million. Management expects to finance such equipment purchases through equipment financing arrangements with various lenders. Net cash flow provided by operating activities was approximately $8.2 million during 1997 compared with approximately $11.4 million in 1996. The Company had a working capital surplus of $3.8 million at December 31, 1997. Historically, the Company has relied on cash generated from operations to fund its working capital requirements. However, the Company has a bank line of credit permitting short-term borrowings of up to $1.5 million. The revolving line of credit is collateralized by accounts receivable and inventory. Interest on the borrowings is at the prime rate less 0.125%. Additionally, Welborn has $1.75 million outstanding in lines of credit under a commercial revolving note, expiring May 30, 1998, bearing interest at the bank's 30-day LIBOR rate plus 225 basis points, for an effective rate of 8.06%. In January 1996, the Company implemented a stock repurchase program based on management's belief that, at then current market prices, the common stock represented a sound investment for the Company's corporate funds. Pursuant to the repurchase program, the Company purchased 122,300 shares of the common stock in open market or negotiated transactions during 1996, for an aggregate purchase price of $928,500. The Company funded such purchases using working capital and borrowing under its line of credit. No stock repurchases were made during 1997. The Company currently has outstanding letters of credit, totaling approximately $2.1 million at December 31, 1997, to cover liability insurance claims and self-insured workers' compensation programs. Annual commitment fees relating to those letters of credit do not exceed 1.5% of the face amounts thereof. Management believes that cash flow from future operations and borrowings available under its lines of credit will be sufficient to meet its needs for working capital for the foreseeable future. Over the long term, the Company will continue to have significant capital requirements which may require the Company to seek additional borrowings or equity capital. The availability of debt financing or equity capital will depend upon prevailing market conditions, the market price of the Common Stock and other factors over which the Company has no control, as well as the Company's financial condition and results of operations. 7 Year 2000 Compliance The inability of computers, software and other equipment utilizing microprocessors to recognize and properly process data fields containing a two-digit year is commonly referred to as the year 2000 compliance issue. As the year 2000 approaches, such systems may be unable to accurately process certain date-based information. In 1997, the Company completed a conversion and modification from existing systems and software to programs that are year 2000 compliant. As of December 31, 1997, management has determined that the conversion and testing of all significant systems is complete. All internal and external costs associated with the Company's year 2000 compliance activities were expensed as incurred. These costs were not material to the Company's consolidated financial statements. The Company has plans to communicate with significant customers, vendors and other third parties with which it does significant business to determine their year 2000 compliance readiness. However, there can be no guarantee that the systems of other entities will be timely converted, or that their failure to convert, or a conversion that is incompatible with the Company's systems, will not have an adverse effect on the Company. Seasonality In the trucking industry, results of operations show a seasonal pattern because customers generally reduce shipments during the winter season, and the Company does experience some seasonality due to the open, flatbed nature of its trailers. The Company has at times experienced delays in meeting its shipping schedules as a result of severe weather conditions, particularly during the winter months. In addition, the Company's operating expenses have historically been higher in the winter months due to decreased fuel efficiency and increased maintenance costs in colder weather. 8 Boyd Bros. Transportation Inc. and Subsidiary Consolidated Balance Sheets
December 31, 1997 1996 - ----------------------------------------------------------------------------------------------------------- Assets CURRENT ASSETS: Cash and cash equivalents $ 3,417,174 $ 3,593,206 Short-term investments 250,000 100,000 Accounts receivable (less allowance for doubtful accounts of $237,000 in 1997 and $125,000 in 1996): Trade and interline 9,415,737 5,541,471 Other 117,034 274,876 Current portion of net investment in sales-type leases (Note 4) 508,829 -- Refundable income taxes -- 579,573 Inventories 263,352 230,920 Prepaid tire expense 904,381 711,208 Other prepaid expenses 1,387,587 761,324 Deferred income taxes (Note 8) 174,587 530,623 Total current assets 16,438,681 12,323,201 - ----------------------------------------------------------------------------------------------------------- PROPERTY AND EQUIPMENT: Land and land improvements 1,046,245 1,082,510 Buildings 3,278,527 3,240,496 Revenue equipment (Note 5) 58,668,742 51,513,665 Other equipment 9,435,642 8,111,012 Leasehold improvements 339,944 406,577 - ----------------------------------------------------------------------------------------------------------- Total 72,769,100 64,354,260 Less accumulated depreciation and amortization 23,910,352 19,761,532 Property and equipment, net 48,858,748 44,592,728 - ----------------------------------------------------------------------------------------------------------- OTHER ASSETS: Net investment in sales-type leases (Note 4) 1,656,490 -- Goodwill net of accumulated amortization of $16,778 (Note 2) 4,459,222 -- Deposits and other assets 112,861 346,050 Total other assets 6,228,573 346,050 - ----------------------------------------------------------------------------------------------------------- TOTAL $71,526,002 $57,261,979 =========================================================================================================== Liabilities and Stockholders' Equity CURRENT LIABILITIES: Current maturities of long-term debt (Note 5) $ 5,914,785 $ 4,625,204 Revolving line of credit (Note 5) 1,021,849 -- Accounts payable - trade and interline 1,517,218 2,122,561 Income taxes 230,327 -- Accrued liabilities: Self-insurance claims (Note 6) 2,122,182 2,203,999 Salaries and wages 1,069,515 465,665 Other 778,148 411,206 - ----------------------------------------------------------------------------------------------------------- Total current liabilities 12,654,024 9,828,635 LONG-TERM DEBT (Note 5) 19,251,702 15,197,840 DEFERRED INCOME TAXES (Note 8) 10,165,682 8,347,757 Total liabilities 42,071,408 33,374,232 - ----------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (Note 6) STOCKHOLDERS' EQUITY (Notes 5 and 7): Preferred stock $.001 par value - 1,000,000 shares authorized; no shares issued and outstanding Common stock $.001 par value - 10,000,000 shares authorized; 4,094,640 and 3,700,688 shares issued and outstanding in 1997 and 1996, respectively 4,095 3,701 Additional paid-in capital 17,030,222 13,780,616 Retained earnings 12,420,277 10,103,430 Total stockholders' equity 29,454,594 23,887,747 - ----------------------------------------------------------------------------------------------------------- TOTAL $71,526,002 $57,261,979 ===========================================================================================================
See notes to consolidated financial statements. 9 Boyd Bros. Transportation Inc. and Subsidiary Consolidated Statements of Income
For The Years Ended December 31, 1997 1996 1995 - ------------------------------------------------------------------------------------------------------ OPERATING REVENUES (Note 9) $ 77,214,629 $ 65,523,412 $ 61,865,851 - ------------------------------------------------------------------------------------------------------ OPERATING EXPENSES: Salaries wages and employee benefits (Note 3) 32,427,094 28,419,881 27,572,613 Cost of independent contractors 2,499,877 -- -- Operating supplies 20,831,643 19,549,827 17,155,929 Taxes and licenses 2,305,506 2,221,710 1,823,281 Insurance and claims 3,438,761 3,378,815 3,209,700 Communications and utilities 1,305,448 1,186,131 1,021,927 Depreciation and amortization 9,181,399 8,261,253 7,295,671 Gain on disposition of property and equipment net (576,750) (805,800) (648,061) Other 711,098 661,110 334,015 - ------------------------------------------------------------------------------------------------------ Total operating expenses 72,124,076 62,872,927 57,765,075 - ------------------------------------------------------------------------------------------------------ OPERATING INCOME 5,090,553 2,650,485 4,100,776 - ------------------------------------------------------------------------------------------------------ OTHER INCOME (EXPENSES): Interest income 135,819 164,363 82,018 Interest expense (1,390,455) (1,408,489) (780,854) - ------------------------------------------------------------------------------------------------------ Other expenses, net (1,254,636) (1,244,126) (698,836) - ------------------------------------------------------------------------------------------------------ INCOME BEFORE PROVISION FOR INCOME TAXES 3,835,917 1,406,359 3,401,940 - ------------------------------------------------------------------------------------------------------ PROVISION (BENEFIT) FOR INCOME TAXES (Note 8): Current 995,000 (602,915) 145,529 Deferred 524,070 1,181,657 1,131,753 - ------------------------------------------------------------------------------------------------------ Total provision for income taxes 1,519,070 578,742 1,277,282 - ------------------------------------------------------------------------------------------------------ NET INCOME $ 2,316,847 $ 827,617 $ 2,124,658 ====================================================================================================== BASIC AND DILUTED NET INCOME PER SHARE $ 0.62 $ 0.22 $ 0.56 ====================================================================================================== WEIGHTED AVERAGE SHARES OUTSTANDING 3,726,591 3,726,496 3,823,000 ======================================================================================================
See notes to consolidated financial statements. 10 Boyd Bros. Transportation Inc. and Subsidiary Consolidated Statements of Stockholders' Equity
For The Years Ended December 31, - ------------------------------------------------------------------------------------------------------ Additional Common Paid-in Retained Stock Capital Earnings Total - ------------------------------------------------------------------------------------------------------ BALANCE JANUARY 1, 1995 $ 3,823 $ 14,708,994 $ 7,151,155 $ 21,863,972 Net income -- -- 2,124,658 2,124,658 - ------------------------------------------------------------------------------------------------------ BALANCE DECEMBER 31, 1995 3,823 14,708,994 9,275,813 23,988,630 Purchase and retirement of common stock (122) (928,378) -- (928,500) Net income -- -- 827,617 827,617 - ------------------------------------------------------------------------------------------------------ BALANCE DECEMBER 31, 1996 3,701 13,780,616 10,103,430 23,887,747 Issuance of common stock (Note 2) 394 3,249,606 -- 3,250,000 Net income -- -- 2,316,847 2,316,847 - ------------------------------------------------------------------------------------------------------ BALANCE DECEMBER 31, 1997 $ 4,095 $ 17,030,222 $12,420,277 $ 29,454,594 ======================================================================================================
See notes to consolidated financial statements. 11 Boyd Bros. Transportation Inc. and Subsidiary Consolidated Statements of Cash Flows
For The Years Ended December 31, 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income $ 2,316,847 $ 827,617 $ 2,124,658 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,181,399 8,261,253 7,295,671 Gain on disposal of property and equipment, net (576,750) (805,800) (648,061) Provision for deferred income taxes 524,070 1,181,657 1,131,753 Changes in assets and liabilities which provided (used) cash: Accounts receivable (3,716,424) 805,570 (2,212,454) Refundable income taxes 579,573 581,738 (860,543) Other current assets (851,868) (9,950) (156,920) Deposits and other assets 233,189 (30,038) (54,012) Accounts payable - trade and interline (605,343) 1,190,036 165,309 Accrued liabilities and other current liabilities 1,119,302 (607,128) (643,341) Net cash provided by operating activities 8,203,995 11,394,955 6,142,060 - --------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Purchase of short-term investments (150,000) -- -- Payments received on lease payments 43,374 -- -- Capital expenditures: Revenue equipment (15,341,667) (20,981,024) (11,452,497) Other property and equipment (1,995,791) (838,881) (1,882,879) Proceeds from disposals of property and equipment 5,948,765 6,959,399 2,663,850 Net cash used in investing activities (11,495,319) (14,860,506) (10,671,526) - --------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Purchase of common stock -- (928,500) -- Proceeds under line of credit 1,021,849 -- -- Proceeds from long-term debt 17,830,191 18,411,485 10,457,052 Principal payments on long-term debt (15,736,748) (11,906,138) (5,731,221) Net cash provided by financing activities 3,115,292 5,576,847 4,725,831 - --------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (176,032) $ 2,111,296 $ 196,365 CASH AND CASH EQUIVALENTS: BEGINNING OF YEAR 3,593,206 1,481,910 1,285,545 - --------------------------------------------------------------------------------------------------------------------------- END OF YEAR $ 3,417,174 $ 3,593,206 $ 1,481,910 =========================================================================================================================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) during the year for: Interest $ 1,254,636 $ 1,350,568 $ 775,495 =========================================================================================================================== Income taxes, net of refunds $ 30,469 $ (943,351) $ 1,043,207 =========================================================================================================================== SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES: Acquisition of Welborn Transport Inc. (See Note 2) Net investment in sales-type leases $ 2,165,063 ===========================================================================================================================
See notes to consolidated financial statements. 12 Boyd Bros. Transportation Inc. and Subsidiary Notes to Consolidated Financial Statements 1. Summary Of Significant Accounting Policies NATURE OF OPERATIONS - Boyd Bros. Transportation Inc. and its subsidiary (the "Company") are flatbed carriers, transporting a variety of products, primarily steel and building materials. The Company has authority to operate in the continental United States; however, its market generally encompasses the eastern two-thirds of the United States. The Company is headquartered in Clayton, Alabama, and operates regional and satellite terminals in locations near interstate highways or customer facilities. PRINCIPLES OF CONSOLIDATION - The accompanying financial statements include the accounts of the Company and its wholly owned subsidiary. All material intercompany items have been eliminated in consolidation. ACCOUNTING ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on hand, cash on deposit and highly liquid investments with a maturity of three months or less at purchase date. SHORT-TERM INVESTMENTS - Short-term investments, which consist of certificates of deposit with maturities of three to twelve months, are stated at cost, which approximates market. TIRES IN SERVICE - Tires placed in service on newly purchased revenue equipment are carried at cost and depreciated over their useful lives, estimated to be eighteen months. The undepreciated cost of tires is included in prepaid tire expense. INVENTORIES - Parts and supplies are stated at the lower of cost or market. PROPERTY AND EQUIPMENT - Property and equipment is stated at cost. Depreciation is computed using the straight-line method at rates intended to distribute the cost of the assets over their estimated service lives as follows: Land improvements 15 years Buildings 5 - 25 years Revenue equipment 5 - 7 years Other equipment 3 - 10 years Leasehold improvements 5 - 20 years
Expenditures which significantly increase values or extend useful lives of property and equipment are capitalized, whereas those for normal maintenance and repairs are expensed. Gains and losses on disposal of property and equipment are reflected in operations in the year of disposal. GOODWILL - Goodwill is amortized over 20 years using the straight-line method. The Company periodically reviews goodwill to assess recoverability, and impairments would be recognized in operating results if a permanent diminution in value were to occur. CLAIMS - The Company accrues estimates for the uninsured portion of claims relating to the Company's insurance programs (see Note 6). REVENUE RECOGNITION - Operating revenue and related costs are recognized on the date shipments are delivered by the Company. NET INCOME PER SHARE - In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share. SFAS No. 128 replaces the presentation of primary earnings per share with a presentation of basic earnings per share, requires dual presentation of basic and diluted earnings per share on the face of the income statement for all entities with complex capital structures, and provides guidance on other computational changes. The Company adopted this statement for all periods presented in the accompanying consolidated statements of income. RECLASSIFICATIONS - Certain reclassifications have been made to the 1996 and 1995 consolidated financial statements to conform to the 1997 presentation. 13 RECENTLY ISSUED ACCOUNTING STANDARDS - In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income, and SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, both of which will be effective for the Company in fiscal 1998. Management does not expect the adoption of these Statements to have a material impact on the Company's financial statements and disclosures. 2. Acquisition On December 8, 1997, the Company acquired Welborn Transport, Inc. ("Welborn") for a total purchase price of $6,631,000, including direct acquisition costs. The acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. Goodwill totaling $4,476,000 was recognized on the acquisition equal to the excess of the price paid over the estimated fair value of the net assets acquired. The consolidated statements of income include the results of Welborn's operations from its acquisition date forward. The estimated fair value of assets acquired and liabilities assumed in this acquisition is summarized as follows:
Fair value of assets acquired $11,985,000 Less liabilities assumed 5,354,000 ----------------------------------------------------------------------- $ 6,631,000 ======================================================================= Consideration consisted of: Fair value of common stock issued $ 3,250,000 Issuance of notes payable to stockholders (Note 5) 3,250,000 Amounts paid or accrued for acquisition costs 131,000 ----------------------------------------------------------------------- Total purchase price $ 6,631,000 =======================================================================
The following unaudited pro forma consolidated results of operations for the years ended December 31, 1997 and 1996 have been prepared as though the acquisition occurred as of January 1, 1996:
1997 1996 ------------------------------------------------------------------------- Operating revenues $105,551,554 $88,875,373 Net income 2,119,420 1,128,198 Basic and diluted net income per share .52 .27
The unaudited pro forma consolidated results of operations have been prepared for comparative purposes only and do not purport to be indicative of the actual results that would have been achieved had the acquisition taken place as of January 1, 1996, or in the future. 3. Employee Benefit Plan The Company has a contributory 401(k) retirement plan, which covers employees who elect to participate and meet certain eligibility requirements. The amounts charged to operations related to this plan for the years ended December 31, 1997, 1996, and 1995 were $151,527, $233,444, and $218,496, respectively. 4. Leases OPERATING LEASES - The Company leases certain terminal buildings, land and equipment under agreements which expire at various dates through 2001. The lease agreements generally include renewal options and the Company is required to pay taxes, insurance and normal maintenance for the facilities. Future minimum lease payments under all operating leases with an initial or remaining noncancelable lease term of more than one year are as follows:
Year 1998 $194,851 1999 186,796 2000 165,162 2001 13,200 ----------------------------------------------------------------------- Total $560,009 =======================================================================
14 Total rental expense for all operating leases totaled $112,243, $98,648, and $96,300 for the years ended December 31, 1997, 1996 and 1995, respectively. SALES-TYPE LEASES - The Company leases revenue equipment to certain of its owner/operators and accounts for these transactions as sales-type leases. These receivables have terms of four years and are collateralized by a security interest in the related revenue equipment. There is no residual value accruing to the Company at the end of the lease term. The components of the net investment in sales-type leases at December 31, 1997 are as follows: Minimum lease payments receivable $3,360,117 Allowance for uncollectibles (380,000) ----------------------------------------------------------------------- Net minimum lease payments receivable 2,980,117 Unearned interest income (814,798) ----------------------------------------------------------------------- Net investment in sales-type leases 2,165,319 Less current portion 508,829 ----------------------------------------------------------------------- Net amount due after one year $1,656,490 =======================================================================
At December 31, 1997, minimum lease payments receivable are approximately $877,000 in 1998, 1999 and 2000, and $729,000 in 2001. 5. Long-Term Debt Long-term debt at December 31, 1997 and 1996 is summarized as follows:
1997 1996 ------------------------------------------------------------------------------------- Revenue equipment obligations: LIBOR plus 1.25% (7.06% - 1997 and 6.81% - 1996) note payable in monthly installments through December 2002 $19,820,760 $19,823,044 7.35% note payable in monthly installments through January 2000 1,549,652 -- 7.16% note payable in monthly installments through March 2001 198,890 -- LIBOR plus 2% (7.81%) note payable in monthly installments through October 2003 314,011 -- Note payable to stockholders 3,250,000 -- Other 33,174 -- ------------------------------------------------------------------------------------- Total 25,166,487 19,823,044 Less current maturities 5,914,785 4,625,204 ------------------------------------------------------------------------------------- Long-term debt exclusive of current maturities $19,251,702 $15,197,840 =====================================================================================
Revenue equipment obligations are collateralized by revenue equipment. The $3,250,000 note payable to stockholders (see Note 2) was paid on January 2, 1998, and refinanced with a bank. The new note is payable in minimum annual installments of $464,286 through 2005 and bears interest at LIBOR plus 1.5%. Accordingly, this note has been classified as long-term in the accompanying consolidated balance sheets. Long-term debt is scheduled to mature as follows:
Year 1998 $ 5,914,785 1999 5,969,284 2000 5,196,946 2001 4,579,051 2002 2,577,851 Thereafter 928,570 ----------------------------------------------------------------------- Total $25,166,487 =======================================================================
15 The Company has $1,750,000 in lines of credit under a commercial revolving note, expiring May 30, 1998, bearing interest at the bank's 30 day LIBOR rate plus 2.25% (1997 - 8.06%). The amounts borrowed under this line of credit were $1,021,849 and $0 at December 31, 1997 and 1996, respectively. The Company also has a $1,500,000 line of credit under a commercial revolving note, expiring April 24, 1998, bearing interest at prime less .125%. This line of credit was not utilized at December 31, 1997 and 1996. Covenants under these loan agreements require the Company, among other things, to maintain a tangible net worth of $14,800,000, as defined, and to maintain certain financial ratios. The Company was in compliance with these financial covenants at December 31, 1997. The fair value of long-term debt approximates its carrying value and was estimated using a discounted cash flow analysis, based on the borrowing rate currently available to the Company for bank loans with similar terms and average maturities. 6. Commitments and Contingencies The Company is currently self-insured as follows:
Retention Amount Per Occurrence ------------------------------------------------------------------------- Liability - bodily injury and property damage $10,000 to 100,000 Employee medical and hospitalization 10,000 to 100,000 Cargo loss and damage 10,000 Collision 2,500 Environmental losses No limit
The above retention amounts represent rates which were negotiated with the Company's insurance carriers at December 31, 1997. For claims prior to 1997, the Company had a retention amount per occurrence under workers' compensation of $300,000. Retention amounts under other previous insurance programs may vary from those stated above. At December 31, 1997, the Company has recorded liabilities for retention amounts related to claims under previous insurance coverage. The Company has excess primary coverage on a per claim and aggregate basis beyond the deductible levels and also maintains umbrella policies to supplement the primary liability coverage. The liabilities for self-insurance are accrued based on claims incurred, with liabilities for unsettled claims and claims incurred but not yet reported being estimated based on management's evaluation of the nature and severity of individual claims and the Company's past claims experience. The Company has outstanding letters of credit at December 31, 1997, totaling approximately $2,055,000 to cover liability insurance claims and self-insured workers' compensation programs, and to purchase revenue equipment. There are sundry claims and suits pending against the Company in the ordinary course of business. In the opinion of the Company's management, any ultimate liability in these matters will have no material adverse effect on the operations or financial position of the Company. 7. Stockholders' Equity PREFERRED STOCK - The Board of Directors is authorized to issue, at its discretion, up to 1,000,000 shares of preferred stock at par value of $.001. The terms and conditions of the preferred stock are to be determined by the Board of Directors. STOCK OPTION PLAN - The Company has a stock option plan ("the Plan") that provides for the granting of stock options to key employees, executive officers and directors. The options are exercisable in increments over a five- 16 year period beginning on the first anniversary of the grant and will expire ten years after the date of the grant. No options were exercised in 1995, 1996, or 1997. Information regarding the Plan is summarized below:
Weighted Weighted Average Average Exercise Fair Value Shares Price at Grant Date -------------------------------------------------------------------------- Shares under option: Outstanding at January 1, 1995 243,900 $11.00 -- Options granted in 1995 73,000 11.00 $ 8.56 Options terminated (25,950) 11.00 -- -------------------------------------------------------------------------- Outstanding at December 31, 1995 290,950 11.00 -- Options granted in 1996 64,500 7.84 6.14 Options terminated (97,050) 10.97 -- -------------------------------------------------------------------------- Outstanding at December 31, 1996 258,400 10.22 -- Options granted in 1997 92,500 7.94 6.12 Options terminated (27,550) 9.61 -- -------------------------------------------------------------------------- 323,350 $ 9.62 -- ==========================================================================
The number of stock options exercisable was 117,310, 77,960, and 43,490 at December 31, 1997, 1996 and 1995, respectively. Stock option shares available for future grants at December 31, 1997 was 10,700. SFAS No. 123, Accounting for Stock-Based Compensation, encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. The option price of all the Company's stock options is equal to the fair value of the stock at the grant date. As such, no compensation expense is recorded in the accompanying consolidated financial statements. The following table summarizes information about fixed stock options as of December 31, 1997:
Options Outstanding Options Exercisable ---------------------------------------------------------------------------------------- Weighted average Weighted remaining Weighted average Range of Number contract average Number exercise exercise price outstanding life exercise price exercisable price ----------------------------------------------------------------------------------------- $6.00 - $11.00 323,350 6.7 years $9.62 117,310 $10.72
Had compensation cost for the Company's stock option plan been determined based upon the fair value at the grant date for options awarded in 1997, 1996 and 1995 under this plan consistent with the methodology prescribed under SFAS No. 123, the Company's pro forma net income and basic and diluted net income per share would have differed from the amounts reported as follows:
As Reported Pro Forma 1997 1996 1995 1997 1996 1995 ---------------------------------------------------------------------------------------------------- Net income $2,316,847 $827,617 $2,124,658 $2,208,410 $696,085 $2,079,365 Basic and diluted net income per share $ .62 $ .22 $ .56 $ .59 $ .19 $ .54
17 The fair value for options was estimated at the date of the grant using a Black-Scholes option pricing model with the following weighted average assumptions:
1997 1996 1995 -------------------------------------------------------------------------------- Risk-free interest rate 6.5% 6.5% 6.5% Dividend yield 0% 0% 0% Expected volatility 81.4% 82.6% 82.6% Weighted average expected life 7 years 7 years 7 years
8. Income Taxes The provision (credit) for income taxes for the years ended December 31, 1997, 1996 and 1995 consisted of the following:
1997 1996 1995 ------------------------------------------------------------------ (in thousands) Current: Federal $ 957 $ (545) $ 125 State 38 (58) 20 ------------------------------------------------------------------ Total current 995 (603) 145 ------------------------------------------------------------------ Deferred: Federal 371 1,019 979 State 153 163 153 ------------------------------------------------------------------ Total deferred 524 1,182 1,132 ------------------------------------------------------------------ Total provision for income taxes $ 1,519 $ 579 $ 1,277 ==================================================================
Income tax expense for the years ended December 31, 1997, 1996 and 1995 differs from the amounts computed by applying the federal statutory rate of 34% to income before income taxes primarily due to state income taxes. The Company has approximately $1,920,000 of state net operating loss carryforwards for tax purposes available to offset future state taxable income through 2011. The Company also has approximately $630,000 of alternative minimum tax credit carryforwards available to offset future federal income tax. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31, 1997 and 1996 are as follows:
1997 1996 ------------------------------------------------------------------------- (in thousands) Deferred tax liabilities: Tax over book depreciation $10,259 $ 8,746 Prepaid expenses deductible when paid 403 247 Capitalized tires 218 265 Cash basis to accrual basis adjustment 766 -- Other 23 31 ------------------------------------------------------------------------- Total deferred tax liabilities 11,669 9,289 ========================================================================= Deferred tax assets: Accrued self insurance claims 494 865 Other accrued expenses not deductible until paid 145 142 Allowance for losses on receivables 180 47 State NOL carryforward 96 118 Alternative minimum tax credit carryforward 630 234 Other 133 66 Total deferred tax assets 1,678 1,472 ------------------------------------------------------------------------- Net deferred tax liabilities $ 9,991 $ 7,817 =========================================================================
18 The above amounts are reflected in the accompanying consolidated balance sheets as:
1997 1996 ---------------------------------------------------------------------- (in thousands) Current assets $ 175 $ 531 Noncurrent liabilities 10,166 8,348 ---------------------------------------------------------------------- Net deferred tax liabilities $ 9,991 $ 7,817 ======================================================================
9. Major Customers The Company does not believe that it is dependent upon any single customer. Sales to the Company's largest customer amounted to 12%, 13% and 14% of operating revenues during 1997, 1996 and 1995, respectively. 10. Quarterly Results Of Operations (Unaudited) The following is a summary of the quarterly results of operations for the years ended December 31, 1997 and 1996:
1997 MARCH 31, JUNE 30, SEPT. 30, DEC. 31, ---------------------------------------------------------------------------------------------- (in thousands, except per share data) Operating revenues $ 17,197 $ 19,303 $ 19,574 $ 21,141 Operating income 745 1,484 1,711 1,151 Net income 270 673 790 584 Basic and diluted net income per share .07 .20 .21 .15 1996 MARCH 31, JUNE 30, SEPT. 30, DEC. 31, ---------------------------------------------------------------------------------------------- (in thousands, except per share data) Operating revenues $ 14,929 $ 16,350 $ 17,529 $ 16,715 Operating income (loss) (101) 890 1,243 618 Net income (loss) (234) 307 507 248 Basic and diluted net income (loss) per share (.06) .08 .14 .07
19 Boyd Bros. Transportation Inc. and Subsidiary Independent Auditors' Report To the Board of Directors and Stockholders of Boyd Bros. Transportation Inc.: We have audited the accompanying consolidated balance sheets of Boyd Bros. Transportation Inc. and subsidiary as of December 31, 1997 and 1996, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the companies at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Birmingham, Alabama February 13, 1998 EX-21 6 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT SUBSIDIARY STATE OF INCORPORATION - ---------- ---------------------- WELBORN TRANSPORT, INC. ALABAMA EX-23 7 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-83768 of Boyd Bros. Transportation Inc. on Form S-8 of our report dated February 13, 1998, appearing in this Annual Report on Form 10-K of Boyd Bros. Transportation Inc. for the year ended December 31, 1997. /s/ Deloitte & Touche LLP Birmingham, Alabama March 30, 1998 EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF BOYD BROS. TRANSPORTATION FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 3,417,174 250,000 9,415,737 237,000 263,352 16,438,681 48,858,748 23,910,352 71,526,002 12,654,024 0 0 0 4,095 29,450,499 71,526,002 77,214,629 77,214,629 0 72,124,076 0 0 1,254,636 3,835,917 1,519,070 2,316,847 0 0 0 2,316,847 .62 .62
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