Central Freight Lines (NASDAQ:CENF)
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Central Freight Lines, Inc. Announces Continued Sequential
Improvement; Reports Second Quarter Financial Results
WACO, Texas, July 28 /PRNewswire-FirstCall/ -- Central Freight Lines, Inc.
(NASDAQ:CENF) announced today its financial and operating results for the
quarter and six months ended July 2, 2005.
Sequential Improvement Continues
Central's President and Chief Executive Officer, Bob Fasso stated: "In the
second quarter, we achieved meaningful sequential improvement in our operating
ratio (operating expenses as a percentage of operating revenue) and
significantly improved our liquidity. On May 12, we announced that our goal
for the second quarter of 2005 was to lower our operating ratio by 200 to 350
basis points compared to the first quarter. We successfully achieved that goal
by improving our operating ratio by 330 basis points in the second quarter.
Also, the operating ratio for the second quarter of 2005 improved 130 basis
points over the same quarter last year. After taking into account the second
quarter results, the total improvement in our operating ratio since the third
quarter of 2004 stands at 740 basis points, which we believe is a substantial
accomplishment for the Company.
"We are encouraged by a 13.2% increase in revenue per day in the second quarter
of 2005 over the first quarter. LTL tons per day increased 10.9% over the same
time period. LTL revenue per hundredweight, without fuel surcharge, also
improved slightly from $10.56 in the first quarter of 2005 to $10.61 in the
second quarter of 2005, despite a 2.1% increase in weight per LTL shipment.
"Further, we announced on July 14, 2005 that we have significantly improved our
liquidity position by closing real estate transactions that generated
approximately $15.2 million in net proceeds. The proceeds from the real estate
transactions were used to repay amounts drawn on the Company's revolving line
of credit led by Bank of America. Subject to certain requirements under the
credit agreement, the Company estimates that it currently has approximately
$35.0 million of borrowing availability under its credit facility. In addition,
Central currently has approximately $4.5 million of idle assets held for sale
that are planned to be disposed of in 2005.
"In the second quarter of 2005 and for the first time in the last five
quarters, the Company generated positive EBITDA (earnings before interest,
income taxes, depreciation and amortization) and we expect EBITDA to be
positive in the third and fourth quarters of 2005. Our goal for the 2005 third
quarter is to lower our operating ratio from the third quarter of 2004 by 750
to 950 basis points."
Second Quarter and Year to Date Financial Results
For the second quarter of 2005, Central's operating revenue was $99.5 million
on 64 working days, compared to operating revenue of $105.5 million on the same
number of working days for the second quarter of 2004. Revenue decreased 5.7%
and total tons hauled decreased 10.8% for the second quarter of 2005 compared
to the same period in 2004. LTL revenue per hundredweight increased 3.9% from
$11.31 in the 2004 quarter to $11.75 in the 2005 quarter, due to an increase in
fuel surcharge revenue. Excluding fuel surcharge revenue, LTL revenue per
hundredweight was down 1.5% in the 2005 second quarter compared to the 2004
quarter, partially due to a 4.2% increase in average weight per LTL shipment.
A pre-tax loss of $6.1 million or $0.34 cents per diluted share was realized in
the 2005 second quarter compared to a pre-tax loss of $6.9 million, or $0.39 per
diluted share in the 2004 second quarter. A net loss of $6.1 million, or $0.34
per diluted share, was realized in the second quarter of 2005. The $6.1 million
pre-tax loss in the second quarter of 2005 generated a tax benefit of
approximately $2.3 million, equivalent to $0.13 per diluted share, which was
offset by the increase in the valuation allowance for deferred tax assets.
This resulted in no tax benefit being recorded in the second quarter of 2005.
The net loss in the second quarter of 2004 was $2.5 million, or $0.14 per
diluted share.
For the six months ended July 2, 2005, operating revenue amounted to $188.8
million a 6.8% decrease compared with operating revenue of $202.6 million for
the first half of 2004. A pre-tax loss of $14.4 million or $0.79 cents per
diluted share was realized in the 2005 first half compared to a pre- tax loss
of $8.7 million, or $0.49 per diluted share in the 2004 first half. A net loss
of $14.4 million, or $0.79 per diluted share, was reported for the six months
ended July 2, 2005. An income tax benefit of approximately $5.5 million,
equivalent to $0.30 benefit per diluted share, was recorded in 2005, but was
offset by an increase in the valuation for deferred tax assets. This resulted
in no tax benefit being recorded in the first half of 2005. The net loss in the
first half of 2004 was $3.7 million, or $0.21 per diluted share.
Balance Sheet and Liquidity
At July 2, 2005, the Company had $73.3 million in stockholders' equity and
$68.4 million of total debt and capital leases, including current maturities.
The debt and capital leases include $15.9 million of borrowing under the Bank
of America led credit facility that matures in the first quarter of 2009.
Notwithstanding the maturity date, borrowings under the facility are
categorized as short-term debt to be consistent with the evolving
interpretations of Emerging Issues Task Force 95-22 Balance Sheet
Classifications, Borrowings Outstanding Under Revolving Credit Agreements that
include both a Subjective Acceleration Clause and a Lock-Box Arrangement ("EITF
95-22").
At July 2, 2005, the Company had approximately $17.5 million of borrowing
availability under the Bank of America facility, reduced by a $5.0 million
minimum availability restriction. Based on an amendment in May 2005 to the
Company's credit facility, the Company has no financial covenants through
August 15, 2005. In lieu of financial covenants, the $5.0 million availability
restriction remains in place. After August 15, 2005, the $5.0 million
restriction is eliminated and no financial covenants exist as long as excess
availability on the line remains above $15.0 million. If excess availability
drops below $15.0 million, the Company is required to maintain minimum EBITDA
(earnings before interest, income taxes, depreciation and amortization) levels.
Please see the Company's Quarterly Report on Form 10-Q for a more detailed
description of the amended credit facility and EITF 95-22.
In May 2005, the Company contracted to sell approximately 14 excess acres in
Phoenix for $1.2 million. This transaction closed in June and the Company
recognized a gain on the sale. In addition, the Company closed on agreements
in July 2005 covering an estimated $14.0 million in sale-leaseback and mortgage
financing transactions on four terminal properties. The Company closed on an
agreement concerning a sale-leaseback on one of its terminals. The transaction
generated approximately $6.2 million in net proceeds and the Company signed a
ten-year lease with a ten-year option. The Company also closed on mortgage
financing on three other terminal properties that generated approximately $7.8
million in net proceeds. All of the proceeds from these transactions were used
to repay existing debt under the Company's credit facility with Bank of America.
In addition to the liquidity from the above financing, at July 2, 2005, Central
had approximately $4.5 million in assets held for sale that are planned to be
disposed of in 2005. In the quarter and six months ended July 2, 2005, the
Company had net capital proceeds of $2.1 million and $1.5 million,
respectively, mainly as a result of proceeds realized from the sale of excess
land in Phoenix. Gross capital expenditures for the remainder of 2005 are
expected to be $1.5 million to $7.5 million. Included in this range is roughly
$6.0 million for the possible replacement of revenue equipment, which if made
will be financed independently from the Bank of America led credit facility.
Central Freight Lines, Inc. is a non-union less-than-truckload carrier
specializing in regional overnight and second day markets. One of the 10
largest regional LTL carriers in the nation, Central provides regional,
interregional, and expedited services, as well as value-added supply chain
management, throughout the Midwest, Southwest, West Coast and Pacific
Northwest. Utilizing marketing alliances, Central provides service solutions
to the Great Lakes, Northeast, Southeast, Mexico and Canada.
This press release contains forward-looking statements that involve risk,
assumptions, and uncertainties that are difficult to predict. Statements that
constitute forward-looking statements are usually identified by words such as
"anticipates," "believes," "estimates," "projects," "expects," "plans,"
"intends," or similar expressions. These statements are made pursuant to the
safe harbor provisions of Section 21E of the Securities Exchange Act of 1934,
as amended, and Section 27A of the Securities Act of 1933, as amended. Such
statements are based upon the current beliefs and expectations of our
management and are subject to significant risks and uncertainties. Actual
results may differ from those set forth in the forward-looking statements. With
respect to statements regarding the Company's goals for the third and fourth
quarters of 2005, those goals are based upon the Company's expectation of a
freight environment similar to the current environment; the Company's
continuing ability to add quality customers and freight without any significant
losses; and the Company's ability to raise its revenue yields by market increase
levels. The Company's goals also are based upon expectations that it will
continue to execute its operating plan (including but not limited to
improvements in insurance and claims expense) and will not suffer any material
management, employee relations, customer or other disruptions; that the Company
is able to maintain adequate liquidity and successfully dispose of assets held
for sale; and that the Company does not suffer any material uninsured losses.
These expectations are subject to risks, including but not limited to the risk
that customers will resist rate increases; the risk of loss of customer freight
based on rate increases, contract non-renewal, or other factors; the risk that
uninsured losses will exceed expectations; the risk that dispositions of assets
held for sale will not be possible on favorable terms or at all; and the risk
that the Company fails to continue to obtain efficiencies to allow margin
improvements in excess of revenue growth. With respect to the Company's
business generally, the following factors, among others, could cause actual
results to differ materially from those in forward- looking statements: the
risk that revenue growth may be delayed or not occur at all; the risk that
improvements in revenue yield and tonnage growth may be delayed or not occur at
all; the risk that service, safety, and productivity measures will be further
delayed or will not be successfully implemented throughout our operations; the
risk that our cost-cutting measures may have unintended and unforeseen
consequences that adversely affect our business; the risk that geographic
expansion has produced or may produce freight imbalances, customer service
issues, operational issues, or other consequences that we cannot manage
successfully on a timely basis or at all; the risk that our insurance and
claims costs will continue to exceed our expectations and will not return to
acceptable levels on a timely basis or at all; the risk that we will be unable
to obtain the financing we are seeking or that it will not be available on
acceptable terms; the risk that operating losses and negative cash flows will
continue and will have a material and adverse result including but no limited
to the termination of our line of credit; and the risks detailed from time to
time in reports filed by the Company with the Securities and Exchange
Commission, including forms 8-K, 10-Q, 10-K, and our registration statement on
Form S-1.
Corporate Contact:
Jeff Hale, Chief Financial Officer
(480) 361-5295
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
Three months ended Six months ended
------------------ ----------------
July 2, July 3, July 2, July 3,
------- ------- ------- -------
2005 2004 2005 2004
---- ---- ---- ----
Working Days 64 64 129 130
--------- --------- --------- ---------
Operating revenues $ 99,518 $ 105,513 $ 188,840 $ 202,551
--------- --------- --------- ---------
Operating expenses:
Salaries, wages and
benefits 53,982 60,084 104,946 115,740
Purchased transportation 9,129 11,387 17,947 22,692
Purchased transportation
- related parties 4,482 5,965 7,953 8,242
Operating and general
supplies and expenses 23,099 20,821 43,704 39,152
Operating and general
supplies and expenses
- related parties 35 39 197 134
Insurance and claims 6,736 6,881 11,761 10,874
Building and equipment
rentals 1,007 1,044 2,026 1,973
Building and equipment
rentals - related parties 449 376 898 896
Depreciation and
amortization 4,127 3,951 9,004 7,870
--------- --------- --------- ---------
Total operating
expenses 103,046 110,548 198,436 207,573
--------- --------- --------- ---------
Loss from operations (3,528) (5,035) (9,596) (5,022)
Other expense:
Interest expense (1,038) (368) (1,653) (573)
Interest expense -
related parties (1,545) (1,537) (3,126) (3,142)
--------- --------- --------- ---------
Loss before income
taxes (6,111) (6,940) (14,375) (8,737)
Income tax:
Income tax benefit --- 4,397 --- 5,065
--------- --------- --------- ---------
Net loss $ (6,111) $ (2,543) $ (14,375) $ (3,672)
========= ========= ========= =========
Net loss per share:
Basic $ (0.34) $ (0.14) $ (0.79) $ (0.21)
Diluted (0.34) (0.14) (0.79) (0.21)
Weighted average outstanding
shares:
Basic 18,215 17,842 18,203 17,777
Diluted 18,215 17,842 18,203 17,777
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 2, 2005 and December 31, 2004
(in thousands)
Assets 2005
(Unaudited) 2004
--------- ---------
Cash and cash equivalents $ 312 $ 2,144
Restricted cash --- 20,825
Accounts receivable, net 52,743 51,582
Other current assets 9,299 8,655
Deferred income taxes 9,901 6,689
--------- ---------
Total current assets 72,255 89,895
Property and equipment, net 126,464 135,274
Goodwill 4,324 4,324
Other assets 7,617 7,761
--------- ---------
Total assets $ 210,660 $ 237,254
========= =========
Liabilities and stockholders' equity
Current maturities of long-term debt $ 9,171 $ 10,958
Short-term notes payable 16,769 28,108
Trade accounts payable 16,697 23,835
Payables for related party transportation
services 2,006 988
Accrued expenses 28,269 23,050
--------- ---------
Total current liabilities 72,912 86,939
Long-term debt, excluding current maturities 19,738 21,884
Related party financing 22,716 22,852
Deferred income taxes 11,587 8,375
Claims and insurance accruals 10,362 9,646
--------- ---------
Total liabilities 137,315 149,696
--------- ---------
Stockholders' equity 73,345 87,558
--------- ---------
Total liabilities and
stockholders' equity $ 210,660 $ 237,254
========= =========
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
OPERATING STATISTICS
(Amounts in thousands except where indicated by *)
Three months ended Six months ended
------------------ ----------------
July 2, July 3, July 2, July 3,
------ ------ ------ ------
2005 2004 % Change 2005 2004 % Change
---- ---- -------- ---- ---- --------
Operating Ratio 103.5% 104.8% 105.1% 102.5%
Working days 64 64 0.0% 129 130 -0.8%
LTL bills 848.43 971.93 -12.7% 1,641.52 1,884.18 -12.9%
Total bills 858.47 982.78 -12.6% 1,660.67 1,903.76 -12.8%
LTL tons 398.56 438.45 -9.1% 763.59 840.42 -9.1%
Total tons 478.04 536.18 -10.8% 917.98 1,018.42 -9.9%
LTL revenue per
hundredweight* $ 11.75 $ 11.31 3.9% $ 11.64 $ 11.37 2.4%
LTL weight per
bill (in pounds)* 940 902 4.2% 930 892 4.3%
Average length of
haul (in miles)* 488 479 1.9% 488 473 3.2%
Fuel surcharge as
a % of total
revenue* 9.7% 4.7% 9.1% 3.9%
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DATASOURCE: Central Freight Lines, Inc.
CONTACT: Jeff Hale, Chief Financial Officer of Central Freight Lines,
Inc., +1-480-361-5295, or
Web site: http://www.centralfreight.com/