Central Freight Lines (NASDAQ:CENF)
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Central Freight Lines, Inc. Reports First Quarter Results and
Pending Financing Package
WACO, Texas, May 12 /PRNewswire-FirstCall/ -- Central Freight Lines, Inc.
(NASDAQ:CENF) announced today its financial and operating results for the
quarter ended April 2, 2005.
Overview
Central's President and Chief Executive Officer, Bob Fasso, commented on the
Company's results, "We have three positive announcements today. First, we
achieved a 240 basis point improvement in our operating ratio versus the fourth
quarter of 2004, an achievement that is notable given the seasonal freight
slowdown that affects our industry during the first quarter.
"Second, we have significantly improved our liquidity prospects by agreeing in
principle to transactions involving an estimated $15.0 million to $16.0 million
in real estate proceeds and financing that we expect to have funded within the
next 60 days. We have $79.4 million in stockholders' equity. Together with
our available credit, the transactions listed above and an additional $6.0
million of assets held for sale, we expect to have the financial resources and
liquidity to execute our plan and provide customers and employees with
sufficient stability.
"Third, our April results indicate further sequential improvement with LTL tons
handled per day up 8.3% over the first quarter. In addition, our major service
indicators such as bills per hour and on-time and damage free delivery continue
to hold at levels that are among the best the Company has achieved in the past
seven years.
"With momentum from these accomplishments, our goal for the second quarter is
to lower the operating ratio from the first quarter of 2005 by 200 to 350 basis
points, making the expected progress from the third quarter of 2004, 610 to 760
basis points."
First Quarter Financial Results
For the first quarter of 2005, Central's operating revenue was $89.3 million on
65 working days, compared to operating revenue of $97.0 million on 66 working
days for the first quarter of 2004. Revenue per working day decreased 6.5% and
total tons hauled per working day decreased 7.4% for the first quarter of 2005
compared to the same period in 2004. LTL revenue per hundredweight increased
0.5% from $11.45 in the 2004 quarter to $11.51 in the 2005 quarter, due to an
increase in fuel surcharge revenue. Excluding fuel surcharge revenue, LTL
revenue per hundredweight was down 5.0% in the 2005 quarter compared to the
2004 quarter, partially due to a 4.5% increase in average weight per LTL
shipment.
A net loss of $8.3 million, or $0.45 per diluted share, was realized in the
first quarter of 2005. The $8.3 million pretax net loss in the first quarter
of 2005 generated a tax benefit of $3.2 million, or $0.17 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 first quarter of
2005. The pretax net loss in the first quarter of 2004 was $1.8 million.
Sequential Improvement Continues
LTL tons handled per working day increased 2.3% from the fourth quarter of 2004
to the first quarter of 2005 while wages and purchased transportation declined
by 0.2% and 2.0% per working day. Meanwhile, cargo claims expenses dropped
over 33% per day due to the improved processes and procedures we implemented
during the second half of 2004. We also realized benefits from the investment
in our fleet during 2004 as repair and maintenance expense declined, and our
Sarbanes-Oxley related expenses decreased significantly. In the first quarter
of 2005 the Company reserved $1 million (our maximum deductible) for a January
2005 injury to one of our employees. Despite this accident, the average number
of injuries reported per 200,000 hours worked in the first quarter of 2005, was
27% lower than the average for 2004.
"Service continues to remain strong, providing Central's customers with service
levels that we believe are competitive with any LTL carrier in our regions.
Effective May 2, 2005, we implemented a 6.0% general rate increase for
customers on our non-contract rate base."
Balance Sheet and Liquidity
At April 2, 2005, the Company had $79.4 million in stockholders' equity and
$68.6 million of total debt and capital leases, including current maturities.
The debt and capital leases include $13.4 million of borrowing under the Bank
of America 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"). Based on the current interpretations of EITF 95-22, we understand
that most revolving credit agreements with a required lock-box arrangement are
required to be classified as current liabilities.
At April 2, 2005, the Company had approximately $18.8 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 $1.3 million and expects to recognize a gain on the sale. In
addition, the Company entered into agreements in principle covering an
estimated $14.0 million to $15.0 million in sale-leaseback and mortgage
financing transactions on five terminal properties. The Company signed a
letter of intent concerning a sale-leaseback on one of its terminals and is
negotiating the definitive agreements concerning the transaction. It is
expected that the transaction will generate approximately $6.0 million in net
proceeds and the Company will sign a ten-year lease with a ten-year option. The
Company also signed a commitment letter concerning mortgage financing on four
other terminal properties that is expected to generate approximately $9.0
million in net proceeds. Both transactions are subject to customary closing
conditions. The transactions are expected to close within 45 to 60 days.
In addition to the liquidity expected from financing, at April 2, 2005, Central
had approximately $6.0 million in assets held for sale that may be disposed of
in 2005. In the quarter ended April 2, 2005, the Company had net capital
expenditures of $0.6 million. Gross capital expenditures for the remainder of
2005 are expected to be $3.0 million to $9.0 million. Included in this range
is roughly $6.0 million for replacing revenue equipment. If the decision is
made to purchase the $6.0 million in replacement equipment, the Company expects
to obtain financing independent from the Bank of America credit facility. Our
goal is to achieve positive EBITDA levels (earnings before interest, income
taxes, depreciation and amortization) in the third and fourth quarters of 2005.
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 second quarter 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 and will not suffer any material
management, employee relations, customer or other disruptions; that the Company
is able to complete the planned real estate financing at the indicated values
and maintains adequate liquidity; 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 the conditions to closing the real estate
financing do not occur; the risk that the properties are appraised for lower
values than we anticipate; the risk that customers will resist the Company's
general rate increase; 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; 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, dollars in thousands, except per share data)
Three months ended
------------------
April 2, April 3,
-------- --------
2005 2004
---- ----
Working Days 65 66
--------- ---------
Operating revenues $89,322 $97,038
--------- ---------
Operating expenses:
Salaries, wages and benefits 50,964 55,656
Purchased transportation 8,818 11,305
Purchased transportation - related parties 3,471 2,277
Operating and general supplies and expenses 20,605 18,580
Operating and general supplies and expenses -
related parties 162 95
Insurance and claims 5,025 3,744
Building and equipment rentals 1,019 929
Building and equipment rentals -
related parties 449 520
Deprecation and amortization 4,877 3,919
--------- ---------
Total operating expenses 95,390 97,025
--------- ---------
(Loss) income from operations (6,068) 13
Other expense:
Interest expense (615) (205)
Interest expense - related parties (1,581) (1,605)
--------- ---------
Loss before income taxes (8,264) (1,797)
Income taxes:
Income tax benefit --- 668
--------- ---------
Net loss $(8,264) $(1,129)
========= =========
Net loss per share:
Basic $ (0.45) $ (0.06)
Diluted (0.45) (0.06)
Weighted average outstanding shares (in thousands):
Basic 18,192 17,714
Diluted 18,192 17,714
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 2, 2005 and December 31, 2004
(Dollars in thousands)
Assets 2005
(Unaudited) 2004
----------- -----------
Cash and cash equivalents $ 1,202 $ 2,144
Restricted cash --- 20,825
Accounts receivable, net 53,042 51,582
Other current assets 11,337 8,655
Deferred income taxes 8,959 6,689
----------- -----------
Total current assets 74,540 89,895
Property and equipment, net 131,198 135,274
Goodwill 4,324 4,324
Other assets 8,994 7,761
----------- -----------
Total assets $219,056 $237,254
=========== ===========
Liabilities and stockholders' equity
Current maturities of long-term debt $ 10,538 $ 10,958
Short-term notes payable 14,337 28,108
Trade accounts payable 18,463 23,835
Payables for related party transportation
services 1,537 988
Accrued expenses 29,799 23,050
----------- -----------
Total current liabilities 74,674 86,939
Long-term debt, excluding current maturities 20,869 21,884
Related party financing 22,852 22,852
Deferred income taxes 10,645 8,375
Claims and insurance accruals 10,644 9,646
----------- -----------
Total liabilities 139,684 149,696
----------- -----------
Stockholders' equity:
Total stockholders' equity 79,372 87,558
----------- -----------
Total liabilities and stockholders' equity $219,056 $237,254
=========== ===========
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
OPERATING STATISTICS
(Amounts in thousands except where indicated by *)
Three months ended
------------------
April 2, April 3,
-------- --------
2005 2004 % Change
---- ---- --------
Operating Ratio 106.8% 100.0%
Working days* 65 66 -1.5%
LTL bills 793.09 912.24 -13.1%
Total bills 802.20 920.98 -12.9%
LTL tons 365.03 401.97 -9.2%
Total tons 439.93 482.24 -8.8%
LTL revenue per hundredweight* $ 11.51 $ 11.45 0.5%
LTL weight per bill (in pounds)* 921 881 4.5%
Average length of haul (in miles)* 490 466 5.1%
Fuel surcharge as a % of total revenue* 8.3% 3.0%
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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/