===================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 34-0-17570
American Freightways Corporation
(Exact name of registrant as specified in its charter)
Arkansas 74-2391754
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2200 Forward Drive, Harrison, Arkansas 72601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501) 741-9000
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
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 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Number of shares of common stock outstanding at June 30, 1995:
30,773,128.
===================================================================
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted, except per share data)
June 30, December 31,
1995 1994
---------------------------
(Unaudited) (Note)
Assets
Current assets
Cash and cash equivalents $ 3,950 $ 3,999
Trade receivables, less allowance
for doubtful accounts (1995-$663;
1994-$639) 52,016 39,818
Operating supplies and inventories 1,983 1,519
Prepaid expenses 8,690 4,247
Deferred income taxes 5,276 4,664
Income taxes receivable 1,248 --
----------- -----------
Total current assets 73,163 54,247
Property and equipment 468,729 396,594
Allowances for depreciation and
amortization (deduction) (113,688) (98,701)
----------- -----------
355,041 297,893
Other assets 3,411 3,208
----------- -----------
$431,615 $ 355,348
=========== ============
Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable $ 10,932 $ 13,358
Accrued expenses 29,021 24,449
Federal and state income taxes -- 233
Current portion of long-term debt 8,067 6,338
----------- -----------
Total current liabilities 48,020 44,378
Long-term debt, less current portion
(Note B) 152,897 104,843
Deferred income taxes 35,628 28,947
Shareholders' equity:
Common stock, par value $.01 per share--
authorized 250,000 shares; issued and
outstanding 30,773 in 1995
and 30,496 in 1994 308 305
Additional paid-in capital 96,808 93,347
Retained earnings 97,954 83,528
----------- -----------
195,070 177,180
----------- -----------
$431,615 $ 355,348
=========== ===========
Note: The condensed consolidated balance sheet at December 31, 1994, has
been derived from the audited consolidated financial statements at that
date.
See notes to condensed consolidated financial statements.
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(000's omitted, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
----------------------------------------
Operating revenue $141,969 $123,656 $274,502 $222,928
Operating expenses and costs:
Salaries, wages and benefits 77,859 63,127 151,266 117,067
Operating supplies and
expenses 9,186 8,034 17,889 15,076
Operating taxes and licenses 5,817 4,697 11,554 9,054
Insurance 4,525 3,897 9,325 6,438
Communications and utilities 2,709 2,325 5,258 4,505
Depreciation and amortization 9,106 7,044 17,542 13,217
Rents and purchased
transportation 11,013 12,023 21,709 23,075
Other 6,230 5,429 12,179 9,822
-------------------- ------------------
126,445 106,576 246,722 198,254
-------------------- ------------------
Operating income 15,524 17,080 27,780 24,674
Other income (expense):
Interest expense (2,491) (1,908) (4,689) (3,243)
Interest income 32 91 75 124
Gain (loss) on disposal of
assets 39 ( 20) 44 ( 19)
Other, net 91 57 152 111
-------------------- ------------------
(2,329) (1,780) (4,418) (3,027)
Income before income taxes 13,195 15,300 23,362 21,647
-------------------- ------------------
Federal and state income taxes:
Current 1,080 5,350 2,868 6,800
Deferred 3,967 464 6,068 1,428
-------------------- ------------------
5,047 5,814 8,936 8,228
-------------------- ------------------
Net income $ 8,148 $ 9,486 $ 14,426 $ 13,419
===================== ==================
Net income per share $ 0.26 $ 0.32 $ 0.46 $ 0.46
====================== ==================
Average shares outstanding 31,426 29,906 31,401 29,393
====================== ==================
See notes to condensed consolidated financial statements.
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30
1995 1994
-----------------------------
(000's omitted)
Net cash provided by operating activities $ 22,684 $ 17,432
Investing activities
Proceeds from sales of equipment 458 16
Capital expenditures (75,118) (45,435)
----------- -----------
Net cash used by investing activities (74,660) (45,419)
Financing activities
Principal payments on long-term debt (20,652) (46,859)
Proceeds from notes payable and
long-term borrowings 70,435 39,000
Proceeds from issuance of common stock 2,144 38,841
----------- -----------
Net cash provided by financing activities 51,927 30,982
----------- ------------
Net increase (decrease) in cash and cash
equivalent $ ( 49) $ 2,995
============ ===========
See notes to condensed consolidated financial statements.
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results of the six month period ended June 30, 1995, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1995. For further information, refer to
the Company's consolidated financial statements and footnotes
thereto included in Form 10-K for the year ended December 31, 1994.
NOTE B - LONG-TERM DEBT
As of June 30, 1995, the Company has outstanding borrowings of
$50,500,000 under its existing $125,000,000 unsecured revolving
line of credit. The proceeds of these borrowings were used for the
purchase of revenue equipment and for the purchase and construction
of terminal facilities. At June 30, 1995, the amount available for
borrowing under the line of credit was $74,500,000. In addition to
this credit facility, the Company has obtained letters of credit
totaling $7,000,000 to provide collateral on its self-insurance
plan. The line of credit bears interest at a variable interest
rate based upon the London Interbank rate or the lender's prime
rate in effect at the time of the borrowing.
As of June 30, 1995, the Company has outstanding borrowings of
$65,000,000 under an uncommitted Master Shelf Agreement which
provides for the issuance of up to $90,000,000 of senior promissory
notes with an average life not to exceed eight years.
NOTE C - COMMON STOCK OFFERING
On May 11, 1994, the Company sold 1,750,000 shares of its common
stock in a public offering at $18.25 per share. Proceeds to the
Company, net of underwriting discounts, commissions and other costs
were $30,145,000. On June 10, 1994, the underwriters exercised an
overallotment provision in the underwriting agreement for an
additional 375,000 shares of common stock. Net proceeds from the
exercise of the overallotment provision were $6,506,000.
NOTE D - COMMITMENTS
Commitments for the purchase of revenue equipment and the purchase
or construction of terminals aggregated approximately $40,982,000
at June 30, 1995.
NOTE E - EARNINGS PER SHARE
Quarter Ended June 30
1995 1994
-----------------------------
(Thousands omitted except
per share amounts)
Weighted average shares outstanding 30,721 29,049
Net effect of dilutive stock options
based on treasury stock method 705 857
----------- -----------
Total weighted average shares outstanding 31,426 29,906
=========== ===========
Net income $ 8,148 $ 9,486
=========== ===========
Earnings per common share and $ 0.26 $ 0.32
common share equivalents =========== ===========
Earnings per common share and common share equivalents are computed
by dividing net income by the weighted average number of shares of
common stock and common stock equivalents outstanding during the
period.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table sets forth, for the periods indicated, the
percentages of operating expenses and other items to operating
revenues:
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
-------------------------------------------
Operating revenue 100.0% 100.0% 100.0% 100.0%
Operating expenses and costs:
Salaries, wages and benefits 54.8% 51.0% 55.1% 52.5%
Operating supplies and expenses 6.5% 6.5% 6.5% 6.8%
Operating taxes and licenses 4.1% 3.8% 4.2% 4.1%
Insurance 3.2% 3.2% 3.4% 2.9%
Communications and utilities 1.9% 1.9% 1.9% 2.0%
Depreciation and amortization 6.4% 5.7% 6.4% 5.9%
Rents and purchased transportation 7.8% 9.7% 7.9% 10.3%
Other 4.4% 4.4% 4.5% 4.4%
-------------------------------------------
Total operating expenses and
costs 89.1% 86.2% 89.9% 88.9%
-------------------------------------------
Operating income 10.9% 13.8% 10.1% 11.1%
Interest expense 1.7% 1.5% 1.7% 1.5%
Other income, net 0.1% 0.1% 0.1% 0.1%
-------------------------------------------
Income before income taxes 9.3% 12.4% 8.5% 9.7%
Income taxes 3.6% 4.7% 3.2% 3.7%
-------------------------------------------
Net income 5.7% 7.7% 5.3% 6.0%
===========================================
Results of Operations
Results of operations for the three and six months ended June 30,
1994 were materially impacted by a 24-day strike during April 1994
called by the International Brotherhood of Teamsters against
several competing companies in the less-than-truckload industry.
As a result, comparisons of operations for the three and six months
ended June 30, 1995 to the strike-impacted periods from the
previous year were materially impacted.
Operating Revenue
- -----------------
Operating revenue for the six months ended June 30, 1995 was
$274,502,000, up 23.1%, compared to $222,928,000 for the six months
ended June 30, 1994. Operating revenue for the three months ended
June 30, 1995 was $141,969,000, up 14.8%, compared to $123,656,000
in the strike-impacted three months ended June 30, 1994. The
growth in operating revenue in the six months ended June 30, 1995
compared to the six months ended June 30, 1994 was primarily
attributable to a 21.2% increase in tonnage handled by the Company
from new and existing customers. The major reasons for this
increase in tonnage were:
- - On January 1, 1995, the Company expanded its all-points
coverage to the states of North Carolina and South Carolina with
the opening of thirteen new terminals.
- - The Company continued to increase its market penetration into
existing service territories.
- - The deregulation of intra-state commerce as of January 1, 1995
by the Federal Aviation Administration Authorization Act of 1994.
- - On April 17, 1995, the Company expanded its service territory
with the addition of terminal locations in: Colorado Springs,
Denver, Fort Collins and Pueblo, CO; Des Moines, IA;
Minneapolis/St. Paul, MN; Omaha, NE; Madison and Milwaukee, WI.
In addition to the increase in tonnage, operating revenue for the
six months ended June 30, 1995 was affected by a 1.1% increase in
revenue per hundred weight as compared to the six months ended June
30, 1994. The major factors contributing to this increase in
revenue per hundred weight were:
- - A general rate increase of approximately 3.5% effective
January 1, 1995. General rate increases initially affect
approximately 50% of the Company's customers. The remaining
customers' rates are determined by contracts and guarantees and are
negotiated throughout the year.
- - The Company's average length of haul increased 5.1%, to 581
miles, in the six months ended June 30, 1995 as compared to the six
months ended June 30, 1994. The increase in average length of haul
was primarily a result of the Company's expanded service territory.
Management expects that growth in operating revenue is sustainable
in the near future. Any growth in operating revenue will primarily
be the result of increased tonnage handled by the Company, as any
future rate increases can be expected to be closely tied to the
overall rate of inflation and general economic conditions.
Operating Expenses
- ------------------
Operating expenses as a percentage of operating revenue increased
to 89.9% in the six months ended June 30, 1995 from 88.9% in the
six months ended June 30, 1994. Operating expenses as a percentage
of operating revenue increased to 89.1% in the three months ended
June 30, 1995 from 86.2% in the three months ended June 30, 1994.
This overall increase was primarily attributable to:
- - Salaries, wages and benefits as a percentage of operating
revenue increased to 55.1% in the six months ended June 30, 1995
from 52.5% in the six months ended June 30, 1994. The utilization
of Company-operated terminals in expansions of service territory
and the conversion of four contractor-operated terminals to Company-
operated terminals contributed to this increase. In addition, the
continuation of the Company's philosophy of sharing its success
with its associates through increased wages and enhanced benefit
packages contributed to this increase. On March 6, 1995, the
Company increased the wages of its drivers, dockmen and clerical
workers by approximately 5.5%.
- - Insurance as a percentage of operating revenue increased to
3.4% in the six months ended June 30, 1995 from 2.9% in the six
months ended June 30, 1994. This increase was primarily a result
of increased experience of accident and cargo claims. During the
twelve months prior to June 30, 1995, accidents and cargo claims
returned to historical levels after being somewhat lower in the
prior two years. Management does not expect a continuation of the
upward trend in insurance expenses as they relate to operating
revenue but expects a stabilization of these expenses near
historical levels.
- - Depreciation and amortization as a percentage of operating
revenue increased to 6.4% in the six months ended June 30, 1995
from 5.9% in the six months ended June 30, 1994. This increase was
primarily a result of decreased usage of rented equipment in favor
of Company-owned equipment. Management expects this increased
utilization of Company-owned equipment, rather than rented
equipment, to continue in the near term.
These increases in operating expenses as a percentage of operating
revenue were partially offset by improvements in the following
areas:
- - Rents and purchased transportation as a percentage of
operating revenue decreased to 7.9% in the six months ended June
30, 1995 from 10.3% in the six months ended June 30, 1994. This
decrease was due to two primary reasons. The first was the
Company's philosophy of utilizing Company-operated terminals rather
than contractor-operated terminals in expansions of service
territory, along with the conversion of four contractor-operated
terminals to Company-operated terminals during 1994. Management
does not expect significant additional conversions of contractor-
operated terminals to Company-operated terminals. The second
primary reason for the decrease in rents and purchased
transportation as a percentage of operating revenue was the
decreased usage of rented equipment in favor of Company-owned
equipment.
- - Operating supplies and expenses as a percentage of operating
revenue decreased to 6.5% in the six months ended June 30, 1995
from 6.8% in the six months ended June 30, 1994. This decrease was
primarily due to a 3.1% improvement in the Company's linehaul load
factor (the average tonnage transported in a typical movement of
freight between terminals).
Other
- -----
Interest expense as a percentage of operating revenue increased to
1.7% in the six months ended June 30, 1995 from 1.5% in the six
months ended June 30, 1994. This increase was primarily
attributable to increased costs of borrowing funds under the
Company's variable-rate, revolving line of credit facility. The
increased costs of borrowing funds were a reflection of increased
interest rates in the general economy.
The effective tax rate of the Company was 38.3% for the first six
months of 1995, up from 38.0% for the first six months of 1994.
Net income for the six months ended June 30, 1995, was $14,426,000,
up 7.5%, from $13,419,000 for the six months ended June 30, 1994.
Liquidity and Capital Resources
The continued growth in operating revenue and the expansion of
service territory initiated during 1995 required significant
capital resources in the six months ended June 30, 1995.
Capital requirements during the six months ended June 30, 1995
consisted primarily of $74,660,000 in investing activities. The
Company invested $75,118,000 in capital expenditures during the six
months ended June 30, 1995 comprised of $44,533,000 in additional
revenue equipment, $17,480,000 in new terminal facilities or the
expansion of existing terminal facilities and $13,105,000 in other
equipment. Management expects capital expenditures for the full
year of 1995 will be approximately $130,000,000. However, the
amount of capital expenditures required in 1995 will be dependent
on the growth rate of the Company and the timing and size of any
future expansions of service territory. At June 30, 1995, the
Company had commitments for land, terminals, revenue and other
equipment of approximately $40,982,000. These commitments were for
the completion of projects in process at June 30, 1995, and for the
purchase of additional revenue equipment in anticipation of
increased revenue levels during the remainder of 1995.
The Company provided for its capital resource requirements in the
six months ended June 30, 1995 with cash from operations and
financing activities. Cash from operations totaled $22,684,000 in
the six months ended June 30, 1995 compared to $17,432,000 in the
six months ended June 30, 1994. Financing activities augmented
cash flow by $51,927,000 in the six months ended June 30, 1995 by
utilizing two primary sources of financing: the revolving line of
credit and the Master Shelf facility.
- - The Company experiences periodic cash flow fluctuations common
to the industry. Cash outflows are heaviest during the first part
of any given year while cash inflows are normally weighted towards
the last two quarters of the year. To smooth these fluctuations
and to provide flexibility to fund future growth, the Company
utilizes a variable-rate, unsecured revolving line of credit
provided by NationsBank of Texas, N.A., Texas Commerce Bank, N.A.
and Wachovia Bank of Georgia, N.A. Effective May 31, 1995, the
limit of this line of credit facility was increased to $125,000,000
from $75,000,000. During the six months ended June 30, 1995, the
Company utilized this facility to provide $16,500,000 of net
financing, bringing outstanding borrowings under the facility to
$50,500,000 and leaving $74,500,000 available for borrowing. The
Company also maintains a short-term, unsecured revolving line of
credit with NationsBank of Texas, N.A. Effective May 9, 1995, the
limit of this short-term facility was increased to $7,500,000 from
$5,000,000. At June 30, 1995, $5,500,000 was available for
borrowing. In addition, the Company maintains a $10,000,000 line
of credit with NationsBank, N.A. to obtain letters of credit to
provide collateral for its self-insurance program. At June 30,
1995, the Company had obtained letters of credit totaling
$7,000,000 for this purpose.
- - To assist in financing longer-lived assets, the Company has an
uncommitted Master Shelf Agreement with the Prudential Insurance
Company of America which provides for the issuance of up to
$90,000,000 in medium to long-term unsecured notes at an interest
rate calculated at issuance. During the six months ended June 30,
1995, the Company utilized this agreement to issue a $15,000,000
note at 8.55% with a ten year maturity and a $20,000,000 note at
6.92% with a ten year maturity. The proceeds of these notes were
used primarily to repay borrowings from the revolving line of
credit or to fund capital expenditures. At June 30, 1995,
$25,000,000 was available under this facility for borrowing.
Management expects that the Company's existing working capital and
its available lines of credit are sufficient to meet the Company's
commitments as of June 30, 1995, and to fund current operating and
capital needs. However, if additional financing is required,
management believes it will be available.
The Company uses off-balance sheet financing in the form of
operating leases primarily in two areas; terminal facilities and
computer equipment. At June 30, 1995, future rental commitments on
operating leases were $42,347,000. The Company prefers to utilize
operating leases for these two areas and plans to use them in the
future when such financing is available and suitable.
Environmental
At June 30, 1995, the Company had no outstanding inquiries with any
state or federal environmental agency.
Recent Events
Effective July 10, 1995, the Company expanded its all-points
coverage to the states of Colorado, Iowa, Nebraska and Wisconsin
with the opening of twelve new terminal locations.
Effective August 14, 1995, the Company will open seven terminal
locations in the state of Florida and provide all-points coverage
to that state. With the addition of Florida, the Company will
provide all-points coverage to 21 states.
INDEX
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (unaudited)
- -------
Condensed consolidated balance sheets--June 30, 1995 and
December 31, 1994
Condensed consolidated statements of income--Three months
ended June 30, 1995 and 1994; Six months ended June 30, 1995
and 1994
Condensed consolidated statements of cash flows--Six months
ended June 30, 1995 and 1994
Notes to condensed consolidated financial statements--June 30,
1995
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings.
- -------
As was disclosed on Form 10-Q for the quarterly period ended March
31, 1995, a complaint was filed against the Company on March 15,
1995 by American Freight System, Inc. of Kansas City, Kansas
alleging among other things, federal trade name and trademark
infringement by the Company. On July 19, 1995, both parties agreed
upon a release and settlement of all claims arising from the
complaint. Under the settlement agreement, American Freightways
acquired all rights to the disputed trademark. The settlement will
not have a material impact upon American Freightways.
Item 6. Exhibits and Reports on Form 8-K
- ------
(a) Exhibits:
--------
(10) First Amendment to Amended and Restated
Credit Agreement among NationsBank of Texas, N.A.,
as agent, the Registrant and its subsidiary dated
May 31, 1995
$20,000,000 note dated June 15, 1995,
issued under the $90,000,000 Master Shelf Agreement
with the Prudential Insurance Company of America
dated September 3, 1993
(27) Financial Data Schedule
(b) Reports on Form 8-K
-------------------
The Company did not file any reports on Form 8-K during
the three month period ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN FREIGHTWAYS CORPORATION
--------------------------------
(Registrant)
Date: December 4, 1995 /s/Frank Conner
Frank Conner
Executive Vice President
Accounting & Finance
and Chief Financial Officer