1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
F O R M 10 - Q
[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 TO 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________.
COMMISSION FILE NUMBER 015503.
FREYMILLER TRUCKING, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
INDIANA 62-1307586
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
8621 NORTH ROCKWELL, OKLAHOMA CITY, OKLAHOMA 73132
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 720-6555.
---------------
________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
Since April 20, 1995, Freymiller Trucking, Inc. has been operating under
Bankruptcy Court protection pursuant to Chapter 11 of the Federal Bankruptcy
Code.
Indicate by check mark whether the registrant (2) 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 shorter period that the registrant
was required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
Yes X No
--------- ---------
Registrant has only one class of common stock, of which 2,425,000 shares were
outstanding as of June 30, 1995.
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FREYMILLER TRUCKING, INC.
JUNE 30, 1995
I N D E X
PART I. FINANCIAL INFORMATION PAGE NUMBER
-----------
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AT JUNE 30, 1995
AND DECEMBER 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED AND SIX MONTHS ENDED JUNE 30, 1995
AND 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED JUNE 30, 1995 AND 1994 . . . . . . . . . . . . . . . . . . . . . 7
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . 20
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FREYMILLER TRUCKING, INC.
BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
ASSETS 1995 1994
------ ---- ----
(UNAUDITED)
Current assets:
Cash $ 536,000 $ -
Receivables:
Freight services, net 6,446,000 9,848,000
Equipment sales, net 2,168,000 2,620,000
Other 498,000 686,000
----------- ------------
9,112,000 13,154,000
Inventories 419,000 433,000
Tires 1,300,000 3,293,000
Prepaid expenses and deposits:
Insurance 97,000 356,000
Licenses 394,000 42,000
Security deposits 508,000 283,000
Other 394,000 430,000
----------- ------------
1,393,000 1,111,000
----------- ------------
Other current assets 291,000 270,000
Total current assets 13,051,000 18,261,000
Property and equipment:
Land and improvements 11,000 11,000
Building and improvements 263,000 287,000
Revenue equipment 17,691,000 42,749,000
Furniture and fixtures 1,602,000 1,602,000
Other equipment 2,297,000 2,404,000
----------- ------------
21,864,000 47,053,000
Less accumulated depreciation
and amortization (7,164,000) (16,135,000)
----------- ------------
14,700,000 30,918,000
Other 7,525,000 5,815,000
----------- ------------
$35,276,000 $ 54,994,000
=========== ============
See accompanying notes.
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FREYMILLER TRUCKING, INC.
BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
- ------------------------------------ ---- ----
(UNAUDITED)
Liabilities Not Subject to Compromise
Current liabilities:
Cash overdraft $ - $ 1,521,000
Accounts payable 1,890,000 5,234,000
Short-term note payable(Note 2) 2,794,000 5,555,000
Current portion of long-term
debt (Note 2) 955,000 30,291,000
Current portion of capital
lease obligation (Note 2) - 370,000
Accrued liabilities:
Employee compensation and
amounts due owner operators 964,000 1,207,000
Insurance costs 489,000 2,995,000
Other 327,000 1,083,000
------------ ------------
1,780,000 5,285,000
------------ ------------
Total current liabilities 7,419,000 48,256,000
Deferred gain on sale of
property and equipment 1,276,000 1,368,000
Accrued insurance costs - 2,550,000
Liabilities Subject to Compromise 32,789,000 (a) -
------------ ------------
Total liabilities 41,484,000 52,174,000
Shareholder's equity:
Common stock $.01 par value;
10,000,000 shares authorized,
2,514,500 shares issued and
outstanding 25,000 25,000
Additional paid-in capital 8,997,000 8,997,000
Retained deficit (14,831,000) (6,061,000)
------------ ------------
(5,809,000) 2,961,000
Less treasury stock of 89,500
and 25,000 shares of common
stock, at cost, respectively (399,000) (141,000)
------------ ------------
Total shareholders'(deficit)equity (6,208,000) 2,820,000
------------ ------------
$ 35,276,000 $ 54,994,000
============ ============
- Continued on Next Page -
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FREYMILLER TRUCKING, INC.
BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
(a) Liabilities subject to compromise consist of the following:
1995
----
(UNAUDITED)
Accounts payable $ 8,270,000
Current portion of long-term
debt (Note 2) 18,056,000
Current portion of capital lease
obligation (Note 2) 314,000
Accrued liabilities
Employee compensation and amounts
due owner/operators 113,000
Insurance costs 5,418,000
Other 618,000
------------
$ 32,789,000
============
See accompanying notes.
Reference is made to the accompanying Notes and Management's Discussion and
Analysis for information related to the Chapter 11 bankruptcy filings made by
Freymiller Trucking, Inc. on April 20, 1995.
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FREYMILLER TRUCKING, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
---- ---- ---- ----
Operating revenue:
Freight services $ 18,688 $ 25,005 $ 41,920 $ 49,202
Operating expenses:
Salaries,wages & benefits 6,483 8,730 14,941 17,003
Purchase transportation 4,326 1,565 7,833 2,978
Fuel 2,289 4,261 5,638 8,610
Supplies & maintenance 2,660 3,330 6,176 6,254
Operating leases 2,142 1,316 3,896 2,703
Depreciation & amortization 927 1,880 2,244 3,691
Taxes & licenses 662 702 1,414 1,486
Insurance & claims 892 1,573 2,465 2,711
Communications & utilities 341 380 643 674
(Gain) loss disposition of
assets (125) (91) (1,027) (192)
Other 827 934 1,874 1,763
--------- -------- -------- --------
21,424 24,580 46,097 47,681
--------- -------- -------- --------
Operating (loss) income (2,736) 425 (4,177) 1,521
Nonoperating income(expense):
Interest expense (616) (1,018) (1,528) (1,952)
Interest income 168 - 261 -
--------- -------- -------- --------
(448) (1,018) (1,267) (1,952)
Loss before reorganization
expense and provision(benefit)
for income taxes (3,184) (593) (5,444) (431)
Reorganization expense
(Note 1) (3,215) - (3,215) -
--------- --------
Loss before provision
(benefit) for income taxes (6,399) (593) (8,659) (431)
Provision(benefit)for
income taxes - (289) 111 (225)
--------- -------- -------- --------
Net Loss $ (6,399) $ (304) $ (8,770) $ (206)
========= ======== ======== ========
Net loss per share $ (2.64) $ (.12) $ (3.60) $ (.08)
========= ======== ======== ========
Weighted average number of
shares of common
outstanding 2,425 2,490 2,436 2,490
========= ======== ======== ========
See accompanying notes.
Reference is made to the accompanying Notes and Management's Discussion and
Analysis for information related to the Chapter 11 bankruptcy filings made by
Freymiller Trucking, Inc. on April 20, 1995.
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FREYMILLER TRUCKING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995 1994
---- ----
Cash flows from operating activities:
Net(loss)income $ (9,078,000) $ (206,000)
Adjustments to reconcile net(loss)
income to net cash (used) provided
by operating activities:
Depreciation and amortization 2,244,000 3,689,000
Benefit for deferred taxes - (129,000)
(Gain) on sales of assets (1,027,000) (192,000)
Loss on assets sold in connection
with Chapter 11 proceeding 510,000 -
Decrease (increase) in freight
services and other receivables 3,590,000 (1,200,000)
Decrease (increase) in inventories
and tires 2,007,000 (304,000)
Increase in prepaid expenses (64,000) (357,000)
Increase in prepaid professional
fees in connection with Chapter
11 proceeding (218,000) -
(Increase) decrease in other
assets (1,710,000) (179,000)
Increase in accounts payable 4,926,000 481,000
Increase (decrease) in accrued
liabilities 338,000 246,000
Increase in accrued liabilities for
professional fees incurred in connection
with Chapter 11 proceeding 64,000 -
------------ ----------
Net cash provided by operating
activities 1,582,000 1,849,000
Cash flows from investing activities:
Proceeds from disposition of
property and equipment 5,046,000 2,028,000
Proceeds for assets sold in connection
with Chapter 11 proceeding 9,830,000 -
Purchase of property and equipment (46,000) (61,000)
------------ ----------
Net cash provided by investing activities 14,830,000 1,967,000
Continued on Next Page.
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FREYMILLER TRUCKING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995 1994
---- ----
Cash flows from financing activities:
(Decrease)increase in cash
overdraft (1,521,000) 78,000
Borrowings under short-term
note payable 37,863,000 51,664,000
Repayments under short-term note
payable (40,624,000) (50,503,000)
Proceeds from long-term borrowings - 448,000
Purchase of treasury stock (258,000) -
Principal payments on long-term debt
and capital leasing obligations (11,336,000) (5,503,000)
----------- -----------
Net cash used by financing
activities (15,876,000) (3,816,000)
Net increase in cash 536,000 -
Cash at beginning of period - -
----------- -----------
Cash at June 30 $ 536,000 $ -
=========== ===========
See Accompanying Notes.
Reference is made to the accompanying Notes and Management's Discussion and
Analysis for information related to the Chapter 11 bankruptcy filings made by
Freymiller Trucking, Inc. on April 20, 1995.
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FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
1. On April 20, 1995, the Company filed a voluntary petition in the
United States Bankruptcy Court for the Western District of Oklahoma
(the "Bankruptcy Court") seeking to reorganize under Chapter 11 of the
Bankruptcy Code. The Company continues to operate its business as a
debtor in possession under Sections 1107 and 1108 of the Bankruptcy
Code. Pursuant to provisions of the Bankruptcy Code, the commencement
or continuation of any judicial, administrative or other proceedings
against the Company relating to events occurring prior to April 20,
1995 are generally automatically stayed. Certain claims against the
Company in existence prior to the filing of the bankruptcy petition
are reflected in the June 30, 1995 balance sheet as "liabilities
subject to compromise".
The financial statements contained herein have been prepared in
accordance with generally accepted principles applicable to a going
concern and do not purport to reflect or to provide for all the
consequences of the ongoing Chapter 11 reorganization case.
Specifically, the financial statements do not present the amount which
will ultimately be paid with respect to claims and interests allowed
in the Chapter 11 reorganization case or the effect of any changes
which may be made in connection with the Company's capitalization or
operations resulting from a plan of reorganization. As a result of
reorganization proceedings under Chapter 11, the Company may take, or
be required to take, actions which may cause assets to be realized, or
liabilities to be liquidated, for amounts other than those reflected
in the financial statements. The appropriateness of continuing to
present financial statements on a going concern basis is dependent
upon, among other things, the terms of the ultimate plan of
reorganization and the Company's ability to generate sufficient cash
from operations and financing sources to meet its obligations.
The accompanying financial statements have not been audited. Certain
information and footnote disclosures, including significant accounting
policies, normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. It is suggested that the accompanying financial
statements and footnotes thereto be read in conjunction with the
financial statements and footnotes included in the Company's December
31, 1994 Form 10-K. The Company believes the financial statements for
the three and six month periods ended June 30, 1995 and 1994 include
all adjustments (which include normal recurring adjustments and
adjustments related to the
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FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
1. (Continued)
downsizing of the Company discussed below) necessary for fair
presentation. Results for the six month period may not be indicative
of the results of the entire year.
Because of the ongoing nature of the reorganization case, the
financial statements contained herein are subject to material
uncertainties, the outcome of which is not presently determinable.
The financial statements contained herein may not be indicative of the
results of future operations or financial position.
Pursuant to provisions of the Bankruptcy Code, liabilities arising
prior to the filing of the petition under Chapter 11 of the Bankruptcy
Code may not be paid without prior approval of the Bankruptcy Court.
Certain pre- petition liabilities have subsequently been paid by the
Company with the prior approval of the Bankruptcy Court. These
amounts included payments to foreign vendors and governmental
agencies; pension plans; wages, salaries, insurance benefits and
expense claims of returning employees; certain insurance claims of
non- returning employees; and adequate protection payments to certain
secured creditors. The Company is developing a plan of reorganization
in connection with the bankruptcy proceedings.
The Company began to reorganize during the second quarter of 1995 by
downsizing its operations. Accordingly, certain assets which have no
value in the ongoing operations were written off and various losses
and costs were incurred as a direct result of the downsizing. These
charges have been classified as reorganization expense under
non-operating expense on the Company's statements of operations for
the three month and six month periods ended June 30, 1995. Components
of reorganization expense included assets written off of $428,000,
tires and permits of $2,169,000, losses on asset sales of $510,000 and
professional fees and other costs of $108,000 for the three and six
months periods ended June 30, 1995.
2. Prior to the bankruptcy proceedings, the Company had an agreement with
a bank expiring January 31, 1996 ("the Agreement") providing for
borrowings up to the lesser of 90% of eligible accounts receivable or
$10,000,000. The Agreement included a working capital line of credit
with maximum borrowings of $7,000,000 and standby letters of credit
up to
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FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
2. (Continued)
$3,000,000, was secured by accounts receivable and certain other
collateral and bore interest at the bank's prime rate plus five
percent.
The Agreement, among other things, required the Company to achieve
certain operating results, maintain certain financial ratios, placed
certain restrictions on the acquisition and disposition of assets,
limited additional indebtedness and prohibited the payment of cash
dividends. The Company was in default of its covenants under the
Agreement and no additional borrowings or letters of credit are
available under the Agreement.
In connection with it's proceedings under Chapter 11 of the U.S.
Bankruptcy Code, debtor-in-possession ("DIP") financing was arranged
with the bank. The DIP financing maintains the limits of the
Agreement described above while removing many of the covenants, thus
removing the defaults. A $600,000 overline was added which is secured
by the equity position the Company has established in certain revenue
equipment. Interest is incurred at a rate equal to the bank's prime
rate plus 2 percent per annum (11.0% at June 30, 1995). Under the DIP
financing arrangement, the Company has agreed to submit its plan of
reorganization to the Bankruptcy Court by October 31, 1995, with
confirmation of the plan to be achieved no later than December 31,
1995. The bank has agreed to extend the financing commitment to the
earlier of a date one year from the date the Company emerges from
bankruptcy or December 31, 1996.
At June 30, 1995, the outstanding loan balance under the DIP financing
arrangement was approximately $4,729,000, of which $2,025,000 was
unfunded stand-by letters of credit issued under the Company's self-
insurance programs for auto liability and worker's compensation. An
additional $917,000 was available to the Company under the financing.
At June 30, 1995 and December 31, 1994, the Company also had
outstanding secured term debt which totaled $19,011,000 and
$30,291,000, respectively, and capital lease obligations which totaled
$314,000 and $370,000, respectively. As a result of the bankruptcy,
the Company suspended payment on pre-petition obligations and is in
default. Accordingly, the total term debt and capital lease
obligations have been classified as current liabilities on the
accompanying balance sheets. The
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FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
2. (Continued)
secured term debt has been reduced in bankruptcy through asset sales
and adequate protection payments which were approved by the Bankruptcy
Court. The Company also began making current payments on its capital
lease obligations within sixty (60) days following commencement of the
bankruptcy case.
The Company has determined that there is insufficient collateral to
cover the interest portion of scheduled payments on certain of its
pre-petition debt obligations. Contractual interest of approximately
$308,000 has not been recorded as of June 30, 1995, related to these
under-secured debt obligations. Interest expense for all other debt
obligations has been accrued and expensed for the three and six months
ended June 30, 1995.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
As explained in Note 1 to the financial statements as of June 30, 1995
and 1994, the Company filed a voluntary petition in the United States
Bankruptcy Court on April 20, 1995 seeking to reorganize under Chapter
11 of the Bankruptcy Code. Subsequently, the Company has downsized
the number of its tractors by 40 percent, the number of drivers by 47
percent and the number of non-driver personnel by 40 percent. The
magnitude of the downsizing is the dominant factor which affected the
Company's results of operations for the second quarter of 1995 and for
the six month period ended June 30, 1995.
The Company has written-off assets which have no value in the ongoing
operations and incurred various losses and costs as a direct result of
the downsizing. These charges have been classified as reorganization
expense under nonoperating expense on the Company's statements of
operations for the three month and six month periods ended June 30,
1995.
Operating revenue for the second quarter of 1995 decreased 25% from
the second quarter of 1994. Operating revenue for the six months
ended June 30, 1995 decreased 15% from the six months ended June 30,
1994. The decreased revenue was primarily the result of the
downsizing of the Company described above. Additionally, the overall
rate per mile decreased from $1.11 in the first six months of 1994 to
$1.09 in 1995, while equipment utilization increased slightly from 320
miles per day in the first six months of 1994 to 332 miles per day in
1995. These statistics reflect the continuing weak economic
conditions that the industry in which the Company operates has been
experiencing.
The Company's operating loss was 14.6% of revenue in the second
quarter of 1995 compared to operating income of 1.7% of revenue in the
second quarter of 1994. The operating loss for the six months ended
June 30, 1995 was 9.96% of revenue compared to operating income of
3.09% for the same period in 1994. Salaries and wages, supplies and
maintenance, taxes and licenses, and other operating expenses
increased as a percentage of revenue in 1995, while fuel expense
decreased. Each of these items is discussed in more detail below.
The Company's operating results for the second quarter of 1995 were
also impacted by a lag in the reduction of costs behind the reduction
of revenues experienced during and after the downsizing of the fleet.
While revenues declined immediately, extended commitments to vendors
and employees delayed the associated cost savings.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATION (CONTINUED)
Salaries, wages and benefits remained relatively constant at 34.7% of
revenue in the second quarter of 1995 compared to 34.9% of revenue in
the second quarter of 1994. Salaries, wages and benefits increased to
35.6% for the first six months of 1995 compared to 34.6% for the same
period of 1994. While these changes do not appear significant,
salaries, wages and benefits could be expected to decrease as a
percentage of revenue because of the increase in purchased
transportation. Revenue from purchased transportation for the second
quarter and for the first six months of 1995 represented 38.9% and
31.6% of total revenues, respectively, compared to 8.9% and 8.4% for
the same periods of 1994.
Salaries, wages and benefits did not decrease as a percentage of
revenue primarily because of three factors: (1) Company drivers were
used in approximately 50% of the leased tractors on average in 1995;
(2) the Company chose to retain its most loyal and experienced drivers
during the downsizing of its fleet, thus paying higher average rates
and benefits for drivers; and (3) non-driver salaries, wages and
benefits remained constant as a percentage of revenue between the
periods. Management expects to see improvements in each of these
areas in the future. The Company is working to reduce the number of
its drivers in tractors leased from outside operators, expects the
average pay rate of its driver force to decline through normal
turnover of drivers and has made further reductions in its non-driver
personnel.
Supplies and maintenance costs increased from 13.3% of revenues from
second quarter 1994 to 14.2% of revenues for the second quarter of
1995. On a year-to-date basis these costs increased from 12.7% in
1994 to 14.7% in 1995. The increase in supplies and maintenance costs
is primarily attributable to the aging of the Company's fleet. Since
1993, the Company sought to run tractors 500,000 miles versus a former
target of 350,000 miles in order to reduce its debt service
requirements. Additionally, although the Company attempted to
separate costs associated with its reorganization in bankruptcy to
nonoperating expense, a certain amount of maintenance costs associated
with trade-in preparation on tractors and trailers is reflected in the
supplies and maintenance cost category on the statements of operations
for 1995.
The Company retired all of the 1991 and 1992 tractors and the older
trailers from its fleet during the recent downsizing. This
significant reduction in the fleet's average age should
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATION (CONTINUED)
have an immediate positive effect on maintenance costs.
Taxes and licenses expense increased from 2.8% of revenues in the
second quarter of 1994 to 3.5% of revenues in the second quarter of
1995. On a year-to-date basis these expenses are up from 3.0% of
revenue in 1994 to 3.4% in 1995. These increases were primarily
attributable to certain taxes and licensing costs which are fixed as
of a certain date each year and do not decline with a decrease in
operating miles or fuel costs. These costs will decline in the future
with the reduction of the Company's fleet size.
Insurance and claims expense decreased from 6.3% of revenues in the
second quarter of 1994 to 4.8% of revenues in the second quarter of
1995. On a year-to-date basis, insurance and claims expense increased
from 5.5% of revenue in 1994 to 5.8% of revenue in 1995. The second
quarter decrease was primarily attributable to a favorable resolution
to a number of outstanding claims and favorable negotiations related
to the Company's insurance premiums. During these negotiations,
management was also able to reduce the Company's self-insurance
exposure from $300,000 per claim to $2,500 per claim on bodily injury
and property damage insurance, and to $5,000 per occurrence on
physical damage insurance for the Company's equipment.
Operating leases increased as a percentage of revenues in 1995
compared to 1994 while depreciation and amortization decreased. These
results are attributable to the Company's decision to lease the
majority of its trailers which were previously owned. This was
accomplished by a sale-leaseback transaction entered into at the end
of December, 1994.
Communications and utilities and other expense also increased as a
percentage of revenues in 1995 compared to 1994. These increases are
primarily attributable to the fixed nature of many costs in these
categories and to continuing commitments entered into prior to the
decision to downsize the Company. Management has now curtailed these
commitments.
The Company's fuel expense dropped from 17.0% of revenue in the second
quarter of 1994 to 12.25% in the second quarter of 1995. On a
year-to-date basis the fuel costs dropped from 17.5% in 1994 to 13.5%
in 1995. These decreases were primarily due to a higher percentage of
the fleet being represented by owner-operators who pay for their own
fuel.In
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS (CONTINUED)
the first six months of 1995, owner-operator miles were up 8,391,000
or 219% over the first six months of 1994.
Interest expense decreased to 3.3% of revenues for the second quarter
of 1995 from 4.1% of revenues in the second quarter of 1994. On a
year-to-date basis, interest expense decreased from 4.0% of revenue in
1994 to 3.7% of revenue in 1995. These decreases were primarily the
result of the Company's determination in bankruptcy that there is
insufficient collateral to cover the interest portion of scheduled
payments on certain of its pre-petition debt obligations. Contractual
interest of approximately $308,000 was not recorded as of June 30,
1995, related to these under-secured debt obligations. Had this
interest been recorded, interest expense would have increased to 4.9%
of revenues and 4.4% of revenues, respectively, for the three and six
months ended June 30, 1995, primarily as a result of increased
interest rates paid on debt due to the Company being in default.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company had outstanding installment obligations
secured by equipment totaling $16,886,000 bearing interest at 4.138%
to 11.5% and maturing at various dates through 1999. The Company also
had a mortgage loan secured by real estate with an outstanding balance
of $1,546,000 bearing interest at 11.10% and maturing in 1995. The
Company had $579,000 in miscellaneous installment obligations at
various interest rates maturing in 1995. In addition, the Company had
certain of its computer equipment under a capital lease arrangement.
At June 30, 1995, the capital lease obligation totaled $314,000. The
total term debt outstanding, including the capital lease obligation,
was $19,325,000 at June 30, 1995, all of which was classified as
current maturities due within one year. As a result of the bankruptcy
petition discussed elsewhere herein, the Company suspended payments
and is in default on all of these installment obligations. The
secured term debt has been reduced in bankruptcy through asset sales
and adequate protection payments which were approved by the Bankruptcy
Court. The Company also began making current payments on its capital
lease obligations within sixty (60) days following commencement of the
bankruptcy case.
In addition to its equipment financing, the Company had a line of
credit agreement with a bank ("the Agreement"), secured by the
Company's accounts receivable and certain other collateral, for
maximum borrowings of $10,000,000 bearing
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
interest at the lender's prime rate plus five percent and expiring on
January 31, 1996. This facility provided a $7,000,000 working capital
line of credit and standby letters of credit up to $3,000,000.
The Agreement, among other things, required the Company to
achieve certain operating results, maintain certain financial
ratios, placed certain restrictions on the acquisition and
disposition of assets, limited additional indebtedness and
prohibited the payment of cash dividends. The Company was in default
of its covenants under the Agreement and no additional borrowings or
letters of credit are available under the Agreement.
In connection with the Company's efforts to reorganize under Chapter
11 of the Bankruptcy Code, debtor-in- possession ("DIP") financing was
arranged with the bank. The DIP financing maintains the limits of the
Agreement described above while removing many of the covenants. A
$600,00 overline was added which is secured by the Company's equity
position in certain revenue equipment. Interest is incurred at a rate
equal to the bank's prime rate plus 2 percent per annum (11% at June
30, 1995). The DIP financing extends to the earlier of a date one
year from the date the Company emerges from bankruptcy or December 31,
1996.
At June 30, 1995, the outstanding loan balance under the DIP financing
arrangement to the Company was approximately $4,729,000 of which
$2,025,000 was unfunded stand-by letters of credit issued under the
Company's self-insurance programs for auto liability and worker's
compensation. An additional $917,000 was available to the Company
under the financing.
The Company has experienced operating and net losses in each of the
last four years. In the first six months of 1995, the Company
incurred an operating loss of $4,177,000 and a net loss of $8,770,000.
These losses were offset by decreases in receivables and inventories
and an increase in accounts payable resulting in positive cash flow
from operations during the first six months of 1995 of $1,582,000.
Proceeds from the disposition of property and equipment during the
first six months of 1995 totaled $14,830,000 of which $11,336,000 was
used to make principal payments on long-term debt and capital lease
obligations. An additional $258,000 was used to purchase treasury
stock during the first quarter of 1995 pursuant to a prior contractual
commitment of the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company reduced its short-term note payable by $2,761,000 and its
cash overdraft by $1,521,000 in the six- month period ended June 30,
1995.
The Company is preparing a plan of reorganization in connection with
the filing of the petition under Chapter 11 of the Bankruptcy Code.
Pursuant to provisions of the Bankruptcy Code, pre-petition payment
obligations have been suspended while post-petition payment
obligations are required to be met on an ongoing basis. To address
these obligations, the plan of reorganization includes, among other
things, a strategy for down-sizing and recapitalizing the Company.
The Company anticipates that cash flows from operations, working
within the framework of the DIP financing arrangement, will be
sufficient to meet the current, ongoing obligations of the
organization. However, a certain amount of new capital, yet to be
determined, will likely be necessary to cover administrative claims
and expenses and to allow for the purchase of licenses and permits
necessary to renew the Company's revenue equipment through the end of
1996. Management is pursuing various alternatives in this regard.
However, there can be no assurance that sufficient new capital will be
obtained. The success of the reorganization plan being developed by
the Company and the Company's ability to obtain sufficient new capital
will depend, in part, on the Company's ability to maintain a
sufficient market position and good relationships with customers,
vendors and employees while implementing the down-sizing and
recapitalizing strategy.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As discussed elsewhere herein, the Company filed on April 20, 1995 a
voluntary petition in the United States Bankruptcy Court for the
Western District of Oklahoma seeking to reorganize under Chapter 11 of
the Bankruptcy Code. The Company continues to operate its business as
a debtor in possession under Sections 1107 and 1108 of the Bankruptcy
code. Pursuant to provisions of the Bankruptcy Code, the commencement
or continuation of any judicial, administrative or other proceedings
against the Company relating to events occurring prior to April 20,
1995, are generally automatically stayed.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As discussed elsewhere herein, the Company had a line of credit
agreement with a bank ("the Agreement"), secured by the Company's
accounts receivable and certain other collateral, for a maximum
borrowings of $10,000,000 consisting of a $7,000,000 working capital
line of credit and standby letters of credit up to $3,000,000. The
Company's pre-petition outstanding loan balance under the Agreement
was approximately $7,616,000 of which $2,025,000 was unfunded stand-by
letters of credit issued under the Company self-insurance program for
auto liability and worker's compensation.
The Company was in default under certain of its covenants in
connection with the Agreement, and no additional borrowings or letters
of credit are available under the Agreement. For more information
concerning negotiations with the bank relating to the Company's
compliance with its covenants under the Agreement, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and Note 3 of Notes to
the Financial Statements of the Company.
The Company also has outstanding secured term debt, including capital
lease obligations, totaling approximately $19,325,000 at June 30,
1995, and significant pre-petition unsecured obligations. As a result
of the bankruptcy, the Company suspended payment on the pre-petition
obligations and is in default.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibit is filed as part of this Quarterly Report on
Form 10-Q:
No. Description
10.1 Stipulation for Secured Borrowing and Use of Cash
Collateral filed with the United States
Bankruptcy Court for the Western District of
Oklahoma on May 23, 1995.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
During the quarter ended June 30, 1995, the Company filed two Current
Reports on Form 8-K.
A Current Report on Form 8-K dated as of April 20, 1995 was filed to
report the Company's filing on April 20, 1995 a voluntary petition in
the United States Bankruptcy Court for the Western District of
Oklahoma seeking to reorganize under Chapter 11 of the Bankruptcy
Code.
A Current Report on Form 8-K dated as of May 12, 1995 was filed to
report the dismissal of Arthur Andersen, LLP as the Company's
independent accountants.
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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.
FREYMILLER TRUCKING, INC.
BY: DON H. FREYMILLER
---------------------
DON H. FREYMILLER
PRESIDENT
AND CHIEF EXECUTIVE OFFICER
BY: RICHARD E. KUEHN
--------------------
RICHARD E. KUEHN
EXECUTIVE VICE PRESIDENT -
CHIEF FINANCIAL AND
OPERATING OFFICER
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EXHIBIT INDEX
NO. DESCRIPTION
- --- -----------
10.1 Stipulation for Secured Borrowing and Use of Cash Collateral
filed with the United States Bankruptcy Court for the Western
District of Oklahoma on May 23, 1995.
27.1 Financial Data Schedule
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