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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 17, 1995
Commission File No. 1-8441
WORLDWAY CORPORATION
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(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1349996
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 YORKMONT ROAD, SUITE 400
CHARLOTTE, NORTH CAROLINA 28217
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(Address of principal executive office)
(704) 329-0123
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(Registrant's telephone number, including area code)
CAROLINA FREIGHT CORPORATION
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(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 of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
COMMON STOCK, $.50 PAR VALUE 6,561,672
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Class Outstanding at June 17, 1995
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WORLDWAY CORPORATION
INDEX
Page No.
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Part I. Financial Information:
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Item 1: Financial Statements
Consolidated Condensed Statements of Earnings--
Twelve and Twenty-four Weeks Ended June 17, 1995 and June 18, 1994 2
Consolidated Balance Sheets--
June 17, 1995 and June 18, 1994 3-4
Consolidated Statements of Cash Flows--
Twenty-four Weeks June 17, 1995 and June 18, 1994 5
Notes to Consolidated Condensed Financial Statements 6
Item 2: Management's Discussion and Analysis 7-9
Part II. Other Information 10
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PART 1: ITEM 1. FINANCIAL INFORMATION
WORLDWAY CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
Twelve and Twenty-four Weeks Ended June 17, 1995 and June 18, 1994
(Unaudited)
(Dollars in Thousands, except share data)
Twelve Weeks Ended Twenty-four Weeks Ended
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June 17, June 18, June 17, June 18,
1995 1994 1995 1994
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Operating revenue $182,823 $263,203 $374,160 $455,833
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Operating expenses:
Employee compensation 119,370 148,916 241,293 271,607
Purchased transportation 27,529 39,428 54,220 62,068
Fuel and fuel taxes 9,530 11,728 19,686 22,399
Tires, repair parts and other operating supplies 10,369 10,945 20,770 20,576
Depreciation and amortization 7,760 8,080 15,688 16,189
Insurance premiums and claims 5,424 7,351 11,199 12,957
Communications and utilities 2,747 2,906 5,603 5,647
Operating taxes and licenses 2,810 2,877 5,674 5,638
Equipment and building rents 1,661 1,303 2,991 2,535
Gain on disposition of operating assets (1,149) (97) (5,485) (148)
General supplies and expenses 11,781 10,792 22,227 19,313
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Total operating expenses 197,832 244,229 393,866 438,781
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Earnings from operations (15,009) 18,974 (19,706) 17,052
Interest and other expense, net 2,891 2,933 5,550 5,336
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Earnings (Loss) before income taxes (17,900) 16,041 (25,256) 11,716
Income tax (benefit) (6,537) 6,401 (9,047) 4,994
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Net earnings (loss) before cumulative effect of change in
accounting principle (11,363) 9,640 (16,209) 6,722
Cumulative effect of change in accounting principle - - - (1,222)
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Net earnings (loss) ($11,363) $9,640 ($16,209) $5,500
==================== ====================
Earnings (Loss) per share before cumulative
effect of change in accounting principle ($1.73) $1.46 ($2.47) $1.02
Cumulative effect of change in
accounting principle - - - ($0.19)
Earnings (Loss) per share ($1.73) $1.46 ($2.47) $0.83
Average common stock and common stock
equivalent shares outstanding 6,564,710 6,561,672 6,569,466 6,561,672
Cash dividends per common share $0.00 $0.00 $0.00 $0.00
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WORLDWAY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited) (Audited)
June 17, December 31,
1995 1994
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Assets
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Current assets:
Cash $ 1,837 $4,710
Temporary investments 2,150 5,011
Investments restricted under letter of credit arrangements
(at cost, which approximates market) 1,249 1,383
Customer and interline receivables, net 19,998 16,924
Customer receivables held by trust, net 24,878 38,782
Other receivables, net 17,725 13,260
Reinsurance balances receivable 10,729 12,149
Prepayments -
Tires on equipment in use 12,635 12,869
Other 12,978 6,871
Inventories of operating supplies 2,040 2,882
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Total current assets 106,219 114,841
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Plant and equipment, at cost:
Revenue and service equipment 251,026 260,378
Land and structures 165,036 180,706
Other equipment 66,408 63,947
Leasehold improvements 2,319 2,048
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484,789 507,079
Less - accumulated depreciation and amortization (266,774) (275,145)
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Net plant and equipment 218,015 231,934
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Investments restricted under letter of credit arrangements
(at cost, which approximates market) 7,675 8,492
Other assets 16,167 15,047
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$348,076 $370,314
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WORLDWAY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited) (Audited)
June 17, December 31,
1995 1994
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Liabilities and Stockholders' Equity
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Current liabilities:
Accounts payable $ 35,190 $ 34,525
Accrued wages, salaries and vacation pay 37,289 36,114
Claims and insurance accruals 24,735 31,860
Income taxes
Current (7,978) 1,439
Deferred 0 -
Other payables and accrued expenses 13,177 13,779
Current maturities of long-term debt 3,448 3,206
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Total current liabilities 105,861 120,923
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Long-term debt:
6 1/4% Convertible Subordinated Debentures, due 2011 49,994 49,994
Other long-term debt 19,669 18,283
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Total long-term debt 69,663 68,277
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Reserves and Deferred Credits:
Income taxes 17,656 17,779
Other deferred liabilities 8,557 7,813
Insurance claims 34,246 27,176
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Total reserves and deferred credits 60,459 52,768
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Stockholders' equity:
Preferred stock, $100 par value, 4% cumulative, authorized
25,000 shares, outstanding 22,112 shares 2,211 2,211
Common stock, $.50 par value, authorized 20,000,000
shares, outstanding 6,561,672 in 1995 and 1994 3,281 3,281
Paid-in capital 44,393 44,393
Retained earnings 62,208 78,461
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Total stockholders' equity 112,093 128,346
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$348,076 $370,314
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WORLDWAY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twenty-four Weeks Ended June 17, 1995 and June 18, 1994
(Unaudited)
(Dollars in Thousands)
Twenty-four Weeks Ended
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June 17, June 18,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) ($16,209) $ 5,500
Noncash items included in income:
Depreciation and amortization 15,688 16,189
Deferred income taxes (123) (5,919)
(Increase) Decrease in customer and interline receivables 10,830 (29,996)
Increase (Decrease) in accounts payable 665 18,552
Increase (Decrease) in claims payable and insurance accruals (54) 7,489
Net increase (decrease) in other working capital items (15,537) 14,965
Other, net (6,141) (4,068)
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Net cash provided by (used for) operating activities (10,881) 22,712
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of plant and equipment:
Revenue and service equipment (10,069) (5,259)
Land and structures (2,079) (1,072)
Other equipment and leasehold improvements (3,429) (1,343)
Proceeds from disposal of plant and equipment 20,389 1,469
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Net cash used for investing activities 4,812 (6,205)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 1,666 15
Repayment of long-term debt (2,537) (4,112)
Net proceeds from (repayments of) revolving credit agreement 2,500 -
Common stock issued - -
Dividends on common and preferred stock (44) (44)
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Net cash provided by financing activities 1,585 (4,141)
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NET INCREASE IN CASH AND TEMPORARY INVESTMENTS (4,484) 12,366
CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF YEAR 9,721 6,502
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CASH AND TEMPORARY INVESTMENTS AT END OF QUARTER $ 5,237 $ 18,868
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WORLDWAY CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements contain all
adjustments and eliminations which, in the opinion of management, are necessary
to present fairly the results of operations for the twelve and twenty-four
weeks ended June 17, 1995 and June 18, 1994, the financial position as of June
17, 1995 and December 31, 1994, and the cash flows for the twenty-four weeks
ended June 17, 1995 and June 18, 1994.
During the first quarter of 1994, the Securities and Exchange Commission issued
a new directive to publicly held corporations regarding the discount rates used
on reserves reported in the liabilities section of their balance sheets. This
directive requires that the discount rates used to reduce these obligations to
their present value be stated at a "risk free" rate. The effect of this change
is to reduce the discount rates used in computing the reserves on the
consolidated balance sheet of WorldWay Corporation from 7% to risk free rates.
The effect of this change is shown as a change in accounting principle of
$1,222,000 on the consolidated statement of earnings.
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PART I: ITEM 2. FINANCIAL INFORMATION
WORLDWAY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Revenue for the second quarter of 1995 was $182,823,000 as compared to
$263,203,000 for the second quarter of 1994. The Company incurred a net loss
in the second quarter of $11,363,000 or $1.73 per share versus net income of
$9,640,000 or $1.32 for the same time period in 1994. Results for the second
quarter of 1995 were adversely impacted by non-recurring costs associated with
the conversion of Carolina Freight Carriers Corporation to a Metropolitan and
Regional Distribution Center freight flow system along with a slowing economy.
Results for the second quarter of 1994 were positively impacted by a
significant increase in freight volumes in our less-than-truckload subsidiaries
due to the 24 day Teamsters strike. Carolina Freight Carriers Corporation and
Red Arrow Freight Lines, Inc., the Company's two unionized subsidiaries,
avoided the work stoppage by signing an interim agreement with the
International Brotherhood of Teamsters.
Year-to-date, the Company had revenue of $374,160,000 as compared to first half
1994 revenue of $455,833,000. Through the second quarter the Company recorded
a cumulative net loss of $16,209,000 or $2.47 per share; during the same time
period in 1994 the Company reported net income of $5,500,000 or $.83 per share.
The Company's fiscal year consists of three 12-week quarters and a final
16-week quarter.
During the second quarter of 1995, all of the Company's subsidiaries
experienced increased pricing competition, increased cost pressures, and
slowing freight volumes as a result of a decline in the national economy. The
largest impact of this economic slowdown occurred in the Company's
less-than-truckload (LTL) subsidiaries, which on a combined basis experienced a
4.9% decline in tonnage and a 4.7% decline in shipments versus the first
quarter of 1995.
Carolina Freight Carriers Corporation continued to incur significant
non-recurring costs associated with its conversion to a Metropolitan and
Regional Distribution Center freight flow system in the second quarter. The
Company estimates the impact of the primary cost categories as follows:
1. Lost productivity $ 1,650,000
2. Cost of hiring and training for new employees $ 650,000
3. Employee relocation cost $ 500,000
4. Other $ 900,000
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$ 3,700,000
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A majority of the non-recurring costs associated with the MRDC system were
incurred in the first half of 1995. On July 17, 1995, the final major
operational changes associated with the MRDC conversion were completed.
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As has been previously reported, the Company entered into an Agreement and
Plan of Merger with Arkansas Best Corporation and one of its subsidiaries, ABC
Acquisition Corporation, which provides for the acquisition of the Company's
common stock at a price of $11.00 per share in cash. Under the terms of the
Agreement, ABC Acquisition has commenced a tender offer for all outstanding
shares of the Company's common stock at $11.00 per share. Subject to
successful completion of the tender offer, and satisfaction of certain
conditions in the Agreement, ABC Acquisition will be merged into the Company
and all shares not purchased in the tender offer (other than shares held by
Arkansas Best Corporation, or the Company, or any of their respective
subsidiaries, or dissenting shareholders) will be converted into the right to
receive $11.00 per share in cash in the merger. Information regarding the
tender offer and merger has been distributed to all shareholders.
The shareholders of Carolina Freight Corporation voted on May 3, 1995, to
change the name of the Company to WorldWay Corporation. Filings to effect the
corporate name change were subsequently filed with the North Carolina Secretary
of State.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital at June 17, 1995, was $.4 million and at December 31, 1994,
was a negative $6.1 million. Cash and cash equivalents were $5.2 million at
June 17, 1995, and $9.7 million at December 31, 1994.
On March 17, 1994, Carolina Freight Carriers Corporation (CFCC) and Red Arrow
Freight Lines (RAFL) entered into a new $45 million revolving credit and letter
of credit agreement with a group of banks. Under this agreement, credit
availability fluctuates with the level of collateral provided. As of June 23,
1995, this credit facility had $.4 million (approximately $2.3 million at June
17, 1995, $10 million at March 25, 1995 and $15 million at December 31, 1994)
of revolving line of credit availability and approximately $31.6 million ($35
million at December 31, 1994) of letters of credit availability. This facility
was fully utilized as of June 23, 1995 and is currently scheduled to expire in
August, 1995. Substantially all of their revenue and service equipment, $38.2
million ($45.8 million at December 31, 1994) of their land and structures and
the Corporation's customer receivables held by trust are pledged as collateral.
This agreement and other existing agreements contain restrictions regarding the
maintenance of specified debt-to-equity, tangible net worth, and cash flow
ratios. The interest rate for borrowings under this agreement will be, at the
Corporation's option, the lead bank's base rate or the reference bank's
Eurodollar rate that fluctuates (stated variable rate plus margin of 0 to 275
basis points) in part based on changes in certain financial ratios of the
Corporation. This agreement states that the occurrence of a material adverse
change in the Corporation's financial condition, as determined by the
participating banks, is an event of default. If an event of default occurs,
then the lenders may declare the outstanding borrowings under the agreement,
certain other debt, and all interest thereon to be due and payable. There were
$2.3 million outstanding borrowings under the terms of the revolving credit
agreement at June 17, 1995 and $.4 million as of June 23, 1995 (no outstanding
borrowings at March 25, 1995, and at December 31, 1994).
On June 23, 1995, the Company's subsidiaries entered into a second revolving
credit agreement with a syndicate of banks headed by Citicorp, N.A. The Loan
and Security Agreement is with Cardinal Freight Carriers, Inc., Innovative
Logistics Incorporated, CaroTrans International, and The Complete Logisitics
Company. This agreement is secured by the accounts receivable of the
aforementioned subsidiaries and is scheduled to expire in August, 1995. The
agreement provides for $5 million of revolving credit availability. As of June
23, 1995, $2.9 million of borrowings were outstanding under this agreement. In
addition, the Company has received a commitment for a new Revolving Credit and
Letter of Credit facility with another lender that would replace the existing
Revolving Credit Agreements with the Company's bank group. This new facility
will be secured by
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substantially all of the assets of the Company. This new commitment to provide
financing extends through August 31, 1995, and is subject to meeting certain
terms and conditions.
Capital expenditures (before proceeds from disposal of operating property of
$20.4 million in 1995 and $1.5 million in 1994) through the second quarter were
$15.6 million compared with $7.7 million in the prior year period. Planned
1995 capital expenditures are approximately $29.0 million. It is anticipated
that approximately $15.8 million will be expended on revenue and service
equipment, $5.5 million on terminal construction and renovation, and $7.7
million for office, computer, and terminal equipment.
Capital expenditures (before proceeds from disposal of operating property of
$7.7 million) during 1994 were $28.3 million. Of this amount, $17.4 million
was expended for revenue and service equipment, $4.0 million for acquisition,
construction, and renovation of land and buildings and $6.9 million for office,
shop, and terminal equipment. Capital expenditures were financed through
internally generated funds.
Management anticipates that 1995 capital expenditures and other working capital
requirements will be financed through internally generated funds and borrowings
under the revolving credit agreement. Management does not anticipate that the
maximum borrowing level under the revolving credit agreement will be exceeded
in 1995.
The long-term debt-to-equity ratio of the Corporation at June 17, 1995, was
62.1% compared with 53.2% at December 31, 1994. At the end of the second
quarter, the Company's current ratio improved to 1.0 versus .93 for the second
quarter of 1994. The Company's level of long-term debt declined slightly from
the second quarter of 1994, to a total of $69.7 million.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
There are not now pending any material legal proceedings, other than ordinary
routine litigation incident to its business, to which the Company or its
subsidiaries are a party or to which any of their property is subject. During
the second quarter of 1995, no material litigation or governmental proceeding
was instituted or pending against the Company or its subsidiaries arising from
any alleged violation of any emission control standards or other environmental
regulations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 3(a)(ii) Articles of Amendment of Carolina Freight Corporation
dated May 3, 1995.
10(j)(vii) 1995 Nonqualified Stock Option Plan of WorldWay Corporation
and its Subsidiaries
27 Financial Data Schedule (for SEC purposes only.)
(b) Registrant did not file, nor was it required to file, with the Commission
in respect of any period in the quarter ended June 17, 1995, a report on Form
8-K.
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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.
WORLDWAY CORPORATION
(Registrant)
DATE: 8/1/95 BY: /s/ Lary R. Scott
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Lary R. Scott
Chief Executive Officer
DATE: 8/1/95 BY: /s/ Shawn W. Poole
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Shawn W. Poole
Chief Financial Officer
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