UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Act of 1934
November 5, 2004
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Date of Report (Date of earliest event reported)
Central Freight Lines, Inc.
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(Exact name of registrant as specified in its charter)
Nevada 00050485 74-2914331
(State or other jurisdiction (Commission (IRS Employer
of incorporation or File number) Identification
organization) Number)
5601 West Waco Drive, Waco, TX, 76710
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(Address of principal executive offices)
(Zip code)
Registrant's telephone number,including area code:
(254) 772-2120
1
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On November 5, 2004, Central Freight Lines, Inc. announced its results of
operations for the quarter ended October 2, 2004. The public announcement was
made by means of a press release attached, the text of which is being furnished
to the U. S. Securities and Exchange Commission in Exhibit 99.1 hereto.
The information contained in this report and the exhibit hereto shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or incorporated by reference in any
filing under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such a filing.
The information in this report and the exhibit hereto may contain
"forward-looking statements" that are made pursuant to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995 and otherwise
may be protected. Such statements are made based on the current beliefs and
expectations of the Company's management and are subject to significant risks
and uncertainties that could cause actual results to differ materially. Please
refer to the Company's prospectus filed on December 12, 2003, and the Company's
other filings with the Securities and Exchange Commission for information
concerning risks, uncertainties, and other factors that may affect future
results.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
99.1 Press Release dated November 5, 2004.
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 hereunto duly authorized.
Central Freight Lines, Inc.
Date: November 5, 2004 By: /s/ Jeffrey A. Hale
Name: Jeffrey A. Hale
Title: Senior Vice President
and Chief Financial Officer
2
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Press Release dated November 5, 2004.
3
CENTRAL FREIGHT LINES, INC. REPORTS
THIRD QUARTER FINANCIAL RESULTS; ANNOUNCES ELECTION OF
CAM CARRUTH TO BOARD
Waco, TX (PR Newswire) - November 5, 2004 - Central Freight Lines, Inc.
(Nasdaq/NMS: CENF) announced today its financial results for the quarter and
nine months ended October 2, 2004. Central also announced today the election of
J. Campbell ("Cam") Carruth, former Chief Executive Officer of US Freightways
Corporation (now USF Corporation), to the Central Board of Directors.
For the third quarter of 2004, Central's operating revenue was $98.5 million on
63 working days, compared to operating revenue of $101.2 million on 64 working
days for the third quarter of 2003. Revenue per working day decreased 1.1% and
total tons hauled per working day decreased 1.5% for the third quarter of 2004
compared to the same period in 2003. LTL revenue per hundredweight increased
2.2% from $11.57 in the 2003 quarter to $11.83 in the 2004 quarter, due to an
increase in fuel surcharge revenue. Excluding fuel surcharge revenue, LTL
revenue per hundredweight was down 1.6% in the 2004 quarter compared to the 2003
quarter.
Consistent with the Company's previous guidance, a net loss of $7.9 million, or
$0.43 per diluted share, was realized in the third quarter of 2004. Pro forma
net income for the third quarter of 2003 was $5.1 million, or $0.43 per diluted
share, using a pro forma tax rate of 39%. Prior to November 1, 2003, the Company
was an S corporation and federal income tax attributes flowed directly to
stockholders.
For the nine months ended October, 2004, operating revenue amounted to $301.1
million, a 0.3% increase over the $300.2 million reported for the same period in
2003, on one less working day. A net loss of $11.6 million, or $0.65 per diluted
share, was reported for the nine months ended October 2, 2004, compared to pro
forma net income of $6.2 million, or $0.52 per diluted share, for the same
period in 2003.
Central's President and Chief Executive Officer, Bob Fasso, commented on the
Company's results: "The results we announced today are consistent with the
guidance we provided on September 23. As previously discussed, the main areas of
concern were a revenue shortfall relating to lower than acceptable tonnage and
yield and higher than acceptable costs of labor and insurance and claims. In
addition, operating and general supplies and expenses increased significantly
with the majority of the increase being attributable to higher fuel prices and
public company expenses. To address the most pressing issues, we have initiated
a turnaround program based on service, safety, and productivity throughout our
Company.
"During the third quarter we began implementing our service, safety and
productivity measures with the goal of improving our Company for our customers,
for our employees, and for our stockholders. One of our first steps was to
initiate reductions in our cost structure to better align controllable costs
with our expected revenue base. In that regard, we consolidated the operations
of ten terminals into surrounding facilities which had excess capacity and
converted an additional seven terminals into driver-only locations. These
terminal realignments occurred primarily in our recently expanded Northwest and
Midwest regions. Our 2003 and 2004 expansions into new geographical markets
primarily targeted the freight corridors along the I-5 and I-35 interstate
highways, which we continue to believe are important market segments to feed
freight to and from our strong base in the Southwest from Texas to California.
In the Southwest, we also opened a new $7 million, 121-door terminal in Phoenix
to replace an aging, cramped, and inefficient facility. The new Phoenix facility
is already one of our most efficient terminals, and we believe it will provide
benefits in moving freight throughout our terminal network. We are committed to
operating the right terminal network to allow us to provide superior regional
LTL service to customers and provide the proper scale for our revenue base.
4
"We have recently reduced our personnel by approximately 310 full time employees
and 220 part time employees attributable to the streamlining of our terminal
network and system wide productivity gains. We also re-engineered most of the
linehaul movements throughout our network to consolidate movements where
possible and reduce our use of third-party purchased transportation. Compared
with the second quarter of 2004, we reduced our combined cost of salaries,
wages, and benefits and purchased transportation by approximately $5.4 million,
on one less working day. This decrease occurred despite an increase in workers
compensation expense of approximately $1.8 million. The corrective actions were
implemented throughout the quarter and are expected to be more substantial on a
full-quarter basis. We continue to focus on our personnel costs as well as our
efficiency, as measured by LTL shipments handled per person per hour worked, or
bills per hour. Our most immediate goal in terms of personnel efficiency is to
return to the average level of bills per hour that we generated during 2003. For
the third quarter of 2004, our productivity was 4.1% below the 2003 target
level. Although it is too early to determine any long-term trend, we are pleased
that productivity as measured by bills per hour improved 2.3% in October over
the third quarter of 2004. However, this still remains 1.9% below our immediate
target.
"The next major area we are addressing relates to insurance and claims. In this
area Central had performed reasonably well in 2003, with insurance and claims
amounting to approximately 4.0% of revenue. In 2004 to date, the level of
follow-through in our claims-related procedures has not been at the level we
desire, which has resulted in far too much expense as well as a customer service
and safety environment that is below our standards. Insurance and claims
increased to 8.8% of revenue in the third quarter of 2004. During the third
quarter, we hired Jeff Jordan from Yellow/Roadway to fill the newly created
position of Director of Claims Prevention. Jeff is leading a Company-wide effort
to prevent and manage claims more effectively. We believe this will take several
months of lead time to return to an acceptable level as the training is
implemented and then translated into results, particularly because reported
claims lag the improvements in process.
"In addition to maintaining gains in productivity and controlling costs, we are
working diligently to increase our revenue yield and the tonnage moving through
our freight network. The Company possesses a newly upgraded fleet, ample freight
capacity and a Company-wide commitment on all levels to offer exemplary customer
service. Communicating to our customers our commitment to satisfying their needs
will be an important part of our efforts. We believe there are two main issues
to address. First, our revenue yield, measured by revenue per hundredweight, has
not kept pace with changes in our freight mix and average length of haul, as LTL
revenue per hundredweight, excluding fuel surcharge revenue, was down in the
2004 quarter compared to the 2003 quarter, despite an increase in the average
length of haul of 8.1%. Second, our tonnage has decreased and is still trending
down, with the seasonally slower winter months ahead. We are taking strong steps
in the sales and pricing areas. During the third quarter, Cliff Cordes, who had
led our record yield improvements efforts during 2002 and part of 2003 returned
to the position of Vice President of Pricing after serving as Director of Sales
in our Dallas division. In addition, we re-assigned sales and marketing under
the direct supervision of Walt Ainsworth and myself. Walt and I are personally
committed to re-invigorating our sales effort."
5
Mr. Fasso concluded his remarks by announcing the election on November 5, 2004
of J. Campbell ("Cam") Carruth to Central's Board of Directors, filling the
vacancy created by the resignation of Duane Acklie on July 12, 2004. Mr. Carruth
formerly served as Chief Executive Officer of US Freightways. Mr. Fasso stated
"Central's management and Board members are excited to have Cam join us. With
over forty years of experience in the trucking industry, Cam will be a valuable
asset to Central."
At October 2, 2004, Central's consolidated balance sheet reflected $4.2 million
in unrestricted cash, $18.9 million in restricted cash that serves as collateral
for letters of credit, $42.8 million in long-term debt and capital lease
obligations, including current portion, and $26.3 million in short term debt, of
which $18.9 million represents the cash collateral for letters of credit.
Stockholders' equity was $98.7 million at October 2, 2004. The Company had net
capital expenditures, primarily for revenue equipment, of $8.8 million during
the third quarter. During the nine months ended October 2, 2004 net capital
expenditures totaled $22.1 million, primarily for revenue equipment and the
purchase of the Phoenix terminal in the second quarter for $7.1, plus an
additional $9.0 million dollars relating to the purchase of certain assets of
Eastern Oregon Fast Freight (EOFF) in March 2004. The Company expects net
capital expenditures of approximately $13.0 million in the fourth quarter of
2004, excluding the additional $1.0 million that may become due for the EOFF
purchase. Net capital expenditures for 2005 are expected to be in the range of
$15 million to $20 million. The Company is in compliance with the covenants
under its revolving credit facility and accounts receivable securitization
facility, in each case as recently amended. The Company recently completed an
approximately $10.0 million sale-leaseback transaction of revenue equipment,
which will be financed under capitalized leases. In addition, the Company is
evaluating proposals to replace its accounts receivable securitization facility,
which matures on April 27, 2005, and its revolving credit facility with a
facility that will afford greater liquidity.
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.
6
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 the Private Securities Litigation Reform Act of 1995.
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. 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 recent 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; 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
jhale@centralfreight.com
7
CENTRAL FREIGHT LINES, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, dollars in thousands, except per share data)
Quarters ended Nine months ended
October 2, October 4, October 2, October 4,
2004 2003 2004 2003
--------- --------- --------- ----------
Working Days 63 64 193 194
--- --- --- ---
Operating revenues $ 98,539 $101,209 $301,090 $300,161
------- ------- ------- -------
Operating expenses:
Salaries, wages and benefits * 57,818 49,142 173,558 157,612
Purchased transportation 10,621 11,029 33,313 28,533
Purchased transportation - related parties 3,590 3,756 11,832 15,965
Operating and general supplies and expenses 22,455 16,691 62,080 50,857
Operating and general supplies and expenses-related parties 91 224 225 244
Insurance and claims 8,689 3,875 19,090 12,261
Building and equipment rentals 1,176 979 3,149 2,612
Building and equipment rentals - related parties 450 358 1,346 1,130
Deprecation and amortization 4,408 4,303 12,278 12,861
------- ------- ------- -------
Total operating expenses 109,298 90,357 316,871 282,075
------- ------- ------- -------
(Loss) income from operations (10,759) 10,852 (15,781) 18,086
Other expense:
Interest expense (399) (938) (972) (2,937)
Interest expense - related parties (1,533) (1,559) (4,675) (4,654)
------- ------- ------- -------
(Loss) income before income taxes (12,691) 8,355 (21,428) 10,495
Income tax:
Income tax benefit (expense) 4,793 (318) 9,858 (449)
------- ------- ------- -------
Net (loss) income $ (7,898) $ 8,037 $(11,570) $ 10,046
------- ------- ------- -------
Pro forma C Corporation data (unaudited):
Historical income before income taxes $ - $ 8,355 $ - $ 10,495
Pro forma income tax expense - (3,257) - (4,288)
------- ------- ------- -------
Pro forma net income $ - $ 5,098 $ - $ 6,207
======= ======= ======= =======
(Loss) income per share:
Basic: (0.43) 0.47 ** (0.65) 0.57**
Diluted: (0.43) 0.43 ** (0.65) 0.52**
Weighted average outstanding shares (in thousands):
Basic 18,158 10,873 17,903 10,870
Diluted 18,158 10,875 17,903 11,909
<FN>
* YTD 2003 includes a $7,799 gain resulting from amendments to a benefit plan.
** Calculation based on pro forma net (loss) income.
</FN>
8
CENTRAL FREIGHT LINES, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 2, 2004 and December 31, 2003
(Unaudited, dollars in thousands, except per share data)
Assets 2004 2003
------------------ ------------------
Cash $ 4,161 $ 41,493
Restricted cash 18,852 -
Accounts receivable 56,675 51,864
Other current assets 9,326 8,298
Deferred income taxes 13,549 4,588
------------------ ------------------
Total current assets 102,563 106,243
Property and equipment, net 129,434 114,693
Goodwill 4,324 4,324
Other assets 6,826 2,113
------------------ ------------------
Total assets $ 243,147 $ 227,373
================== ==================
Liabilities and stockholders' equity
Current maturities of long term-debt $ 8,077 $ 6,375
Notes payable 26,323 -
Trade accounts payable 19,242 18,136
Payables for related party transportation services 987 1,020
Accrued expenses 32,114 27,207
------------------ ------------------
Total current liabilities 86,743 52,738
Long-term debt, excluding current maturities 11,876 19,988
Related party financing 22,852 23,154
Other liabilities 22,968 23,055
------------------ ------------------
Total liabilities 144,439 118,935
------------------ ------------------
Total stockholders' equity 98,708 108,438
------------------ ------------------
Total liabilities and stockholders' equity $ 243,147 $ 227,373
================== ==================
9
CENTRAL FREIGHT LINES, INC AND SUBSIDIARIES
OPERATING STATISTICS
(Amounts in thousands except where indicated by *)
Quarters ended Nine months ended
-------------- -----------------
October 2, October 4, October 2, October 4,
--------- --------- --------- ----------
2004 2003 % Change 2004 2003 % Change
--------- --------- -------- --------- ---------- --------
Operating Ratio 110.9% 89.3% 105.2% 94.0%
Working days 63 64 -1.6% 193 194 -0.5%
LTL bills 889.39 964.15 -7.8% 2,773.57 2,930.63 -5.4%
Total bills 899.19 974.29 -7.7% 2,802.95 2,960.26 -5.3%
LTL tons 390.78 416.56 -6.2% 1,231.20 1,265.16 -2.7%
Total tons 481.00 496.20 -3.1% 1,499.42 1,528.31 -1.9%
LTL revenue per hundredweight* $ 11.83 $ 11.57 2.2% $ 11.52 $ 11.25 2.4%
LTL weight per bill (in pounds)* 879 864 1.7% 888 863 2.9%
Average length of haul (in miles)* 481 445 8.1% 475 432 10.0%
Fuel surcharge as a % of total revenue* 5.9% 2.3% 4.5% 2.6%
10