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 Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 28, 2005
CENTRAL FREIGHT LINES, INC.
(Exact name of registrant as specified in its charter)
Nevada 000-50485 74-2914331
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5601 West Waco Drive, Waco, TX 76710
(Address of principal executive offices) (Zip Code)
(254) 772-2120
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On July 28, 2005, Central Freight Lines, Inc. (the "Company") issued a press
release announcing the financial results of the Company for the three and six
months ended July 2, 2005. A copy of the press release is attached to this
report as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure.
See Item 2.02 above, and the press release attached to this report as Exhibit
99.1.
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. Actual results or events may differ from those anticipated by
forward-looking statements. Please refer to the Company's Annual Report on Form
10-K and 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:
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
99.1 Press release dated July 28, 2005.
SIGNATURE
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: July 28, 2005 By: /s/ Jeff Hale
Jeff Hale
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
99.1 Press release dated July 28, 2005.
CENTRAL FREIGHT LINES, INC. ANNOUNCES
CONTINUED SEQUENTIAL IMPROVEMENT; REPORTS SECOND QUARTER FINANCIAL RESULTS
Waco, TX (PR Newswire) - July 28, 2005 - Central Freight Lines, Inc.
(Nasdaq/NMS: CENF) announced today its financial and operating results for the
quarter and six months ended July 2, 2005.
Sequential Improvement Continues
Central's President and Chief Executive Officer, Bob Fasso stated: "In the
second quarter, we achieved meaningful sequential improvement in our operating
ratio (operating expenses as a percentage of operating revenue) and
significantly improved our liquidity. On May 12, we announced that our goal for
the second quarter of 2005 was to lower our operating ratio by 200 to 350 basis
points compared to the first quarter. We successfully achieved that goal by
improving our operating ratio by 330 basis points in the second quarter. Also,
the operating ratio for the second quarter of 2005 improved 130 basis points
over the same quarter last year. After taking into account the second quarter
results, the total improvement in our operating ratio since the third quarter of
2004 stands at 740 basis points, which we believe is a substantial
accomplishment for the Company.
"We are encouraged by a 13.2% increase in revenue per day in the second quarter
of 2005 over the first quarter. LTL tons per day increased 10.9% over the same
time period. LTL revenue per hundredweight, without fuel surcharge, also
improved slightly from $10.56 in the first quarter of 2005 to $10.61 in the
second quarter of 2005, despite a 2.1% increase in weight per LTL shipment.
"Further, we announced on July 14, 2005 that we have significantly improved our
liquidity position by closing real estate transactions that generated
approximately $15.2 million in net proceeds. The proceeds from the real estate
transactions were used to repay amounts drawn on the Company's revolving line of
credit led by Bank of America. Subject to certain requirements under the credit
agreement, the Company estimates that it currently has approximately $35.0
million of borrowing availability under its credit facility. In addition,
Central currently has approximately $4.5 million of idle assets held for sale
that are planned to be disposed of in 2005.
"In the second quarter of 2005 and for the first time in the last five quarters,
the Company generated positive EBITDA (earnings before interest, income taxes,
depreciation and amortization) and we expect EBITDA to be positive in the third
and fourth quarters of 2005. Our goal for the 2005 third quarter is to lower our
operating ratio from the third quarter of 2004 by 750 to 950 basis points."
Second Quarter and Year to Date Financial Results
For the second quarter of 2005, Central's operating revenue was $99.5 million on
64 working days, compared to operating revenue of $105.5 million on the same
number of working days for the second quarter of 2004. Revenue decreased 5.7%
and total tons hauled decreased 10.8% for the second quarter of 2005 compared to
the same period in 2004. LTL revenue per hundredweight increased 3.9% from
$11.31 in the 2004 quarter to $11.75 in the 2005 quarter, due to an increase in
fuel surcharge revenue. Excluding fuel surcharge revenue, LTL revenue per
hundredweight was down 1.5% in the 2005 second quarter compared to the 2004
quarter, partially due to a 4.2% increase in average weight per LTL shipment.
Page 1
A pre-tax loss of $6.1 million or $0.34 cents per diluted share was realized in
the 2005 second quarter compared to a pre-tax loss of $6.9 million, or $0.39 per
diluted share in the 2004 second quarter. A net loss of $6.1 million, or $0.34
per diluted share, was realized in the second quarter of 2005. The $6.1 million
pre-tax loss in the second quarter of 2005 generated a tax benefit of
approximately $2.3 million, equivalent to $0.13 per diluted share, which was
offset by the increase in the valuation allowance for deferred tax assets. This
resulted in no tax benefit being recorded in the second quarter of 2005. The net
loss in the second quarter of 2004 was $2.5 million, or $0.14 per diluted share.
For the six months ended July 2, 2005, operating revenue amounted to $188.8
million a 6.8% decrease compared with operating revenue of $202.6 million for
the first half of 2004. A pre-tax loss of $14.4 million or $0.79 cents per
diluted share was realized in the 2005 first half compared to a pre-tax loss of
$8.7 million, or $0.49 per diluted share in the 2004 first half. A net loss of
$14.4 million, or $0.79 per diluted share, was reported for the six months ended
July 2, 2005. An income tax benefit of approximately $5.5 million, equivalent to
$0.30 benefit per diluted share was recorded in 2005, but was offset by an
increase in the valuation for deferred tax assets. This resulted in no tax
benefit being recorded in the first half of 2005. The net loss in the first half
of 2004 was $3.7 million, or $0.21 per diluted share.
Balance Sheet and Liquidity
At July 2, 2005, the Company had $73.3 million in stockholders' equity and
$68.4 million of total debt and capital leases, including current maturities.
The debt and capital leases include $15.9 million of borrowing under the Bank of
America led credit facility that matures in the first quarter of 2009.
Notwithstanding the maturity date, borrowings under the facility are categorized
as short-term debt to be consistent with the evolving interpretations of
Emerging Issues Task Force 95-22 Balance Sheet Classifications, Borrowings
Outstanding Under Revolving Credit Agreements that include both a Subjective
Acceleration Clause and a Lock-Box Arrangement ("EITF 95-22").
At July 2, 2005, the Company had approximately $17.5 million of borrowing
availability under the Bank of America facility, reduced by a $5.0 million
minimum availability restriction. Based on an amendment in May 2005 to the
Company's credit facility, the Company has no financial covenants through August
15, 2005. In lieu of financial covenants, the $5.0 million availability
restriction remains in place. After August 15, 2005, the $5.0 million
restriction is eliminated and no financial covenants exist as long as excess
availability on the line remains above $15.0 million. If excess availability
drops below $15.0 million, the Company is required to maintain minimum EBITDA
(earnings before interest, income taxes, depreciation and amortization) levels.
Please see the Company's Quarterly Report on Form 10-Q for a more detailed
description of the amended credit facility and EITF 95-22.
In May 2005, the Company contracted to sell approximately 14 excess acres in
Phoenix for $1.2 million. This transaction closed in June and the Company
recognized a gain on the sale. In addition, the Company closed on agreements in
July 2005 covering an estimated $14.0 million in sale-leaseback and mortgage
financing transactions on four terminal properties. The Company closed on an
agreement concerning a sale-leaseback on one of its terminals. The transaction
generated approximately $6.2 million in net proceeds and the Company signed a
ten-year lease with a ten-year option. The Company also closed on mortgage
financing on three other terminal properties that generated approximately $7.8
million in net proceeds. All of the proceeds from these transactions were used
to repay existing debt under the Company's credit facility with Bank of America.
Page 2
In addition to the liquidity from the above financing, at July 2, 2005, Central
had approximately $4.5 million in assets held for sale that are planned to be
disposed of in 2005. In the quarter and six months ended July 2, 2005, the
Company had net capital proceeds of $2.1 million and $1.5 million, respectively,
mainly as a result of proceeds realized from the sale of excess land in Phoenix.
Gross capital expenditures for the remainder of 2005 are expected to be $1.5
million to $7.5 million. Included in this range is roughly $6.0 million for the
possible replacement of revenue equipment, which if made will be financed
independently from the Bank of America led credit facility.
Central Freight Lines, Inc. is a non-union less-than-truckload carrier
specializing in regional overnight and second day markets. One of the 10 largest
regional LTL carriers in the nation, Central provides regional, interregional,
and expedited services, as well as value-added supply chain management,
throughout the Midwest, Southwest, West Coast and Pacific Northwest. Utilizing
marketing alliances, Central provides service solutions to the Great Lakes,
Northeast, Southeast, Mexico and Canada.
This press release contains forward-looking statements that involve risk,
assumptions, and uncertainties that are difficult to predict. Statements that
constitute forward-looking statements are usually identified by words such as
"anticipates," "believes," "estimates," "projects," "expects," "plans,"
"intends," or similar expressions. These statements are made pursuant to the
safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. Such
statements are based upon the current beliefs and expectations of our management
and are subject to significant risks and uncertainties. Actual results may
differ from those set forth in the forward-looking statements. With respect to
statements regarding the Company's goals for the third and fourth quarters of
2005, those goals are based upon the Company's expectation of a freight
environment similar to the current environment; the Company's continuing ability
to add quality customers and freight without any significant losses; and the
Company's ability to raise its revenue yields by market increase levels. The
Company's goals also are based upon expectations that it will continue to
execute its operating plan (including but not limited to improvements in
insurance and claims expense) and will not suffer any material management,
employee relations, customer or other disruptions; that the Company is able to
maintain adequate liquidity and successfully dispose of assets held for sale;
and that the Company does not suffer any material uninsured losses. These
expectations are subject to risks, including but not limited to the risk that
customers will resist rate increases; the risk of loss of customer freight based
on rate increases, contract non-renewal, or other factors; the risk that
uninsured losses will exceed expectations; the risk that dispositions of assets
held for sale will not be possible on favorable terms or at all; and the risk
that the Company fails to continue to obtain efficiencies to allow margin
improvements in excess of revenue growth. With respect to the Company's business
generally, the following factors, among others, could cause actual results to
differ materially from those in forward-looking statements: the risk that
revenue growth may be delayed or not occur at all; the risk that improvements in
revenue yield and tonnage growth may be delayed or not occur at all; the risk
that service, safety, and productivity measures will be further delayed or will
not be successfully implemented throughout our operations; the risk that our
cost-cutting measures may have unintended and unforeseen consequences that
adversely affect our business; the risk that geographic expansion has produced
or may produce freight imbalances, customer service issues, operational issues,
or other consequences that we cannot manage successfully on a timely basis or at
all; the risk that our insurance and claims costs will continue to exceed our
expectations and will not return to acceptable levels on a timely basis or at
all; the risk that we will be unable to obtain the financing we are seeking or
that it will not be available on acceptable terms; the risk that operating
losses and negative cash flows will continue and will have a material and
adverse result including but no limited to the termination of our line of
credit; and the risks detailed from time to time in reports filed by the Company
with the Securities and Exchange Commission, including forms 8-K, 10-Q, 10-K,
and our registration statement on Form S-1.
Corporate Contact:
Jeff Hale, Chief Financial Officer
(480) 361-5295
jhale@centralfreight.com
Page 3
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share data)
Three months ended Six months ended
-------------------------------------------------------------
July 2, July 3, July 2, July 3,
2005 2004 2005 2004
---- ---- ---- ----
Working Days 64 64 129 130
Operating revenues $ 99,518 $ 105,513 $ 188,840 $ 202,551
Operating expenses:
Salaries, wages and benefits 53,982 60,084 104,946 115,740
Purchased transportation 9,129 11,387 17,947 22,692
Purchased transportation - related parties 4,482 5,965 7,953 8,242
Operating and general supplies and expenses 23,099 20,821 43,704 39,152
Operating and general supplies and expenses - related
parties 35 39 197 134
Insurance and claims 6,736 6,881 11,761 10,874
Building and equipment rentals 1,007 1,044 2,026 1,973
Building and equipment rentals - related parties 449 376 898 896
Depreciation and amortization 4,127 3,951 9,004 7,870
------- ------- ------- -------
Total operating expenses 103,046 110,548 198,436 207,573
------- ------- ------- -------
Loss from operations (3,528) (5,035) (9,596) (5,022)
Other expense:
Interest expense (1,038) (368) (1,653) (573)
Interest expense - related parties (1,545) (1,537) (3,126) (3,142)
------- ------- ------- -------
Loss before income taxes (6,111) (6,940) (14,375) (8,737)
Income tax:
Income tax benefit --- 4,397 --- 5,065
------- ------- ------- -------
Net loss $ (6,111) $ (2,543) $ (14,375) $ (3,672)
========= ========== ========== =========
Net loss per share:
Basic $ (0.34) $ (0.14) $ (0.79) $ (0.21)
Diluted (0.34) (0.14) (0.79) (0.21)
Weighted average outstanding shares:
Basic 18,215 17,842 18,203 17,777
Diluted 18,215 17,842 18,203 17,777
Page 4
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 2, 2005 and December 31, 2004
(In thousands)
2005
Assets (Unaudited) 2004
-----------------------------------
Cash and cash equivalents $ 312 $ 2,144
Restricted cash --- 20,825
Accounts receivable, net 52,743 51,582
Other current assets 9,299 8,655
Deferred income taxes 9,901 6,689
-----------------------------------
Total current assets 72,255 89,895
Property and equipment, net 126,464 135,274
Goodwill 4,324 4,324
Other assets 7,617 7,761
-----------------------------------
Total assets $ 210,660 $ 237,254
===================================
Liabilities and stockholders' equity
Current maturities of long-term debt $ 9,171 $ 10,958
Short-term notes payable 16,769 28,108
Trade accounts payable 16,697 23,835
Payables for related party transportation services 2,006 988
Accrued expenses 28,269 23,050
-----------------------------------
Total current liabilities 72,912 86,939
Long-term debt, excluding current maturities 19,738 21,884
Related party financing 22,716 22,852
Deferred income taxes 11,587 8,375
Claims and insurance accruals 10,362 9,646
-----------------------------------
Total liabilities 137,315 149,696
-----------------------------------
Stockholders' equity 73,345 87,558
-----------------------------------
Total liabilities and stockholders' equity $ 210,660 $ 237,254
=====================================
Page 5
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
OPERATING STATISTICS
(Amounts in thousands except where indicated by *)
Three months ended Six months ended
July 2, July 3, July 2, July 3,
2005 2004 % Change 2005 2004 % Change
Operating Ratio 103.5% 104.8% 105.1% 102.5%
Working days 64 64 0.0% 129 130 -0.8%
LTL bills 848.43 971.93 -12.7% 1,641.52 1,884.18 -12.9%
Total bills 858.47 982.78 -12.6% 1,660.67 1,903.76 -12.8%
LTL tons 398.56 438.45 -9.1% 763.59 840.42 -9.1%
Total tons 478.04 536.18 -10.8% 917.98 1,018.42 -9.9%
LTL revenue per hundredweight* $ 11.75 $ 11.31 3.9% $ 11.64 $ 11.37 2.4%
LTL weight per bill (in pounds)* 940 902 4.2% 930 892 4.3%
Average length of haul (in miles)* 488 479 1.9% 488 473 3.2%
Fuel surcharge as a % of total revenue* 9.7% 4.7% 9.1% 3.9%
Page 6