Central Freight Lines, Inc. Reports Third Quarter Financial
Results; Announces Election of Cam Carruth to Board WACO, Texas,
Nov. 5 /PRNewswire-FirstCall/ -- Central Freight Lines, Inc.
(NASDAQ: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. "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."
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. 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 CENTRAL
FREIGHT LINES, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited, dollars in thousands, except per share data)
Quarters ended Nine months ended -----------------
------------------ Oct. 2, Oct. 4, Oct. 2, Oct. 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 * YTD 2003 includes a $7,799 gain resulting
from amendments to a benefit plan. ** Calculation based on pro
forma net (loss) income. 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 ========
======== CENTRAL FREIGHT LINES, INC AND SUBSIDIARIES OPERATING
STATISTICS (Amounts in thousands except where indicated by *)
Quarters ended Nine months ended -------------- -----------------
Oct. 2, Oct. 4, Oct. 2, Oct. 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%
http://www.newscom.com/cgi-bin/prnh/20040205/DACENTRALLOGO
http://photoarchive.ap.org/ DATASOURCE: Central Freight Lines, Inc.
CONTACT: Jeff Hale, Chief Financial Officer of Central Freight
Lines, Inc., +1-480-361-5295, or Web site:
http://www.centralfreight.com/
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