CENF Central Freight Lines

Central Freight Lines, Inc. Reports Fourth Quarter, Full Year Results WACO, Texas, March 16 /PRNewswire-FirstCall/ -- Central Freight Lines, Inc. (NASDAQ:CENF) announced today its financial and operating results for the quarter and year ended December 31, 2004. Central also announced today that it recently entered into a new four-year, $70.0 million credit facility with Bank of America, N.A., replacing its previous revolving credit facility and accounts receivable securitization facility and providing Central with additional liquidity. For the fourth quarter of 2004, Central's operating revenue was $85.5 million on 60 working days, compared to operating revenue of $89.5 million on 59 working days for the fourth quarter of 2003. Revenue per working day decreased 6.1% and total tons hauled per working day decreased 7.4% for the fourth quarter of 2004 compared to the same period in 2003. LTL revenue per hundredweight increased 2.4% from $11.79 in the 2003 quarter to $12.07 in the 2004 quarter, due to an increase in fuel surcharge revenue. Excluding fuel surcharge revenue, LTL revenue per hundredweight was down 3.8% in the 2004 quarter compared to the 2003 quarter. A net loss of $8.9 million, or $0.49 per diluted share, was realized in the fourth quarter of 2004. This net loss included a non-cash charge of $2.9 million, or $0.16 per diluted share, related to the write-off of a deferred tax asset. Pro forma income from continuing operations for the fourth quarter of 2003 was $2.2 million, or $0.17 per diluted share, using a pro forma tax rate of approximately 39%. Prior to November 1, 2003, Central was an S corporation and federal income tax attributes flowed directly to stockholders. For the full year 2004, operating revenue amounted to $386.6 million, a 0.8% decrease from the $389.7 million in 2003. A net loss of $20.5 million, or $1.14 per diluted share, was reported for 2004, compared to pro forma income from continuing operations of $8.4 million, or $0.69 per diluted share, in 2003. At December 31, 2004, Central's balance sheet reflected $2.1 million in unrestricted cash, $20.8 million in restricted cash that served as collateral for letters of credit under Central's prior credit facility, $55.7 million in long-term debt and capital lease obligations, including current portion, and $28.1 million in short term debt, of which $20.8 million represented the cash collateral for letters of credit. Stockholders' equity was $89.9 million at December 31, 2004. The Company had net capital expenditures, primarily for revenue equipment, of $10.4 million during the fourth quarter. During full year 2004, net capital expenditures totaled $32.5 million, primarily for revenue equipment and the purchase of the Phoenix terminal in the second quarter for $7.1 million, plus an additional $9.3 million dollars relating to the purchase of certain assets of Eastern Oregon Fast Freight in March 2004. Net capital expenditures for 2005 are expected to be in the range of $4 million to $7 million. Central's President and Chief Executive Officer, Bob Fasso, commented on the Company's results: "Our goal for the fourth quarter was to obtain significant improvement in the operating ratio over the third quarter, despite three less working days and the seasonal drop in revenue per day. We achieved this goal, as our operating ratio improved 250 basis points to 108.4% from 110.9% between the third and fourth quarter of 2004. "From the third quarter of 2004 to the fourth, wages and purchased transportation per working day declined 12.1% and 14.5%, respectively, on a 10.7% drop in tons handled per day. Workers' compensation expense decreased 40.7% per day, as lost time injuries compared to hours worked in the fourth quarter of 2004 were lower than any other quarter in 2004 or 2003. In addition, cargo claim expense dropped 29.0% per day in the fourth quarter of 2004 compared to the third quarter. "LTL revenue per hundredweight, excluding fuel surcharge, was down 0.5% from the third to fourth quarter of 2004, due primarily to a 1.6% increase in weight per LTL shipment. Tons per day dropped 10.7% for the same period. In 2003, the drop in tons per day from the third to the fourth quarter was 5.0%. Although we expect to retain our constant focus on cost control, our primary emphasis in the near term is on tonnage and yield growth, so as to effectively utilize our excess capacity in infrastructure and rolling stock. Our enhanced focus on our service product over the past several quarters has paid off, as service levels are at their highest in seven years, which provides Central's customers with service levels that we believe are competitive with any LTL carrier in our regions. "While much work remains to be done to return Central's results to acceptable levels, we believe the sequential improvements from the third quarter to the fourth demonstrate measurable gains and a step in the right direction. In addition, based on improvements in labor, customer service, and claims that we are currently experiencing, we expect modest sequential improvement in our operating ratio in the first quarter of this year versus the fourth quarter, despite the seasonal effects on revenue and costs." New Credit Facility After reporting the above results, Mr. Fasso discussed the execution on January 31, 2005 of a new four-year, $70.0 million senior secured revolving credit facility and letter of credit sub-facility with Bank of America, N.A. The Bank of America facility replaced the Company's prior credit facility and accounts receivable securitization facility with SunTrust Bank, each of which was set to expire in 2005. With respect to the Bank of America facility, Mr. Fasso stated, "The Bank of America facility offers a long-term agreement, additional availability, and more flexible financial covenants than our former credit facility." Update on Section 404 of the Sarbanes-Oxley Act Currently, in accordance with Section 404 of the Sarbanes-Oxley Act, Central and its independent auditors are in the process of completing the evaluation and assessment of the effectiveness of Central's internal controls over financial reporting. While this process is not yet complete, Central has noted certain material weaknesses in internal controls relating to revenue and inventory. The control weakness in revenue relates to the failure to have certain billing entries reviewed by a second party for accuracy after they are input into Central's billing system and the absence of a control to ensure changes to customer contracts are entered into the billing system timely and accurately. Further, in conducting an inventory audit in January 2005, a $0.5 million discrepancy in inventory was discovered, which was noted as involving an additional material weakness. The material weakness in the internal controls over the revenue process is not expected to have an impact on the reported year-end financial results. The $0.5 million adjustment to inventory noted above was recorded in fourth quarter 2004 results. Management will report on these weaknesses in its 10-K, and Central expects its auditors to issue an adverse opinion on the effectiveness of the Company's internal controls because of these two areas. At this time, management can not provide assurances that it will not determine that additional material weaknesses exist as it completes its evaluation and assessment of the effectiveness of internal controls over financial reporting. Year-End Reporting Central also reported today that the filing of its Annual Report on Form 10-K for the year ended December 31, 2004 would be delayed pending completion of the evaluation and assessment of internal controls over financial reporting. As a result, Central expects to file a Form 12b-25 (Notification of Late Filing) with the Securities and Exchange Commission seeking a 15-day extension to file its Annual Report. Central expects to file its Annual Report by March 31, 2005. 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 our geographic expansion during 2003 and 2004 will continue to produce freight imbalances, customer service issues, operational issues, and 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; the risk that additional deficiencies in our internal controls may be reported as a result of testing our year-end procedures; the risk that our capital expenditures may exceed the amounts we expect; the risk that our new credit facility may not provide all of the liquidity we need, particularly if we fail to comply with all financial and other covenants; 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 Years ended -------------- ----------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, -------- -------- -------- -------- 2004 2003 2004 2003 ---- ---- ---- ---- Working Days 60 59 253 253 -------- --------- --------- --------- Operating revenues $85,511 $ 89,535 $386,601 $389,696 -------- --------- --------- --------- Operating expenses: Salaries, wages and benefits * 48,672 47,781 222,230 205,393 Purchased transportation 8,839 9,580 42,152 38,113 Purchased transportation - related parties 2,739 2,617 14,571 18,582 Operating and general supplies and expenses 21,318 15,352 82,702 66,144 Operating and general supplies and expenses - related parties 49 --- 274 12 Insurance and claims 4,710 3,496 24,496 16,057 Building and equipment rentals 1,148 693 4,297 3,181 Building and equipment rentals - related parties 449 649 1,795 1,903 Deprecation and amortization 4,771 3,747 17,049 16,605 -------- --------- --------- --------- Total operating expenses 92,695 83,915 409,566 365,990 -------- --------- --------- --------- (Loss) income from operations (7,184) 5,620 (22,965) 23,706 Other expense: Interest expense (497) (611) (1,469) (3,547) Interest expense - related parties (1,522) (1,475) (6,197) (6,130) -------- --------- --------- --------- (Loss) income before income taxes (9,203) 3,534 (30,631) 14,029 Income tax: Income tax benefit (expense) 301 (11,144) 10,159 (11,593) -------- --------- --------- --------- (Loss) income from continuing operations (8,902) (7,610) (20,472) 2,436 Loss from discontinued operations --- (8,341) --- (8,341) -------- --------- --------- --------- Net (loss) $(8,902) $(15,951) $(20,472) $ (5,905) ======== ========= ========= ========= Pro forma C Corporation data (unaudited): Historical income before income taxes $ --- $ 3,534 $ --- $ 14,029 Pro forma income tax expense --- (1,378) --- (5,666) -------- --------- --------- --------- Pro forma income from continuing operations --- 2,156 --- 8,363 Loss from discontinued operations --- (8,341) --- (8,341) -------- --------- --------- --------- Pro forma net (loss) income $ --- $ (6,185) $ --- $ 22 ======== ========= ========= ========= Quarters ended Years ended -------------- ----------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, -------- -------- -------- -------- 2004 2003 2004 2003 ---- ---- ---- ---- Net loss per share: Basic $(0.49) $ --- $(1.14) $ --- Diluted (0.49) --- (1.14) --- Pro forma income (loss) per share: Basic: Income from continuing operations $ --- $ 0.18 $ --- $ 0.75 Loss from discontinued operations --- (0.69) --- (0.75) Net (loss) income --- (0.51) ** --- --- ** Diluted: Income from continuing operations $ --- $ 0.17 $ --- $ 0.69 Loss from discontinued operations --- (0.64) --- (0.69) Net (loss) income --- (0.47) ** --- --- ** Weighted average outstanding shares (in thousands): Basic 18,179 12,127 17,971 11,163 Diluted 18,179 13,060 17,971 12,103 * 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 December 31, 2004 and December 31, 2003 (Unaudited, dollars in thousands, except per share data) Assets 2004 2003 --------- --------- Cash $ 2,144 $ 37,269 Restricted cash 20,825 --- Accounts receivable 51,582 51,864 Other current assets 8,655 8,298 Deferred income taxes 13,871 4,588 --------- --------- Total current assets 97,077 102,019 Property and equipment, net 135,274 114,693 Goodwill 4,324 4,324 Other assets 7,761 2,113 --------- --------- Total assets $244,436 $223,149 ========= ========= Liabilities and stockholders' equity Current maturities of long term-debt $ 10,958 $ 6,375 Notes payable 28,108 --- Trade accounts payable 23,835 15,391 Payables for related party transportation services 988 1,020 Accrued expenses 22,360 25,728 --------- --------- Total current liabilities 86,249 48,514 Long-term debt, excluding current maturities 21,884 19,988 Related party financing 22,852 23,154 Deferred income taxes 13,871 15,633 Other liabilities 9,646 7,422 --------- --------- Total liabilities 154,502 114,711 --------- --------- Total stockholders' equity 89,934 108,438 --------- --------- Total liabilities and stockholders' equity $244,436 $223,149 ========= ========= CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES OPERATING STATISTICS (Amounts in thousands except where indicated by *) Quarters ended Years ended -------------- ----------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, -------- -------- -------- -------- 2004 2003 % Change 2004 2003 % Change ---- ---- -------- ---- ---- -------- Operating Ratio 108.4% 93.7% 105.9% 93.9% Working days 60 59 1.7% 253 253 0.0% LTL bills 737.87 819.43 -10.0% 3,511.44 3,750.06 -6.4% Total bills 747.03 828.79 -9.9% 3,549.98 3,789.05 -6.3% LTL tons 329.45 359.63 -8.4% 1,560.65 1,624.79 -3.9% Total tons 409.20 434.58 -5.8% 1,908.62 1,962.89 -2.8% LTL revenue per hundredweight* $ 12.07 $ 11.79 2.4% $ 11.63 $ 11.37 2.3% LTL weight per bill (in pounds)* 893 878 1.7% 889 867 2.5% Average length of haul (in miles)* 489 475 2.9% 478 442 8.1% Fuel surcharge as a % of total revenue* 8.3% 2.4% 5.4% 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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