CENF Central Freight Lines

Central Freight Lines, Inc. Reports First Quarter Results and Pending Financing Package WACO, Texas, May 12 /PRNewswire-FirstCall/ -- Central Freight Lines, Inc. (NASDAQ:CENF) announced today its financial and operating results for the quarter ended April 2, 2005. Overview Central's President and Chief Executive Officer, Bob Fasso, commented on the Company's results, "We have three positive announcements today. First, we achieved a 240 basis point improvement in our operating ratio versus the fourth quarter of 2004, an achievement that is notable given the seasonal freight slowdown that affects our industry during the first quarter. "Second, we have significantly improved our liquidity prospects by agreeing in principle to transactions involving an estimated $15.0 million to $16.0 million in real estate proceeds and financing that we expect to have funded within the next 60 days. We have $79.4 million in stockholders' equity. Together with our available credit, the transactions listed above and an additional $6.0 million of assets held for sale, we expect to have the financial resources and liquidity to execute our plan and provide customers and employees with sufficient stability. "Third, our April results indicate further sequential improvement with LTL tons handled per day up 8.3% over the first quarter. In addition, our major service indicators such as bills per hour and on-time and damage free delivery continue to hold at levels that are among the best the Company has achieved in the past seven years. "With momentum from these accomplishments, our goal for the second quarter is to lower the operating ratio from the first quarter of 2005 by 200 to 350 basis points, making the expected progress from the third quarter of 2004, 610 to 760 basis points." First Quarter Financial Results For the first quarter of 2005, Central's operating revenue was $89.3 million on 65 working days, compared to operating revenue of $97.0 million on 66 working days for the first quarter of 2004. Revenue per working day decreased 6.5% and total tons hauled per working day decreased 7.4% for the first quarter of 2005 compared to the same period in 2004. LTL revenue per hundredweight increased 0.5% from $11.45 in the 2004 quarter to $11.51 in the 2005 quarter, due to an increase in fuel surcharge revenue. Excluding fuel surcharge revenue, LTL revenue per hundredweight was down 5.0% in the 2005 quarter compared to the 2004 quarter, partially due to a 4.5% increase in average weight per LTL shipment. A net loss of $8.3 million, or $0.45 per diluted share, was realized in the first quarter of 2005. The $8.3 million pretax net loss in the first quarter of 2005 generated a tax benefit of $3.2 million, or $0.17 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 first quarter of 2005. The pretax net loss in the first quarter of 2004 was $1.8 million. Sequential Improvement Continues LTL tons handled per working day increased 2.3% from the fourth quarter of 2004 to the first quarter of 2005 while wages and purchased transportation declined by 0.2% and 2.0% per working day. Meanwhile, cargo claims expenses dropped over 33% per day due to the improved processes and procedures we implemented during the second half of 2004. We also realized benefits from the investment in our fleet during 2004 as repair and maintenance expense declined, and our Sarbanes-Oxley related expenses decreased significantly. In the first quarter of 2005 the Company reserved $1 million (our maximum deductible) for a January 2005 injury to one of our employees. Despite this accident, the average number of injuries reported per 200,000 hours worked in the first quarter of 2005, was 27% lower than the average for 2004. "Service continues to remain strong, providing Central's customers with service levels that we believe are competitive with any LTL carrier in our regions. Effective May 2, 2005, we implemented a 6.0% general rate increase for customers on our non-contract rate base." Balance Sheet and Liquidity At April 2, 2005, the Company had $79.4 million in stockholders' equity and $68.6 million of total debt and capital leases, including current maturities. The debt and capital leases include $13.4 million of borrowing under the Bank of America 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"). Based on the current interpretations of EITF 95-22, we understand that most revolving credit agreements with a required lock-box arrangement are required to be classified as current liabilities. At April 2, 2005, the Company had approximately $18.8 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 $1.3 million and expects to recognize a gain on the sale. In addition, the Company entered into agreements in principle covering an estimated $14.0 million to $15.0 million in sale-leaseback and mortgage financing transactions on five terminal properties. The Company signed a letter of intent concerning a sale-leaseback on one of its terminals and is negotiating the definitive agreements concerning the transaction. It is expected that the transaction will generate approximately $6.0 million in net proceeds and the Company will sign a ten-year lease with a ten-year option. The Company also signed a commitment letter concerning mortgage financing on four other terminal properties that is expected to generate approximately $9.0 million in net proceeds. Both transactions are subject to customary closing conditions. The transactions are expected to close within 45 to 60 days. In addition to the liquidity expected from financing, at April 2, 2005, Central had approximately $6.0 million in assets held for sale that may be disposed of in 2005. In the quarter ended April 2, 2005, the Company had net capital expenditures of $0.6 million. Gross capital expenditures for the remainder of 2005 are expected to be $3.0 million to $9.0 million. Included in this range is roughly $6.0 million for replacing revenue equipment. If the decision is made to purchase the $6.0 million in replacement equipment, the Company expects to obtain financing independent from the Bank of America credit facility. Our goal is to achieve positive EBITDA levels (earnings before interest, income taxes, depreciation and amortization) in the third and fourth quarters of 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 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 second quarter 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 and will not suffer any material management, employee relations, customer or other disruptions; that the Company is able to complete the planned real estate financing at the indicated values and maintains adequate liquidity; 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 the conditions to closing the real estate financing do not occur; the risk that the properties are appraised for lower values than we anticipate; the risk that customers will resist the Company's general rate increase; 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; 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 CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, dollars in thousands, except per share data) Three months ended ------------------ April 2, April 3, -------- -------- 2005 2004 ---- ---- Working Days 65 66 --------- --------- Operating revenues $89,322 $97,038 --------- --------- Operating expenses: Salaries, wages and benefits 50,964 55,656 Purchased transportation 8,818 11,305 Purchased transportation - related parties 3,471 2,277 Operating and general supplies and expenses 20,605 18,580 Operating and general supplies and expenses - related parties 162 95 Insurance and claims 5,025 3,744 Building and equipment rentals 1,019 929 Building and equipment rentals - related parties 449 520 Deprecation and amortization 4,877 3,919 --------- --------- Total operating expenses 95,390 97,025 --------- --------- (Loss) income from operations (6,068) 13 Other expense: Interest expense (615) (205) Interest expense - related parties (1,581) (1,605) --------- --------- Loss before income taxes (8,264) (1,797) Income taxes: Income tax benefit --- 668 --------- --------- Net loss $(8,264) $(1,129) ========= ========= Net loss per share: Basic $ (0.45) $ (0.06) Diluted (0.45) (0.06) Weighted average outstanding shares (in thousands): Basic 18,192 17,714 Diluted 18,192 17,714 CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS April 2, 2005 and December 31, 2004 (Dollars in thousands) Assets 2005 (Unaudited) 2004 ----------- ----------- Cash and cash equivalents $ 1,202 $ 2,144 Restricted cash --- 20,825 Accounts receivable, net 53,042 51,582 Other current assets 11,337 8,655 Deferred income taxes 8,959 6,689 ----------- ----------- Total current assets 74,540 89,895 Property and equipment, net 131,198 135,274 Goodwill 4,324 4,324 Other assets 8,994 7,761 ----------- ----------- Total assets $219,056 $237,254 =========== =========== Liabilities and stockholders' equity Current maturities of long-term debt $ 10,538 $ 10,958 Short-term notes payable 14,337 28,108 Trade accounts payable 18,463 23,835 Payables for related party transportation services 1,537 988 Accrued expenses 29,799 23,050 ----------- ----------- Total current liabilities 74,674 86,939 Long-term debt, excluding current maturities 20,869 21,884 Related party financing 22,852 22,852 Deferred income taxes 10,645 8,375 Claims and insurance accruals 10,644 9,646 ----------- ----------- Total liabilities 139,684 149,696 ----------- ----------- Stockholders' equity: Total stockholders' equity 79,372 87,558 ----------- ----------- Total liabilities and stockholders' equity $219,056 $237,254 =========== =========== CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES OPERATING STATISTICS (Amounts in thousands except where indicated by *) Three months ended ------------------ April 2, April 3, -------- -------- 2005 2004 % Change ---- ---- -------- Operating Ratio 106.8% 100.0% Working days* 65 66 -1.5% LTL bills 793.09 912.24 -13.1% Total bills 802.20 920.98 -12.9% LTL tons 365.03 401.97 -9.2% Total tons 439.93 482.24 -8.8% LTL revenue per hundredweight* $ 11.51 $ 11.45 0.5% LTL weight per bill (in pounds)* 921 881 4.5% Average length of haul (in miles)* 490 466 5.1% Fuel surcharge as a % of total revenue* 8.3% 3.0% 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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