CENF Central Freight Lines

Central Freight Lines, Inc. Announces Continued Sequential Improvement; Reports Second Quarter Financial Results WACO, Texas, July 28 /PRNewswire-FirstCall/ -- Central Freight Lines, Inc. (NASDAQ: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. 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. 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 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 CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS July 2, 2005 and December 31, 2004 (in thousands) Assets 2005 (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 ========= ========= 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% 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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