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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