<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 18, 1994 Commission File Number 1-8441
----------------- ----------
CAROLINA FREIGHT CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1349996
------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
Highway 150 East, Cherryville, N. C. 28021
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant`s telephone number, including area code (704) 435-6811
------------------
No Changes
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check-mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock, $.50 par value 6,561,672
- -------------------------------- ---------------------------------
Class Outstanding at June 18, 1994
<PAGE> 2
CAROLINA FREIGHT CORPORATION
INDEX
Page No.
--------
Part I. Financial Information:
Item 1: Financial Statements
Consolidated Condensed Statements of Earnings--
Twelve Weeks and Twenty-four Weeks Ended
June 18, 1994 and June 19, 1993 2
Consolidated Balance Sheets--
June 18, 1994 and December 31, 1993 3-4
Consolidated Statements of Cash Flows--
Twenty-four Weeks Ended June 18, 1994
and June 19, 1993 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2: Management's Discussion and Analysis 7-10
Part II. Other Information 11
-1-
<PAGE> 3
PART 1: ITEM 1. FINANCIAL INFORMATION
CAROLINA FREIGHT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
Twelve and Twenty-four Weeks Ended June 18, 1994 and June 19, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts)
Twelve Weeks Ended Twenty-four Weeks Ended
-----------------------------------------------------
June 18, June 19, June 18, June 19,
1994 1993 1994 1993
-----------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue $263,203 $196,773 $455,833 $384,104
-----------------------------------------------------
Operating expenses:
Employee compensation 148,916 125,780 271,607 244,963
Purchased transportation 39,428 23,357 62,068 43,787
Fuel and fuel taxes 11,728 10,122 22,399 19,879
Tires, repair parts and other operating supplies 10,945 9,033 20,576 17,707
Depreciation and amortization 8,080 7,801 16,189 16,149
Insurance premiums and claims 7,351 5,157 12,957 10,968
Communications and utilities 2,906 2,484 5,647 5,120
Operating taxes and licenses 2,877 2,836 5,638 5,544
Equipment and building rents 1,303 1,187 2,535 2,327
Gain on disposition of operating assets (97) (432) (148) (451)
General supplies and expenses 10,792 8,045 19,313 15,351
-----------------------------------------------------
Total operating expenses 244,229 195,370 438,781 381,344
-----------------------------------------------------
Earnings from operations 18,974 1,403 17,052 2,760
Interest and other expense, net 2,933 2,274 5,336 4,287
-----------------------------------------------------
Earnings (Loss) before income taxes 16,041 (871) 11,716 (1,527)
Income tax provision (benefit) 6,401 (323) 4,994 (589)
-----------------------------------------------------
Net earnings (loss) before cumulative effect of change in
accounting principle 9,640 (548) 6,722 (938)
Cumulative effect of change in accounting principle - - (1,222) -
-----------------------------------------------------
Net earnings (loss) $9,640 ($548) $5,500 ($938)
=====================================================
Earnings (Loss) per share before cumulative
effect of change in accounting principle
Primary $1.46 ($0.09) $1.02 ($0.15)
Fully Diluted 1.32 (0.09) 0.99 (0.15)
Cumulative effect of change in
accounting principle
Primary - - ($0.19) -
Fully Diluted - - (0.16) -
Earnings (Loss) per share
Primary $1.46 ($0.09) $0.83 ($0.15)
Fully Diluted 1.32 (0.09) 0.83 (0.15)
Average common stock and common stock
equivalent shares outstanding
Primary 6,561,672 6,561,672 6,561,702 6,561,672
Fully Diluted 7,614,177 6,561,672 7,614,177 6,561,672
Cash dividends per common share $0.00 $0.05 $0.00 $0.10
</TABLE>
-2-
<PAGE> 4
CAROLINA FREIGHT CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
June 18, December 31,
1994 1993
------------------------------
<S> <C> <C>
Assets
- ------
Current assets:
Cash $ 10,866 $ 6,502
Temporary investments (at cost, which
approximates market) 18,171 10,169
Customer and interline receivables, net 11,039 10,091
Customer receivables held by trust, net 64,835 35,787
Other receivables, net 8,221 6,985
Reinsurance balances receivable 12,469 13,815
Prepayments -
Tires on equipment in use 13,396 13,632
Other 10,370 5,755
Inventories of operating supplies 2,977 2,869
------------------------------
Total current assets 152,344 105,605
------------------------------
Plant and equipment, at cost:
Revenue and service equipment 270,250 267,112
Land and structures 180,913 179,220
Other equipment 59,417 57,356
Leasehold improvements 1,520 1,512
------------------------------
512,100 505,200
Less - accumulated depreciation and amortization (272,402) (258,772)
------------------------------
Net plant and equipment 239,698 246,428
------------------------------
Other assets 13,078 11,905
------------------------------
$ 405,120 $ 363,938
==============================
</TABLE>
-3-
<PAGE> 5
CAROLINA FREIGHT CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
June 18, December 31,
1994 1993
------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 51,818 $ 33,266
Accrued wages, salaries and vacation pay 42,009 34,191
Claims and insurance accruals 44,932 33,084
Income taxes
Current 10,222 522
Deferred 0 -
Other payables and accrued expenses 13,320 11,496
Current maturities of long-term debt 2,830 5,494
------------------------------
Total current liabilities 165,131 118,053
------------------------------
Long-term debt:
6 1/4% Convertible Subordinated Debentures, due 2011 49,994 49,994
Other long-term debt 19,750 21,182
------------------------------
Total long-term debt 69,744 71,176
------------------------------
Reserves and Deferred Credits:
Income taxes 9,249 15,168
Other deferred liabilities 8,502 8,211
Insurance claims 25,359 29,718
------------------------------
Total reserves and deferred credits 43,110 53,097
------------------------------
Stockholders' equity:
Preferred stock, $100 par value, 4% cumulative, authorized
25,000 shares, outstanding 22,112 shares 2,211 2,211
Common stock, $.50 par value, authorized 20,000,000
shares, outstanding 6,561,672 in 1994 and 1993 3,281 3,281
Paid-in capital 44,349 44,349
Retained earnings 77,294 71,771
------------------------------
Total stockholders' equity 127,135 121,612
------------------------------
$405,120 $363,938
==============================
</TABLE>
-4-
<PAGE> 6
CAROLINA FREIGHT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twenty-four Weeks Ended June 18, 1994 and June 19, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in Thousands)
Twenty-four Weeks Ended
--------------------------------------------------------------------------------------------
June 18, June 19,
1994 1993
--------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 5,500 ($938)
Noncash items included in income:
Depreciation and amortization 16,189 16,149
Deferred income taxes (5,919) (1,292)
Increase in customer and interline receivables (29,996) (13,201)
Increase (Decrease) in accounts payable 18,552 (483)
Increase (Decrease) in claims payable and insurance accruals 7,489 72
Net increase (decrease) in other working capital items 14,965 1,799
Other, net (4,068) (980)
--------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 22,712 1,126
--------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of plant and equipment:
Revenue and service equipment (5,259) (11,257)
Land and structures (1,072) (2,513)
Other equipment and leasehold improvements (1,343) (1,622)
Proceeds from disposal of plant and equipment 1,469 5,818
--------------------------------------------------------------------------------------------
Net cash used for investing activities (6,205) (9,574)
--------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 15 65
Repayment of long-term debt (4,112) (2,512)
Net proceeds from revolving credit agreements - 10,500
Common stock issued - -
Dividends on common and preferred stock (44) (700)
--------------------------------------------------------------------------------------------
Net cash provided by financing activities (4,141) 7,353
--------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND TEMPORARY INVESTMENTS 12,366 (1,095)
CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF YEAR 16,671 17,696
-----------------------------
CASH AND TEMPORARY INVESTMENTS AT END OF QUARTER $ 29,037 $ 16,601
=============================
</TABLE>
-5-
<PAGE> 7
CAROLINA FREIGHT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements contain all
adjustments and eliminations which, in the opinion of management, are necessary
to present fairly the results of operations for the twelve weeks and
twenty-four weeks ended June 18, 1994 and June 19, 1993, the financial position
as of June 18, 1994 and December 31, 1993, and the cash flows for the
twenty-four weeks ended June 18, 1994 and June 19, 1993.
During the first quarter of 1994, the Securities and Exchange Commission
issued a new directive to publicly held corporations regarding the discount
rates used on reserves reported in the liabilities section of their balance
sheets. This directive requires that the discount rates used to reduce these
obligations to their present value be stated at a "risk free" rate. The effect
of this change is to reduce the discount rates used in computing the reserves
on the consolidated balance sheet of Carolina Freight Corporation from 7% to
risk free rates. The effect of this change is shown as a change in accounting
principle of $1,222,000 on the consolidated statement of earnings.
-6-
<PAGE> 8
PART I: ITEM 2. FINANCIAL INFORMATION
CAROLINA FREIGHT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Revenue for the second quarter ended June 18, 1994 increased 33.8% to
$263,203,000 compared with revenue of $196,773,000 in the second quarter of
1993. Net earnings were $9,640,000, or $1.46 per share, compared with a net
loss of $548,000, or $.09 per share, during the same period in 1993.
Revenue for the twenty-four weeks ended June 18, 1994 was $455,833,000, an
increase of 18.7% over the comparable period of 1993. Net earnings were
$5,500,000 compared with a net loss of $938,000 in the first half of 1993. The
Company's fiscal year consists of three 12-week quarters and a final 16-week
quarter.
The results of the second quarter were enhanced by the strike called by
the International Brotherhood of Teamsters (IBT) against members of Trucking
Management, Inc. (TMI) whose membership includes the four largest competitors
of Carolina Freight Carriers Corporation (CFCC). The strike began April 6 and
ended April 28, 1994. CFCC, the Company's largest less-than-truckload (LTL)
operation and also a member of TMI, was excluded from the strike action when it
signed an interim agreement to abide by the final contract between TMI and the
IBT. As a result of that agreement, CFCC continued to operate during the
strike. CFCC experienced substantial increases in shipment and tonnage volumes
during the strike period over levels of the prior year. In addition, G.I.
Trucking Company, the west coast LTL carrier of the Company, experienced
similar levels of volume growth. The preponderance of volume increases came
from existing customers of each company.
The estimated impact of the strike-related volume gains on consolidated
net earnings is approximately $8,504,000, or $1.30 per share. More recently,
business in the LTL subsidiaries has returned to levels that are slightly below
those of the prior year.
The results for the Company's other operating subsidiaries - Cardinal
Freight Carriers, CaroTrans International, and The Complete Logistics Company -
continued to progress at a strong pace equal to or above the Company's
projections. Their results for the second quarter were largely unaffected by
the Teamsters' strike.
At the end of the second quarter, the Company's total long-term debt was
$69,744,000 compared to $71,176,000 at the end of 1993. The debt reduction
occurred as a result of improved cash
-7-
<PAGE> 9
flow during the second quarter of this year. It is important to note that the
remaining debt for the Corporation consists primarily of obligations with a
fixed term ranging from three years to seventeen years with interest rates
ranging from 3.5% to 6.25%. This debt reduction, coupled with the Company's
new revolving credit facility entered into on March 17, 1994, provides a stable
financial foundation from which the various operating companies can grow.
CFCC continues to pursue programs announced in the first quarter to
improve operating results. These actions consist of:
o A new terminal load plan.
o A computerized dock/yard tracking system.
o Decentralization of operations management.
o The conversion of its linehaul tractor fleet from a 7-year trade cycle
to a 4-year trade cycle.
These actions will be the focus of CFCC's management for the remainder of the
year.
At the May 4, 1994 Board of Directors' meeting, Lary R. Scott, Chief
Executive Officer of Carolina Freight Corporation, was elected to the
additional position of Chairman of the Board. He succeeds Kenneth G. Younger,
Jr., who will continue to serve as a member of the Board of Directors.
The management team continues to implement the actions they believe are
necessary to continue the improvement within the core business - LTL freight
transportation. At the same time, management is eager to provide opportunities
for substantial and profitable growth in the other operating subsidiaries.
The total number of service centers for the consolidated group at the end
of the quarter was 226.
Liquidity and Capital Resources
Net working capital at June 18, 1994 was a negative $12.8 million and at
December 31, 1993 was a negative $12.4 million. Cash and cash equivalents were
$29 million at June 18, 1994 and $16.7 million at December 31, 1993.
In December 1993 the Corporation entered into an agreement to sell, on a
revolving basis, a $60 million ownership interest in a designated pool of its
customer receivables. The pool of receivables eligible for sale is held by a
trust in which the Corporation retains the residual ownership interest. The
agreement for this revolving sale of receivables expires in December 2000.
-8-
<PAGE> 10
On March 17, 1994, the Carolina Freight Carriers Corporation (CFCC) and
Red Arrow Freight Lines entered into a new $45 million revolving credit and
letter of credit agreement with a group of banks. Under this agreement, which
currently provides approximately $18 million of revolving line of credit
availability, $27 million of letters of credit and expires June 30, 1996,
substantially all revenue and service equipment, $45.8 million of land and
structures and the Corporation's customer receivables held by trust, are
pledged as collateral. This agreement and existing agreements contain
restrictions regarding the maintenance of specified debt, tangible net worth,
and cash flow ratios. The interest rate for borrowings under this agreement
will be, at the Corporation's option, the lead bank's base rate or another
variable rate which fluctuates (in part) based on changes in certain financial
ratios of the Corporation. This agreement states that the occurrence of a
material adverse change in the Corporation's financial condition, as determined
by the participating banks, is an event of default. If an event of default
occurs, then the lenders may declare the outstanding borrowings under the
agreement, certain other debt, and all interest thereon to be due and payable.
No revolving credit was outstanding at June 18, 1994 and at December 31, 1993.
Capital expenditures (net of proceeds from disposal of operating property)
through the second quarter of 1994 were $6.2 million compared with $9.6 million
in the prior year period. Planned 1994 capital expenditures are approximately
$17.0 million. It is anticipated that approximately $9.6 million will be
expended on revenue and service equipment, $2.7 million on terminal
construction and renovation, and $4.7 million for office, computer, and
terminal equipment.
Capital expenditures (net of proceeds from disposal of operating property)
during 1993 were $15.8 million. Of this amount, $17.3 million was expended for
revenue and service equipment, $4.7 million for acquisition, construction, and
renovation of land and buildings and $7.3 million for office, shop, and
terminal equipment. Capital expenditures were financed through internally
generated funds and borrowings under the terms of the revolving credit
agreement.
Management anticipates that 1994 capital expenditures and other working
capital requirements will be financed through internally generated funds and
borrowings under the revolving credit agreement. Management does not
anticipate that the maximum borrowing level under the revolving credit
agreement will be exceeded in 1994.
-9-
<PAGE> 11
The long-term debt-to-equity ratio of the Corporation at June 18, 1994 was
54.9% compared with 58.5% at December 31, 1993.
The Board of Directors suspended payment of the dividend on common stock
of the Company on January 10, 1994.
-10-
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
There are not now pending any material legal proceedings, other than ordinary
routine litigation incident to its business, to which the Company or its
subsidiaries are a party or to which any of their property is subject. During
the second quarter of 1994, no material litigation or governmental proceeding
was instituted or pending against the Company or its subsidiaries arising from
any alleged violation of any emission control standards or other environmental
regulations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Registrant did not file, nor was it required to file, with the Commission
in respect of any period in the quarter ended June 18, 1994, a report on
Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAROLINA FREIGHT CORPORATION
(Registrant)
DATE July 27, 1994 BY /s/ Lary R. Scott
- --------------------------- -------------------------------------
Lary R. Scott
Chairman and CEO
DATE July 27, 1994 BY /s/ Shawn W. Poole
- --------------------------- ------------------------------------
Shawn W. Poole
Vice President and CFO
-11-
