<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 September 10, 1994 Commission File Number 1-8441
---------------------- --------
CAROLINA FREIGHT CORPORATION
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(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 September 10, 1994
<PAGE> 2
CAROLINA FREIGHT CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I. Financial Information:
Item 1: Financial Statements
Consolidated Condensed Statements of Earnings--
Twelve Weeks and Thirty-six Weeks Ended
Sept. 10, 1994 and Sept. 11, 1993 2
Consolidated Balance Sheets--
Sept. 10, 1994 and December 31, 1993 3-4
Consolidated Statements of Cash Flows--
Thirty-six Weeks Ended Sept. 10, 1994
and Sept. 11, 1993 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2: Management's Discussion and Analysis 7-9
Part II. Other Information 10
</TABLE>
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<PAGE> 3
PART 1: ITEM 1. FINANCIAL INFORMATION
CAROLINA FREIGHT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
Twelve and Thirty-six Weeks Ended September 10, 1994 and September 11, 1993
(UNAUDITED)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Twelve Weeks Ended Thirty-six Weeks Ended
-----------------------------------------------------
Sept. 10, Sept. 11, Sept. 10, Sept. 11,
1994 1993 1994 1993
-----------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenue $ 203,340 $ 198,557 $ 659,173 $ 582,661
-----------------------------------------------------
Operating expenses:
Employee compensation 125,979 127,367 397,586 372,330
Purchased transportation 23,699 23,899 85,767 67,686
Fuel and fuel taxes 10,136 9,464 32,535 29,343
Tires, repair parts and other operating supplies 10,076 9,263 30,652 26,970
Depreciation and amortization 7,966 7,943 24,155 24,092
Insurance premiums and claims 5,174 5,725 18,131 16,693
Communications and utilities 2,731 2,603 8,378 7,723
Operating taxes and licenses 3,001 2,973 8,639 8,517
Equipment and building rents 1,313 1,169 3,848 3,496
Gain on disposition of operating assets (109) (525) (257) (976)
General supplies and expenses 8,829 7,517 28,142 22,868
-----------------------------------------------------
Total operating expenses 198,795 197,398 637,576 578,742
-----------------------------------------------------
Earnings from operations 4,545 1,159 21,597 3,919
Interest and other expense, net 2,434 2,309 7,770 6,596
-----------------------------------------------------
Earnings (Loss) before income taxes 2,111 (1,150) 13,827 (2,677)
Income tax provision (benefit) 1,101 433 6,095 (156)
-----------------------------------------------------
Net earnings (loss) before cumulative effect
of change in accounting principle
1,010 (1,583) 7,732 (2,521)
Cumulative effect of change in accounting principle - - (1,222) -
-----------------------------------------------------
Net earnings (loss) $ 1,010 $ (1,583) $ 6,510 $ (2,521)
=====================================================
Earnings (Loss) per share before cumulative
effect of change in accounting principle
Primary $ 0.15 $ (0.24) $ 1.17 $ (0.39)
Fully Diluted 0.15 (0.24) 1.17 (0.39)
Cumulative effect of change in
accounting principle
Primary - - $ (0.19) -
Fully Diluted - - -
Earnings (Loss) per share
Primary $ 0.15 $ (0.24) $ 0.98 $ (0.39)
Fully Diluted 0.15 (0.24) 0.98 (0.39)
Average common stock and common stock
equivalent shares outstanding
Primary 6,161,672 6,561,672 6,561,806 6,561,702
Fully Diluted 6,161,672 6,561,672 6,561,806 6,561,702
Cash dividends per common share $ 0.00 $ 0.05 $ 0.00 $ 0.15
</TABLE>
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<PAGE> 4
CAROLINA FREIGHT CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
September 10, December 31,
1994 1993
------------------------------
Assets
- ------
<S> <C> <C>
Current assets:
Cash $ 14,625 $ 6,502
Temporary investments (at cost, which
approximates market) 17,456 10,169
Customer and interline receivables, net 12,089 10,091
Customer receivables held by trust, net 52,210 35,787
Other receivables, net 9,877 6,985
Reinsurance balances receivable 12,148 13,815
Prepayments -
Tires on equipment in use 13,007 13,632
Other 10,490 5,755
Inventories of operating supplies 2,778 2,869
-------------------------------
Total current assets 144,680 105,605
-------------------------------
Plant and equipment, at cost:
Revenue and service equipment 266,204 267,112
Land and structures 181,135 179,220
Other equipment 61,362 57,356
Leasehold improvements 1,774 1,512
-------------------------------
510,475 505,200
Less - accumulated depreciation and amortization (275,131) (258,772)
-------------------------------
Net plant and equipment 235,344 246,428
-------------------------------
Other assets 13,335 11,905
-------------------------------
$ 393,359 $ 363,938
===============================
</TABLE>
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<PAGE> 5
CAROLINA FREIGHT CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
September 10, December 31,
1994 1993
------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
- -----------------------------------------
Current liabilities:
Accounts payable $ 41,059 $ 33,266
Accrued wages, salaries and vacation pay 38,444 34,191
Claims and insurance accruals 43,679 33,084
Income taxes
Current 12,180 522
Deferred 0 -
Other payables and accrued expenses 15,219 11,496
Current maturities of long-term debt 3,177 5,494
------------------------------
Total current liabilities 153,758 118,053
------------------------------
Long-term debt:
6 1/4% Convertible Subordinated Debentures, due 2011 49,994 49,994
Other long-term debt 19,218 21,182
------------------------------
Total long-term debt 69,212 71,176
------------------------------
Reserves and Deferred Credits:
Income taxes 8,119 15,168
Other deferred liabilities 8,877 8,211
Insurance claims 25,270 29,718
------------------------------
Total reserves and deferred credits 42,266 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 78,282 71,771
------------------------------
Total stockholders' equity 128,123 121,612
------------------------------
$393,359 $363,938
==============================
</TABLE>
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<PAGE> 6
CAROLINA FREIGHT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Thirty-six Weeks Ended September 10, 1994 and September 11, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in Thousands)
Thirty-six Weeks Ended
------------------------------
Sept. 10, Sept. 11,
1994 1993
------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 6,510 $ (2,521)
Noncash items included in income:
Depreciation and amortization 24,155 24,092
Deferred income taxes (7,049) (636)
Increase in customer and interline receivables (18,421) (20,990)
Increase (Decrease) in accounts payable 7,793 7,450
Increase (Decrease) in claims payable and insurance
accrual 6,147 1,079
Net increase (decrease) in other working capital items 14,390 1,342
Other, net (955) (2,047)
------------------------------
Net cash provided by (used for) operating activities 32,570 7,769
------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of plant and equipment:
Revenue and service equipment (9,751) (17,172)
Land and structures (1,957) (3,642)
Other equipment and leasehold improvements (4,373) (5,740)
Proceeds from disposal of plant and equipment 3,268 7,659
------------------------------
Net cash used for investing activities (12,813) (18,895)
------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 457 159
Repayment of long-term debt (4,738) (3,649)
Net proceeds from revolving credit agreements - 14,000
Common stock issued - -
Dividends on common and preferred stock (66) (1,051)
------------------------------
Net cash provided by financing activities (4,347) 9,459
------------------------------
NET INCREASE IN CASH AND TEMPORARY INVESTMENTS 15,410 (1,667)
CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF YEAR 16,671 17,696
------------------------------
CASH AND TEMPORARY INVESTMENTS AT END OF QUARTER $ 32,081 $ 16,029
==============================
</TABLE>
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<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 thirty-six
weeks ended September 10, 1994 and September 11, 1993, the financial position
as of September 10, 1994 and December 31, 1993, and the cash flows for the
thirty-six weeks ended September 10, 1994 and September 11, 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.
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<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 third quarter ended September 10, 1994 increased 2.4% to
$203,340,000 compared with revenue of $198,557,000 in the third quarter of
1993. Net earnings were $1,010,000, or $.15 per share, compared with a net
loss of $1,583,000, or $.24 per share, during the same period in 1993.
Revenue for the thirty-six weeks ended September 10, 1994 was
$659,173,000, an increase of 13.1% over the comparable period of 1993. Net
earnings were $6,510,000 compared with a net loss of $2,521,000 for 1993. The
Company's fiscal year consists of three 12-week quarters and a final 16-week
quarter.
During the third quarter of 1994, the Company's less-than-truckload
(LTL) business levels were approximately 95% of those of the prior year.
However, pricing levels improved by approximately 4%. The decline in volume in
the LTL operations during the third quarter is the result of a general
contraction in the unionized segment of the LTL carriers' market base and a
more aggressive pricing posture. Also, Carolina Freight Carriers (CFCC) and
G.I. Trucking are continuing to restructure the mix of business within their
LTL operations, which may keep volume levels down for the remainder of 1994.
Programs designed to reduce operating costs at CFCC continued during
the third quarter. The new terminal load plan, which will reduce freight
handling cost, has a targeted completion date of December 1994. The
computerized dock/yard tracking system, which will substantially improve the
efficiency and real time tracking capability for the CFCC breakbulk system, was
installed in the Carlisle distribution center. Implementation at the Chicago
and Atlanta distribution centers is scheduled for the fourth quarter. A
successful conversion of CFCC's linehaul tractor fleet is progressing with
nearly 350 new units currently in place.
Both Cardinal Freight Carriers and The Complete Logistics Company
enjoyed record third quarters. Cardinal showed revenue growth of 45.9% and The
Complete Logistics Company had revenue growth of 39.6%. In addition, G.I.
Trucking, the Company's west coast LTL operation, continued to show improved
operating results. Each company operated at a profit.
-7-
<PAGE> 9
CaroTrans International occupied its new corporate headquarters during the
third quarter. A new computer system - E-Sea Sail(R) - is expected to provide
CaroTrans a competitive advantage over other non vessel operating (NVO)
companies.
E-Sea Sail(R) simplifies international shipping by allowing the
electronic transfer of information relating to the issuance of ocean bills of
lading and booking ocean transportation.
The management team is committed to improving operating results in the
Company's core business, LTL freight transportation, through the programs
mentioned above, and to continuing the strong growth experienced in the
truckload and logistics companies.
The total number of service centers for the consolidated group at the
end of the quarter was 222.
Liquidity and Capital Resources
Net working capital at September 10, 1994 was a negative $9.1 million and
at December 31, 1993 was a negative $12.4 million. Cash and cash equivalents
were $32.1 million at September 10, 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.
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,
-8-
<PAGE> 10
certain other debt, and all interest thereon to be due and payable. No
revolving credit was outstanding at September 10, 1994 and at December 31,
1993.
Capital expenditures (net of proceeds of from disposal of operating
property) through the third quarter of 1994 were $12.8 million compared with
$18.9 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 of $13.5 million 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.
The long-term debt-to-equity ratio of the Corporation at September 10,
1994 was 54% 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.
-9-
<PAGE> 11
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 third 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 - 27. Financial Data Schedule (For SEC use only)
(b) Registrant did not file, nor was it required to file, with the
Commission in respect of any period in the quarter ended September 10, 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 October 20, 1994 BY /s/ Lary R. Scott
- ------------------------------ ----------------------------------
Lary R. Scott
Chairman and CEO
DATE October 20, 1994 BY /s/ Shawn W. Poole
- ------------------------------ ---------------------------------
Shawn W. Poole
Vice President and CFO
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<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27 Financial Data Schedule (For SEC use only)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF CAROLINA FREIGHT CORPORATION FOR THE 9 MONTHS ENDED
SEPTEMBER 10, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-10-1994
<CASH> 32,081
<SECURITIES> 0
<RECEIVABLES> 69,911
<ALLOWANCES> 5,612
<INVENTORY> 2,778
<CURRENT-ASSETS> 144,680
<PP&E> 510,475
<DEPRECIATION> 275,131
<TOTAL-ASSETS> 393,359
<CURRENT-LIABILITIES> 153,758
<BONDS> 69,212
<COMMON> 3,281
0
2,211
<OTHER-SE> 122,631
<TOTAL-LIABILITY-AND-EQUITY> 393,359
<SALES> 0
<TOTAL-REVENUES> 659,173
<CGS> 0
<TOTAL-COSTS> 637,576
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,950
<INTEREST-EXPENSE> 3,795
<INCOME-PRETAX> 13,827
<INCOME-TAX> 6,095
<INCOME-CONTINUING> 7,732
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,222)
<NET-INCOME> 6,510
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
</TABLE>
