<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 25, 1995
Commission File No. 1-8441
CAROLINA FREIGHT CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1349996
---------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 YORKMONT ROAD, SUITE 400
CHARLOTTE, NORTH CAROLINA 28217
--------------------------------
(Address of principal executive office)
(704) 329-0123
--------------
(Registrant's telephone number, including area code)
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 March 25, 1995
<PAGE> 2
CAROLINA FREIGHT CORPORATION
INDEX
Page No.
--------
Part I. Financial Information:
---------------------
Item 1: Financial Statements
------
Consolidated Condensed Statements of Earnings--
Twelve Weeks Ended March 25, 1995 and March 26, 1994 2
Consolidated Balance Sheets--
March 25, 1995 and December 31, 1994 3-4
Consolidated Statements of Cash Flows--
Twelve Weeks Ended March 25, 1995 and March 26, 1994 5
Notes to Consolidated Condensed Financial Statements 6
Item 2: Management's Discussion and Analysis 7-9
------
Part II. Other Information 10
<PAGE> 3
PART 1: ITEM 1. FINANCIAL INFORMATION
CAROLINA FREIGHT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
Twelve Weeks Ended March 25, 1995 and March 26, 1994
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in Thousands, except share data)
Twelve Weeks Ended
------------------------
March 25, March 26,
1995 1994
------------------------
<S> <C> <C>
Operating revenue $191,337 $192,630
------------------------
Operating expenses:
Employee compensation 121,923 122,691
Purchased transportation 26,691 22,640
Fuel and fuel taxes 10,156 10,671
Tires, repair parts and other operating supplies 10,401 9,631
Depreciation and amortization 7,928 8,109
Insurance premiums and claims 5,775 5,606
Communications and utilities 2,856 2,741
Operating taxes and licenses 2,864 2,761
Equipment and building rents 1,330 1,232
Gain on disposition of operating assets (4,336) (51)
General supplies and expenses 10,446 8,521
------------------------
Total operating expenses 196,034 194,552
------------------------
Earnings from operations (4,697) (1,922)
Interest and other expense, net 2,659 2,403
------------------------
Earnings (Loss) before income taxes (7,356) (4,325)
Income tax (benefit) (2,510) (1,407)
------------------------
Net earnings (loss) before cumulative effect of change in
accounting principle (4,846) (2,918)
Cumulative effect of change in accounting principle - (1,222)
------------------------
Net earnings (loss) ($4,846) ($4,140)
========================
Earnings (Loss) per share before cumulative
effect of change in accounting principle ($0.74) ($0.44)
Cumulative effect of change in
accounting principle - ($0.19)
Earnings (Loss) per share ($0.74) ($0.63)
Average common stock and common stock
equivalent shares outstanding 6,570,659 6,561,672
Cash dividends per common share $0.00 $0.00
</TABLE>
-2-
<PAGE> 4
CAROLINA FREIGHT CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 25, December 31,
1995 1994
------------------------------
<S> <C> <C>
Assets
--------------
Current assets:
Cash $10,226 $4,710
Temporary investments 6 5,011
Investments restricted under letter of credit arrangements
(at cost, which approximates market) 1,474 1,383
Customer and interline receivables, net 18,189 16,924
Customer receivables held by trust, net 30,761 38,782
Other receivables, net 15,186 13,260
Reinsurance balances receivable 10,947 12,149
Prepayments -
Tires on equipment in use 12,808 12,869
Other 13,650 6,871
Inventories of operating supplies 2,769 2,882
------------------------------
Total current assets 116,016 114,841
------------------------------
Plant and equipment, at cost:
Revenue and service equipment 257,839 260,378
Land and structures 167,032 180,706
Other equipment 65,572 63,947
Leasehold improvements 2,178 2,048
------------------------------
492,621 507,079
Less - accumulated depreciation and amortization (272,394) (275,145)
------------------------------
Net plant and equipment 220,227 231,934
------------------------------
Investments restricted under letter of credit arrangements
(at cost, which approximates market) 9,053 8,492
Other assets 15,211 15,047
------------------------------
$360,507 $370,314
==============================
</TABLE>
-3-
<PAGE> 5
CAROLINA FREIGHT CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 25, December 31,
1995 1994
------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
--------------------------------------------
Current liabilities:
Accounts payable $28,200 $34,525
Accrued wages, salaries and vacation pay 38,757 36,114
Claims and insurance accruals 25,870 31,860
Income taxes
Current (904) 1,439
Deferred 0 -
Other payables and accrued expenses 14,887 13,779
Current maturities of long-term debt 3,383 3,206
------------------------------
Total current liabilities 110,193 120,923
------------------------------
Long-term debt:
6 1/4% Convertible Subordinated Debentures, due 2011 49,994 49,994
Other long-term debt 16,798 18,283
------------------------------
Total long-term debt 66,792 68,277
------------------------------
Reserves and Deferred Credits:
Income taxes 17,108 17,779
Other deferred liabilities 8,188 7,813
Insurance claims 34,748 27,176
------------------------------
Total reserves and deferred credits 60,044 52,768
------------------------------
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 1995 and 1994 3,281 3,281
Paid-in capital 44,393 44,393
Retained earnings 73,593 78,461
------------------------------
Total stockholders' equity 123,478 128,346
------------------------------
$360,507 $370,314
==============================
</TABLE>
-4-
<PAGE> 6
CAROLINA FREIGHT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twelve Weeks Ended March 25, 1995 and March 26, 1994
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in Thousands)
Twelve Weeks Ended
------------------------------
March 25, March 26,
1995 1994
------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) ($4,846) ($4,140)
Noncash items included in income:
Depreciation and amortization 7,928 8,109
Deferred income taxes (671) (1,019)
(Increase) Decrease in customer and interline receivables 6,756 (7,850)
Increase (Decrease) in accounts payable (6,325) 734
Increase (Decrease) in claims payable and insurance accruals 1,582 5,361
Net increase (decrease) in other working capital items (4,538) (3,273)
Other, net (5,564) 17
------------------------------
Net cash provided by (used for) operating activities (5,678) (2,061)
------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of plant and equipment:
Revenue and service equipment (3,191) (2,332)
Land and structures (708) (624)
Other equipment and leasehold improvements (2,650) (778)
Proceeds from disposal of plant and equipment 15,542 681
------------------------------
Net cash used for investing activities 8,993 (3,053)
------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 577 8
Repayment of long-term debt (1,885) (3,485)
Net proceeds from revolving credit agreements - 10,000
Common stock issued - -
Dividends on common and preferred stock (22) (22)
------------------------------
Net cash provided by financing activities (1,330) 6,501
------------------------------
NET INCREASE IN CASH AND TEMPORARY INVESTMENTS 1,985 1,387
CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF YEAR 9,721 6,502
------------------------------
CASH AND TEMPORARY INVESTMENTS AT END OF QUARTER $11,706 $7,889
==============================
</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 ended March
25, 1995 and March 26, 1994, the financial position as of March 25, 1995 and
December 31, 1994, and the cash flows for the twelve weeks ended March 25, 1995
and March 26, 1994.
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 first quarter ended March 25, 1995, decreased 0.7% to
$191,337,000 compared with revenue of $192,630,000 in the first quarter of
1994. With several non-recurring items and a decline in business volumes of
the less-than-truckload (LTL) operations, a net loss of $4,846,000 or $0.74 per
share for the quarter was experienced. During the first quarter of 1994, the
company incurred a charge for a change in accounting principles because of a
Securities and Exchange Commission directive concerning discount rates on
self-insurance reserves.
Following the development of new marketing and network strategies in 1994,
Carolina Freight Carriers Corporation (CFCC) and Red Arrow Freight Lines, Inc.
(RAFL), both unionized LTL companies, began implementing the Metropolitan and
Regional Distribution Center (MRDC) system during the first quarter of 1995.
The change in operations, focusing on MRDCs, created non-recurring costs at the
service centers and regions affected. Included were:
1. Productivity losses with changes in freight handling and trailer load
factor - $2,800,000.
2. Relocation costs with the movement of contractual and non-contractual
employees - $800,000.
3. Training costs associated with MRDC startup - $600,000.
4. Miscellaneous non-recurring costs directly associated with MRDC conversion -
$750,000.
During the quarter, the company had an opportunity to sell the large, outdated
hub-and-spoke facility at Carlisle, PA, along with terminals in Charlotte, NC
and Fort Lauderdale, FL, generating a $4.3 million gain.
The first quarter proved to be a period of continued strong growth among
several of the company's subsidiaries.
G.I. Trucking (GITC) experienced revenue growth of 11.2% along with an 88.0%
operating ratio. GITC plans to build on its geographic coverage through the
opening of 12 new service centers in Idaho, Montana, and Wyoming during 1995.
Cardinal Freight Carriers enjoyed 38.9% revenue growth and a 90.6% operating
ratio. During 1995, flatbed operations will expand with an additional driver
base in Mississippi and with the delivery of over 50 new tractor/trailer units.
7
<PAGE> 9
CaroTrans International completed its first year of operations with first
quarter revenue of nearly $13 million and a 95.7% operating ratio. CaroTrans
is building access to world markets through a new partnership with InterWorld,
a West German freight forwarder serving Europe and the Middle East. With this
agreement, CaroTrans also increases its capabilities to handle expanded imports
into the United States.
The Complete Logistics Company (CLC) continued rapid growth with revenues up
26.4% with a 91.4% operating ratio. During the quarter, CLC purchased the
assets of Morada Distribution, Inc. of Modesto, CA. With this acquisition, CLC
will enhance its expertise to serve crucial warehousing markets and expand its
logistics services capabilities.
The results of the first quarter reflect changes within both our LTL operations
as well as the transportation industry in general. The company's response to
those changes have involved the operational realignment of CFCC and RAFL
coupled with expanded marketing efforts. Those actions along with the revenue
and service progress of other subsidiaries position your company for growth and
improved profitability in the long run.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital at March 25, 1995, was $5.8 million and at December 31,
1994, was a negative $6.1 million. Cash and cash equivalents were $11.7
million at March 25, 1995, and $9.7 million at December 31, 1994.
On March 17, 1994, Carolina Freight Carriers Corporation (CFCC) and Red Arrow
Freight Lines (RAFL) 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 $10 million ($15 million at December 31, 1994)
of revolving line of credit availability, $35 million of letters of credit and
expires June 30, 1996, substantially all of their revenue and service
equipment, $45.8 million of their land and structures and the Corporation's
customer receivables held by trust are pledged as collateral. This agreement
and other existing agreements contain restrictions regarding the maintenance of
specified debt-to-equity, 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 that 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. There were no outstanding
borrowings under the terms of the revolving credit agreement at March 25, 1995,
and at December 31, 1994.
Capital expenditures (before proceeds from disposal of operating property of
$15.5 million in 1995 and $.7 million in 1994) through the first quarter were
$6.5 million compared with $3.7 million in the prior year period. Planned 1995
capital expenditures are approximately $29.0
8
<PAGE> 10
million. It is anticipated that approximately $15.8 million will be expended
on revenue and service equipment, $5.5 million on terminal construction and
renovation, and $7.7 million for office, computer, and terminal equipment.
Capital expenditures (before proceeds from disposal of operating property of
$7.7 million) during 1994 were $28.3 million. Of this amount, $17.4 million
was expended for revenue and service equipment, $4.0 million for acquisition,
construction, and renovation of land and buildings and $6.9 million for office,
shop, and terminal equipment. Capital expenditures were financed through
internally generated funds.
Management anticipates that 1995 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 1995.
The long-term debt-to-equity ratio of the Corporation at March 25, 1995, was
54.1% compared with 53.2% at December 31, 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 first quarter of 1995, 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) 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 March 25, 1995, a report on Form
8-K.
10
<PAGE> 12
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: MAY 8, 1995 BY: /s/ Lary R. Scott
-----------------------------
Lary R. Scott
Chief Executive Officer
DATE: May 5, 1995 BY: /s/ Shawn W. Poole
-----------------------------
Shawn W. Poole
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CAROLINA FREIGHT CORPORATION FOR THE TWELVE WEEKS ENDED
MARCH 25, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-25-1995
<CASH> 11,706
<SECURITIES> 0
<RECEIVABLES> 80,587
<ALLOWANCES> 5,504
<INVENTORY> 2,769
<CURRENT-ASSETS> 116,016
<PP&E> 492,621
<DEPRECIATION> 272,394
<TOTAL-ASSETS> 360,507
<CURRENT-LIABILITIES> 110,193
<BONDS> 66,792
<COMMON> 3,281
0
2,211
<OTHER-SE> 117,986
<TOTAL-LIABILITY-AND-EQUITY> 360,507
<SALES> 0
<TOTAL-REVENUES> 191,337
<CGS> 0
<TOTAL-COSTS> 196,034
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 441
<INTEREST-EXPENSE> 1,415
<INCOME-PRETAX> (7,356)
<INCOME-TAX> (2,510)
<INCOME-CONTINUING> (4,846)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,846)
<EPS-PRIMARY> (0.74)
<EPS-DILUTED> (0.74)
</TABLE>
