<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
F O R M 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 TO 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________.
COMMISSION FILE NUMBER 015503.
------
FREYMILLER TRUCKING, INC.
- - --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
INDIANA 62-1307586
- - --------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
8621 NORTH ROCKWELL, OKLAHOMA CITY, OKLAHOMA 73132
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 720-6555.
----------------
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Since April 20, 1995, Freymiller Trucking, Inc. has been operating under
Bankruptcy Court protection pursuant to Chapter 11 of the Federal Bankruptcy
Code.
Indicate by check mark whether the registrant (2) 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 (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
Yes X No
----- -----
Registrant has only one class of common stock, of which 2,425,000 shares were
outstanding as of September 30, 1995.
1
<PAGE> 2
FREYMILLER TRUCKING, INC.
SEPTEMBER 30, 1995
I N D E X
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
-----------
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AT SEPTEMBER 30, 1995
AND DECEMBER 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED AND NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 6
STATEMENTS OF CASH FLOWS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 . . . . . . . . . . . . . . . . . . 7
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 6. EXHIBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FREYMILLER TRUCKING, INC.
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---- ----
(UNAUDITED)
<S> <C> <C>
Current Assets
Receivables:
Freight services, net $ 5,026,000 $ 9,848,000
Equipment sales, net 2,002,000 2,620,000
Other 609,000 686,000
------------ ------------
7,637,000 13,154,000
Inventories 407,000 433,000
Tires 1,242,000 3,293,000
Prepaid expenses and deposits:
Insurance 12,000 356,000
Licenses 130,000 42,000
Security deposits 1,143,000 283,000
Other 326,000 430,000
------------ ------------
1,611,000 1,111,000
------------ ------------
Other current assets 285,000 270,000
Total current assets 11,182,000 18,261,000
Property and equipment:
Land and improvements 11,000 11,000
Building and improvements 320,000 287,000
Revenue equipment 15,289,000 42,749,000
Furniture and fixtures 1,602,000 1,602,000
Other equipment 2,315,000 2,404,000
------------ ------------
19,537,000 47,053,000
Less accumulated depreciation
and amortization (6,724,000) (16,135,000)
------------ ------------
12,813,000 30,918,000
Other 7,105,000 5,815,000
------------ ------------
$ 31,100,000 $ 54,994,000
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
FREYMILLER TRUCKING, INC.
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
- - ------------------------------------ ---- ----
(UNAUDITED)
<S> <C> <C>
Liabilities Not Subject to Compromise
Current liabilities:
Cash overdraft $ 126,000 $ 1,521,000
Accounts payable 1,517,000 5,234,000
Short-term note payable(Note 2) 2,902,000 5,555,000
Current portion of long-term
debt (Note 2) 1,186,000 30,291,000
Current portion of capital
lease obligation (Note 2) - 370,000
Accrued liabilities:
Employee compensation and
amounts due owner operators 1,262,000 1,207,000
Insurance costs 931,000 2,995,000
Other 994,000 1,083,000
------------ ------------
3,187,000 5,285,000
------------ ------------
Total current liabilities 8,918,000 48,256,000
Deferred gain on sale of
property and equipment 1,228,000 1,368,000
Accrued insurance costs - 2,550,000
Liabilities Subject to Compromise 29,101,000 (a) -
------------ ------------
Total liabilities 39,247,000 52,174,000
Shareholder's equity:
Common stock $.01 par value;
10,000,000 shares authorized,
2,514,500 shares issued and
outstanding 25,000 25,000
Additional paid-in capital 8,997,000 8,997,000
Retained deficit (16,770,000) (6,061,000)
------------ ------------
(7,748,000) 2,961,000
Less treasury stock of 89,500
and 25,000 shares of common
stock, at cost, respectively (399,000) (141,000)
------------ ------------
Total shareholders'(deficit)equity (8,147,000) 2,820,000
------------ ------------
$ 31,100,000 $ 54,994,000
============ ============
</TABLE>
- Continued on Next Page -
4
<PAGE> 5
FREYMILLER TRUCKING, INC.
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(a) Liabilities subject to compromise consist of the following:
<TABLE>
<CAPTION>
1995
----
(UNAUDITED)
<S> <C>
Accounts payable $ 8,628,000
Current portion of long-term
debt (Note 2) 15,333,000
Current portion of capital lease
obligation (Note 2) 241,000
Accrued liabilities
Employee compensation and amounts
due owner/operators 121,000
Insurance costs 4,328,000
Other 450,000
------------
$ 29,101,000
============
</TABLE>
See accompanying notes.
Reference is made to the accompanying Notes and Management's Discussion and
Analysis for information related to the Chapter 11 bankruptcy filings made by
Freymiller Trucking, Inc. on April 20, 1995.
5
<PAGE> 6
FREYMILLER TRUCKING, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenue:
Freight services $ 13,104 $ 23,537 $ 55,024 $ 72,739
Operating expenses:
Salaries,wages & benefits 4,294 8,251 19,235 25,254
Purchased transportation 4,044 1,540 11,877 4,518
Fuel 1,247 3,959 6,885 12,569
Supplies & maintenance 1,578 3,451 7,754 9,705
Operating leases 1,106 1,031 4,912 3,734
Depreciation & amortization 629 1,850 2,873 5,541
Taxes & licenses 330 825 1,744 2,311
Insurance & claims 701 1,502 3,166 4,213
Communications & utilities 152 328 795 1,062
(Gain) loss disposition of
assets (137) 234 (1,164) 42
Other 311 808 2,185 2,571
--------- -------- -------- --------
14,165 23,839 60,262 71,520
--------- -------- -------- --------
Operating (loss) income (1,061) (302) (5,238) 1,219
Nonoperating income(expense):
Interest expense (222) (1,108) (1,750) (3,060)
Interest income 152 - 413 -
--------- -------- -------- --------
(70) (1,108) (1,337) (3,060)
--------- -------- -------- --------
Loss before reorganization
expense and provision
(benefit)for income taxes (1,131) (1,410) (6,575) (1,841)
Reorganization expense
(Note 1) (807) - (4,022) -
--------- -------- -------- --------
Loss before provision
(benefit)for income taxes (1,938) (1,410) (10,597) (1,841)
Provision(benefit)for
income taxes 1 (564) 112 (789)
--------- -------- -------- --------
Net Loss $ (1,939) $ (846) $(10,709) (1,052)
========= ======== ======== ========
Net loss per share $ (.80) $ (.34) $ (4.40) $ (.42)
========= ======== ======== ========
Weighted average number of
shares of common
outstanding 2,425 2,490 2,432 2,490
========= ======== ======== ========
</TABLE>
See accompanying notes.
Reference is made to the accompanying Notes and Management's Discussion and
Analysis for information related to the Chapter 11 bankruptcy filings made by
Freymiller Trucking, Inc. on April 20, 1995.
6
<PAGE> 7
FREYMILLER TRUCKING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net(loss)income $ (10,709,000) $ (1,052,000)
Adjustments to reconcile net(loss)
income to net cash (used) provided
by operating activities:
Depreciation and amortization 2,873,000 5,541,000
Benefit for deferred taxes - (693,000)
(Gain) loss on sales of assets (1,164,000) 42,000
Loss on assets sold in connection
with Chapter 11 proceeding 677,000 -
Decrease (increase) in freight
services and other receivables 4,899,000 (446,000)
Decrease (increase) in inventories
and tires 2,077,000 (232,000)
Increase in prepaid expenses (369,000) (712,000)
Increase in prepaid professional
fees in connection with Chapter
11 proceeding (131,000) -
(Increase) decrease in other
assets (1,290,000) 239,000
Increase(decrease)in accounts payable 2,877,000 (386,000)
Increase (decrease) in accrued
liabilities 251,000 706,000
------------- -----------
Net cash (used) provided by operating
activities (9,000) 3,007,000
Cash flows from investing activities:
Proceeds from disposition of
property and equipment 5,046,000 3,967,000
Proceeds for assets sold in connection
with Chapter 11 proceeding 11,277,000 -
Purchase of property and equipment (141,000) (121,000)
------------- -----------
Net cash provided by investing activities 16,182,000 3,846,000
</TABLE>
Continued on Next Page.
7
<PAGE> 8
FREYMILLER TRUCKING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from financing activities:
(Decrease)increase in cash
overdraft (1,395,000) 419,000
Borrowings under short-term
note payable 52,893,000 78,350,000
Repayments under short-term note
payable (55,546,000) (77,860,000)
Proceeds from long-term borrowings - 448,000
Purchase of treasury stock (258,000) -
Principal payments on long-term debt
and capital leasing obligations (11,867,000) (8,210,000)
----------- -----------
Net cash used by financing
activities (16,173,000) (6,853,000)
Net increase in cash - -
Cash at beginning of period - -
----------- ------------
Cash at September 30 $ - $ -
=========== ============
</TABLE>
See Accompanying Notes.
Reference is made to the accompanying Notes and Management's Discussion and
Analysis for information related to the Chapter 11 bankruptcy filings made by
Freymiller Trucking, Inc. on April 20, 1995.
8
<PAGE> 9
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
1. On April 20, 1995, the Company filed a voluntary petition in the
United States Bankruptcy Court for the Western District of Oklahoma
(the "Bankruptcy Court") seeking to reorganize under Chapter 11 of the
Bankruptcy Code. The Company continues to operate its business as a
debtor in possession under Sections 1107 and 1108 of the Bankruptcy
Code. Pursuant to provisions of the Bankruptcy Code, the commencement
or continuation of any judicial, administrative or other proceedings
against the Company relating to events occurring prior to April 20,
1995 are generally automatically stayed. Certain claims against the
Company in existence prior to the filing of the bankruptcy petition
are reflected in the September 30, 1995 balance sheet as "liabilities
subject to compromise".
The financial statements contained herein have been prepared in
accordance with generally accepted principles applicable to a going
concern and do not purport to reflect or to provide for all the
consequences of the ongoing Chapter 11 reorganization case.
Specifically, the financial statements do not present the amount which
will ultimately be paid with respect to claims and interests allowed
in the Chapter 11 reorganization case or the effect of any changes
which may be made in connection with the Company's capitalization or
operations resulting from a plan of reorganization. As a result of
reorganization proceedings under Chapter 11, the Company may take, or
be required to take, actions which may cause assets to be realized, or
liabilities to be liquidated, for amounts other than those reflected
in the financial statements. The appropriateness of continuing to
present financial statements on a going concern basis is dependent
upon, among other things, the terms of the ultimate plan of
reorganization and the Company's ability to generate sufficient cash
from operations and financing sources to meet its obligations.
The accompanying financial statements have not been audited. Certain
information and footnote disclosures, including significant accounting
policies, normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. It is suggested that the accompanying financial
statements and footnotes thereto be read in conjunction with the
financial statements and footnotes included in the Company's December
31, 1994 Form 10-K. The Company believes the financial statements for
the three and nine month periods ended September 30, 1995 and 1994
include all adjustments (which include normal recurring adjustments
and adjustments related
9
<PAGE> 10
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
1. (Continued)
to the downsizing of the Company discussed below) necessary for fair
presentation. Results for the nine month period may not be indicative
of the results of the entire year.
Because of the ongoing nature of the reorganization case, the
financial statements contained herein are subject to material
uncertainties, the outcome of which is not presently determinable.
The financial statements contained herein may not be indicative of the
results of future operations or financial position.
Pursuant to provisions of the Bankruptcy Code, liabilities arising
prior to the filing of the petition under Chapter 11 of the Bankruptcy
Code may not be paid without prior approval of the Bankruptcy Court.
Certain pre-petition liabilities have subsequently been paid by the
Company with the prior approval of the Bankruptcy Court. These
amounts included payments to foreign vendors and governmental
agencies; pension plans; wages, salaries, insurance benefits and
expense claims of returning employees; certain insurance claims of
non-returning employees; and adequate protection payments to certain
secured creditors.
The Company began to reorganize during the second quarter of 1995 by
downsizing its operations. Accordingly, certain assets which have no
value in the ongoing operations were written off and various losses
and costs were incurred as a direct result of the downsizing. These
charges have been classified as reorganization expense under
non-operating expense on the Company's statements of operations for
the three month and nine month periods ended September 30, 1995.
Components of reorganization expense for the three and nine month
periods ended September 30, 1995 included assets written off of
$445,000 and $873,000, tires and permits of $56,000 and $2,225,000,
losses on asset sales of $167,000 and $667,000, and professional fees
and other costs of $139,000 and $247,000, respectively.
2. On October 25, 1995, the Company filed a plan of reorganization (the
"plan") with the Bankruptcy Court. The plan contemplates the
reorganization of the Company by contracting its operations to focus
on the customers and the routes which management has identified as
most profitable and which can be served with its best tractors and its
best trailers.
10
<PAGE> 11
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
2. (Continued)
The plan states that, while management will continue to seek a person
or an entity interested in injecting capital into the Company, the
Company will effect an internal reorganization. On the plan's
effective date, all of the existing shares of the Company's issued and
outstanding common stock will be cancelled. The Company will issue
10,000,000 shares of new common stock, with a par value of $.01 per
share, to the Unsecured Trust, a trust created for the benefit of the
holders of unsecured claims which are not otherwise remedied in the
plan. The new common stock will be subject to a purchase right in
favor of the Company. The purchase right is intended to provide an
incentive for management to pay cash to the Unsecured Trust.
All creditors of the Company with pre-petition claims should read the
Disclosure Statement for Plan of Reorganization of Freymiller
Trucking, Inc. which has been filed with the Bankruptcy Court. The
Company has the exclusive right to solicit acceptances with respect to
the plan until December 28, 1995.
3. Prior to the bankruptcy proceedings, the Company had an agreement with
a bank expiring January 31, 1996 ("the Agreement") providing for
borrowings up to the lesser of 90% of eligible accounts receivable or
$10,000,000. The Agreement included a working capital line of credit
with maximum borrowings of $7,000,000 and standby letters of credit
up to $3,000,000, was secured by accounts receivable and certain other
collateral and bore interest at the bank's prime rate plus five
percent.
The Agreement, among other things, required the Company to achieve
certain operating results, maintain certain financial ratios, placed
certain restrictions on the acquisition and disposition of assets,
limited additional indebtedness and prohibited the payment of cash
dividends. The Company was in default of its covenants under the
Agreement and no additional borrowings or letters of credit are
available under the Agreement.
11
<PAGE> 12
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
3. (Continued)
In connection with it's proceedings under Chapter 11 of the U.S.
Bankruptcy Code, debtor-in-possession ("DIP") financing was arranged
with the bank. The DIP financing maintains the limits of the
Agreement described above while removing many of the covenants, thus
removing the defaults. A $600,000 overline was added which is secured
by the equity position the Company has established in certain revenue
equipment. Interest is incurred at a rate equal to the bank's prime
rate plus 2 percent per annum (10.75% at September 30, 1995). Under
the DIP financing arrangement, the Company agreed to submit its plan
of reorganization to the Bankruptcy Court by October 31, 1995 (see
Note 2) with confirmation of the plan to be achieved no later than
December 31, 1995. The bank agreed to extend the financing commitment
to the earlier of a date one year from the date the Company emerges
from bankruptcy or December 31, 1996.
At September 30, 1995, the outstanding loan balance under the DIP
financing arrangement was approximately $2,902,000, of which
$1,425,000 was unfunded stand-by letters of credit issued under the
Company's self-insurance programs for auto liability and worker's
compensation. No additional amount was available to the Company under
the financing as of that date.
At September 30, 1995 and December 31, 1994, the Company also had
outstanding secured term debt which totaled $16,519,000 and
$30,291,000, respectively, and capital lease obligations which totaled
$241,000 and $370,000, respectively. As a result of the bankruptcy,
the Company suspended payment on pre-petition obligations and is in
default. Accordingly, the total term debt and capital lease
obligations have been classified as current liabilities on the
accompanying balance sheets. The secured term debt has been reduced
in bankruptcy through asset sales and adequate protection payments
which were approved by the Bankruptcy Court. The Company also began
making current payments on its capital lease obligations within sixty
(60) days following commencement of the bankruptcy case.
The Company has determined that there is insufficient collateral to
cover the interest portion of scheduled payments on certain of its
pre-petition debt obligations. Contractual interest of approximately
$302,000 and $610,000, respectively, has not been recorded for the
three month and nine month periods ended September 30, 1995, related
to these under-secured debt obligations. Interest expense for all
other debt obligations has been accrued and expensed for the three and
nine months ended September 30, 1995.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
As explained in Note 1 to the financial statements as of September 30,
1995 and 1994, the Company filed a voluntary petition in the United
States Bankruptcy Court on April 20, 1995 seeking to reorganize under
Chapter 11 of the Bankruptcy Code. Subsequently, the Company has
downsized the number of its tractors by 49 percent, the number of
drivers by 59 percent and the number of non-driver personnel by 46
percent. The magnitude of the downsizing is the primary factor which
affected the Company's results of operations for the third quarter of
1995 and for the nine month period ended September 30, 1995.
The Company has written-off assets which have no value in the ongoing
operations and incurred various losses and costs as a direct result of
the downsizing. These charges have been classified as reorganization
expense under nonoperating expense on the Company's statements of
operations for the three month and nine month periods ended September
30, 1995. Components of reorganization expense for the three and nine
month periods ended September 30, 1995 included assets written off of
$445,000 and $873,000, tires and permits of $56,000 and $2,225,000,
losses on asset sales of $167,000 and $667,000, and professional fees
and other costs of $139,000 and $247,000, respectively.
Operating revenue for the third quarter of 1995 decreased 44% from the
third quarter of 1994. Operating revenue for the nine months ended
September 30, 1995 decreased 24% from the nine months ended September
30, 1994. The decreased revenue was primarily the result of the
downsizing of the Company described above. Additionally, the overall
rate per mile decreased from $1.11 in the first nine months of 1994 to
$1.08 in 1995, while equipment utilization increased slightly from 317
miles per day in the first nine months of 1994 to 330 miles per day in
1995. These statistics reflect the continuing weak economic
conditions that the industry in which the Company operates has been
experiencing.
The Company's operating loss was 8.1% of revenue in the third quarter
of 1995 compared to an operating loss of 1.3% of revenue in the third
quarter of 1994. Purchased transportation increased as a percentage
of revenue in the third quarter of 1995 compared to the third quarter
of 1994, while salaries and wages, fuel expense, supplies and
maintenance, taxes and licenses, and other operating expenses
decreased. The operating loss for the nine months ended September 30,
1995 was 9.52% of revenue compared to operating income of 1.68% for
the same period in 1994. Salaries and
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATION (CONTINUED)
wages, purchased transportation and supplies and maintenance,
increased as a percentage of revenue in the nine month period ended
September 30, 1995, while fuel expense, taxes and licenses, and other
operating expenses decreased. Each of these items is discussed in
more detail below. The Company's year-to-date operating results as of
September 30, 1995 were also impacted by a lag in the reduction of
costs behind the reduction of revenues experienced during and after
the downsizing of the fleet. While revenues declined immediately,
extended commitments to vendors and employees delayed the associated
cost savings.
Salaries, wages and benefits decreased to 32.8% of revenue in the
third quarter of 1995 compared to 35.1% of revenue in the third
quarter of 1994. Salaries, wages and benefits increased to 35.0% for
the first nine months of 1995 compared to 34.7% for the same period of
1994. While these changes do not appear significant, salaries, wages
and benefits could be expected to decrease to a larger extent as a
percentage of revenue because of the increase in purchased
transportation. Revenue from purchased transportation for the third
quarter and for the first nine months of 1995 represented 51.6% and
36.4% of total revenues, respectively, compared to 10.9% and 9.2% for
the same periods of 1994.
Salaries, wages and benefits did not decrease significantly as a
percentage of revenue primarily because of three factors: (1) Company
drivers were used in approximately 50% of the leased tractors on
average in 1995; (2) the Company chose to retain its most loyal and
experienced drivers during the downsizing of its fleet, thus paying
higher average rates and benefits for drivers; and (3) non-driver
salaries, wages and benefits remained constant as a percentage of
revenue between the periods. Management expects to see improvements
in each of these areas in the future. The Company is working to
reduce the number of its drivers in tractors leased from outside
operators, expects the average pay rate of its driver force to decline
through normal turnover of drivers and has made further reductions in
its non-driver personnel.
Supplies and maintenance costs decreased from 14.7% of revenues from
the third quarter 1994 to 12.0% of revenues for the third quarter of
1995. On a year-to-date basis these costs increased from 13.3% in
1994 to 14.1% in 1995. The year-to-date increase in supplies and
maintenance costs is primarily attributable to the aging of the
Company's fleet. Since 1993, the Company sought to run tractors
500,000 miles versus a former target of 350,000 miles in order to
reduce its
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATION (CONTINUED)
debt service requirements. Additionally, although the Company
attempted to separate costs associated with its reorganization in
bankruptcy to nonoperating expense, a certain amount of maintenance
costs associated with trade-in preparation on tractors and trailers is
reflected in the supplies and maintenance cost category on the
statements of operations for 1995.
The decrease in supplies and maintenance costs in the third quarter is
primarily due to the recent downsizing. The Company retired all of
the 1991 and 1992 tractors and the older trailers from its fleet. This
significant reduction in the fleet's average age should continue to
have a positive effect on maintenance costs.
Taxes and licenses expense decreased from 3.5% of revenues in the
third quarter of 1994 to 2.5% of revenues in the third quarter of
1995. On a year-to-date basis these expenses are down only slightly
from 3.18% of revenue in 1994 to 3.17% in 1995. These decreases were
primarily attributable the reduction of the Company's fleet size which
began to have an effect in the third quarter of 1995.
Insurance and claims expense decreased from 6.4% of revenues in the
third quarter of 1994 to 5.4% of revenues in the third quarter of
1995. On a year-to-date basis, insurance and claims expense decreased
from 5.8% of revenue in 1994 to 5.7% of revenue in 1995. The third
quarter decrease was primarily attributable to favorable negotiations
related to the Company's insurance premiums. During these
negotiations, management was also able to reduce the Company's
self-insurance exposure from $300,000 per claim to $2,500 per claim on
bodily injury and property damage insurance, and to $5,000 per
occurrence on physical damage insurance for the Company's equipment.
Operating leases increased as a percentage of revenues in 1995
compared to 1994 while depreciation and amortization decreased. These
results are attributable to the Company's decision to lease the
majority of its trailers which were previously owned. This was
accomplished by a sale-leaseback transaction entered into at the end
of December, 1994.
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS (CONTINUED)
Communications and utilities and other expense also decreased as a
percentage of revenues in 1995 compared to 1994. These decreases are
primarily attributable to the downsizing of the Company.
The Company's fuel expense dropped from 16.8% of revenue in the third
quarter of 1994 to 9.5% in the third quarter of 1995. On a
year-to-date basis the fuel costs dropped from 17.3% in 1994 to 12.5%
in 1995. These decreases were primarily due to a higher percentage of
the fleet being represented by owner-operators who pay for their own
fuel. In the first nine months of 1995, owner-operator miles were up
12,271,000 or 199% over the first nine months of 1994.
Interest expense decreased to 1.7% of revenues for the third quarter
of 1995 from 4.7% of revenues in the third quarter of 1994. On a
year-to-date basis, interest expense decreased from 4.2% of revenue in
1994 to 3.2% of revenue in 1995. These decreases were primarily the
result of the Company's determination in bankruptcy that there is
insufficient collateral to cover the interest portion of scheduled
payments on certain of its pre-petition debt obligations. Contractual
interest of approximately $302,000 and $610,000 respectively, was not
recorded for the three month and nine month periods ended September
30, 1995, related to these under-secured debt obligations. Had this
interest been recorded, interest expense would have increased to 4.0%
of revenues and 4.3% of revenues, respectively, for the three and nine
months ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company had outstanding installment
obligations secured by equipment totaling $14,385,000 bearing interest
at 6.5% to 11.85% and maturing at various dates through 1999. The
Company also had a mortgage loan secured by real estate with an
outstanding balance of $1,555,000 bearing interest at 11.10% and
maturing in 1995. The Company had $579,000 in miscellaneous
installment obligations at various interest rates maturing in 1995. In
addition, the Company had certain of its computer equipment under a
capital lease arrangement. At September 30, 1995, the capital lease
obligation totaled $241,000. The total term debt outstanding,
including the capital lease obligation, was $16,760,000 at September
30, 1995, all of which was classified as current maturities due within
one year. As a result of the bankruptcy petition discussed elsewhere
herein, the Company suspended payments and is in default on all of
these installment
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
obligations. The secured term debt has been reduced in bankruptcy
through asset sales and adequate protection payments which were
approved by the Bankruptcy Court. The Company also began making
current payments on its capital lease obligations within sixty (60)
days following commencement of the bankruptcy case.
In addition to its equipment financing, the Company had a line of
credit agreement with a bank ("the Agreement"), secured by the
Company's accounts receivable and certain other collateral, for
maximum borrowings of $10,000,000 bearing interest at the
lender's prime rate plus five percent and expiring on January 31,
1996. This facility provided a $7,000,000 working capital line of
credit and standby letters of credit up to $3,000,000.
The Agreement, among other things, required the Company to
achieve certain operating results, maintain certain financial
ratios, placed certain restrictions on the acquisition and
disposition of assets, limited additional indebtedness and
prohibited the payment of cash dividends. The Company was in default
of its covenants under the Agreement and no additional borrowings or
letters of credit are available under the Agreement.
In connection with the Company's efforts to reorganize under Chapter
11 of the Bankruptcy Code, debtor-in-possession ("DIP") financing was
arranged with the bank. The DIP financing maintains the limits of the
Agreement described above while removing many of the covenants. A
$600,000 overline was added which is secured by the Company's equity
position in certain revenue equipment. Interest is incurred at a rate
equal to the bank's prime rate plus 2 percent per annum (10.75% at
September 30, 1995). The DIP financing extends to the earlier of a
date one year from the date the Company emerges from bankruptcy or
December 31, 1996.
At September 30, 1995, the outstanding loan balance under the DIP
financing arrangement to the Company was approximately $2,902,000 of
which $1,425,000 was unfunded stand-by letters of credit issued under
the Company's self-insurance programs for auto liability and worker's
compensation. No additional amount was available to the Company under
the financing as of that date.
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company has experienced operating and net losses in each of the
last four years. In the first nine months of 1995, the Company
incurred an operating loss of $5,238,000 and a net loss of
$10,709,000. These losses were offset by decreases in receivables and
inventories and an increase in accounts payable resulting in positive
cash flow from operations during the first nine months of 1995 of
$2,090,000. Proceeds from the disposition of property and equipment
during the first nine months of 1995 totaled $16,258,000 of which
$13,901,000 was used to make principal payments on long-term debt and
capital lease obligations. An additional $258,000 was used to
purchase treasury stock during the first quarter of 1995 pursuant to a
prior contractual commitment of the Company. The Company reduced its
short-term note payable by $2,653,000 and its cash overdraft by
$1,395,000 in the nine month period ended September 30, 1995.
On October 25, 1995, the Company filed a plan of reorganization in
connection with its petition under Chapter 11 of the Bankruptcy Code.
Pursuant to provisions of the Bankruptcy Code, pre-petition payment
obligations have been suspended while post-petition payment
obligations are required to be met on an ongoing basis. To address
these obligations, the plan of reorganization includes, among other
things, down-sizing and a strategy for recapitalizing the Company.
The Company anticipates that cash flows from operations, working
within the framework of the DIP financing arrangement, will be
sufficient to meet the current, ongoing obligations of the
organization. However, a certain amount of new capital, yet to be
determined, will likely be necessary to cover administrative claims
and expenses and to allow for the purchase of licenses and permits
necessary to renew the Company's revenue equipment through the end of
1996. Management is pursuing various alternatives in this regard.
However, there can be no assurance that sufficient new capital will be
obtained. The success of the reorganization plan and the Company's
ability to obtain sufficient new capital will depend, in part, on the
Company's ability to maintain a sufficient market position and good
relationships with customers, vendors and employees while implementing
the down-sizing and recapitalizing strategy.
18
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As discussed elsewhere herein, the Company filed on April 20, 1995 a
voluntary petition in the United States Bankruptcy Court for the
Western District of Oklahoma seeking to reorganize under Chapter 11 of
the Bankruptcy Code. The Company continues to operate its business as
a debtor in possession under Sections 1107 and 1108 of the Bankruptcy
code. Pursuant to provisions of the Bankruptcy Code, the commencement
or continuation of any judicial, administrative or other proceedings
against the Company relating to events occurring prior to April 20,
1995, are generally automatically stayed.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As discussed elsewhere herein, the Company had a line of credit
agreement with a bank ("the Agreement"), secured by the Company's
accounts receivable and certain other collateral, for a maximum
borrowings of $10,000,000 consisting of a $7,000,000 working capital
line of credit and standby letters of credit up to $3,000,000. The
Company's pre-petition outstanding loan balance under the Agreement
was approximately $7,616,000 of which $2,025,000 was unfunded stand-by
letters of credit issued under the Company self-insurance program for
auto liability and worker's compensation.
The Company was in default under certain of its covenants in
connection with the Agreement, and no additional borrowings or letters
of credit are available under the Agreement. For more information
concerning negotiations with the bank relating to the Company's
compliance with its covenants under the Agreement, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and Note 3 of Notes to
the Financial Statements of the Company.
The Company also has outstanding secured term debt, including capital
lease obligations, totaling approximately $16,760,000 at September 30,
1995, and significant pre-petition unsecured obligations. As a result
of the bankruptcy, the Company suspended payment on the pre-petition
obligations and is in default.
19
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 6. EXHIBIT
(a) Exhibit
The following exhibit is filed as part of this Quarterly Report on
Form 10-Q:
<TABLE>
<CAPTION>
No. Description
<S> <C>
27.1 Financial Data Schedule
</TABLE>
20
<PAGE> 21
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.
FREYMILLER TRUCKING, INC.
BY: DON H. FREYMILLER
---------------------
DON H. FREYMILLER
PRESIDENT
AND CHIEF EXECUTIVE OFFICER
BY: RICHARD E. KUEHN
--------------------
RICHARD E. KUEHN
EXECUTIVE VICE PRESIDENT -
CHIEF FINANCIAL AND
OPERATING OFFICER
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION
- - --- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AS OF SEPTEMBER 30, 1995 AND STATEMENT OF OPERATIONS FOR
THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10Q
FILING FOR THE THIRD QUARTER OF 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 7,637
<ALLOWANCES> 0
<INVENTORY> 407
<CURRENT-ASSETS> 11,182
<PP&E> 19,537
<DEPRECIATION> 6,724
<TOTAL-ASSETS> 31,100
<CURRENT-LIABILITIES> 35,469
<BONDS> 0
<COMMON> 25
0
0
<OTHER-SE> (8,172)
<TOTAL-LIABILITY-AND-EQUITY> 31,100
<SALES> 0
<TOTAL-REVENUES> 55,024
<CGS> 0
<TOTAL-COSTS> 60,262
<OTHER-EXPENSES> 4,022
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,337
<INCOME-PRETAX> (10,597)
<INCOME-TAX> 112
<INCOME-CONTINUING> (10,709)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,709)
<EPS-PRIMARY> (4.40)
<EPS-DILUTED> (4.40)
</TABLE>
