<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
F O R M 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the fiscal year
ended December 31, 1994.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the transition period
from __________________ to ____________________.
COMMISSION FILE NUMBER 0-15503
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 Avenue Oklahoma City, OK 73132
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 720-6555
Securities registered pursuant to Section 12 (b) or the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.01 Par Value
________________________________________________________________________________
(Title of Class)
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 (or for such 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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K. [ ]
At March 27, 1995, there were outstanding 2,425,000 shares of the
Registrant's Common Stock, $.01 par value. The aggregate market value of
voting stock held by nonaffiliates of the Registrant was $2,421,000 as of March
27, 1995.
Part III is incorporated by reference from the Registrant's definitive
Proxy Statement for its 1995 Annual Meeting of Shareholders which will be
filed, pursuant to Regulation 14A, no later than 120 days after the close of
the Registrant's fiscal year.
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PART I
ITEM 1. BUSINESS
GENERAL
Freymiller Trucking, Inc. ("the Company") is a long-haul truckload carrier
providing transportation of temperature controlled and time sensitive materials
and general commodities pursuant to operating authority, both contract and
common, granted by the Interstate Commerce Commission ("the ICC"). The
Company, which is headquartered in Oklahoma City, Oklahoma, is an Indiana
corporation. The Company's business was begun as a sole proprietorship by Don
Freymiller in 1968.
The Company's current strategy involves increased equipment utilization,
higher freight rates, development of core carrier relationships with major
customers, replacement of older revenue equipment with new equipment, some
company-owned equipment additions while increasing its owner/operator fleet and
a consistent pattern of reduced relative debt levels.
MARKETING
The Company maintains marketing offices in Oklahoma City, Oklahoma;
Chesterton, Indiana; and Pennsauken, New Jersey. Marketing personnel travel in
their assigned regions to solicit new customers and maintain contact with
existing customers. Once a customer relationship is established, the primary
day to day Company contact is one of the Company's customer service
representatives.
Working from the Company's headquarters in Oklahoma City, the customer
service representatives regularly contact existing customers to solicit
additional business on a load-by-load basis, particularly when equipment will
be available nearby, following a completed haul. The Company's continuing
personal customer contact is designed to ensure a high level of customer
satisfaction and maximize the use of the Company's revenue equipment.
The Company sets its freight rates based on a number of factors, including
current market conditions and the level of service required by a particular
customer. Customers have the option of negotiating a contract for services with
the Company or using rates the Company has on file in its general tariff. The
Company's rate structure is designed to compensate the Company for the cost of
temperature controlled revenue equipment, as well as hauling loads into areas
that result in empty non-revenue miles to pick up the next load.
The Company transports a wide variety of commodities and, during 1994, no
customer accounted for more than 10% of the Company's freight revenue.
OPERATIONS
The Company specializes in high quality service to the temperature
controlled, time sensitive material and general commodities truckload freight
markets. During 1994, the Company derived approximately 86% of its revenues
from hauling temperature controlled products (approximately 60% of which were
perishable) and derived the remainder of its revenue from hauling dry freight.
The Company operates its fleet with driver managers located in Oklahoma
City, Oklahoma. Driver managers are responsible for the daily management of 45
to 60 drivers. Driver managers coordinate with the Company's marketing
personnel to match customer needs with Company capacity. This information is
constantly updated on the Company's management information system.
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While the Company operates in all 48 contiguous states, Canada and Mexico,
the Company's primary traffic lanes are between the West Coast and the Midwest,
between the West Coast and the Northeast and between the West Coast and Eastern
Canada. The average length-of-haul of a trip (one way) was 1,343 miles during
1994. The Company's loads generally move from origin directly to destination
thus eliminating the need for freight terminals.
COMPETITION
The Company competes primarily with other truckload carriers, private
carriage fleets and, to a lesser extent, railroads. The trucking industry is
highly competitive which results in aggressive pricing practices and narrow
operating margins. The Company attempts to mitigate downward rate pressures by
setting rates on the basis of its quality of service and its ability to provide
temperature controlled and other specialized services. Several other truckload
carriers have substantially greater financial resources than the Company, own
more equipment and carry a larger volume of freight.
REGULATION
The Company is a common and contract motor carrier regulated by the ICC and
various state and international agencies. These regulatory authorities have
broad powers governing activities such as authority to engage in motor carrier
operations, rates and charges, and certain mergers, consolidations and
acquisitions. The Motor Carrier Act of 1980 ("the Act") substantially
increased competition among motor carriers and limited the level of regulation
in the industry. The Act enables the applicants to obtain ICC operating
authority more easily and allows interstate motor carriers, such as the
Company, to change their rates without ICC approval. The Act also removed many
route and commodity restrictions on the transportation of freight.
Motor carrier operations are subject to safety requirements prescribed by
the United States Department of Transportation governing interstate operations.
Such matters as weight and dimensions of equipment are also subject to federal,
state and international regulations.
The Company also has intrastate operating authority in California.
The Company believes it is in substantial compliance with the regulations of
the above agencies.
EMPLOYEES
As of December 31, 1994, the Company employed 1039 persons, of whom 911
were drivers, mechanics and maintenance personnel. The balance consists of
supervisory, management and administrative personnel. None of the Company's
employees are represented by a collective bargaining unit, and the Company
considers relations with employees to be good.
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DRIVERS AND SAFETY
As of December 31, 1994, the Company employed 862 drivers and, in addition,
had contracts with owner/operators for the services of 72 tractors (which
provide that both the tractor and a qualified driver or driver team will be
available for the Company's exclusive use), and 63 equipment lease contracts
(which provide that the tractor will be available for the Company's exclusive
use and the Company will supply a qualified driver).
The Company believes its compensation program provides an important
incentive to attract and retain qualified drivers. Company drivers are paid on
a mileage basis and receive additional compensation for pick-ups, deliveries,
loading and unloading. Drivers are eligible for certain bonuses based on annual
mileage, safety and longevity criteria. Occasionally, there are shortages of
drivers in the trucking industry, particularly the long-haul segment. During
1994 the Company suffered through an extended period of disruption as it
relocated from Bakersfield, California to Oklahoma City, Oklahoma. This
disruption ultimately led to a substantial shortage of drivers. As a result,
the Company's equipment utilization and related revenue production was
negatively impacted. Reacting to this shortage, the Company sold its older
excess equipment to reduce unused capacity and paid off related equipment debt.
In addition, effective October 1, 1994, the Company issued a driver wage
increase and, for the first time in the Company's history, offered lateral
entry pay to compensate drivers for their verifiable experience with their most
recent employers. The Company also intensified its efforts in recruiting and
training student drivers. While the Company currently has a sufficient
number of qualified drivers, it cannot predict whether it will experience
shortages in the future.
The Company pays its owner/operators on a mileage basis. Owner/Operators
staff their equipment and pay for their own fuel, maintenance, repairs and
other expenses. During 1994 the Company initiated an equipment lease contract.
Under this arrangement the Company employs the driver and pays the equipment
owner on a mileage basis. The equipment owner is responsible for their own
fuel, maintenance, repairs and other expenses.
The Company is committed to safe operations. To promote safety
consciousness and limit the frequency and severity of accidents, the Company
has adopted several procedures including rigorous driver selection methods,
ongoing driver training and equipment maintenance programs.
SEASONALITY
The Company's revenues, consistent with the trucking industry's revenues in
general, show a seasonal pattern. The Company historically has experienced
higher revenues during the summer months due to higher rates and a higher
volume of shipments of frozen, perishable and refrigerated foods. In addition,
operating revenues may be affected by unusually inclement weather during the
winter months which can damage produce and delay shipments. The Company's
operating expenses have historically been higher in the winter months due
primarily to decreased fuel efficiency and increased maintenance costs of
revenue equipment in colder weather. The Company is continuing to reduce its
dependency on fresh produce freight to mitigate the impact of seasonality and
weather conditions.
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ITEM 2.PROPERTIES
REVENUE EQUIPMENT
The following table shows the number of tractors and trailers in the
Company's fleet, both those owned or leased by the Company and by owner/
operators, at the end of each of the past five years.
<TABLE>
<CAPTION>
As of December 31,
------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Company tractors 575 698 713 704 683
Owner/Operator tractors 72 56 50 20 27
Equipment Lease Contracts 63 --- --- --- ---
---- ---- ---- ---- ----
Total tractors 710 754 724 720 710
==== ==== ==== ==== ====
Company refrigerated trailers 909 948 930 904 823
Company dry vans -0- -0- 16 15 15
Owner/Operator trailers -0- -0- -0- 9 15
---- ---- ---- ---- ----
Total trailers 909 948 946 928 853
==== ==== ==== ==== ====
</TABLE>
At December 31, 1994, the Company's tractor fleet averaged approximately 30
months of age and the Company's trailer fleet averaged 62 months of age. The
Company is currently trading tractors at approximately 500,000 miles and its
trailers between five years and seven years. The tractor fleet secures most of
the outstanding long term debt of the Company.
OTHER PROPERTIES
The Company's executive offices are located in Oklahoma City, Oklahoma in
a 27,500 square foot brick building owned by the Company's Chairman of the
Board. The Company has leased approximately 24,000 square feet of the building
at $15,000 per month for seven years beginning August 1, 1994.
The Company maintains its former executive offices which are located on
approximately 9.7 acres of land in Bakersfield, California, as investment
property. This property was acquired by the Company in 1980 and contains
approximately 30,000 square feet of office space and 25,000 square feet of
equipment repair and maintenance space. The land and buildings secure a
mortgage on the property.
The Company also has a maintenance facility in Oklahoma City, Oklahoma. The
Oklahoma City property is leased by the Company for three years beginning
December 1, 1994 at a monthly rate of $4,000. The property consists of
approximately 25,000 square feet of maintenance and office space.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its business,
primarily involving claims for personal injury and property damage, incurred in
the transport of freight. The Company is self-insured for $1,000,000 per
occurrence for bodily injury or property damage to any third party for claims
incurred prior to September 1, 1993 and $300,000 for such claims that incurred
on or after September 1, 1993 and carries insurance for liability above those
amounts. The Company maintains deductibles, per occurrence, of $25,000 for
cargo damage and is fully self-insured for physical damage to Company
equipment. The Company is also self-insured in Oklahoma for workers'
compensation insurance with a loss limit of $500,000 per claim.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year covered by this report.
PART II
ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS MATTERS
The Company's Common Stock is traded over-the-counter on the NASDAQ National
Market System under the symbol FRML. The following table sets forth, for the
calendar periods indicated, the high and low last sales prices for the
Company's Common Stock. At March 27, 1995, there were 98 shareholders of
record of the Company's Common Stock. The Company believes there are at least
400 beneficial shareholders of the Company's Common Stock.
<TABLE>
<CAPTION>
1994 HIGH LOW
---- ---- ---
<S> <C> <C>
1st Quarter $5 3/4 $3 3/4
2nd Quarter 5 1/4 4
3rd Quarter 6 1/4 4
4th Quarter 4 1
</TABLE>
<TABLE>
<CAPTION>
1993 HIGH LOW
---- ---- ---
<S> <C> <C>
1st Quarter $6 $4 5/16
2nd Quarter 6 1/2 4 1/2
3rd Quarter 5 1/4 4 1/4
4th Quarter 5 1/4 3 3/4
</TABLE>
The Company has never paid a cash dividend on its common stock. It is the
intention of the Company's Board of Directors to continue to retain earnings to
finance the growth of the Company's business rather than to pay dividends. In
addition, the Company's loan agreements prohibit the payment of cash dividends.
Future payment of cash dividends will depend upon the Company's financial
condition, results of operations, capital commitments, terms of loan agreements
and other factors deemed relevant by the Board of Directors.
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ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
(In thousands, except operating information and per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Financial Information:
- - ---------------------
Operating revenues $ 95,152 $100,557 $94,712 $91,989 $85,161
Operating (loss) income 194 (3,112) 1,819 1,689 7,284
Net (loss) income ( 5,167) (5,503) (1,563) ( 1,776) 1,569
Net (loss) income per
share ( 2.08) ( 2.21) ( .63) ( .73) .64
Total assets 54,994 63,053 69,746 72,037 71,411
Long-term debt 21,946 23,444 27,036 30,860 30,476
Shareholders' equity 2,820 7,987 13,490 15,053 16,571
Operating Information:
- - ----------------------
Operating ratio (a) 99.8% 103.1% 98.1% 98.2% 91.4%
Average revenue per
mile $1.105 $1.058 $1.043 $1.060 $1.029
Average miles per
tractor per year (b) 116,500 125,000 122,000 120,000 131,000
Average revenue per
tractor per week (c) $2,477 $2,538 $2,458 $2,445 $2,604
Average number of
truckloads per week 1,110 1,187 1,073 1,091 955
Average miles per trip 1,343 1,379 1,625 1,525 1,664
Empty mile percentage 10.07% 10.19% 9.5% 9.1% 8.6%
</TABLE>
_______________
(a) Operating expenses as a percentage of operating revenues.
(b) Based on weighted average number of tractors throughout
the year to total miles.
(c) Based on weighted average number of tractors each week to total
operating revenues.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain expense
items to operating revenues for the years indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating revenues 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and benefits 35.4 38.2 37.0
Purchased transportation 7.2 5.2 4.6
Fuel 17.1 18.7 19.4
Supplies and maintenance 13.3 12.1 10.7
Operating leases 4.6 5.5 5.1
Depreciation and amortization 7.6 7.6 7.6
Taxes and licenses 3.4 4.1 4.1
Insurance and claims 5.6 5.0 4.4
Communications and utilities 1.5 1.3 1.5
Loss on disposition of assets .2 .4 .1
Relocation .2 1.0 -
Other 3.8 4.0 3.6
------ ------- ------
Total operating expenses 99.8 103.1 98.1
------ ------- ------
Operating income (loss) 0.2 ( 3.1) 1.9
Net interest expense (4.6) ( 4.3) (4.4)
------ ------- ------
Loss before benefit
for income taxes (4.4) ( 7.4) ( 2.5)
(Provision) benefit for income taxes (1.0) 2.5 .8
------ ------- ------
Net loss before cumulative
effect of accounting changes (5.4) ( 4.9) -
Cumulative effect of accounting
changes -- (.6) -
------ ------- ------
Net loss (5.4%) (5.5%) (1.7%)
====== ======= ======
</TABLE>
RESULTS of OPERATIONS
The Company began 1994 with a high degree of optimism. The 1994 first quarter
profitability was driven by continued improvement in the overall revenue rate
per mile, relatively low loss experience in the Company's self insurance
programs and reduced fuel expense attributable to fewer unaccounted miles. The
Company did experience a decrease in equipment utilization during the first
quarter, however, management firmly believed this was attributable to inclement
weather conditions and, to a lesser degree, an industry-wide driver shortage.
As the Company progressed through the second and third quarters of 1994, it
became increasingly evident that the disruption associated with the relocation
of the Company's headquarters from Bakersfield, California to Oklahoma City,
Oklahoma was much more significant than had been anticipated. The Company had
to replace over 75% of its non-driver personnel because of the move. Critical
areas such as operations, customer service and driver recruiting were some of
the areas that were affected the most. As a result, the key elements of the
Company's business, customers and drivers, were also the most affected.
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Operating revenues decreased 5.4% from 1993 to 1994 which was primarily
attributable to an 8% reduction in the Company's tractor utilization during
1994. The impact of the lower tractor utilization on operating revenues was
compounded by a 6% reduction in the Company's total tractor fleet during 1994.
These items were partially offset by improved revenue rates per mile during the
same period of time. High turnover of customer service, load planner, and
driver management personnel as a result of the Company's relocation from
California to Oklahoma had a negative impact on equipment utilization, driver
retention and recruitment. As a result, the Company experienced an unusually
high percentage of trucks without drivers throughout most of 1994.
Correspondingly, the Company's tractor utilization dropped from 499 miles per
day per tractor in 1993 to 457 miles per day per tractor in 1994. Persistent
progress in the Company's sales and marketing efforts increased average revenue
rates per mile from $1.058 in 1993 to $1.107 in 1994.
Operating revenues increased 6% from 1992 to 1993 which was primarily the
result of increased rates and improved tractor utilization. Average revenue
rates per mile increased from $1.043 per mile in 1992 to $1.058 per mile in
1993. The improved rates accounted for 24% of the increase in revenue in 1993
over 1992. At the same time, tractor utilization improved from 480 miles per
day per tractor in 1992 to 499 miles per day per tractor in 1993.
The Company's operating income improved from a negative 3.1% in 1993 to a
positive 0.2% in 1994. This improvement was largely attributable to the
absence of the large non-recurring charges that the Company incurred during
1993 for worker's compensation insurance reserve accounts (see salaries, wages
and benefits discussion below) and relocation expenses. These items negatively
effected the 1993 operating income by approximately 2%. The balance of the
improvement in 1994 is primarily the result of a lower incidence of claims
under the Company's benefit related self insurance programs for health and
worker's compensation and a lower cost of operating taxes and licenses. The
Company's operating income continues to be negatively impacted by higher
supplies and maintenance costs associated with operating tractors at higher
mileage levels. It is the Company's intent to sell the oldest of this
equipment and replace it with independent owner/operators who own and maintain
their own tractors. In addition, the Company is attempting to arrange
equipment financing to replace as many of the remaining oldest tractors as
possible.
The Company's operating income dropped from 1.9% of revenue in 1992 to a
negative 3.1% in 1993. This drop in operating income was primarily the result
of a higher incidence of claims under the Company's self insurance programs and
the adoption of Financial Accounting Standard No. 112 (FAS 112), Accounting for
Postemployment Benefits (see Note 10 of "Notes to Financial Statements").
Higher supplies and maintenance costs in 1993 also had a negative impact on
operating income as the Company suspended its two year tractor replacement
program as part of the Company's strategy to reduce its outstanding term debt.
Finally, the Company accrued the estimated relocation costs of the Company's
move from Bakersfield, California to Oklahoma City, Oklahoma.
Salaries, wages and benefits decreased from 38.2% of revenues in 1993 to 35.4%
of revenues in 1994. This decrease was attributable to the absence of the
large non-recurring charges that the Company incurred during 1993 for worker's
compensation insurance reserve accounts, as well as a lower incidence of claims
under the Company's benefit related self-insurance programs for health and
worker's compensation during 1994. In addition, as the Company continues to
increase the percentage of owner/operator equipment relative to Company-owned
equipment, this expense will decrease as a percentage of revenue with a related
increase in purchased transportation as a percentage of revenue.
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Salaries, wages and benefits increased from 37.0% of revenues in 1992 to 38.2%
of revenues in 1993. This increase was largely the result of the early adoption
of FAS 112.Effective January 1, 1993, the Company elected the early adoption of
the requirements of FAS 112. This statement requires that the cost of
postemployment benefits, which are primarily workers' compensation related, be
recognized in the financial statements during the employees' active working
careers. To comply with FAS 112, the Company changed its method of measuring
the estimated liability for workers' compensation to employ actuarial
assumptions to discount to present value the estimated future payments of these
claims, using a discount rate of 4% for 1993. As a result of the adoption of
FAS 112, the Company recorded a charge to earnings of $957,000 in 1993 as an
operating expense. The increased reserve requirements for workers' compensation
claims are reflected as salaries, wages and benefits expense. This increase
related to the FAS 112 adjustment was partially offset by decreased levels of
non-driver personnel in 1992. The implementation of certain changes to the
Company's software allowed for the reduction of non-driver personnel. These
changes were not fully implemented until late in the second quarter of 1992.
The decrease in staffing levels was further augmented by an increased reliance
on of the Company's owner/operator fleet and a corresponding decrease in the
Company-owned fleet and an increase in revenue rates per mile. The higher
revenue rates per mile in 1993 required the Company's drivers to drive less
miles to produce the equivalent dollar volumes of 1992 revenues. Payments to
owner/operators is recorded as purchased transportation.
Purchased transportation increased from 4.6% of revenues in 1992 to 5.2% of
revenues in 1993 and to 7.2% of revenues in 1994. The increase in this
expense, which represents payments to owner/operators, resulted from the
expansion of the Company's owner/operator fleet in each of the years. An
increased reliance on an owner/operator fleet will reduce the Company's capital
requirements for tractors (owner/operators own their tractors) and provide an
opportunity for the Company to continue to maintain lower relative equipment
debt levels.
The Company's fuel expense decreased from 19.4% of revenues in 1992 to
18.7% in 1993 to 17.1% in 1994. This decrease was primarily due a higher
percentage of the fleet being represented by owner/operators who pay for their
own fuel, and to reduced fuel consumption attributable to a lower unaccounted
mile percentage in 1994 compared to 1993, and in 1993 compared to 1992 coupled
with higher average revenue rates per mile in 1994 compared to 1993 and in 1993
compared to 1992. Through the reorganization of the operations department, the
Company was successful in reducing unaccounted miles by 5% in 1994 compared in
1993 levels and by 20.0% in 1993 compared to 1992 levels. Additionally, the
higher revenue rates per mile in 1994 over 1993 and in 1993 over 1992 allowed
the Company's tractors to travel progressively fewer miles to produce the
equivalent dollar volume of revenues. The less miles driven, the less fuel is
consumed, thereby decreasing costs.
Supplies and maintenance expense increased from 10.7% of revenues in 1992 to
12.1% of revenues in 1993 to 13.3% of revenues in 1994. These increases are
primarily the result of the Company's decision to suspend its two year tractor
replacement program. The Company currently runs its tractors for 500,000 miles
versus a former target of 350,000 miles. The Company initially believed that
the savings to be obtained from lower debt service requirements would more than
offset the increase in the maintenance expense over a two to three year period.
However, the maintenance expense in older equipment has escalated at a more
rapid pace than anticipated by management. Consequently, to the extent that
the Company can arrange suitable financing, management intends to replace up to
250 older tractors during 1995.
Insurance and claims expense increased from 5.0% of revenues in 1993 to 5.6% in
1994. This increase is primarily attributable to a slightly higher premium
cost for excess coverage on a smaller revenue base. The actual claims
experienced under the Company's self insurance programs were slightly improved
as a percent of revenue in 1994 versus 1993. Insurance and claims expense
increased from 4.4% of revenues in 1992 to 5.0% in 1993. This increase was the
result of a less favorable loss performance in 1993 compared to 1992.
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Operating leases and depreciation and amortization expense on a combined basis
remained relatively constant as a percentage of revenue for 1994, 1993 and
1992.
Taxes and licenses decreased from 4.1% of revenue in 1993 to 3.4% of revenue in
1994. This decrease is primarily attributable to an increase in the
owner/operator fleet with a corresponding decrease in Company-owned equipment.
Over the road operating taxes are paid by the owner/operator on his tractor and
by the Company on Company-owned equipment. Taxes and licenses remained
consistent as a percentage of revenue in 1993 and 1992.
Communications and utilities expense remained relatively consistent as a
percentage of revenue for 1994, 1993 and 1992.
Other expenses remained relatively consistent as a percentage of revenues in
1994 compared to 1993 and, increased slightly from 3.6% of revenues in 1992 to
4.0% of revenues in 1993. The increase from 1992 to 1993 was primarily due to
increases in certain operating costs associated with a change in traffic lanes
initiated by the development of the core carrier relationship previously
discussed. As the core carrier relationships become more firmly established,
the Company believes that these costs will stabilize and be offset by higher
average revenue rates per mile. The slight decrease in 1994 from 1993 is an
indication of this trend.
Interest expense was relatively consistent at 4.6% of revenues in 1994 compared
to 4.3% of revenues in 1993. The slight decrease to 4.3% of revenues in 1993
from 4.4% in 1992 was primarily the result of the Company's reducing its short
and long-term debt by $5,766,000 between December 31, 1992 and December 31,
1993, which was offset somewhat by higher average borrowings and interest rates
on the Company's working capital line of credit.
The Company recorded $981,000 of relocation costs in 1993 associated with the
Company's announced 1994 relocation of its corporate offices from Bakersfield,
California to Oklahoma City, Oklahoma. Approximately $316,000 of such costs
related to estimated severance pay for displaced employees after the closure of
the Bakersfield facility. The remaining $665,000 relates to the moving costs
associated with transferring Company assets and personnel to Oklahoma City.
The Company incurred an additional $189,000 in 1994 in relocation expenses
representing the final costs associated with the move from California to
Oklahoma.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109 "Accounting for Income Taxes" (FAS 109), without
retroactive restatement. Under this method, income tax liabilities and assets
are recognized at enacted tax rates for the expected future tax consequences of
temporary differences between carrying amounts and tax bases of assets and
liabilities. There was no significant impact on the Company's 1993 operations
as a result of the adoption of FAS 109.
FAS 109 requires an evaluation of the likelihood that a deferred tax asset will
be fully utilized prior to the expiration of the particular elements that
created the asset (such as net operating loss carry forwards). To the extent
that the Company cannot adequately project full utilization of the deferred tax
asset, a valuation allowance should be established. As a result of such
testing, the Company established a valuation allowance of $2,909,000 to reserve
the entire net deferred tax asset as of December 31, 1994. Since a portion of
the Company's deferred tax asset had been recorded as of December 31, 1993, the
1994 valuation allowance adjustment resulted in a deferred tax provision of
$980,000. To the extent that the Company is successful in generating future
taxable income, the valuation allowance will be reversed against future tax
provisions resulting in a tax benefit in those future periods.
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By the end of the 1994 fourth quarter the new operations and customer service
personnel had become much more settled. In addition, the driver recruiting
department had begun to have success in staffing the Company's equipment with
qualified drivers. The recruiting efforts were supplemented by a driver wage
increase that was effective October 1, 1994, and was instituted in response to
industry-wide increases. The Company continues to focus on increased equipment
utilization in core carrier relationships while working to arrange equipment
financing to replace its older fleet. The Company's success in these two
areas will directly affect the quantity and quality of the revenue produced, as
well as the associated maintenance and operating costs to produce that revenue.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994, the Company had outstanding installment obligations
secured by equipment totaling $28,128,000 bearing interest at 7.825 % to 11.50%
and maturing at various dates through 1999. The Company also has a mortgage
loan secured by real estate with an outstanding balance of $1,550,000 bearing
interest at 11.1%, and maturing in 1995. The Company has $613,000 in
miscellaneous installment obligations at various dates maturing through 1996.
In addition, the Company has certain of its computer equipment under a capital
lease arrangement. At December 31,1994, the capital lease obligation totaled
$370,000. The total term debt outstanding, including the capital lease
obligation, was $30,661,000 at December 31, 1994, of which $8,716,000 was
classified as current maturities due within one year.
In addition to its equipment financing, the Company has a line of credit with a
bank, secured by the Company's accounts receivable, for maximum borrowings of
$10,000,000, bearing interest at the lender's prime rate plus four and
one-quarter percent (currently 13.5%) and expires on January 31, 1996. This
facility provides a $7,000,000 working capital line of credit and standby
letters of credit up to $3,000,000. Advances under the line of credit are
limited to a fixed portion of the Company's trade accounts receivable. Based
upon the level of the Company's trade accounts receivable at December 31, 1994
the Company had fully utilized this working capital line.
The Company has experienced operating and net losses in each of the last three
years. These losses have made it difficult for the Company to achieve a
positive cash flow on a consistent basis and to timely meet its current
obligations. During 1994, in order to relieve the cash flow pressure and
provide additional liquidity, the Company negotiated and consummated a sale
leaseback transaction on substantially all of its trailer fleet, sold older
assets in which it had a net cash equity position, and negotiated revised and
extended terms on remaining equipment obligations.
As can be seen in the Company's statements of cash flows for the year ended
December 31, 1994, the net loss was $5,167,000 after a deferred tax provision
of $980,000. The pre-tax operating loss for 1994 was $4,187,000. The net
effects of the sale leaseback transaction and sale of assets in which the
Company had net cash equity are located in the cash flows from investing and
financing activities sections of the statements of cash flows. Proceeds from
the disposition of property and equipment totaled $18,178,000 of which
$16,680,000 was used to make principal payments of long-term debt and capital
lease obligations. At December 31, 1994, approximately $2,100,000 of these
sales proceeds were uncollected which is the primary reason for the increase of
$2,478,000 in equipment notes receivable. The $2,100,000 was collected in
January, 1995.
Through the cooperation of its various equipment lenders, the Company was able
to negotiate certain beneficial changes to its existing equipment obligations.
These changes included scheduled months for which no payment is due, stated
periods for which interest only is due, and extended note maturity dates to
reduce current monthly obligations. While these efforts provided some relief,
the Company continues to face periodic difficulties in meeting all equipment
obligations as they come due.
12
<PAGE> 13
To address its cash flow deficit, the Company has made efforts to obtain new
capital. As of the date of this filing, management has met with a number of
interested persons, none of whom has made or is expected to make a proposal.
While the Company will continue to pursue new capital, in the view of
management, it is unlikely that such new capital will be available in the
immediate future.
Given the uncertainty that an injection of new capital will occur in the
immediate future and the continuing cash flow deficit, management anticipates
that the Company will file a voluntary petition under Chapter 11 of the
Bankruptcy Code in the immediate future. The Company has commenced affirmative
actions in connection with such a filing.
13
<PAGE> 14
<TABLE>
<CAPTION>
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PAGE
----
<S> <C>
Index to Financial Statements:
Report of Independent Public Accountants 15-16
Balance Sheets 17-18
Statements of Operations 19
Statements of Shareholders' Equity 20
Statements of Cash Flows 21-22
Notes to Financial Statements 23-33
</TABLE>
14
<PAGE> 15
Report of Independent Public Accountants
To the Shareholders and Board of Directors
Freymiller Trucking, Inc.:
We have audited the accompanying balance sheets of Freymiller Trucking
Inc. (an Indiana Corporation) as of December 31, 1994 and 1993, and the related
statements of operations, shareholders' equity and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Freymiller
Trucking, Inc. as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed further in Note 2 to
the financial statements, the Company has suffered recurring losses from
operations and has an accumulated deficit and management anticipates that the
Company will file a voluntary petition under Chapter 11 of the Bankruptcy Code.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 2. The financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
As discussed in Note 6 and Note 10 to the financial statements, the
Company changed its method of accounting for post-employment benefits and
income taxes effective January 1, 1993.
Our audit was made for the purpose of forming an opinion on the basic
financial statements as of December 31, 1994 and 1993, and the years then ended
taken as a whole. The schedule listed in Item 14(a)(2) is the responsibility of
the Company's management and is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in our audit of the basic financial statements and in our
opinion, fairly states in all material respects the financial data for 1994 and
1993 required to be set forth therein in relation to the basic 1994 and 1993
financial statements taken as a whole.
Arthur Andersen LLP
Oklahoma City, Oklahoma
March 13, 1995
15
<PAGE> 16
Report of Independent Auditors
Shareholders and Board of Directors
Freymiller Trucking, Inc.
We have audited the accompanying statements of operations,
shareholders' equity and cash flows of Freymiller Trucking, Inc. for the year
ended December 31, 1992. Our audit also included the financial statement
schedule for the year ended December 31, 1992 listed in the index to Item 14
(a). These financial statements and schedule are the responsibility of the
Company management. Our responsibility is to express an opinion on these
financial statements and schedule, based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the results of its operations and its cash
flows for the year ended December 31, 1992, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Fresno, California
March 5, 1993
16
<PAGE> 17
FREYMILLER TRUCKING, INC.
BALANCE SHEETS
December 31, 1994 and 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
- - ------ ---- ----
<S> <C> <C>
Current assets:
Receivables (Note 1):
Freight services, net (Notes 3 & 4) $ 9,848,000 $ 9,500,000
Equipment sales, net (Note 3) 2,620,000 142,000
Other 686,000 883,000
------------ ------------
13,154,000 10,525,000
Inventories (Note 1) 433,000 369,000
Tires 3,293,000 3,818,000
Prepaid expenses and deposits:
Insurance 356,000 779,000
Licenses 42,000 248,000
Security deposits 283,000 171,000
Other 430,000 327,000
------------ ------------
1,111,000 1,525,000
------------ ------------
Other current assets 270,000 -
Total current assets 18,261,000 16,237,000
Property and equipment (Notes 1,7 & 8):
Land and improvements 11,000 950,000
Buildings and improvements 287,000 3,707,000
Revenue equipment 42,749,000 60,226,000
Furniture and fixtures 1,602,000 1,611,000
Other equipment 2,404,000 3,051,000
------------ ------------
47,053,000 69,545,000
Less accumulated depreciation and
amortization (16,135,000) (25,099,000)
------------ ------------
30,918,000 44,446,000
Deferred income taxes (Notes 1 & 6) - 980,000
Other 5,815,000 1,390,000
------------ ------------
$54,994,000 $63,053,000
=========== ===========
</TABLE>
See accompanying notes.
17
<PAGE> 18
FREYMILLER TRUCKING, INC.
BALANCE SHEETS
December 31, 1994 and 1993
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
- - ------------------------------------ ---- ----
<S> <C> <C>
Current liabilities:
Cash overdraft $1,521,000 $685,000
Accounts payable (Note 1) 5,234,000 7,031,000
Note payable to bank (Note 4) 5,555,000 5,690,000
Current portion of long-term
debt (Note 7) 8,550,000 11,223,000
Current portion of capital lease
obligations (Note 8) 165,000 175,000
Accrued liabilities:
Employee compensation and amounts due
owner operators 1,207,000 1,319,000
Insurance costs (Note 5) 2,995,000 2,334,000
Other 1,083,000 615,000
----------- -----------
5,285,000 4,268,000
----------- -----------
Total current liabilities 26,310,000 29,072,000
Long-term debt (Note 7) 21,741,000 23,366,000
Capital lease obligations (Note 8) 205,000 78,000
Deferred gain on sale of property and equipment 1,368,000 -
Accrued insurance costs (Notes 1 & 5) 2,550,000 2,550,000
----------- -----------
Total Liabilities 52,174,000 55,066,000
Commitments and contingencies
(Notes 5, 9, & 12)
Shareholders' equity (Notes 1 & 11):
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) earnings (6,061,000) (894,000)
----------- -----------
2,961,000 8,128,000
Less treasury stock, 25,000 shares,
at cost (141,000) (141,000)
----------- -----------
Total shareholders' equity 2,820,000 7,987,000
----------- -----------
$54,994,000 $63,053,000
=========== ===========
</TABLE>
See accompanying notes.
18
<PAGE> 19
FREYMILLER TRUCKING, INC.
STATEMENTS OF OPERATIONS
Years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating revenues:
Freight services $95,152,000 $100,557,000 $94,712,000
Operating expenses:
Salaries, wages & benefits 33,716,000 38,455,000 35,027,000
Purchased transportation 6,837,000 5,261,000 4,306,000
Fuel 16,249,000 18,780,000 18,333,000
Supplies and maintenance 12,653,000 12,188,000 10,096,000
Operating leases (Note 9) 4,397,000 5,503,000 4,820,000
Depreciation and
amortization 7,198,000 7,646,000 7,198,000
Taxes and licenses 3,201,000 4,115,000 3,917,000
Insurance and claims 5,332,000 4,955,000 4,213,000
Communications and
utilities 1,465,000 1,376,000 1,403,000
Loss on disposition of assets 148,000 368,000 142,000
Relocation 189,000 981,000 -
Other 3,573,000 4,041,000 3,438,000
----------- ----------- ------------
94,958,000 103,669,000 92,893,000
----------- ----------- ------------
Operating income (loss) 194,000 ( 3,112,000) 1,819,000
Nonoperating income (expense):
Interest expense (4,393,000) ( 4,368,000) (4,213,000)
Interest income 12,000 - 6,000
----------- ----------- ------------
(4,381,000) (4,368,000) (4,207,000)
----------- ----------- ------------
Loss before benefit
for income taxes (4,187,000) ( 7,480,000) (2,388,000)
(Provision) benefit for income taxes
(Note 6) (980,000) 2,519,000 825,000
----------- ----------- ------------
Loss before cumulative
effect of accounting changes (5,167,000) ( 4,961,000) (1,563,000)
Cumulative effect
of accounting changes, net
(Notes 6 and 10) - (542,000) -
----------- ----------- ------------
Net loss $(5,167,000) $(5,503,000) $(1,563,000)
=========== =========== ============
Per share information:
Loss per share before cumulative
effect of accounting changes $(2.08) $(1.99) $(.63)
Cumulative effect
of accounting changes - (.22) -
----------- ----------- ------------
Net loss per share $(2.08) $(2.21) $(.63)
=========== =========== ============
Weighted average number of
shares of common stock
outstanding 2,489,500 2,489,500 2,489,500
</TABLE>
See accompanying notes.
19
<PAGE> 20
FREYMILLER TRUCKING, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Common Stock Additional Retained Total
--------------------- Paid-in (Deficit) Treasury Shareholders'
Shares Amount Capital Earnings Stock Equity
------ ------ ------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1991 2,514,500 $25,000 $8,997,000 $6,172,000 $(141,000) $15,053,000
Net loss - - - (1,563,000) - (1,563,000)
--------- ------- ---------- ----------- --------- -----------
Balance at
December 31, 1992 2,514,500 25,000 8,997,000 4,609,000 (141,000) 13,490,000
Net loss - - - (5,503,000) - (5,503,000)
--------- ------- ---------- ----------- --------- -----------
Balance at
December 31, 1993 2,514,500 25,000 8,997,000 (894,000) (141,000) 7,987,000
Net loss - - - (5,167,000) - (5,167,000)
--------- ------- ---------- ----------- --------- -----------
Balance at
December 31, 1994 2,514,500 $25,000 $8,997,000 $(6,061,000) $(141,000) $2,820,000
========= ======= ========== =========== ========= ===========
</TABLE>
See accompanying notes.
20
<PAGE> 21
FREYMILLER TRUCKING, INC.
STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(5,167,000) $(5,503,000) $(1,563,000)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 7,198,000 7,646,000 7,198,000
Provision (benefit) for deferred income
taxes 980,000 (2,902,000) ( 843,000)
Loss on disposition of assets 148,000 368,000 142,000
Changes in operating assets and
liabilities:
(Increase) decrease in freight
service & other receivables (151,000) (438,000) 542,000
Decrease (Increase) in
inventories and tires 461,000 ( 2,000) ( 269,000)
Decrease (increase) in prepaid
expenses and deposits 414,000 233,000 ( 53,000)
Decrease (increase) in other
assets (1,144,000) - -
(Decrease) Increase in
accounts payable (1,797,000) 1,787,000 1,751,000
Increase (decrease) in
accrued liabilities 1,017,000 3,223,000 1,067,000
Increase in other assets - ( 167,000) ( 184,000)
(Decrease) increase in other
liabilities - (60,000) -
------------ ----------- -----------
Net cash provided by
operating activities 1,959,000 4,185,000 7,788,000
------------ ----------- -----------
Cash flows from investing activities:
Proceeds from the disposition of
property and equipment 13,787,000 3,978,000 3,622,000
Purchase of property and equipment (215,000) (106,000) (1,097,000)
------------ ----------- -----------
Net cash provided by
investing activities $13,572,000 $3,872,000 $2,525,000
------------ ----------- -----------
</TABLE>
(continued)
See accompanying notes.
21
<PAGE> 22
FREYMILLER TRUCKING, INC.
STATEMENTS OF CASH FLOWS (continued)
Years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Increase (decrease) in cash
overdraft $ 836,000 $ (840,000) $ 1,525,000
Net borrowings (repayments) (135,000) 2,388,000 (983,000)
under line of credit agreement
Proceeds from long-term borrowings 448,000 1,720,000 487,000
Principal payments of long-term debt
and capital lease obligations (16,680,000) (11,325,000) (11,898,000)
----------- ----------- -----------
Net cash (used in) provided by
financing activities (15,531,000) (8,057,000) (10,869,000)
----------- ----------- -----------
Net decrease in cash - - (556,000)
Cash at beginning of year - - 556,000
----------- ----------- -----------
Cash at end of year $ - $ - $ -
=========== =========== ===========
</TABLE>
See accompanying notes.
22
<PAGE> 23
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
1. Summary of significant accounting policies
Inventories
Inventories consist of fuel, materials and supplies which are stated
at average cost which approximates market.
Tires
Tires are carried at cost and are amortized using a rate per mile
based on experience.
Property and equipment
Property and equipment are recorded at cost. Tractors are depreciated
using the units-of-production method. The Company believes the
units-of-production method is preferable to the straight-line method since it
more closely matches revenues and expenses. All other property and equipment is
depreciated by use of the straight-line method based upon the estimated useful
lives and salvage values of the various classes of assets, which range
principally from three to thirty years. Repairs and maintenance expenditures
are expended as incurred.
Revenue recognition
Operating revenues and related operating expenses are recognized as
of the date freight is received for shipment.
Income taxes
The Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" effective January 1, 1993, without
retroactive restatement. Under this method, income tax liabilities and assets
are recognized at enacted tax rates for the expected future tax consequences of
temporary differences between carrying amounts and tax bases of assets and
liabilities.
Insurance accruals
Claims and insurance accruals, both current and long-term, reflect the
estimated cost of claims for cargo damage, personal injury and property damage,
employee medical, workers' compensation and collision, not covered by
insurance. These costs are included in insurance and claims expense.
On January 1, 1993, the Company changed its method of accounting for
workers' compensation costs (see Note 10).
23
<PAGE> 24
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
2. Operations
The Company has experienced net losses in each of the last three
years. These losses have made it difficult for the Company to achieve a
positive cash flow on a consistent basis and to timely meet its current
obligations and raise substantial doubt about its ability to continue operating
in the normal course of business. In order to relieve the cash flow pressure,
the Company negotiated and consummated a sales leaseback transaction on
substantially all of its trailer fleet, has sold older assets in which it had a
net cash equity position, and negotiated revised and extended terms on its
remaining equipment obligations. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.
Through the cooperation of its various equipment lenders, the Company
was able to negotiate certain beneficial changes to its existing equipment
obligations. These changes included scheduled months for which no payment is
due, stated periods for which interest only is due, and extended note maturity
dates to reduce current monthly obligations. While these efforts provided some
relief, the Company continues to face periodic difficulties in meeting all debt
obligations as they come due and is delinquent on certain obligations (See
Notes 4 and 7).
To address its cash flow deficit, the Company has made efforts to
obtain new capital. As of the date of this filing, management has met with a
number of interested persons, none of whom has made or is expected to make a
proposal. While the Company will continue to pursue new capital, in the view
of management, it is unlikely that such new capital will be available in the
immediate future.
Given the uncertainty that an injection of new capital will occur in
the immediate future and the continuing cash flow deficit, management
anticipates that the Company will file a voluntary petition under Chapter 11 of
the Bankruptcy Code in the immediate future. The Company has commenced
affirmative actions in connection with such a filing.
3. Receivables
Equipment sales receivables represent balances due for the routine
sales of revenue equipment that have been replaced with new equipment.
The Company has recorded allowances for doubtful accounts of $641,000
and $376,000 at December 31, 1994 and 1993, respectively, which have been
netted against the related amounts receivable.
The Company provides transportation services to the temperature
controlled and general commodities truckload freight market throughout all 48
contiguous states, Canada and Mexico. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not
require collateral. Credit losses have generally been within management's
expectations.
24
<PAGE> 25
4. Note payable to bank
The Company has 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 includes a working capital
line of credit with maximum borrowings of $7,000,000 and standby letters of
credit up to $3,000,000, is secured by accounts receivable and bears interest
at the bank's prime rate plus four and one-quarter percent. The Agreement
provides for interest rate reductions if certain financial conditions are
achieved by the Company.
At December 31, 1994, line of credit borrowings outstanding are
$5,555,000 and an additional $2,100,000 secures outstanding letters of credit.
The interest rate at December 31, 1994 is 13.5%. At December 31, 1994, the
Company fully utilized the working capital line. The maximum amounts
outstanding during 1994 and 1993 were $7,318,000 and $6,888,000 respectively.
The average amounts outstanding were $6,181,000 and $4,793,000 respectively.
The weighted average interest rates on these borrowings during 1994 and 1993
were 11.57% and 8.94%.
The Agreement, among other things, requires the Company to achieve
certain operating results, maintain certain financial ratios, places certain
restrictions on the acquisition and disposition of assets, limits additional
indebtedness and prohibits the payment of cash dividends. The Company is in
default of its covenants under the Agreement. The bank and the Company are in
active negotiations to amend the Agreement to bring the Company into compliance
on a current and prospective basis.
5. Self-insurance programs
The Company's insurance programs for personal injury and physical
damage, employee medical and cargo damage includes self-insurance, limited to
losses of $300,000, $125,000 and $25,000, respectively, for each claim. The
Company's self-insurance liability for personal injury and physical damage is
limited to $1,000,000 for each claim incurred prior to September 1, 1993. The
Company is self-insured for collision, theft and fire to its revenue equipment.
Additionally, the Company is also self-insured in Oklahoma for workers'
compensation insurance with a loss limit of $500,000 per claim. Claims in
excess of these amounts are covered by insurance companies. At December 31,
1994 and 1993, $5,545,000 and $4,884,000 respectively, have been accrued for
estimated incurred losses relating to these self-insurance programs.
The Company is a party to routine litigation incidental to its
business, primarily claims for personal injury and property damage, incurred in
the transport of freight. Management believes, after consultation with
counsel, that adequate accruals have been provided related to such litigation.
25
<PAGE> 26
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
6. Income taxes
Effective January 1, 1993, the Company adopted FAS 109 which requires
an asset and liability approach in accounting for income taxes. Under this
method, deferred income taxes are recognized, at enacted rates, to reflect the
future effects of tax carry forwards and temporary differences arising between
the tax bases of assets and liabilities and their financial reporting amounts
at each year-end.
Components of the provision (benefit) for income taxes follow:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $111,000 $ - $25,000
State - 26,000 (7,000)
---------- ----------- ---------
$111,000 26,000 18,000
Deferred:
Federal (1,085,000) (3,146,000) (758,000)
State (584,000) 230,000 (85,000)
---------- ----------- ---------
(1,669,000) (2,916,000) ( 843,000)
---------- ----------- ---------
(1,558,000) (2,890,000) (825,000)
Valuation Allowance 2,538,000 371,000 -
---------- ----------- ---------
$980,000 $(2,519,000) $(825,000)
========== =========== =========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of deferred income tax assets and liabilities at December 31, 1994
were as follows:
<TABLE>
<CAPTION>
DEC. 31, 1994 DEC. 31, 1993
------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carry forwards $6,325,000 $8,096,000
Insurance 1,454,000 732,000
Relocation Costs - 381,000
Bad Debt 251,000 151,000
Prepaids - 72,000
Other 137,000 456,000
Alternative minimum tax credit 520,000 455,000
Other tax credits 330,000 331,000
----------- -----------
Gross deferred tax assets 9,017,000 10,674,000
Valuation allowance ( 2,909,000) (371,000)
----------- -----------
6,108,000 10,303,000
Deferred tax liabilities:
Depreciation (5,062,000) (9,323,000)
Prepaids (1,046,000) -
----------- -----------
Net deferred tax asset $ - $ 980,000
=========== ===========
</TABLE>
26
<PAGE> 27
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
6. Income taxes (Continued)
The Company established a valuation allowance of $2,909,000 in 1994 and
$371,000 in 1993 as the realization of certain federal income tax credits and
state net operating loss carry forwards were not fully assured under the
criteria established in FAS 109.
A reconciliation of the provision (benefit) for income taxes to the
statutory federal income tax rate is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Tax benefit computed at 34% $(1,424,000) $ (2,543,000) $(812,000)
State income taxes, net
of federal tax benefit (584,000) (166,000) (61,000)
Other 450,000 181,000 48,000
----------- ------------- -----------
(1,558,000) (2,890,000) (825,000)
Valuation allowance 2,538,000 371,000 -----
----------- ------------- -----------
$ 980,000 $ (2,519,000) $ (825,000)
=========== ============= ===========
</TABLE>
In 1993 and 1992, the Company paid income taxes of $26,000 and $22,000
respectively.
At December 31, 1994, the Company, has available net operating loss carry
forwards of approximately $17,109,000 and $7,322,000 for federal and state
income tax purposes, respectively. Such net operating losses expire at various
dates beginning in 2006 through the year 2008.
At December 31, 1994, the Company has alternative minimum tax ("AMT")
credit carryovers of approximately $520,000 for federal income tax purposes.
With certain exceptions, the AMT credits can be carried forward indefinitely
and used to reduce regular tax, but not below the AMT amount in such future
years.
7. Long-term debt
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Installment obligations; interest
rates of 7.825%-11.50%, secured by
equipment with a net book value of
$28,228,000; due in varying monthly
payments through 1999. $28,128,000 $32,673,000
Mortgage payable to a bank; interest
rate of 11.10%, secured by real
estate with a net book value of
$3,281,000; due in monthly payments
of $16,000 through 1995 and a balloon
payment of $1,477,000 due in December 1995 1,550,000 1,563,000
Other 613,000 353,000
----------- -----------
30,291,000 34,589,000
Less current maturities (8,550,000) (11,223,000)
----------- -----------
$21,741,000 $23,366,000
=========== ===========
</TABLE>
27
<PAGE> 28
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
7. Long-term debt (continued)
Interest paid on all debt in 1994, 1993 and 1992 was $3,811,000, $4,318,000
and $4,239,000, respectively. During 1994 and 1993, equipment with a cost of
approximately $11,503,000 and $3,933,000, respectively, was purchased through
the assumption of long-term debt.
Annual maturities of long-term debt subsequent to 1995 are approximately
$11,764,000, $6,924,000, and $3,053,000 in 1996, 1997 and 1998, respectively.
The Company is delinquent and in technical default on certain equipment loans
and continues to face periodic difficulties in meeting all equipment
obligations as they come due. (See Note 2).
8. Capital lease obligations
The Company has certain computer equipment which was acquired under capital
lease arrangements in 1989 and 1994. At December 31, 1994 and 1993, this
equipment had a capitalized cost of $447,000 and $796,000 and accumulated
amortization of $112,000 and $598,000 respectively. Amortization of equipment
under capital lease is included in depreciation expense.
At December 31, 1994, future minimum lease payments under the capital lease
obligations are as follows:
<TABLE>
<S> <C>
1995 $ 194,000
1996 116,000
1997 96,000
---------
Total lease payments 406,000
Less amount representing
interest 36,000
---------
Present value of minimum
lease payments 370,000
Less current portion 165,000
---------
$205,000
=========
</TABLE>
9. Commitments
At December 31, 1994, the future minimum lease payments under noncancelable
operating leases, which are primarily for revenue equipment, are approximately
$5,740,000 $4,058,000 and $2,410,000 in 1995, 1996 and 1997, respectively, for
aggregate future minimum lease payments of $12,208,000. The Company incurred
rent expense of approximately $4,397,000, $5,503,000 and $4,820,000 for the
years ended December 31, 1994, 1993 and 1992, respectively. See Note 13 for a
description of lease arrangements with related parties that are included in the
future minimum lease payments and rental expense amounts.
The Company has entered into certain operating lease agreements for revenue
equipment which contain a terminal rental adjustment clause. Such agreements
provide for adjustments of the total rental obligations upon lease termination
in the event the proceeds from final disposition of the equipment deviate from
predetermined residual values. Management believes the proceeds from
dispositions of the equipment held under such leases will at least equal the
residual values; accordingly, no liability has been recorded at December 31,
1994.
28
<PAGE> 29
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
9. Commitments (continued)
In December 1994 the Company successfully consummated a sale and leaseback
transaction on substantially all of its trailer fleet. The leaseback period
varies from 12 to 48 months depending on the year of the trailer. As a result
of this transaction the Company recognized a deferred gain on sale of assets of
$897,000. Such gain is included with deferred gain on sale of property and
equipment in the accompanying balance sheets and will be amortized into income
over the life of the leaseback period. Additionally, the Company recorded
deferred gains on the sale of certain equipment to owner/operators during the
year.
10. Accounting for postemployment benefits
Effective January 1, 1993, the Company elected early adoption of the
requirements of FAS No. 112, "Employers Accounting for Postemployment
Benefits". This statement requires that the cost of postemployment benefits,
which are primarily workers' compensation related, be recognized in the
financial statements during the employees' active working careers. The Company
changed its method of measuring the estimated liability for workers'
compensation to employ actuarial assumptions to discount to present value the
estimated future payments for these claims. The discount rate utilized by the
actuary was 6% and 4% in 1994 and 1993 respectively. The Company recorded a
charge of $542,000 ($.22 per share), net of $362,000 income tax benefits, as of
January 1, 1993 to reflect the cumulative effect of this change in accounting
principle. The estimated cost of these benefits are included in accrued
insurance costs in the accompanying balance sheets.
11. Stock option agreements
In 1987, the Company adopted an Incentive Stock Option Plan. Under
the plan, the Company grants options to employees to purchase shares of its
common stock at a price not less than the fair market value at the date of
grant. The following summarizes activity and price information during 1994,
1993 and 1992:
<TABLE>
<CAPTION>
Option Price
Shares Per share
------ ---------
<S> <C> <C>
Outstanding, December 31, 1991 82,000 $ 4.00
Granted 34,000 3.75
Canceled 28,000 4.00
------- ----------
Outstanding, December 31, 1992 88,000 3.75-4.00
Granted 85,000 4.50-4.75
Canceled - -
------- ----------
Outstanding, December 31, 1993 173,000 3.75-4.75
Granted 8,000 4.50
Canceled 67,000 3.75-4.75
------- ----------
Outstanding, December 31, 1994 114,000 $ 3.75-4.75
======= ===========
</TABLE>
Also in 1987, the Company adopted a Nonstatutory Stock Option Plan
pursuant to which stock options may be granted to employees, members of the
board of directors, consultants and independent contractors of the Company, at
a price not less than the fair market value at the date of grant. During 1991,
the Company granted options to three of its directors for the purchase of
24,000 shares at $4.00 per share. In 1994, 1993 and 1992, no shares were
granted, exercised or canceled under this plan.
29
<PAGE> 30
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
11. Stock Option Agreements (Continued)
The plans provide for the issuance of up to 200,000 shares of the Company's
common stock pursuant to stock option grants. The vesting period and terms of
the plans are at the discretion of the board of directors with certain
limitations. The options granted in 1994, 1993 and 1992 vest over a five-year
period in equal amounts each year. The options granted under the plans in 1991
vest over a six-year period in equal amounts each year. All options expire ten
years from the date of grant. At December 31, 1994, options to acquire 8,000
shares granted during 1993 were exercisable as were 9,600 shares granted during
1992, and 33,000 shares granted during 1991.
In 1991, the Company entered into a stock option agreement under which its
former President was granted options to purchase 242,500 shares of the
Company's common stock at $4.00 per share. These options were cancelled as of
February 1, 1995 in connection with the termination of employment of such
individual.
In September 1994, the Company entered into stock option agreements providing
for the grant to officers of RBC Ventures, Inc., a consultant of the Company,
of options to purchase 230,000 shares of the Company's Common Stock at the
exercise price of $7.00 per share. Of such options, 195,500 were granted to
Roger B. Collins. See Note 13 for additional information concerning the terms
of these options.
12. Employee savings plan
In 1989, the Company adopted the Freymiller Retirement Plan ("the Plan"), an
employee savings plan with employer participation in accordance with the
provisions of the Internal Revenue Code. All Company employees who have
completed one year of service are eligible to participate in the Plan. Under
the Plan, participants may elect to contribute up to 6% of their compensation
up to a maximum of $7,000. The Company contributes an additional amount equal
to 25% of the employees' contributions. Participants are immediately 100%
vested in the employer contributions. All amounts contributed to the Plan are
deposited in a trust fund and administered by an independent trustee.
The Company's matching contributions to the Plan were $79,000; $99,000 and
$62,000 in 1994, 1993 and 1992, respectively.
13. Related party transactions
Certain of the revenue equipment leased by the Company (see Note 9) is owned
by an officer of the Company and is subject to operating leases expiring in
1996. Rent expense on these leases totaled $86,000; $83,000 and $71,000 for the
years ended December 31, 1994, 1993 and 1992, respectively. Aggregate future
minimum lease payments are approximately $76,000; $76,000 and $76,000 in 1995,
1996 and 1997, respectively. The Company expended $158,000; $275,000 and
$339,000, in 1994, 1993 and 1992, respectively, for purchased transportation
provided by a company owned by an officer of the Company. The Chairman owns the
Company's corporate office building and has leased space to the Company for
seven years at $15,000 per month beginning in 1994. Rent expense for this
space totaled $75,000 in 1994. Additionally, the Chairman owned a terminal
facility that was leased to the Company on a month-to-month basis for $4,000
per month. This rental agreement terminated November 30, 1993. Rent expense
totaled $44,000 in 1993 and $48,000 in 1992.
30
<PAGE> 31
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
13. Related party transactions (continued)
In connection with the resignation of Jerry K. Stanners as President and
Chief Executive Officer of the Company, Mr. Stanners entered into a separation
agreement with the Company effective as of February 1, 1995 (the "Separation
Agreement"). Pursuant to the Separation Agreement, the Company paid to Mr.
Stanners a lump sum severance payment of $258,000 as required under Mr.
Stanners' employment agreement with the Company. As a result of such payment,
64,500 shares of the Company's Common Stock previously issued to Mr. Stanners,
which were subject to forfeiture in the event of the termination of Mr.
Stanners employment prior to the expiration of his employment agreement, were
returned to the Company. The Company also agreed to reimburse Mr. Stanners for
relocation expenses and to extend at its expense certain insurance benefits.
Outstanding options to purchase 242,500 shares of Common Stock previously
granted to Mr. Stanners were cancelled and approximately $94,000 remaining in a
deferred compensation asset in the Company's balance sheet was expensed in the
current year income statement. In addition, the Company retained Mr. Stanners
to render consulting services to the Company for a period of six months
following the date of the Separation Agreement pursuant to which Mr. Stanners
receives a fee of $6,000 per month.
In September 1994, the Company entered into a consulting agreement with RBC
Ventures, Inc. ("RBCV") pursuant to which RBCV agreed to assist the Company in
attempting to obtain additional working capital and to provide business
counseling and other consulting services in connection with the Company's
operations. In December 1994, the Company closed the sale and leaseback of a
majority of its trailer fleet to Transport International Pool, Inc. The
Company was assisted in the negotiation of this transaction by RBCV, and in
connection with such services the Company paid to RBCV in January, 1995 a fee
of $100,000 as provided in the consulting agreement. In addition, the
consulting agreement provides for the payment by the Company of consulting fees
to RBCV in the amount of $25,000 per month. During 1994, there were no
monthly fees paid or due pursuant to the consulting agreement. The consulting
agreement will expire on September 23, 1997 and may be terminated by the
Company upon the occurrence of specified events. Roger B. Collins is the
President and beneficial owner of 100% the outstanding shares of RBCV.
In connection with the execution of the consulting agreement with RBCV in
September 1994, the Company granted to Mr. Collins options to purchase 195,500
shares of Common Stock of the Company at an exercise price of $7.00 per share.
The option may not be exercised until the following conditions precedent are
satisfied: (i) the Company must complete a financing transaction meeting
certain criteria and (ii) the average of the highest bid price of the Common
Stock as reported on the National Association of Securities Dealers, Inc.
Automated Quotation System for each of any five consecutive trading days must
exceed $10.00 per share. The former condition was satisfied by the sale and
lease back described above. As of March 27, 1995, the latter condition had not
been satisfied and, as a result, the options were not exercisable as of such
date. If not previously exercised, the options will expire in September 2004.
The Company has also granted certain registration rights with respect to shares
purchased upon exercise of the options. Options to purchase an additional
35,000 shares of the Company's Common Stock were granted on identical terms to
another officer of RBCV.
31
<PAGE> 32
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
14. Summary quarterly financial data (unaudited)
The following is a tabulation of unaudited quarterly operating results for
1994 and 1993 (in thousands, except per share information).
<TABLE>
<CAPTION>
First Second Third Fourth
1994 Quarter Quarter Quarter Quarter
- - ---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating Revenues $24,197 $25,005 $23,537 $22,413
Operating Income
(loss) 1,096 425 (302) (1,025)
Net Income (loss) 98 (304) (846) (4,115)
Net Income (loss)
per share .04 (.12) (.34) (1.66)
1993
- - ----
Operating revenues $23,941 $25,866 $26,046 $24,704
Operating income
(loss) 429 1,127 (57) (4,611)
(Loss) income
before cumulative
effect of accounting
changes (366) 12 (727) (3,880)
Cumulative effect of
accounting changes (542) - - -
Net (loss) income (908) 12 (727) (3,880)
Net (loss) income
per share (.36) - (.29) (1.56)
</TABLE>
During the fourth quarter of 1993, the Company adopted FAS 112. The
cumulative effect of the change on prior years reduced first quarter 1993
earnings by $542,000, net of taxes. The 1993 effect of this accounting change
decreased earnings by $134,000, $146,000, $152,000 and $142,000 for the first,
second, third and fourth quarters of 1993, respectively. On January 1, 1993,
the Company adopted FAS 109. There was no significant impact on the Company's
operating results as a result of the adoption of FAS 109.
In the fourth quarter 1993, the Company recorded $981,000 of relocation costs
associated with the Company's announced 1994 relocation of its corporate
offices from Bakersfield, California to Oklahoma City, Oklahoma. Additionally,
the fourth quarter 1993 results reflect an increase in personal injury and
physical damage insurance reserves of approximately $1,000,000.
32
<PAGE> 33
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Ernst & Young was engaged as the Company's independent certified public
accountants by the Board of Directors for the fiscal years ended December 31,
1991 and December 31, 1992. On October 5, 1993, the Board of Directors, on the
recommendation of the Audit Committee, dismissed Ernst & Young LLP and engaged
Arthur Andersen LLP to serve as the Company's independent certified public
accountants.
Neither of the reports of Ernst & Young LLP with respect to the Company's
financial statements for the fiscal years ended December 31, 1991 and December
31, 1992, contain any adverse opinion or disclaimer of opinion, or was
qualified or modified as to uncertainty, audit scope or account principles.
During the period commencing January 1, 1991 and ending October 5, 1993, there
were no disagreements between the Company and Ernst & Young LLP on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements, if not resolved to the
satisfaction of Ernst & Young LLP, would have caused it to make reference to
the subject matter of a disagreement in connection with its reports. During
the period commencing January 1, 1991 and ending October 5, 1993, there were no
"reportable events" as defined in the rules and regulations of the Securities
and Exchange Commission.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant intends to file with the Securities and Exchange Commission a
definitive proxy statement pursuant to Regulation 14A, which will involve the
election of directors, within 120 days of the end of the fiscal year covered by
this Form 10-K (the "Proxy Statement"). Information regarding directors and
executive officers of the Company will appear under the captions "Election of
Directors" and "Executive Officers" in the Proxy Statement for the 1995 Annual
Meeting of Shareholders and is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation will appear under the caption
"Management Compensation" in the Proxy Statement for the 1995 Annual Meeting of
Shareholders and is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management will appear under the caption "Principal Shareholders" in the Proxy
Statement for the 1995 Annual Meeting of Shareholders and is incorporated
herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions will
appear under the caption "Certain Transactions" in the Proxy Statement for the
1995 Annual Meeting of Shareholders and is incorporated herein by this
reference.
33
<PAGE> 34
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) (1) FINANCIAL STATEMENTS (INCLUDED IN PART II, (ITEM 8) PAGE NO.
--------------------------------------------------- --------
<S> <C> <C>
Balance Sheets as of December 31, 1994 and 1993 17-18
Statements of Operations for the years ended
December 31, 1994, 1993 and 1992 19
Statements of Shareholders' Equity for the years
ended December 31, 1994, 1993 and 1992 20
Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 21-22
Notes to Financial Statements 23-33
(2) FINANCIAL STATEMENT SCHEDULES
-----------------------------
Schedule II - Valuation and Qualifying Accounts 37
All other schedules are omitted since the requested
information is not present or is not present in amounts
sufficient to require submission of the schedule, or because
the information required is included in the financial
statements or notes thereto.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
fiscal quarter ended December 31, 1994 (the last fiscal
quarter covered by this report).
</TABLE>
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibits
------ --------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company (Incorporated by reference Exhibit 3.1 of the
Company's Registration Statement on Form S-1 (File No. 33-12431).
3.2 Articles of Amendment of the Amended and Restated Articles of Incorporation of the Company (Incorporated by
reference to Exhibit 3.3 of the Company's Registration Statement on Form S-1, File No. 33-12431).
3.3 Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Company's Registration
Statement on Form S-1, File No. 33-12431).
*10.1 1987 Inventive Stock Option Plan and 1987 Non-Statutory Stock Option Plan of the Company (Incorporated by
reference to Exhibit 10.1 of the Company's Registration Statement on Form S-1, File No. 33-12431).
</TABLE>
34
<PAGE> 35
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K (CONTINUED)
<TABLE>
<S> <C>
*10-2 Form of Stock Option Agreement pursuant to the 1987 Inventive Stock Option Plan and 1987 Non-Statutory Stock
Option Plan of the Company (Incorporated by reference to Exhibit 10.2 of the Company's registration Statement
on Form S-1, File No. 33-12431).
10.3 Employee Stock Purchase Plan of the Company (Incorporated by reference to Exhibit 10.14 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1992).
10.4 1992 Credit and Restructure Agreement between the Company and Wells Fargo Bank dated October 14, 1992
(Incorporated by reference to Exhibit 19.6 of the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992).
10.5 First Amendment to 1992 Credit and Restructure Agreement dated December 3, 1992; Extension Agreement and
Second Amendment to 1992 Credit and Restructure Agreement dated December 21, 1992; and Third Amendment to 1992
Credit and Restructure Agreement dated February 1993 (Incorporated by reference to Exhibit 10.12 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1992).
10.6 Form of Installment Note with Mercedes Benz Credit Corporation (Incorporated by reference to Exhibit 10.15 of
the Company's Annual Report on Form 10-K for the year ended December 31, 1992).
10.7 Form of Installment Note with Associates Commercial Corporation (Incorporated by reference to Exhibit 10.16 of
the company's Annual Report on Form 10-K for the year ended December 31, 1992).
10.8 Revolving Credit Agreement between the Company and Norwest Business Credit, Inc. dated February 11, 1993
(Incorporated by reference to Exhibit 10.13 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1992).
10.9 First Amendment to Revolving Credit Agreement between the Company and Norwest Business Credit, Inc. dated
March 30, 1993 (Incorporated by reference to Exhibit 10.17 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1993).
10.10 Second Amendment to Revolving Credit Agreement between the Company and Norwest Business Credit, Inc. dated
September 15, 1993(Incorporated by reference to Exhibit 10.18 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1993),
10.11 Fourth Amendment to Loan Documents between the Company and Norwest Business Credit, Inc. dated December 28,
1994 (Incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K dated as of
January 4, 1995).
10.12 Vehicle Lease Agreement No. 32443 between the Company and Transport International Pool, Inc. dated December
22. 1994 (Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K dated as of
January 4, 1995).
</TABLE>
35
<PAGE> 36
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K (CONTINUED)
<TABLE>
<CAPTION>
Exhibit
Number Exhibits
------ --------
<S> <C>
10.13 Lease Agreement between the Company and Wabash National Finance Corporation dated December 19, 1994
(Incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K dated as of January 4,
1995).
10.14 Consulting Agreement between the Company and RBC Ventures, Inc. dated September 23, 1994 and related Stock
Option Agreement between the Company and Roger B. Collins dated September 23, 1994 (Incorporated by reference
to Exhibit 10.4 of the Company's Current Report on Form 8-K dated as of January 4, 1995).
10.15 Employment Agreement and related Stock Option Agreement between the Company and Kirk A. Williams each dated
January 17, 1995 (Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K dated
as of January 17, 1995).
10.16 Employment Agreement and related Stock Option Agreement between the Company and J. Harold Fambro each dated
January 14, 1995 and Letter Agreement between the Company and J. Harold Fambro dated January 17, 1995
amending the Employment Agreement and the Stock Option Agreement (Incorporated by reference to Exhibit 10.2 of
the Company's Current Report on Form 8-k dated as of January 17, 1995).
10.17 Termination and Consulting Agreement between the Company and Jerry K. Stanners dated January 27, 1995
(Incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K dated as of January 17,
1995).
</TABLE>
_________________
* Constitutes a management contract of compensatory plan or arrangement
required to be filed as an exhibit to this report.
36
<PAGE> 37
SCHEDULE II
FREYMILLER TRUCKING, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Balance at
beginning Charged to Amounts end of
of Period expenses Recoveries Written off period
--------- -------- ---------- ----------- ------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts years ended
December 31,
1994 $376,000 $414,000 $9,000 $158,000 $641,000
1993 1,006,000 395,000 - 1,025,000 376,000
1992 996,000 452,000 28,000 470,000 1,006,000
</TABLE>
37
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
(Registrant)
April 18, 1995
BY:Don H. Freymiller
-----------------
Don H. Freymiller
Chairman of the Board
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities on the
dates indicated.
BY:Don H. Freymiller BY:Richard E. Kuehn
----------------- ----------------
Don H. Freymiller Richard E. Kuehn
Chairman of the Board, Executive Vice President
President and CEO and Chief Financial Officer
(Principal Executive Officer) (Principal Financial and
Accounting Officer)
Date: April 18, 1995 Date: April 18, 1995
38
<PAGE> 39
EXHIBIT INDEX
Exhibit - 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
COMPANY'S BALANCE SHEET AS OF DECEMBER 31, 1994 AND STATEMENT OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH (B) FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-K FILING FOR
1994.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 13,154
<ALLOWANCES> 0
<INVENTORY> 433
<CURRENT-ASSETS> 18,261
<PP&E> 47,053
<DEPRECIATION> 16,135
<TOTAL-ASSETS> 54,994
<CURRENT-LIABILITIES> 26,310
<BONDS> 21,946
<COMMON> 25
0
0
<OTHER-SE> 2,795
<TOTAL-LIABILITY-AND-EQUITY> 54,994
<SALES> 0
<TOTAL-REVENUES> 95,152
<CGS> 0
<TOTAL-COSTS> 94,958
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,381
<INCOME-PRETAX> (4,187)
<INCOME-TAX> 980
<INCOME-CONTINUING> (5,167)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,167)
<EPS-PRIMARY> (2.08)
<EPS-DILUTED> (2.08)
</TABLE>
