<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 JUNE 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 June 30, 1995.
1
<PAGE> 2
FREYMILLER TRUCKING, INC.
JUNE 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 JUNE 30, 1995
AND DECEMBER 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED AND SIX MONTHS ENDED JUNE 30, 1995
AND 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED JUNE 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. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FREYMILLER TRUCKING, INC.
BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---- ----
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash $ 536,000 $ -
Receivables:
Freight services, net 6,446,000 9,848,000
Equipment sales, net 2,168,000 2,620,000
Other 498,000 686,000
----------- ------------
9,112,000 13,154,000
Inventories 419,000 433,000
Tires 1,300,000 3,293,000
Prepaid expenses and deposits:
Insurance 97,000 356,000
Licenses 394,000 42,000
Security deposits 508,000 283,000
Other 394,000 430,000
----------- ------------
1,393,000 1,111,000
----------- ------------
Other current assets 291,000 270,000
Total current assets 13,051,000 18,261,000
Property and equipment:
Land and improvements 11,000 11,000
Building and improvements 263,000 287,000
Revenue equipment 17,691,000 42,749,000
Furniture and fixtures 1,602,000 1,602,000
Other equipment 2,297,000 2,404,000
----------- ------------
21,864,000 47,053,000
Less accumulated depreciation
and amortization (7,164,000) (16,135,000)
----------- ------------
14,700,000 30,918,000
Other 7,525,000 5,815,000
----------- ------------
$35,276,000 $ 54,994,000
=========== ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
FREYMILLER TRUCKING, INC.
BALANCE SHEETS
JUNE 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 $ - $ 1,521,000
Accounts payable 1,890,000 5,234,000
Short-term note payable(Note 2) 2,794,000 5,555,000
Current portion of long-term
debt (Note 2) 955,000 30,291,000
Current portion of capital
lease obligation (Note 2) - 370,000
Accrued liabilities:
Employee compensation and
amounts due owner operators 964,000 1,207,000
Insurance costs 489,000 2,995,000
Other 327,000 1,083,000
------------ ------------
1,780,000 5,285,000
------------ ------------
Total current liabilities 7,419,000 48,256,000
Deferred gain on sale of
property and equipment 1,276,000 1,368,000
Accrued insurance costs - 2,550,000
Liabilities Subject to Compromise 32,789,000 (a) -
------------ ------------
Total liabilities 41,484,000 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 (14,831,000) (6,061,000)
------------ ------------
(5,809,000) 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 (6,208,000) 2,820,000
------------ ------------
$ 35,276,000 $ 54,994,000
============ ============
</TABLE>
- Continued on Next Page -
4
<PAGE> 5
FREYMILLER TRUCKING, INC.
BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
(a) Liabilities subject to compromise consist of the following:
<TABLE>
<CAPTION>
1995
----
(UNAUDITED)
<S> <C>
Accounts payable $ 8,270,000
Current portion of long-term
debt (Note 2) 18,056,000
Current portion of capital lease
obligation (Note 2) 314,000
Accrued liabilities
Employee compensation and amounts
due owner/operators 113,000
Insurance costs 5,418,000
Other 618,000
------------
$ 32,789,000
============
</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 Six Months Ended
June 30 June 30
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenue:
Freight services $ 18,688 $ 25,005 $ 41,920 $ 49,202
Operating expenses:
Salaries,wages & benefits 6,483 8,730 14,941 17,003
Purchase transportation 4,326 1,565 7,833 2,978
Fuel 2,289 4,261 5,638 8,610
Supplies & maintenance 2,660 3,330 6,176 6,254
Operating leases 2,142 1,316 3,896 2,703
Depreciation & amortization 927 1,880 2,244 3,691
Taxes & licenses 662 702 1,414 1,486
Insurance & claims 892 1,573 2,465 2,711
Communications & utilities 341 380 643 674
(Gain) loss disposition of
assets (125) (91) (1,027) (192)
Other 827 934 1,874 1,763
--------- -------- -------- --------
21,424 24,580 46,097 47,681
--------- -------- -------- --------
Operating (loss) income (2,736) 425 (4,177) 1,521
Nonoperating income(expense):
Interest expense (616) (1,018) (1,528) (1,952)
Interest income 168 - 261 -
--------- -------- -------- --------
(448) (1,018) (1,267) (1,952)
Loss before reorganization
expense and provision(benefit)
for income taxes (3,184) (593) (5,444) (431)
Reorganization expense
(Note 1) (3,215) - (3,215) -
--------- --------
Loss before provision
(benefit) for income taxes (6,399) (593) (8,659) (431)
Provision(benefit)for
income taxes - (289) 111 (225)
--------- -------- -------- --------
Net Loss $ (6,399) $ (304) $ (8,770) $ (206)
========= ======== ======== ========
Net loss per share $ (2.64) $ (.12) $ (3.60) $ (.08)
========= ======== ======== ========
Weighted average number of
shares of common
outstanding 2,425 2,490 2,436 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
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net(loss)income $ (9,078,000) $ (206,000)
Adjustments to reconcile net(loss)
income to net cash (used) provided
by operating activities:
Depreciation and amortization 2,244,000 3,689,000
Benefit for deferred taxes - (129,000)
(Gain) on sales of assets (1,027,000) (192,000)
Loss on assets sold in connection
with Chapter 11 proceeding 510,000 -
Decrease (increase) in freight
services and other receivables 3,590,000 (1,200,000)
Decrease (increase) in inventories
and tires 2,007,000 (304,000)
Increase in prepaid expenses (64,000) (357,000)
Increase in prepaid professional
fees in connection with Chapter
11 proceeding (218,000) -
(Increase) decrease in other
assets (1,710,000) (179,000)
Increase in accounts payable 4,926,000 481,000
Increase (decrease) in accrued
liabilities 338,000 246,000
Increase in accrued liabilities for
professional fees incurred in connection
with Chapter 11 proceeding 64,000 -
------------ ----------
Net cash provided by operating
activities 1,582,000 1,849,000
Cash flows from investing activities:
Proceeds from disposition of
property and equipment 5,046,000 2,028,000
Proceeds for assets sold in connection
with Chapter 11 proceeding 9,830,000 -
Purchase of property and equipment (46,000) (61,000)
------------ ----------
Net cash provided by investing activities 14,830,000 1,967,000
</TABLE>
Continued on Next Page.
7
<PAGE> 8
FREYMILLER TRUCKING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from financing activities:
(Decrease)increase in cash
overdraft (1,521,000) 78,000
Borrowings under short-term
note payable 37,863,000 51,664,000
Repayments under short-term note
payable (40,624,000) (50,503,000)
Proceeds from long-term borrowings - 448,000
Purchase of treasury stock (258,000) -
Principal payments on long-term debt
and capital leasing obligations (11,336,000) (5,503,000)
----------- -----------
Net cash used by financing
activities (15,876,000) (3,816,000)
Net increase in cash 536,000 -
Cash at beginning of period - -
----------- -----------
Cash at June 30 $ 536,000 $ -
=========== ===========
</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.
8
<PAGE> 9
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 June 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 six month periods ended June 30, 1995 and 1994 include
all adjustments (which include normal recurring adjustments and
adjustments related to the
9
<PAGE> 10
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
1. (Continued)
downsizing of the Company discussed below) necessary for fair
presentation. Results for the six 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 is developing a plan of reorganization
in connection with the bankruptcy proceedings.
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 six month periods ended June 30, 1995. Components
of reorganization expense included assets written off of $428,000,
tires and permits of $2,169,000, losses on asset sales of $510,000 and
professional fees and other costs of $108,000 for the three and six
months periods ended June 30, 1995.
2. 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
10
<PAGE> 11
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
2. (Continued)
$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.
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 (11.0% at June 30, 1995). Under the DIP
financing arrangement, the Company has agreed to submit its plan of
reorganization to the Bankruptcy Court by October 31, 1995, with
confirmation of the plan to be achieved no later than December 31,
1995. The bank has 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 June 30, 1995, the outstanding loan balance under the DIP financing
arrangement was approximately $4,729,000, of which $2,025,000 was
unfunded stand-by letters of credit issued under the Company's self-
insurance programs for auto liability and worker's compensation. An
additional $917,000 was available to the Company under the financing.
At June 30, 1995 and December 31, 1994, the Company also had
outstanding secured term debt which totaled $19,011,000 and
$30,291,000, respectively, and capital lease obligations which totaled
$314,000 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
11
<PAGE> 12
FREYMILLER TRUCKING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
2. (Continued)
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
$308,000 has not been recorded as of June 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 six months
ended June 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 June 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 40 percent, the number of drivers by 47
percent and the number of non-driver personnel by 40 percent. The
magnitude of the downsizing is the dominant factor which affected the
Company's results of operations for the second quarter of 1995 and for
the six month period ended June 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 six month periods ended June 30,
1995.
Operating revenue for the second quarter of 1995 decreased 25% from
the second quarter of 1994. Operating revenue for the six months
ended June 30, 1995 decreased 15% from the six months ended June 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 six months of 1994 to
$1.09 in 1995, while equipment utilization increased slightly from 320
miles per day in the first six months of 1994 to 332 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 14.6% of revenue in the second
quarter of 1995 compared to operating income of 1.7% of revenue in the
second quarter of 1994. The operating loss for the six months ended
June 30, 1995 was 9.96% of revenue compared to operating income of
3.09% for the same period in 1994. Salaries and wages, supplies and
maintenance, taxes and licenses, and other operating expenses
increased as a percentage of revenue in 1995, while fuel expense
decreased. Each of these items is discussed in more detail below.
The Company's operating results for the second quarter of 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.
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATION (CONTINUED)
Salaries, wages and benefits remained relatively constant at 34.7% of
revenue in the second quarter of 1995 compared to 34.9% of revenue in
the second quarter of 1994. Salaries, wages and benefits increased to
35.6% for the first six months of 1995 compared to 34.6% for the same
period of 1994. While these changes do not appear significant,
salaries, wages and benefits could be expected to decrease as a
percentage of revenue because of the increase in purchased
transportation. Revenue from purchased transportation for the second
quarter and for the first six months of 1995 represented 38.9% and
31.6% of total revenues, respectively, compared to 8.9% and 8.4% for
the same periods of 1994.
Salaries, wages and benefits did not decrease 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 increased from 13.3% of revenues from
second quarter 1994 to 14.2% of revenues for the second quarter of
1995. On a year-to-date basis these costs increased from 12.7% in
1994 to 14.7% in 1995. The 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 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 Company retired all of the 1991 and 1992 tractors and the older
trailers from its fleet during the recent downsizing. This
significant reduction in the fleet's average age should
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATION (CONTINUED)
have an immediate positive effect on maintenance costs.
Taxes and licenses expense increased from 2.8% of revenues in the
second quarter of 1994 to 3.5% of revenues in the second quarter of
1995. On a year-to-date basis these expenses are up from 3.0% of
revenue in 1994 to 3.4% in 1995. These increases were primarily
attributable to certain taxes and licensing costs which are fixed as
of a certain date each year and do not decline with a decrease in
operating miles or fuel costs. These costs will decline in the future
with the reduction of the Company's fleet size.
Insurance and claims expense decreased from 6.3% of revenues in the
second quarter of 1994 to 4.8% of revenues in the second quarter of
1995. On a year-to-date basis, insurance and claims expense increased
from 5.5% of revenue in 1994 to 5.8% of revenue in 1995. The second
quarter decrease was primarily attributable to a favorable resolution
to a number of outstanding claims and 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.
Communications and utilities and other expense also increased as a
percentage of revenues in 1995 compared to 1994. These increases are
primarily attributable to the fixed nature of many costs in these
categories and to continuing commitments entered into prior to the
decision to downsize the Company. Management has now curtailed these
commitments.
The Company's fuel expense dropped from 17.0% of revenue in the second
quarter of 1994 to 12.25% in the second quarter of 1995. On a
year-to-date basis the fuel costs dropped from 17.5% in 1994 to 13.5%
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
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS (CONTINUED)
the first six months of 1995, owner-operator miles were up 8,391,000
or 219% over the first six months of 1994.
Interest expense decreased to 3.3% of revenues for the second quarter
of 1995 from 4.1% of revenues in the second quarter of 1994. On a
year-to-date basis, interest expense decreased from 4.0% of revenue in
1994 to 3.7% 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 $308,000 was not recorded as of June 30,
1995, related to these under-secured debt obligations. Had this
interest been recorded, interest expense would have increased to 4.9%
of revenues and 4.4% of revenues, respectively, for the three and six
months ended June 30, 1995, primarily as a result of increased
interest rates paid on debt due to the Company being in default.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company had outstanding installment obligations
secured by equipment totaling $16,886,000 bearing interest at 4.138%
to 11.5% and maturing at various dates through 1999. The Company also
had a mortgage loan secured by real estate with an outstanding balance
of $1,546,000 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 June 30, 1995, the capital lease obligation totaled $314,000. The
total term debt outstanding, including the capital lease obligation,
was $19,325,000 at June 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 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
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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
$600,00 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 (11% at June
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 June 30, 1995, the outstanding loan balance under the DIP financing
arrangement to the Company was approximately $4,729,000 of which
$2,025,000 was unfunded stand-by letters of credit issued under the
Company's self-insurance programs for auto liability and worker's
compensation. An additional $917,000 was available to the Company
under the financing.
The Company has experienced operating and net losses in each of the
last four years. In the first six months of 1995, the Company
incurred an operating loss of $4,177,000 and a net loss of $8,770,000.
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 six months of 1995 of $1,582,000.
Proceeds from the disposition of property and equipment during the
first six months of 1995 totaled $14,830,000 of which $11,336,000 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.
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company reduced its short-term note payable by $2,761,000 and its
cash overdraft by $1,521,000 in the six- month period ended June 30,
1995.
The Company is preparing a plan of reorganization in connection with
the filing of the 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, a strategy for down-sizing and 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 being developed by
the Company 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 $19,325,000 at June 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. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibit is filed as part of this Quarterly Report on
Form 10-Q:
No. Description
10.1 Stipulation for Secured Borrowing and Use of Cash
Collateral filed with the United States
Bankruptcy Court for the Western District of
Oklahoma on May 23, 1995.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
During the quarter ended June 30, 1995, the Company filed two Current
Reports on Form 8-K.
A Current Report on Form 8-K dated as of April 20, 1995 was filed to
report the Company's filing 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.
A Current Report on Form 8-K dated as of May 12, 1995 was filed to
report the dismissal of Arthur Andersen, LLP as the Company's
independent accountants.
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>
10.1 Stipulation for Secured Borrowing and Use of Cash Collateral
filed with the United States Bankruptcy Court for the Western
District of Oklahoma on May 23, 1995.
27.1 Financial Data Schedule
</TABLE>
22
<PAGE> 1
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF OKLAHOMA
___________________________________
In re:
Freymiller Trucking, Inc., Bky. No. 95-12095-BH
Debtor.
___________________________________
STIPULATION FOR SECURED BORROWING AND USE OF CASH COLLATERAL
Freymiller Trucking, Inc., an Indiana corporation (the
"Debtor"), and Norwest Business Credit, Inc., a Minnesota corporation (the
"Secured Party"), hereby stipulate and agree, subject to approval of this
Stipulation by the Court as hereinafter set forth, as follows:
1. Nature and Amount of Secured Party's Claim. The
Debtor hereby stipulates and agrees that:
(a) The Secured Party is the holder of a claim as of
April 20, 1995 (the "Secured Party's Claim") against the Debtor in the
sum of $7,696,653.44 consisting of total borrowings ($5,671,653.44)
and obligations in respect of presently undrawn letters of credit
($2,025,000.00), plus all costs and expenses of administration,
collection and enforcement in accordance with the loan documentation
incurred by Secured Party prior to commencement of the Debtor's
bankruptcy case (the "Case"), plus, to the extent permitted under
Section 506(b) of the United States Bankruptcy Code (the "Code"),
interest accrued after commencement of the Case and the reasonable
fees, costs and charges referred to in Section 506(b).
<PAGE> 2
(b) The Secured Party's Claim is evidenced by the
Debtor's Revolving Note dated as of February 11, 1993 (as amended to
date, the "Note") and the Revolving Credit Agreement dated as of
February 11, 1993 (as amended to date, the "Credit Agreement"), and is
secured, among other things, pursuant to the following documents each
dated as of February 11, 1993 unless otherwise noted (collectively,
the "Security Documents"): (1) the Security Agreement, as amended to
date (the "Security Agreement"), (2) the Collateral Account Agreement
by the Debtor and Norwest Bank Iowa, National Association ("Norwest
Iowa"), (3) four Occupancy Agreements, one of which is dated May 5,
1994, (4) the Assignment of Life Insurance Policy as Collateral (the
"Life Insurance Assignment"), (5) the Special Deposit Agreement dated
as of February 9, 1993 by the Debtor and Community First Bank, (6) the
Agreement as to Lockbox Service (the "Lockbox Agreement") by the
Debtor and Norwest Iowa, (7) the collateral account letter agreement
dated March 20, 1995 by the Debtor and Bank IV Oklahoma, N.A., and (8)
the Special Deposit Agreement by Harris Trust and Savings Bank and the
Debtor dated March 31, 1993.
(c) Payment of the Secured Party's Claim is absolutely
and unconditionally due and payable, without defense, offset or
counterclaim, and the Debtor waives and releases any right to object
to the allowance of the Secured Party's Claim, provided, however, the
portion of the Secured Party's Claim with respect to letters of credit
which expire undrawn shall not be allowed, and, provided further, the
Debtor reserves its right to challenge the amount of expenses charged
by the Secured Party.
2
<PAGE> 3
(d) The Secured Party's Claim is secured by a security
interest in (A) all collateral security granted to the Secured Party
pursuant to the Security Documents and all other documents given by
the Debtor in favor of the Secured Party (including, without
limitation, all inventory, accounts, chattel paper, instruments,
equipment and general intangibles, and vehicles, as those terms are
defined in the Uniform Commercial Code, in existence on or before the
commencement of the Debtor's Case and the life insurance policy
assigned pursuant to the Life Insurance Assignment); and (B) all
proceeds and products of such collateral security acquired by the
estate created by the Debtor's Case (the "Estate") after the
commencement of the Case, except only allowances to the Estate for
improvements made by the Estate after the commencement of the Case, as
determined pursuant to Section 552(b) of the Code.
(e) Except as the Secured Party may otherwise agree, in
writing, the Debtor will look solely to its rights under paragraph 3
below to recover any costs and expenses of preserving said collateral
security and such proceeds and products (which collateral security,
proceeds and products are herein called the "Prepetition Collateral")
and for any allowances or reimbursement for any improvements made by
the Estate after commencement of the Case.
(f) Secured Party acknowledges that its security interest
in and to the Debtor's tractors and trailers, except for the Show
Truck and the Motor Coach as defined in paragraph 5(e) below, was not
perfected at the date of commencement of the case. Otherwise, unless
the Debtor files a written objection or complaint with the Court
properly objecting to the perfection of any security interest in favor
of Secured Party
3
<PAGE> 4
on or before the final hearing on the approval of this Stipulation,
which shall be held within 30 days of the issuance of the interim
order approving this Stipulation, the due and proper perfection of
such security interest shall be deemed admitted and approved, and the
Debtor shall be deemed to have waived and released any right to object
thereto.
2. Use of Collateral; Adequate Protection.
(a) The Debtor stipulates and agrees that, other than as
permitted herein, prior to the termination of this Stipulation, it:
(1) will not without prior written consent of the Secured Party engage
in, or seek authority for, (A) any use of cash collateral of the
Secured Party except as permitted herein, or (B) any use, sale or
lease of Prepetition Collateral other than in the ordinary course of
business, provided, however, that the Debtor (i) may trade in
GE-financed 1993 tractors and Mercedes Benz-financed 1993 tractors on
reasonable business terms for new tractors without the prior written
consent of the Secured Party, and (ii) may sell of or lease tractors
and trailers without the prior written consent of Secured Party as
long as the same are on usual business terms and any surplus proceeds
from the sale or lease of such tractors and trailers after payment of
prior liens are paid to Secured Party as set forth herein and,
provided further, that nothing herein shall prohibit the Debtor from
seeking to consummate any transaction necessary or appropriate in
connection with its confirmed plan of reorganization; (2) will keep
insured and properly care for all tangible Prepetition Collateral as
provided in the Credit Agreement, Security Documents and the documents
related thereto; (3) will segregate and account for all cash
collateral of
4
<PAGE> 5
the Secured Party; and (4) will pay to the Secured Party on the first
day of each month all interest accruing on the Secured Party's Claim
in the prior month, provided that from and after April 20, 1995, such
interest shall accrue at an annual rate equal to two percent (2%) over
the Base Rate, as such term is defined in paragraph 5(a) below.
(b) Any cash collateral of the Secured Party used by the
Debtor since the commencement of the Debtor's Case, but before the
execution of this Stipulation, shall be treated as a New Loan under
paragraph 5 hereof.
(c) Effective upon the earlier of December 31, 1995 or
the date on which an order is entered in the Case confirming a plan
("the Termination Date"), the Secured Party's consent to the use of
cash collateral shall expire, and the Debtor and the Secured Party
shall have with respect to the use and disposition of property of the
Estate the rights and duties imposed by the Code and any order of the
Court, provided that such expiration shall not affect any rights or
liens in the property of the Estate granted to the Secured Party
during the period this Stipulation is in effect nor the agreement of
Debtor in paragraph 3 hereof.
3. Allowance for Improvements made by the Estate. In
consideration of the Debtor's right to use collateral in accordance with
paragraph 2 and in view of the effect of such use, no allowance shall be made
to the Estate for any insurance, preservation, repair or improvement with
respect to any of the Prepetition Collateral, except as otherwise agreed
hereafter in writing by the Secured Party.
4. Segregation and Payment of the Secured Party's Cash
Collateral. The Debtor shall pay over to the Secured Party for application to
the Secured Party's Claim all
5
<PAGE> 6
cash proceeds of Prepetition Collateral now held by Debtor. The Lockbox
Agreement shall remain in full force and effect and the Debtor shall continue
to notify all account debtors to direct payments to the lock box. On a daily
basis, unless otherwise agreed by the Secured Party in writing, the Debtor
shall account to the Secured Party for any sums received directly by the
Debtor, and shall pay over to the Secured Party for application on the Secured
Party's Claim as provided herein, all cash proceeds of the Prepetition
Collateral (except to the extent such proceeds are necessary to satisfy
perfected, prepetition liens on the item of prepetition collateral sold)
received by the Debtor during that day. All cash proceeds of Prepetition
Collateral shall be deposited in a collateral account (the "Collateral
Account") under the exclusive control of the Secured Party, established at a
bank selected by the Debtor and reasonably satisfactory to the Secured Party.
After allowing for the collection of uncollected items, the Secured Party is
authorized to and shall apply the amounts so deposited to the reduction of the
Secured Party's Claim as provided herein.
Subject to paragraph 1(f) above, any application of sums by
the Secured Party to the reduction of the Secured Party's Claim prior to the
termination of this Stipulation shall be final. Subject to paragraph 1(f)
above, neither such application nor the validity of the Secured Party's
pre-petition security interest in the Prepetition Collateral as security for
the Secured Party's Claim shall be subject to challenge by the Debtor, and
nothing shall impair the validity of such application or security interest.
5. Terms of Any New Loans to the Debtor. The Secured
Party will make loans (the "New Loans") and issue guaranties of letters of
credit (the "New L/C Guaranties")
6
<PAGE> 7
to or for the benefit of the Debtor from time to time before the Termination
Date on the following terms and conditions:
(a) The New Loans shall bear interest at an annual rate
which shall at all times be equal to two percent (2%) over the rate of
interest publicly announced from time to time by Norwest Bank
Minnesota, National Association as its "base rate" or, if such bank
ceases to announce a rate so designated, any similar successor rate
designated by the Secured Party, with interest computed on the basis
of actual days elapsed in a 360-day year (the "Base Rate").
(b) All New Loans, with such interest thereon, and all
New L/C Guaranties, with all fees associated therewith, and all
collection costs and enforcement expenses related to each shall be:
(1) allowable under Section 503(b)(1) of the Code
as an administrative expense with priority pursuant to the
provisions of Section 364(c)(1) of the Code over all other
administrative expenses of the kind specified in Section
503(b) or Section 507(b) of the Code and all other expenses
and claims, provided that nothing herein shall prohibit the
Debtor from paying such other administrative expenses from the
proceeds of New Loans in the ordinary course of the Debtor's
Case; and
(2) secured by (and the Secured Party is hereby
granted) a lien on and security interest in all present and
future property of the Estate, including both real and
personal property, whether now held or hereafter acquired by
the Estate, and including specifically and without limitation
(A) all of the Estate's now owned or hereafter acquired
inventory, equipment, accounts, instruments,
7
<PAGE> 8
documents, chattel paper and general intangibles, as those
terms are defined in the Uniform Commercial Code, (B) any
recovery that the Estate may obtain pursuant to Sections 544,
545, 547, 548, 549 or 553 of the Code, (C) the Prepetition
Collateral, (D) any real estate, and (E) all proceeds,
products, rents, issues and profits of all of the foregoing
(all herein referred to as the "Secured Party's Collateral"),
which lien and security interest shall have priority over all
other liens, claims and expenses, including administrative
expenses, in the Debtor's Case, except as otherwise set forth
in subparagraph 5(c) below and except all other contractual
security interests in equipment or real estate of the Debtor
which were duly perfected on the date of commencement of the
Debtor's Case and are not subject to avoidance therein. The
liens granted above to secure payment of the New Loans and the
New L/C Guaranties shall be valid and enforceable regardless
of whether the Court determines, in response to an objection
or complaint filed in accordance with paragraph 1 above, that
some or all of the liens held by the Secured Party in the
Prepetition Collateral are unenforceable for any reason.
(c) Notwithstanding the provisions of subparagraph 5(b)
above, the liens and security interest herein granted to the Secured
Party shall be subordinate to the security interest in the Prepetition
Collateral held by the Secured Party in the inventory, accounts,
equipment, general intangibles and other assets of the Debtor which
was duly perfected on the date of commencement of the Debtor's Case.
8
<PAGE> 9
(d) The Debtor's obligation to repay the New Loans and to
reimburse the Secured Party in connection with all New L/C Guaranties
shall be evidenced by this Stipulation and by the Secured Party's
books and records. Such obligation shall be due and payable on the
termination of this Stipulation, with prepayments as herein provided.
The liens securing the New Loans and New L/C Guaranties shall be
evidenced by this Stipulation.
(e) The Debtor will not request, and the Secured Party
shall not make, any New Loan or New L/C Guaranty unless the aggregate
balance of the New Loans and New L/C Guaranties which would be
outstanding hereunder if such New Loan or New L/C Guaranty were made,
which when added to the amount of the Secured Party's Claim then
outstanding, does not exceed the amount of a "Borrowing Base" computed
as follows:
The lesser of $10,000,000 or
(i) 90% of Eligible Billed Freight
Accounts Receivable, plus
(ii) 70% of Eligible Unbilled Freight
Accounts Receivable; provided, however, that in no
event shall the sum of (A) New L/C Guaranties plus
(B) Letter of Credit Guaranties under the Credit
Agreement exceed $3,000,000, plus
(iii) $600,000, minus
(iv) 100% of the net proceeds received by
the Debtor from the sale, refinance or other
disposition of the Debtor's Prevost motor home,
9
<PAGE> 10
vehicle identification number 2P9M33404L1001641 (the
"Motor Coach"),minus
(v) 100% of the net proceeds received by
the Debtor from the sale, refinance or other
disposition of the Debtor's 1991 Freightliner show
tractor, vehicle identification number
1F7DOY92MP506405 (the "Show Truck"),minus
(vi) 50% of the net cash proceeds
received by the Debtor from the sale, refinancing or
other disposition of each of the Debtor's tractors,
whether such sale, refinancing or other disposition
is in units or in bulk, and whenever consummated,
minus
(vii) 100% of the net cash proceeds received
by the Debtor from the sale, refinance or other
disposition of each item of the Debtor's other
machinery and equipment.
For these purposes, "Letter of Credit Guaranties," "Eligible Billed
Freight Accounts Receivable" and "Eligible Unbilled Freight Accounts
Receivable" shall have the meanings given to such terms in the Credit
Agreement. Notwithstanding the foregoing, the Secured Party may from
time to time, at its sole discretion, make temporary New Loans to the
Debtor and issue New L/C Guaranties which, when added to the aggregate
balance of the New Loans, the New L/C Guaranties and the Secured
Party's Claim then outstanding, would exceed the Borrowing Base.
(f) The Secured Party may terminate its obligation to
make New Loans and issue New L/C Guaranties if an Event of Default has
occurred under Section 6 below.
10
<PAGE> 11
(g) The Secured Party will make New Loans and issue New
L/C Guaranties only after the Secured Party and its legal counsel are
satisfied that: (1) the liens securing the New Loans have been duly
perfected by entry of an order approving this Stipulation; (2) there
are no prior liens in the Secured Party's Collateral except the
Secured Party's security interest in the Prepetition Collateral and
other valid pre-petition security interests held by others and
disclosed to the Secured Party; (3) there is appropriate and adequate
insurance coverage for the Secured Party's Collateral as provided in
the Credit Agreement, Security Documents, and documents related
thereto; and (4) Don H. Freymiller has duly consented to this
Stipulation, and the Bankruptcy Court has found that the Secured
Party, by agreeing to this Stipulation, has not impaired in any way
the enforceability of the Guaranty dated February 11, 1993, as
amended, of Don H. Freymiller, in favor of the Secured Party (the
"Guaranty") as to the Secured Party's Claim and the New Loans; and (5)
the Court has approved this Stipulation and the Debtor's execution and
delivery of it, and this Stipulation has been duly executed and
delivered by the Debtor.
(h) The Debtor will immediately deposit in the Collateral
Account, in the form received, all cash proceeds of any property of
the Estate. The Lockbox Agreement shall remain in full force and
effect and the Debtor shall continue to notify all account debtors to
direct payments to the lock box. After allowing for the collection of
uncollected items, the Secured Party is authorized to apply the
amounts deposited in the Collateral Account first to the Secured
Party's Claim and then to the payment of the New Loans. Any
application of sums by the Secured Party to the
11
<PAGE> 12
reduction of the Secured Party's Claim or the New Loans after the date
of this Stipulation shall be final. Neither such application nor the
lien and the security interest herein granted to the Secured Party
shall be subject to challenge by the Debtor, and nothing shall impair
the validity of such application and of such lien and security
interest.
(i) The Secured Party is authorized to make the New Loans
and to issue New L/C Guaranties upon telephonic or other oral or
written request of Richard Kuehn and such other persons as set forth
in the Credit Agreement and to disburse proceeds of the New Loans as
instructed by such person(s).
(j) Each of the Debtor and the Secured Party agrees to
comply with and abide by all applicable provisions of the Credit
Agreement and Security Documents except as modified herein, including
without limitation (i) the obligation of the Debtor to pay the
Facility Fee, the Letter of Credit Fee, and all other fees payable to
the Secured Party as provided in the Credit Agreement and Security
Documents, and (ii) the procedures with respect to requesting New
Loans, the issuance of New L/C Guaranties, and the repayment of same.
The Secured Party shall have all of the rights thereby conferred both
with respect to the Prepetition Collateral and the liens securing the
New Loans, including the right to conduct periodic audits of the
Debtor's business during reasonable business hours, with the right to
have an auditor of the Secured Party on the Debtor's premises.
12
<PAGE> 13
(k) The proceeds of all New Loans shall be used in the
ordinary course of business.
(l) The Debtor shall at all times maintain an inventory
of parts at a level exceeding $100,000.
(m) The Debtor shall pay, when due, the administrative
expenses in the Debtor's case.
(n) The Debtor shall use its best efforts to prepare,
propose and file a plan of reorganization in the Debtor's case as
quickly as possible and in no event later than October 31, 1995 and to
confirm such plan of reorganization no later than December 31, 1995.
6. Events of Default. "Event of Default", wherever used
herein, means any one of the following events, unless waived in writing by the
Secured Party:
(a) Any of the Secured Party's Collateral is converted by
the Debtor, lost or stolen in any material amount, or not accounted
for by the Debtor; or
(b) The Debtor fails to pay any cash proceeds of
collateral to the Secured Party as herein provided or otherwise fail
to make any payment required hereunder; or
(c) The Order entered by the Court approving the terms of
this Stipulation, or any subsection or portion thereof, shall be
vacated, reversed, or modified; or
(d) The Debtor fails to comply with any of its
obligations under the Code or other applicable law, if such
noncompliance has a material adverse impact on the Debtor's business
or the Debtor's estate or to the Secured Party; or
13
<PAGE> 14
(e) The Debtor fails to allow the Secured Party to
conduct its customary audits of the Secured Party's Collateral during
regular business hours; or
(f) The Debtor fails to timely deliver to Secured Party
the reports required under paragraph 8 hereof, provided, however, that
the Debtor may have until ten days after written notice from the
Secured Party to deliver the reports required by paragraphs 8(b), (c)
and (e) hereof; or
(g) The Debtor shall at any time discontinue or shall be
ordered to discontinue the conduct of its business; or
(h) The automatic stay is terminated with respect to any
other party permitting that party to proceed against any assets of the
Debtor, or the Debtor assumes or rejects any executory contract, which
has a material adverse impact on the Debtor's business or the Debtor's
estate or the Secured Party; or
(i) The Debtor's Case shall be dismissed or converted to
a Chapter 7 case ; or
(j) The Debtor fails to attain at least 60% of the
cumulative, projected cash flows as set forth in the Budget attached
hereto as Exhibit A; or
(k) Appointment of a trustee or examiner with expanded
powers under 11 U.S.C. Section 1104; or
(l) The Debtor fails to comply with any representation,
warranty, covenant contained in the Credit Agreement, Security
Documents (except for the covenants related to the filing of a
bankruptcy petition, solvency or financial covenants) or
14
<PAGE> 15
herein, and the continuance of such failure following ten days written
notice to the Debtor from the Secured Party.
As of the date of this Stipulation, the Secured Party is not aware of any
failure or act which would constitute an Event of Default hereunder. The
Secured Party acknowledges that a plan of reorganization may contain terms
inconsistent with such representations, warranties and covenants but the
Secured Party reserves all of its rights to object to such inconsistent terms.
These Events of Default are exclusive and supersede those Events of Default
stated in the Security Documents or Credit Agreement.
7. Secured Party's Remedies. In addition to the Secured
Party's right to refuse to make New Loans and New L/C Guaranties as provided in
paragraph 5(f),
(a) upon the occurrence of an Event of Default, all
indebtedness of the Debtor to the Secured Party shall, at the Secured
Party's option, become immediately due and payable, without notice or
demand, and the Secured Party may immediately, without notice, demand
or any period of grace, temporarily suspend or permanently cease
making New Loans and issuing New L/C Guaranties pursuant to paragraph
5 hereof, and may withdraw its consent to the Debtor's use of cash
collateral; and
(b) upon the occurrence of any Event of Default at the
Secured Party's option and upon five business days notice to the
Debtor, the Secured Party shall be entitled to an order from the
Bankruptcy Court terminating the automatic stay of 11 U.S.C. Section
362 as to the Secured Party, which order the Debtor agrees may be
entered.
15
<PAGE> 16
8. Reporting. The Debtor will make available to the
Secured Party all information required by the Credit Agreement and Security
Documents, or as otherwise required by the Secured Party, including without
limitation, the following items:
(a) as soon as available, a copy of each weekly cash flow
statement;
(b) within 20 days after the end of each month, an
operating statement for that month and asset and liability statement
as at the end of that month;
(c) each day, (1) collection reports of accounts
receivable and cash sales; and (2) a listing of new accounts
receivable, along with, at the request of the Secured Party, each
receivable's invoice documentation;
(d) on the first business day of each week, (1) a
certificate setting forth the amount of New Loans and New L/C
Guaranties outstanding hereunder, the amount of Prepetition
Collateral, the Secured Party's Collateral and the Borrowing Base
referred to in subparagraph 5(e), in each case as of the end of the
previous week; and (2) reports on the aging of accounts receivable and
accounts payable;
(e) immediately upon the sale, refinancing or other
disposition of the Motor Coach, the Show Truck, any tractor, or any
other item of machinery or equipment with a sales price in excess of
$1,500, a certificate setting forth the amount of the net proceeds
received from such sale, refinancing or other disposition.
9. Reservation of Rights. Except as otherwise expressly
set forth herein, the Secured Party reserves and retains all rights it may have
as to the Secured Party's Claim and the Prepetition Collateral and all rights
against any and all other collateral security held by the Secured Party.
16
<PAGE> 17
10. Modification of Prior Documents. Except as expressly
modified, changed or amended by this Stipulation, all provisions of the Credit
Agreement, Security Documents, and documents in favor of the Secured Party,
remain in full force and effect.
11. Complete Agreement. This Stipulation sets forth the
complete agreement of the parties. It may not be modified, waived or changed,
except by a writing signed by the party to be bound thereto.
12. Binding Effect. This Stipulation is binding upon the
parties and their respective successors and assigns, including but not limited
to any successor entity under any plan of reorganization of the Debtor. Any
trustee in this Chapter 11 case or any converted Chapter 7 case shall be bound
by this Stipulation without prejudice, however, to such trustee's rights to
challenge paragraph 1 hereof.
13. Expenses. The Debtor agrees to reimburse the Secured
Party for all reasonable attorney's fees and legal expenses incurred by the
Secured Party in connection with the negotiation, execution and delivery of
this Stipulation or the making of any New Loan, or the collection, enforcement
or protection of this Stipulation, the indebtedness evidenced hereby, or the
security therefor.
14. Termination. Any termination of the Secured Party's
consent to the use of cash collateral or of the Secured Party's obligation to
extend New Loans or New L/C Guaranties shall not affect any rights or the
validity, priority or effect of liens in the property of the Estate granted to
the Secured Party during the period this Stipulation is in effect or the
Debtor's agreement in paragraphs 3 and 7 hereof.
17
<PAGE> 18
15. Stipulation Subject to Entry of Court Order. This
Stipulation is subject to, and shall be effective only upon, entry of an order
of the Court authorizing the Debtor to enter into and perform this Stipulation,
including (without limitation) the provisions of paragraphs 3, 4 and 5 hereof,
for which order the Debtor hereby applies to the Court. During the pendency of
this case and prior to confirmation of a plan of reorganization, the United
States Bankruptcy Court for the Western District of Oklahoma shall be the sole
forum for resolving disputes between the Debtor and the Secured Party under the
Stipulation.
16. Exit Financing. The Debtor has requested that the
Secured Party provide financing to the Debtor after the confirmation of a plan
of reorganization in the Debtor's Case (the "Exit Financing"). The Secured
Party is willing to provide the Exit Financing on the following terms and
conditions:
(a) The Debtor's plan of reorganization and the order
confirming the plan shall provide for the continuing validity,
enforceability and effectiveness of the Credit Agreement, Security
Documents and documents related thereto on the same terms and
conditions as existed before the commencement of the Debtor's Case,
except as specifically set forth below. Without limitation of the
foregoing, the Debtor's plan of reorganization and the order
confirming the plan must provide for (i) the payment in full through
the Exit Financing or otherwise of all amounts due to the Secured
Party, whether incurred before, during or after the Debtor's Case,
(ii) the continuation of all liens, claims and encumbrances in favor
of the Secured Party on assets of the Estate and the reorganized
Debtor, and (iii) the maintenance of the loan structure which existed
before the commencement of the Debtor's Case.
18
<PAGE> 19
(b) The Exit Financing shall expire and be repaid in full
no later than the earlier of (i) one year after the date on which an
order is entered in the case confirming a plan of Reorganization, or
(ii) December 31, 1996.
(c) The Exit Financing will not be made available to the
Debtor if an Event of Default has occurred under this Stipulation or
if the Termination Date has occurred prior to the confirmation of the
Debtor's plan.
(d) The Debtor must have delivered to the Secured Party,
before the date of confirmation of the Debtor's plan, projections for
operations of the Debtor through December 31, 1996 showing positive
cash flow and positive net income, which projections shall be the
basis for resetting the financial covenants in the Credit Agreement
with respect to the Exit Financing.
(e) Interest shall accrue at an annual rate equal to two
and one-half percent (2 1/2%) over the Base Rate. After default,
interest shall accrue at four and one-half percent (4 1/2%) in excess
of the Base Rate. All other fees, charges and other expenses shall be
payable by the Debtor to the Secured Party as set forth in the Credit
Agreement, Security Documents, and documents related thereto.
(f) The "Borrowing Base" shall return to the definition
of such term in the Credit Agreement immediately prior to the
commencement of the Debtor's Case.
(g) The Exit Financing shall be secured by a perfected
security interest in all assets of the Debtor, and Don H. Freymiller
shall acknowledge that the terms of the Exit Financing do not impair
in any way the enforceability of the Guaranty as to the Exit
Financing.
19
<PAGE> 20
(h) The Debtor shall execute such documents as the
Secured Party may deem appropriate or reasonable to evidence the terms
set forth above and the continuing validity, enforceability and
effectiveness of the Credit Agreement, Loan Documents and documents
related thereto.
The Debtor is agreeable to all of the foregoing terms and conditions, and
agrees that it will not propose a plan of reorganization which fails to include
each of the foregoing terms.
Dated: May 23, 1995
Debtor's Counsel: Debtor:
FREYMILLER TRUCKING, INC.
/s/ Judy Hamilton Morse
Judy Hamilton Morse
Roger A. Stong By /s/ Richard E. Kuehn
Crowe & Dunlevy Its Chief Financial Officer
20 North Broadway, Suite 1800
Oklahoma City, Oklahoma 73102
Telephone (405) 720-6555
20
<PAGE> 21
Secured Party's Counsel: Secured Party:
/s/ G. Blaine Schwabe, III NORWEST BUSINESS CREDIT, INC.
G. Blaine Schwabe, III
Mock, Schwabe, Waldo, Elder,
Rooves & Bryant By /s/ Perry T. Larson
211 North Robinson Its Vice President
Oklahoma City, OK 73102
and
Michael R. Stewart
Kathleen H. Sanberg
Faegre & Benson, Professional Limited
Liability Partnership
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Telephone (612) 336-3000
The undersigned hereby agrees that the terms of the foregoing
Stipulation do not impair in any way the enforceability of the undersigned's
Guaranty dated February 11, 1993, as amended, in favor of the Secured Party as
to the Secured Party's Claim and the New Loans.
/s/ Don H. Freymiller
Don H. Freymiller
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AS OF JUNE 30, 1995 AND STATEMENT OF OPERATIONS FOR THE
SIX MONTH PERIOD ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q
FILING FOR THE SECOND QUARTER OF 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 536
<SECURITIES> 0
<RECEIVABLES> 9,112
<ALLOWANCES> 0
<INVENTORY> 419
<CURRENT-ASSETS> 13,051
<PP&E> 21,864
<DEPRECIATION> 7,164
<TOTAL-ASSETS> 35,276
<CURRENT-LIABILITIES> 37,658
<BONDS> 0
<COMMON> 25
0
0
<OTHER-SE> (6,233)
<TOTAL-LIABILITY-AND-EQUITY> 35,276
<SALES> 0
<TOTAL-REVENUES> 41,920
<CGS> 0
<TOTAL-COSTS> 46,097
<OTHER-EXPENSES> 3,215
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,267
<INCOME-PRETAX> (8,659)
<INCOME-TAX> 111
<INCOME-CONTINUING> (8,770)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,770)
<EPS-PRIMARY> (3.60)
<EPS-DILUTED> (3.60)
</TABLE>
