-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IIZVetA86VJCPq2Hio5kpWMCg0VZ81eOLBYmzpXUS/69gwS4c/thegMRA6f04Bx4 l8bTjVL2/JuxcLVqrlOE5A== 0000846729-96-000006.txt : 19961101 0000846729-96-000006.hdr.sgml : 19961101 ACCESSION NUMBER: 0000846729-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961031 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN FREIGHTWAYS CORP CENTRAL INDEX KEY: 0000846729 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 742391754 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17570 FILM NUMBER: 96650854 BUSINESS ADDRESS: STREET 1: 2200 FORWARD DR CITY: HARRISON STATE: AR ZIP: 72601 BUSINESS PHONE: 5017419000 MAIL ADDRESS: STREET 1: 2200 FORWARD DR CITY: HARRISON STATE: AR ZIP: 72601 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1996 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 34-0-17570 AMERICAN FREIGHTWAYS CORPORATION (Exact name of registrant as specified in its charter) ARKANSAS 74-2391754 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 2200 FORWARD DRIVE, HARRISON, ARKANSAS 72601 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (501) 741-9000 NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act 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 such filing requirements for the past 90 days. [X] Yes [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of common stock outstanding at September 30, 1996: 31,133,303. PART I. FINANCIAL INFORMATION Item 1. Financial Statements AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (000's omitted)
SEPTEMBER 30, December 31, 1996 1995 --------- --------- (UNAUDITED) (Note) ASSETS Current assets Cash and cash equivalents $ 7,994 $ 2,642 Trade receivables, less allowance for doubtful accounts (1996-$1,286;1995-$845) 69,372 54,119 Operating supplies and inventories 2,462 2,136 Prepaid expenses 6,512 5,504 Deferred income taxes 11,492 8,444 Income taxes receivable 1,768 4,368 --------- --------- Total current assets 99,600 77,213 Property and equipment 621,430 530,589 Allowances for depreciation and amortization (deduction) (167,055) (132,887) --------- --------- 454,375 397,702 Other assets 2,780 2,847 --------- --------- $ 556,755 $ 477,76 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Trade accounts payable $ 14,280 $ 10,532 Accrued expenses 43,433 33,590 Current portion of long-term debt 11,460 8,392 --------- --------- Total current liabilities 69,173 52,514 Long-term debt, less current portion (Note B) 236,813 189,239 Deferred income taxes 46,811 40,575 Shareholders' equity Common stock, par value $.01 per share--authorized 250,000 shares; issued and outstanding 31,133 in 1996 and 30,931 in 1995 311 309 Additional paid-in capital 100,609 98,514 Retained earnings 103,038 96,611 --------- --------- 203,958 195,434 --------- --------- $ 556,755 $ 477,762 ========= =========
Note: The condensed consolidated balance sheet at December 31, 1995, has been derived from the audited consolidated financial statements at that date. See notes to condensed consolidated financial statements. AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (000's omitted, except per share data)
Three Months Ended Nine Months Ended September 30 September 30 1996 1995 1996 1995 ------------------ ------------------ OPERATING REVENUE $192,497 $149,392 $539,742 $423,894 OPERATING EXPENSES AND COSTS Salaries, wages and benefits 117,224 89,462 327,564 240,728 Operating supplies and expenses 15,108 9,303 42,577 27,192 Operating taxes and licenses 8,250 5,961 23,813 17,515 Insurance 6,784 5,685 19,744 15,011 Communications and utilities 3,310 2,875 9,593 8,133 Depreciation and amortization 12,081 9,963 34,438 27,505 Rents and purchased transportation 11,746 12,321 35,660 34,029 Other 8,834 7,376 25,308 19,555 -------- -------- -------- -------- 183,337 142,946 518,697 389,668 -------- -------- -------- -------- OPERATING INCOME 9,160 6,446 21,045 34,226 OTHER INCOME (EXPENSE) Interest expense (4,128) (2,636) (10,826) (7,326) Interest income 25 45 85 120 Gain on disposal of assets 2 14 13 59 Other, net 27 89 149 241 -------- -------- -------- -------- (4,074) (2,488) (10,579) (6,906) INCOME BEFORE INCOME TAXES 5,086 3,958 10,466 27,320 FEDERAL AND STATE INCOME TAXES Current 388 (2,327) 682 541 Deferred 1,575 3,841 3,358 9,909 -------- -------- -------- -------- 1,963 1,514 4,040 10,450 -------- -------- -------- -------- NET INCOME $ 3,123 $ 2,444 $ 6,426 $ 16,870 ======== ======== ======== ======== NET INCOME PER SHARE $ 0.10 $ 0.08 $ 0.21 $ 0.54 ======== ======== ======== ======== AVERAGE SHARES OUTSTANDING 31,285 31,398 31,265 31,400 ======== ======== ======== ========
See notes to condensed consolidated financial statements. AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30 1996 1995 --------- --------- (000's omitted) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 44,100 $ 37,462 INVESTING ACTIVITIES Proceeds from sales of equipment 71 548 Capital expenditures (91,206) (100,952) --------- --------- Net cash used by investing activities (91,135) (100,404) FINANCING ACTIVITIES Principal payments on long-term debt (25,858) (23,911) Proceeds from notes payable and long-term borrowings 76,500 84,936 Proceeds from issuance of common stock 1,745 2,512 --------- --------- Net cash provided by financing activities 52,387 63,537 --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS $ 5,352 $ 595 ========= =========
See notes to condensed consolidated financial statements. AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 30, 1996 NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results of the nine month period ended September 30, 1996, are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the Company's consolidated financial statements and footnotes thereto included in Form 10-K for the year ended December 31, 1995. NOTE B - LONG-TERM DEBT As of September 30, 1996, the Company has outstanding borrowings of $121,000,000 under its existing $175,000,000 unsecured revolving line of credit. The proceeds of these borrowings were used for the purchase of revenue equipment and for the purchase and construction of terminal facilities. At September 30, 1996, the amount available for borrowing under the line of credit was $54,000,000. The line of credit bears interest at a variable interest rate based upon the London Interbank rate or the lender's prime rate in effect at the time of the borrowing. In addition to this credit facility, the Company has obtained letters of credit totaling $5,075,000 to provide collateral on its self-insurance plan. As of September 30, 1996, the Company has outstanding borrowings of $89,250,000 under a Master Shelf Agreement which provides for the issuance of up to $90,000,000 of senior promissory notes with an average life not to exceed eight years. NOTE C - COMMITMENTS Commitments for the purchase of revenue equipment and the purchase or construction of terminals aggregated approximately $11,755,000 at September 30, 1996. NOTE D - EARNINGS PER SHARE
Three Months Ended Nine Months Ended September 30 September 30 1996 1995 1996 1995 -------- -------- -------- -------- (000's omitted except per share amounts) Weighted average shares outstanding 31,128 30,821 31,037 30,702 Net effect of dilutive stock options based on treasury stock method 157 577 228 698 -------- -------- -------- -------- Total weighted average shares outstanding 31,285 31,398 31,265 31,400 ======== ======== ======== ======== Net income $ 3,123 $ 2,44 $ 6,426 $ 16,870 ======== ======== ======== ======== Earnings per common share and common share equivalents $ 0.10 $ 0.08 $ 0.21 $ 0.54 ======== ======= ======== ========
Earnings per common share and common share equivalents are computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following table sets forth, for the periods indicated, the percentages of operating expenses and other items to operating revenue:
Three Months Ended Nine Months Ended September 30 September 30 1996 1995 1996 1995 --------------------------------- Operating revenue 100.0% 100.0% 100.0% 100.0% Operating expenses and costs Salaries, wages and benefits 60.9% 59.9% 60.7% 56.8% Operating supplies and expenses 7.8% 6.2% 7.9% 6.4% Operating taxes and licenses 4.3% 4.0% 4.4% 4.1% Insurance 3.5% 3.8% 3.6% 3.6% Communications and utilities 1.7% 1.9% 1.8% 1.9% Depreciation and amortization 6.3% 6.7% 6.4% 6.5% Rents and purchased transportation 6.1% 8.3% 6.6% 8.0% Other 4.6% 4.9% 4.7% 4.6% --------------------------------- Total operating expenses and costs 95.2% 95.7% 96.1% 91.9% --------------------------------- Operating income 4.8% 4.3% 3.9% 8.1% Interest expense (2.2%) (1.8%) (2.0%) (1.7%) Other income, net 0.0% 0.1% 0.0% 0.1% --------------------------------- Income before income taxes 2.6% 2.6% 1.9% 6.5% Income taxes 1.0% 1.0% 0.7% 2.5% --------------------------------- Net income 1.6% 1.6% 1.2% 4.0% =================================
RESULTS OF OPERATIONS Operating Revenue Operating revenue for the nine months ended September 30, 1996 was $539,742,000, up 27.3%, compared to $423,894,000 for the nine months ended September 30, 1995. Operating revenue for the three months ended September 30, 1996 was $192,497,000, up 28.9%, compared to $149,392,000 in the three months ended September 30, 1995. The additional operating revenue during the nine month period ended September 30, 1996 resulted primarily from increased tonnage from new and existing customers. Tonnage was up 24.3% and 22.1%, respectively, from the same nine and three month periods of 1995. This increase in tonnage was primarily a result of the following: - - The Company continued to increase its market penetration into existing service territories, particularly those geographic areas added during 1995. - - The increase in intrastate tonnage following the deregulation of intrastate commerce effective January 1, 1995. - - On January 1, 1996, the Company expanded its all-points coverage to the states of Delaware, Maryland, Virginia and West Virginia with the opening of twelve new terminals. - - On June 3, 1996, the Company expanded its all-points coverage to 26 states with the addition of Minnesota. Five new terminals were opened to complement the two terminals already operating in that state. Revenue per hundred weight for the first nine months of 1996 was up 2.3% from levels experienced in the first nine months of 1995. The majority of this year-to-date increase in revenue per hundred weight was the result of a 5.0% increase experienced in the three months ended September 30, 1996. This third quarter improvement in revenue per hundred weight was primarily a result of increased demand in the LTL industry. The increased demand resulted in a partial reduction of the excess capacity that has existed in the industry for the past year. Other factors influencing revenue per hundred weight were: - - A general rate increase of approximately 5.75% effective January 1, 1996. General rate increases initially affect approximately 44% of the Company's customers. The remaining customers' rates are determined by contracts and guarantees and are negotiated throughout the year. - - The Company's average length of haul increased 2.2%, to 595 miles, in the nine months ended September 30, 1996 as compared to the nine months ended September 30, 1995. The increase in average length of haul was primarily a result of the Company's expanded service territory. - - The percentage of the Company's total revenue that was derived from truckload shipments (greater than 10,000 pounds) declined to 6.7% in the nine months ended September 30, 1996 as compared to 7.9% in the nine months ended September 30, 1995. Management expects that growth in operating revenue is sustainable in the near term. However, the rate of growth in operating revenue is likely to be less than that experienced by the Company in recent years. This is largely due to less aggressive plans for geographic expansion in the near term. Any near-term growth in operating revenue would, as in recent periods, continue to be primarily due to increased tonnage handled by the Company. To a lesser degree, operating revenue may be increased by improvements in revenue per hundred weight if market and competitive conditions allow. The foregoing statement about the sustainability of revenue growth is subject to a number of factors, including LTL industry capacity, increased tonnage and general economic conditions. Operating Expenses Operating expenses as a percentage of operating revenue increased to 96.1% in the nine months ended September 30, 1996 from 91.9% in the nine months ended September 30, 1995. Operating expenses as a percentage of operating revenue improved to 95.2% in the three months ended September 30, 1996 from 95.7% in the three months ended September 30, 1995. This overall, year-to-date increase was primarily attributable to: - - Salaries, wages and benefits as a percentage of operating revenue increased to 60.7% in the nine months ended September 30, 1996 from 56.8% in the nine months ended September 30, 1995. This increase was primarily due to the following factors. First was the Company's investment in additional people in order to improve on- time service. The timing of freight flows was interrupted in the second half of 1995 due to a large geographic expansion by the Company and a softening of general economic conditions. As a result, on-time service fell below the traditionally high levels established by the Company. The Company invested in additional manpower which has returned on-time service to traditional levels. Second, the Company increased the wages of its drivers, dockmen and clerical workers by approximately 3.0% effective March 3, 1996. In addition, five terminals were converted from contractor-operated terminals to Company-operated facilities during the first nine months of 1996. - - Operating supplies and expenses as a percentage of operating revenue increased to 7.9% in the nine months ended September 30, 1996 from 6.4% in the nine months ended September 30, 1995. This increase was largely due to an overall increase in fuel prices beginning in February 1996. Management estimates that operating supplies and expenses during this period were increased by approximately $4,000,000 due to increased fuel costs. A fuel surcharge was enacted effective September 16, 1996. The surcharge is tied to the Department of Energy's National Diesel Fuel Index and was 1.3% as of September 30, 1996. These increases in operating expenses as a percentage of operating revenue were partially offset by improvements in the following area: - - Rents and purchased transportation as a percentage of operating revenue decreased to 6.6% in the nine months ended September 30, 1996 from 8.0% in the nine months ended September 30, 1995. This improvement was primarily a result of the utilization of Company-operated terminals, rather than contractor-operated terminals, in expansions of service territory. In addition, five contractor-operated terminals were converted to Company-operated terminals during the first nine months of 1996. Other Interest expense as a percentage of operating revenue increased to 2.0% in the nine months ended September 30, 1996 from 1.7% in the nine months ended September 30, 1995. This increase was primarily attributable to increased borrowings incurred by the Company to finance the purchase and construction of terminals and the purchase of revenue and other equipment. The effective tax rate of the Company was 38.6% for the first nine months of 1996, up from 38.3% for the same time period of 1995. Net income for the nine months ended September 30, 1996, was $6,426,000, down 61.9%, from $16,870,000 for the nine months ended September 30, 1995. LIQUIDITY AND CAPITAL RESOURCES The continued growth in operating revenue and the expansion of service territory initiated on January 1, 1996 required significant capital resources in the nine months ended September 30, 1996. Capital requirements during the nine months ended September 30, 1996 consisted primarily of $91,135,000 in investing activities. The Company invested $91,206,000 in capital expenditures during the nine months ended September 30, 1996 comprised of $43,045,000 in additional revenue equipment, $34,026,000 in new terminal facilities or the expansion of existing terminal facilities and $14,135,000 in other equipment. Management expects capital expenditures for the full year of 1996 will be approximately $105,000,000. At September 30, 1996, the Company had commitments for land, terminals and construction in progress of approximately $11,755,000. The Company provided for its capital resource requirements in the nine months ended September 30, 1996 with cash from operations and financing activities. Cash from operations totaled $44,100,000 in the nine months ended September 30, 1996 compared to $37,462,000 provided by operations in the nine months ended September 30, 1995. Financing activities augmented cash flow by $52,387,000 in the nine months ended September 30, 1996 by utilizing two primary sources of financing: the revolving line of credit and the Master Shelf facility. - - The Company experiences periodic cash flow fluctuations common to the industry. Cash outflows are heaviest during the first part of any given year while cash inflows are normally weighted towards the last two quarters of the year. To smooth these fluctuations and to provide flexibility to fund future growth, the Company utilizes a variable-rate, unsecured revolving line of credit. Effective May 31, 1996, the limit of this revolving credit facility was increased to $175,000,000, from $125,000,000, and the number of lending institutions participating in the facility was increased to six from three. This increased line of credit is provided by NationsBank of Texas, N.A. (agent), Texas Commerce Bank, N.A., Wachovia Bank of Georgia, N.A., ABN-AMRO Bank N.V., The First National Bank of Chicago and Credit Lyonnais. During the nine months ended September 30, 1996, the Company utilized this facility to provide $27,000,000 of net financing, leaving $54,000,000 available for borrowing. The Company also had $10,000,000 available under its short-term, unsecured revolving line of credit with NationsBank of Texas, N.A. Effective May 31, 1996, the limit of this facility was increased to $10,000,000 from $7,500,000. In addition, the Company maintains a $10,000,000 line of credit with NationsBank, N.A. to obtain letters of credit for its self- insurance program. At September 30, 1996, the Company had obtained letters of credit totaling $5,075,000 for this purpose. - - To assist in financing longer-lived assets, the Company has an uncommitted Master Shelf Agreement with the Prudential Insurance Company of America which provides for the issuance of up to $90,000,000 in medium to long-term unsecured notes at an interest rate calculated at issuance. On May 1, 1996, the Company utilized this facility to issue $25,000,000 in 10-year, senior notes at an interest rate of 7.51%. With the issuance of these notes, the Company had fully utilized the existing capacity of this facility. Management expects that the Company's existing working capital and its available lines of credit are sufficient to meet the Company's commitments as of September 30, 1996, and to fund current operating and capital needs. However, if additional financing is required, management believes it will be available. The Company uses off-balance sheet financing in the form of operating leases primarily in the following areas; terminal facilities, revenue equipment and computer equipment. At September 30, 1996, future rental commitments on operating leases were $51,225,000. The Company prefers to utilize operating leases for these areas and plans to use them in the future when such financing is available and suitable. ENVIRONMENTAL At September 30, 1996, the Company had no outstanding inquiries with any state or federal environmental agency. INDEX AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Condensed consolidated balance sheets--September 30, 1996 and December 31, 1995 Condensed consolidated statements of income--Three months ended September 30, 1996 and 1995; Nine months ended September 30, 1996 and 1995 Condensed consolidated statements of cash flows--Nine months ended September 30, 1996 and 1995 Notes to condensed consolidated financial statements-- September 30, 1996 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: (27) Financial Data Schedule (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the three month period ended September 30, 1996. 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. AMERICAN FREIGHTWAYS CORPORATION (Registrant) Date: October 31, 1996 /s/Frank Conner Frank Conner Executive Vice President Accounting & Finance and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the September 30, 1996 quarterly consolidated financial statements and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 7,994 0 70,658 1,286 2,462 99,600 621,430 167,055 556,755 69,173 236,813 0 0 311 203,647 556,755 0 539,742 0 518,697 0 0 10,826 10,466 4,040 6,426 0 0 0 6,426 .21 .21 Provision for doubtful accounts included in costs and expenses applicable to revenues.
-----END PRIVACY-ENHANCED MESSAGE-----