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The Credit Agreement contains various covenants which limit, among other things, dividends, indebtedness, capital expenditures, loans and investments, as well as requiring the Company to meet certain financial tests. As of December 31, 1994, these covenants have been met. If there is an event of default which is not remedied or waived within 10 days, the Credit Agreement will become secured to the extent of amounts then outstanding of all of the Company’s receivables (excluding receivables sold under the receivables purchase agreement), revenue equipment, real property and common stock included in the borrowing base (subject to certain exceptions). The Credit Agreement also, at December 1992, included a $50 million Term Loan Facility. In February 1993, the Company completed its public offering of 1,495,000 shares of Preferred Stock. The Company used the net proceeds of approximately $71.9 million to repay the Term Loan and for general corporate purposes. The Preferred Stock is convertible at the option of the holder into Common Stock at the rate of 2.5397 shares of Common Stock for each share of Preferred Stock. Annual dividends are $2.875 and are cumulative. The Preferred Stock is redeemable at the Company’s option on or after February 15, 1996 at $52.0125 per share plus accumulated unpaid dividends, and is exchangeable at the option of the Company for the Company’s 5 3/4% Convertible Subordinated Debentures due February 15, 2018 at a rate of $50 principal amount of debentures for each share of Preferred Stock. The holders of the Preferred Stock have no voting rights unless dividends are in arrears six quarters or more, at which time the holders have the right to elect two directors of the Company until all dividends have been paid. The Company entered into a $20 million term credit agreement, dated as of April 25, 1994, with NationsBank of Texas, N.A., as agent, and Societe Generale Southwest Agency. The proceeds from the agreement are being used in financing the construction of the Company’s corporate office which was completed in March 1995. Amounts advanced and unpaid bear interest of 8.07% per annum. The Company shall repay the outstanding principal amount in 40 equal installments, each in the amount of $500,000, due and payable on the fifteenth day of each January, April, July, and October, commencing on July 15, 1994. At December 31, 1994, there was $19.0 million outstanding. On March 2, 1994, ABF, Renaissance Asset Funding Corp. ("Renaissance") and Societe Generale entered into a receivables purchase agreement. The agreement allows ABF to sell to Renaissance an interest in up to $55 million in a pool of receivables. At December 31, 1994, ABF had $40 million of receivables financed through this facility. Treadco is a party to a revolving credit facility with Societe Generale (the "Treadco Credit Agreement") providing for borrowings of up to the lesser of $12 million or the applicable borrowing base. At December 31, 1994, the borrowing base was $25.6 million. Borrowings under the Treadco Credit Agreement are collateralized by accounts receivable and inventory. Borrowings under the agreement bear interest, at Treadco’s option, at 1% above the bank’s LIBOR rate, or at the higher of the bank’s prime rate or the "federal funds rate" plus 1/2%. At December 31, 1994, the interest rate was 7.1%. At December 31, 1994, Treadco had $3 million outstanding under the Treadco Credit Agreement. Treadco pays a commitment fee of 3/8% on the unused amount under the Treadco Credit Agreement. The Treadco Credit Agreement contains various convenants which limit, among other things, dividends, disposition of receivables, indebtedness and investments, as well as requiring Treadco to meet certain financial tests which have been met. Under the Treadco Credit Agreement, Treadco’s assets are subject to pledge and, therefore, are available for use only by that subsidiary. On September 30, 1994, the Company paid an initial payment of $54 million to the Clipper Group shareholders from cash on hand and funds provided under its existing lines of credit. The final $6 million payment (subject to certain closing audit and other contractual adjustments) which is due May 15, 1995 will be funded from cash and/or funds provided under its existing lines of credit. On October 12, 1994, the Company issued 310,191 shares of common stock for all of the outstanding stock of the Traveller Group. The final number of shares that will be issued in conjunction with this transaction are subject to certain closing audit adjustments. The following table sets forth the Company’s historical capital expenditures (net of equipment trade-ins) for the periods indicated below:
Year Ended December 31
1994 1993 1992
($ millions)
Carrier operations $ 44.2 $ 48.6 $ 47.7
Tire operations 4.3 6.1 2.2
Service and other 15.6 3.3 2.2
64.1 58.0 52.1
Less: Operating leases - (24.8) (25.5)
Total $ 64.1 $ 33.2 $ 26.6
The amounts presented in the table under operating leases reflect the estimated purchase price of the equipment had the Company purchased the equipment versus financing through operating lease transactions. In 1995, the Company anticipates spending approximately $85.9 million in total capital expenditures net of proceeds from equipment sales. It is expected that approximately $26.2 million of equipment expenditures will be financed by capital leases, $24.6 million will be financed by operating leases and the remaining $35.1 million will be financed through internally generated funds and borrowings under the Credit Agreement and Treadco Credit Agreement.
Capital Expenditures Program for 1995
Net of Equipment Trade-Ins
Facilities Equipment Miscellaneous Total
($ millions)
Carrier operations $ 16.5 $ 37.1 $ 4.0 $ 57.6
Forwarding operations - 0.3 - 0.3
Tire operations 0.8 5.7 0.5 7.0
Service and other 9.0 7.5 4.5 21.0
$ 26.3 $ 50.6 $ 9.0 $ 85.9
Management believes, based upon the Company’s current levels of operations and anticipated growth, the Company’s cash, capital resources, borrowings available under the Credit Agreement and cash flow from operations will be sufficient to finance current and future operations and meet all present and future debt service requirements. The motor carrier segment is affected by seasonal fluctuations, which affect tonnage to be transported. Freight shipments, operating costs and earnings are also affected adversely by inclement weather conditions. The third calendar quarter of each year usually has the highest tonnage levels while the first quarter has the lowest. Forwarding operations are similar to the motor carrier segment with revenues being weaker in the first quarter and stronger during the months of September and October. Treadco’s operations are somewhat seasonal with the last six months of the calendar year generally having the highest levels of sales. |
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