<PAGE>
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 JUNE 30, 1997
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: (870) 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 June 30, 1997:
31,365,572.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
<TABLE>
JUNE 30, December 31,
1997 1996
---------- ----------
(UNAUDITED) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 4,062 $ 4,394
Trade receivables, less allowance
for doubtful accounts
(1997-$1,542; 1996-$1,378) 79,091 66,673
Operating supplies and inventories 2,370 2,493
Prepaid expenses 9,321 4,648
Deferred income taxes 12,742 10,649
Income taxes receivable 361 3,097
---------- ----------
Total current assets 107,947 91,954
Property and equipment 662,223 634,791
Accumulated depreciation
and amortization (204,542) (179,193)
---------- ----------
457,681 455,598
Other assets 2,974 2,323
---------- ----------
$568,602 $ 549,875
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 12,597 $ 9,425
Accrued expenses 54,252 45,278
Current portion of long-term debt 11,494 11,463
---------- ----------
Total current liabilities 78,343 66,166
Long-term debt, less current
portion (Note B) 219,451 226,776
Deferred income taxes 54,739 50,635
Shareholders' equity
Common stock, par value $.01
per share--authorized 250,000
shares; issued and outstanding
31,365 in 1997 and 31,242 in 1996 314 312
Additional paid-in capital 102,844 101,519
Retained earnings 112,911 104,467
---------- ----------
216,069 206,298
---------- ----------
$568,602 $ 549,875
========== ==========
</TABLE>
Note: The condensed consolidated balance sheet at December 31,
1996, has been derived from the audited consolidated financial
statements at that date.
See notes to condensed consolidated financial statements.
<PAGE>
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(000's omitted, except per share data)
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
------------------ ------------------
<S> <C> <C> <C> <C>
OPERATING REVENUE $219,088 $181,085 $412,140 $347,245
OPERATING EXPENSES AND COSTS
Salaries, wages and benefits 130,272 108,766 248,577 210,339
Operating supplies and expenses 18,663 15,280 37,175 27,469
Operating taxes and licenses 8,877 8,222 17,478 15,563
Insurance 6,732 6,366 13,414 12,960
Communications and utilities 3,581 3,198 7,076 6,284
Depreciation and amortization 13,024 11,334 25,870 22,357
Rents and purchased
transportation 13,607 11,800 23,497 23,914
Other 8,760 8,596 17,079 16,474
------------------ ------------------
203,516 173,562 390,166 335,360
------------------ ------------------
OPERATING INCOME 15,572 7,523 21,974 11,885
OTHER INCOME (EXPENSE)
Interest expense (4,174) (3,207) (8,260) (6,698)
Interest income 67 45 122 61
Gain (loss) on
disposal of assets 16 (5) 33 11
Other, net 9 44 19 121
------------------ ------------------
(4,082) (3,123) (8,086) (6,505)
INCOME BEFORE INCOME TAXES 11,490 4,400 13,888 5,380
FEDERAL AND STATE INCOME TAXES
Current 2,088 282 3,381 294
Deferred 2,416 1,416 2,063 1,783
------------------ ------------------
4,504 1,698 5,444 2,077
------------------ ------------------
NET INCOME $ 6,986 $ 2,702 $ 8,444 $ 3,303
================== ==================
NET INCOME PER SHARE (NOTE D) $ 0.22 $ 0.09 $ 0.27 $ 0.11
================== ==================
AVERAGE SHARES OUTSTANDING 31,597 31,338 31,544 31,255
================== ==================
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
Six Months Ended
June 30
1997 1996
-------------------------
(000's omitted)
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 33,690 $ 22,252
INVESTING ACTIVITIES
Proceeds from sales of equipment 67 42
Capital expenditures (27,983) (57,115)
---------- ----------
Net cash used by investing activities (27,916) (57,073)
FINANCING ACTIVITIES
Principal payments on long-term debt (55,694) (25,071)
Proceeds from notes payable
and long-term borrowings 48,400 59,500
Proceeds from issuance of common stock 1,188 1,689
---------- ----------
Net cash provided by financing activities (6,106) 36,118
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ (332) $ 1,297
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1997
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 six month period ended June 30, 1997, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1997. 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, 1996.
NOTE B - LONG-TERM DEBT
As of June 30, 1997, the Company has outstanding borrowings of
$63,000,000 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 customer center facilities. At June 30, 1997, the amount
available for borrowing under the line of credit was $112,000,000.
In addition to this credit facility, the Company has obtained
letters of credit totaling $5,076,000 to provide collateral on its
self-insurance plan.
As of June 30, 1997, the Company has outstanding borrowings of
$135,250,000 under an uncommitted Master Shelf Agreement which
provides for the issuance of up to $140,000,000 of senior
promissory notes with an average life not to exceed twelve years.
NOTE C - COMMITMENTS
Commitments for the purchase of revenue equipment and the purchase
or construction of customer centers aggregated approximately
$34,467,000 at June 30, 1997.
NOTE D - EARNINGS PER SHARE
<TABLE>
Three months ended Six months ended
June 30 June 30,
1997 1996 1997 1996
----------------------------------------
(000's omitted except per share amounts)
<S> <C> <C> <C> <C>
Weighted average shares
outstanding 31,301 31,036 31,280 30,992
Net effect of dilutive stock
options based on treasury
stock method 296 302 264 263
------- ------- ------- -------
Total weighted average
shares outstanding 31,597 31,338 31,544 31,255
======= ======= ======= =======
Net income $ 6,986 $ 2,702 $ 8,444 $ 3,303
======= ======= ======= =======
Earnings per common share
and common share equivalents $ 0.22 $ 0.09 $ 0.27 $ 0.11
======= ======= ======= =======
</TABLE>
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.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share, which is required to be
adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings
per share and to restate all prior periods. Under the new
requirements for computing primary earnings per share, the dilutive
effect of stock options will be excluded. The impact of Statement
128 on the calculation of primary earnings per share and fully
diluted earnings per share for these quarters is not expected to be
material.
<PAGE>
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:
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
----------------------------------
<S> <C> <C> <C> <C>
Operating revenue 100.0% 100.0% 100.0% 100.0%
Operating expenses and costs
Salaries, wages and benefits 59.5% 60.1% 60.3% 60.6%
Operating supplies and expenses 8.5% 8.4% 9.0% 7.9%
Operating taxes and licenses 4.1% 4.5% 4.2% 4.5%
Insurance 3.1% 3.5% 3.3% 3.7%
Communications and utilities 1.6% 1.8% 1.7% 1.8%
Depreciation and amortization 5.9% 6.3% 6.3% 6.4%
Rents and purchased transportation 6.2% 6.5% 5.7% 6.9%
Other 4.0% 4.7% 4.2% 4.8%
----------------------------------
Total operating expenses
and costs 92.9% 95.8% 94.7% 96.6%
----------------------------------
Operating income 7.1% 4.2% 5.3% 3.4%
Interest expense (1.9%) (1.8%) (2.0%) (1.9%)
Other income, net 0.1% 0.0% 0.1% 0.1%
----------------------------------
Income before income taxes 5.3% 2.4% 3.4% 1.6%
Income taxes 2.1% 0.9% 1.3% 0.6%
----------------------------------
Net income 3.2% 1.5% 2.1% 1.0%
==================================
</TABLE>
RESULTS OF OPERATIONS
Operating Revenue
Operating revenue for the six months ended June 30, 1997 was
$412,140,000, up 18.7%, compared to $347,245,000 for the six months
ended June 30, 1996. Operating revenue for the three months ended
June 30, 1997 was $219,088,000, up 21.0%, compared to $181,085,000
for the three months ended June 30, 1996. The growth in operating
revenue was primarily the result of increased revenue per hundred
weight and increased tonnage from new and existing customers.
Revenue per hundred weight for the first six months of 1997 was up
9.1% from levels experienced in the first six months of 1996.
Factors contributing to the increase in revenue per hundred weight
were:
- - A general rate increase of approximately 5.9% effective
January 1, 1997. General rate increases initially affect
approximately 45% of the Company's customers. The remaining
customers' rates are determined by contracts and guarantees and are
negotiated throughout the year.
- - The Company initiated a fuel surcharge beginning September 16,
1996 to help recover the increased costs of fuel. This surcharge
is tied to the Department of Energy's National Diesel Fuel Index
and was 0.7% for LTL shipments as of June 30, 1997. The surcharge
is designed to suspend at the time this national index moves below
$1.15 per gallon.
<PAGE>
The percentage of the Company's total revenue that was derived from
truckload shipments (greater than 10,000 pounds) declined to 5.8%
during the first six months of 1997 as compared to 6.9% during the
first six months of 1996.
Tonnage handled by the Company during the six and three months
ended June 30, 1997, increased 8.5% and 10.5%, respectively, over
the same time periods of 1996. This increase in tonnage was mainly
a result of the following:
- - The Company continued to increase its market penetration into
existing service territories, particularly those geographic areas
added during 1995 and 1996. During 1995, the Company expanded its
all-points coverage to the states of Colorado, Florida, Iowa,
Nebraska, North Carolina, South Carolina and Wisconsin. 1996
expansions included the states of Delaware, Maryland, Minnesota,
Virginia and West Virginia.
- - The continued increase in intrastate tonnage following the
deregulation of intrastate commerce effective January 1, 1995.
Management expects that growth in operating revenue is sustainable
in the near term. However, the Company's planned expansions of
service territory during 1997 are less aggressive than those
initiated in recent years. The primary focus for growth in
operating revenue in the near term will be further penetration of
existing markets. As a result, any near-term percentage growth in
operating revenue will likely be less than that experienced in
recent years. The foregoing statement concerning 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 improved to
94.7% in the six months ended June 30, 1997 from 96.6% in the six
months ended June 30, 1996. Operating expenses as a percentage of
operating revenue improved to 92.9% in the three months ended June
30, 1997 from 95.8% in the three months ended June 30, 1996. This
overall improvement was primarily attributable to:
- - Rents and purchased transportation as a percentage of
operating revenue decreased to 5.7% in the six months ended June
30, 1997 from 6.9% in the six months ended June 30, 1996. This
improvement was primarily a result of the utilization of Company-
operated customer centers, rather than contractor-operated customer
centers, in expansions of service territory. In addition, five
contractor-operated customer centers were converted to Company-
operated customer centers during 1996. Management expects rents
and purchased transportation as a percentage of operating revenue
to remain flat or gradually increase due to two principal reasons:
1) most functions that were previously being provided by
contractors have already been absorbed by the Company, and 2) the
Company has started to increase the strategic use of purchased
transportation in selected line-haul lanes.
- - Other expenses as a percentage of operating revenue improved
to 4.2% in the first six months of 1997 from 4.8% in the first six
months of 1996. This improvement was mostly due to decreased hotel
costs for line-haul drivers. The Company reconfigured its line-
haul network, with an emphasis on improving service in regional and
intrastate markets, during the last half of 1996. One of the
benefits of this reconfiguration was that line-haul drivers were
required to spend less time in hotels.
These improvements in operating expenses as a percentage of
operating revenue were partially offset by increases in the
following areas:
- - Operating supplies and expenses as a percentage of operating
revenue increased to 9.0% in the six months ended June 30, 1997
from 7.9% in the six months ended June 30, 1996. This increase
primarily relates to increased maintenance costs of equipment and
facilities. Management expects these maintenance costs will
continue to gradually increase as the Company's fleet ages. Fuel
prices moderated, particularly during the second quarter of 1997,
from levels experienced during the last half of 1996 and early
1997. However, fuel prices remain higher than in comparable
periods in 1996.
Other
Interest expense as a percentage of operating revenue increased to
2.0% in the six months ended June 30, 1997, compared to 1.9% in the
six months ended June 30, 1996.
The effective tax rate of the Company was 39.2% for the first six
months of 1997, up from 38.6% for the same time period of 1996.
This increase was mostly due to increased state taxes.
<PAGE>
Net income for the six months ended June 30, 1997, was $8,444,000,
up 155.6%, from $3,303,000 for the six months ended June 30, 1996.
Net income for the three months ended June 30, 1997, was
$6,986,000, up 158.5%, from $2,702,000 for the three months ended
June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The focus on further penetration of existing markets coupled with
improved asset utilization reduced the capital requirements of the
Company during the first six months of 1997.
Capital requirements during the six months ended June 30, 1997
consisted primarily of $27,916,000 in investing activities. The
Company invested $27,983,000 in capital expenditures during the six
months ended June 30, 1997 comprised of $379,000 in additional
revenue equipment, $19,016,000 in new customer center facilities or
the expansion of existing facilities and $8,588,000 in other
equipment. Management expects capital expenditures for the full
year of 1997 will be approximately $75,000,000. However, the
amount of capital expenditures required in 1997 will be dependent
on the growth rate of the Company and the timing and size of any
future expansions of service territory. At June 30, 1997, the
Company had commitments for land, customer centers, revenue and
other equipment of approximately $34,467,000. These commitments
were mostly for the completion of projects in process at June 30,
1997.
The Company provided for its capital resource requirements in the
six months ended June 30, 1997 with cash from operations. Cash
from operations totaled $33,690,000 in the six months ended June
30, 1997 compared to $22,252,000 provided by operations in the six
months ended June 30, 1996. Cash from operations exceeded capital
requirements by $6,106,000 during the six months ended June 30,
1997. This excess was used primarily to repay debt. Two primary
sources of credit financing were available to the Company: 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 of
$175,000,000 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. Due
to controlled capital expenditures, improved cash from operations
and proceeds from the issuance of fixed rate debt, the Company
reduced the amount outstanding under this facility during the six
months ended June 30, 1997. At June 30, 1997, $63,000,000 was
outstanding on the revolving line of credit, leaving $112,000,000
available for borrowing. The Company also had $10,000,000
available under its short-term, unsecured revolving $10,000,000
line of credit with NationsBank of Texas, N.A. In addition, the
Company maintains a $10,000,000 line of credit with NationsBank,
N.A. to obtain letters of credit required for its self-insurance
program. At June 30, 1997, the Company had obtained letters of
credit totaling $5,076,000 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
$140,000,000 in medium to long-term unsecured notes at an interest
rate calculated at issuance. On April 18, 1997, the Company
utilized this facility to issue a $50,000,000 note at 8.11% with a
15-year maturity. At June 30, 1997, the Company had $135,250,000
outstanding under 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 June 30, 1997, 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; customer center
facilities, revenue equipment and computer equipment. At June 30,
1997, future rental commitments on operating leases were
$46,285,000. Of these commitments, $13,137,000, $9,958,000 and
$7,370,000 are due in 1998, 1999 and 2000, respectively. 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.
<PAGE>
ENVIRONMENTAL
At June 30, 1997, the Company had no outstanding inquiries with any
state or federal environmental agency.
RECENT EVENTS
On June 3, 1997, the Company announced that it will expand its all-
points coverage to the state of New Mexico effective August 4,
1997. With the addition of New Mexico, the Company will serve 27
states via its network of 206 customer centers.
Effective May 20, 1997, former U.S. Congressman John Paul
Hammerschmidt of Harrison, Arkansas, was appointed to the Company's
board of directors.
<PAGE>
INDEX
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets--June 30, 1997 and
December 31, 1996
Condensed consolidated statements of income--Three months
ended June 30, 1997 and 1996; Six months ended June 30, 1997
and 1996
Condensed consolidated statements of cash flows--Six months
ended June 30, 1997 and 1996
Notes to condensed consolidated financial statements--June 30,
1997
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:
(10) Amended and Restated Elected Non-Employee
Director Stock Option Plan
Appointed Non-Employee Director Stock
Option Plan
(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 June 30, 1997.
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: August 1, 1997 /s/Frank Conner
Frank Conner
Executive Vice President-
Accounting & Finance
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
June 30, 1997 quarterly consolidated financial statements and is qualfied
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,062
<SECURITIES> 0
<RECEIVABLES> 80,633
<ALLOWANCES> 1,542
<INVENTORY> 2,370
<CURRENT-ASSETS> 107,947
<PP&E> 662,223
<DEPRECIATION> 204,542
<TOTAL-ASSETS> 568,602
<CURRENT-LIABILITIES> 78,343
<BONDS> 219,451
0
0
<COMMON> 314
<OTHER-SE> 215,755
<TOTAL-LIABILITY-AND-EQUITY> 568,602
<SALES> 0
<TOTAL-REVENUES> 412,140
<CGS> 0
<TOTAL-COSTS> 390,166
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 8,260
<INCOME-PRETAX> 13,888
<INCOME-TAX> 5,444
<INCOME-CONTINUING> 8,444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,444
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
<FN>
<F1>Provision for Doubtful accounts included in costs and expenses applicable
to revenues.
</FN>
</TABLE>
<PAGE>
AMERICAN FREIGHTWAYS CORPORATION
AMENDED AND RESTATED
ELECTED NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
SECTION 1
1. This 1995 Non-Employee Director Stock Option Plan (the
"Plan") as amended and restated in July, 1997, is intended to
attract and retain the services of a non-employee director
("Director") of American Freightways Corporation (the "Company"),
for the benefit of the Company and its shareholders and to provide
additional incentive for such persons to continue to work for the
best interests of the Company and its shareholders.
2. ADMINISTRATION. The Plan shall be administered by the
Board of Directors of the Company (the "Board"). The Board shall
have the power to construe the Plan, to determine all questions
arising thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem
desirable.
The interpretation and construction by the Board of any
provisions of the Plan or of any option granted under it shall be
final. No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any
option granted under it.
3. ELIGIBILITY. Each person who shall have been elected a
director of the Company at its annual meeting of stockholders shall
automatically be granted options to purchase 6,000 shares of the
Company's common stock (subject to further adjustment as provided
herein) on the date such person is initially elected to the Board
(but not on subsequent election dates) and on each succeeding first
day in February (beginning February 1, 1998), provided, that such
automatic option grants shall be made only if the recipient
director (i) is not otherwise an employee of the Company or any
subsidiary on the date of grant, (ii) is a member of the Board of
Directors on the date such option is granted.
The dates on which options are granted hereunder are referred
to herein as the "Grant Date." No person may receive more than one
option grant in any calendar year under the Plan.
All options granted to any Directors under this Section 3
shall vest at the rate of 33.3% per year beginning on the first
anniversary of the Grant Date.
4. SHARES OF STOCK SUBJECT TO THE PLAN. The shares that may
be issued under the Plan shall be authorized and unissued or
reacquired shares of the Company's common stock (the "Common
Stock"). The aggregate number of shares which may be issued under
the Plan shall not exceed 150,000 shares of Common Stock, unless an
adjustment is required in accordance with Section 3.
<PAGE>
5. AMENDMENT OR TERMINATION OF THE PLAN. The Board of
Directors may, insofar as permitted by law, from time to time,
suspend or terminate the Plan or revise or amend it in any respect
whatsoever, except that no such amendment shall alter or impair or
diminish any rights or obligations under any option theretofore
granted under the Plan without the consent of the person to whom
such option was granted. In addition no such amendment shall be
effective without shareholder approval if such approval is required
in order to assure the Plan's continued qualification under Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as
amended. The Plan's provisions regarding the formula for
determining the amount, exercise price, and timing of options to be
granted under the Plan shall in no event be amended more than once
every six months, other than to comport with changes in the
Internal Revenue Code of 1986, as amended.
6. EXPIRATION OF PLAN. Options may be granted under the
Plan until February 1, 2003. Notwithstanding the foregoing, each
option granted under the Plan shall remain in effect until such
option has been satisfied by the issuance of shares or terminated
in accordance with its terms and the terms of the Plan.
7. NONASSIGNABILITY. No option shall be assignable or
transferable by the grantee except by will or by the laws of
descent and distribution. During the lifetime of the optionee, the
option shall be exercisable only by him or her, and no other person
shall acquire any rights therein.
8. WITHHOLDING TAXES. Whenever shares of Common Stock are
to be issued under the Plan, the Company shall, at its option,
require the optionee to remit to the Company an amount sufficient
to satisfy federal, state and local withholding tax requirements
prior to the delivery of any certificate or certificates for such
shares.
9. DEFINITION OF "FAIR MARKET VALUE". For the purposes of
this Plan, the term "fair market value," when used in reference to
the date of grant of an option shall be the mean:
If the Shares of the Company are listed on a national
securities exchange (including the New York, American or NASDAQ
National Market System) in the United States on the date any Option
is granted, the fair market value per Share shall be deemed to be
the average of the high and low sale prices per share of such
Shares of the Company on such national securities exchange in the
United States on such date, as published by the Wall Street Journal
or other reliable publication, but if the Shares of the Company are
not traded on such date or such national securities exchange is not
open for business on such date, the fair market value per Share
shall be the average of such high and low sale prices on the last
preceding date on which such exchange shall have been open for
business and the Shares of the Company were traded. If the Shares
of the Company are listed on more than one national securities
exchange in the United States on the date any such Option is
granted, the Committee shall determine, in its discretion, which
national securities exchange shall be used for the purpose of
determining the fair market value per Share.
<PAGE>
If at any date any Option is granted a public market exists
for the Shares of the Company but such Shares are not listed on a
national securities exchange in the United States, the fair market
value per Share shall be deemed to be the mean between the closing
bid and asked quotations in the over-the-counter market for such
Shares of the Company in the United States on the date such Option
is granted. If there are no bid and asked quotations for such
Shares on such date, the fair market value per Share shall be
deemed to be the mean between the closing bid and asked quotations
in the over-the-counter market in the United States for such Shares
of the Company on the closest date preceding the date such Option
is granted, for which such quotations are available.
SECTION 2
STOCK OPTIONS
1. AWARD OF STOCK OPTIONS. Awards of stock options shall be
made under the Plan under all the terms and conditions contained
herein. Each option granted under the Plan shall be evidenced by
an option agreement duly executed on behalf of the Company and by
the recipient, which option agreements shall comply with and be
subject to the terms and conditions of the Plan. Any option
agreement may contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the Board.
2. TERM OF OPTIONS AND EFFECT OF TERMINATION.
Notwithstanding any other provision of the Plan, no option granted
under the Plan shall be exercisable after the expiration of ten
years from the date of its grant.
In the event that any outstanding option under the Plan
expires by reason of lapse of time or otherwise is terminated for
any reason, the shares of Common Stock subject to any such option
which have not been issued pursuant to the exercise of the option
shall again become available in the pool of shares of Common Stock
for which options may be granted under the Plan.
3. TERMS AND CONDITIONS OF OPTIONS. Options granted
pursuant to the Plan shall be evidenced by agreements in such form
as the Board shall from time to time determine, which agreements
shall comply with the following terms and conditions.
A. Number of Shares. Each option agreement shall state the
number of shares to which the option pertains.
B. Option Price. Each option agreement shall state the
option price per share (or the method by which such price shall be
computed), which shall be equal to 100% of the Fair Market Value of
a share of the Common Stock on the date such option is granted.
<PAGE>
C. Medium and Time of Payment. The option price shall be
payable upon the exercise of an option in the legal tender of the
United States. Upon receipt of payment, the Company shall deliver
to the optionee (or person entitled to exercise the option) a
certificate or certificates for the shares of Common Stock to which
the option pertains.
D. Exercise of Options. Options granted under the Plan
shall vest and become exercisable in 33.3% increments per year,
beginning on the first anniversary of the Grant Date of the Option.
To the extent that an option has become exercisable and
subject to the restrictions and limitations set forth in this Plan
and any option agreement, it may be exercised in whole or such
lesser amount as may be authorized by the option agreement. If
exercised in part, any vested, unexercised portion of an option
shall continue to be held by the optionee and may thereafter be
exercised as provided herein.
E. Termination of Director. If an optionee ceases to be a
director for any reason, any option held by such person may be
exercised at any time within 90 days after the date on which such
person ceased to be a director, but only to the extent the option
was vested and exercisable at such date.
Any such option granted hereunder may be exercised by the
executors or administrators of the optionee's estate or by any
person or persons who shall have acquired the option directly from
the optionee by his will or the applicable law of descent and
distribution.
SECTION 3
RECAPITALIZATIONS AND REORGANIZATIONS
The number of shares of Common Stock covered by the Plan, the
number of shares and price per share of each outstanding option,
and the number of shares subject to each grant provided for in
Section 1 hereof shall be proportionately adjusted for any increase
or decrease in the number of issued and outstanding shares of
Common Stock resulting from a subdivision or consolidation of
shares or the payment of a stock dividend or any other increase or
decrease in the number of issued and outstanding shares of Common
Stock effected without receipt of consideration by the Company.
If the Company shall be the surviving corporation in any
merger or consolidation, each outstanding option shall pertain to
and apply to the securities to which a holder of the same number of
shares of Common Stock that are subject to that option would have
been entitled. A dissolution or liquidation of the Company, or a
merger or consolidation in which the Company is not the surviving
corporation, shall cause each outstanding option to terminate,
unless the agreement of merger or consolidation shall otherwise
provide; provided that, in the event such dissolution, liquidation,
<PAGE>
merger or consolidation will cause outstanding options to terminate,
optionee shall have the right immediately prior to such
dissolution, liquidation, merger or consolidation to exercise his
option in whole or in part without regard to any limitations on the
exercisability of such option other than the expiration date of the
option.
To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the
Board, whose determination in that respect shall be final, binding
and conclusive.
SECTION 4
MISCELLANEOUS PROVISIONS
1. RIGHTS AS A SHAREHOLDER. An optionee or a transferee of
an option as such shall have no rights as a shareholder with
respect to any shares covered by an option until the date of the
receipt of payment (including any amounts required by the Company
pursuant to Subsection 10 of Section 1) by the Company.
2. PURCHASE FOR INVESTMENT. Unless the shares of Common
Stock to be issued upon exercise of an option granted under the
Plan have been effectively registered under the Securities Act of
1933, as amended (the "Securities Act"), the Company shall be under
no obligation to issue any shares of Common Stock covered by any
option unless the person who exercises such option, in whole or in
part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel to the
Company and upon which, in the opinion of such counsel, the Company
may reasonably rely, that he is acquiring the shares of Common
Stock issued to him pursuant to such exercise of the option for his
own account as an investment and not with a view to, or for sale in
connection with, the distribution of any such shares of Common
Stock, and that he will make no transfer of the same except in
compliance with any rules and regulations in force at the time of
such transfer under the Securities Act, or any other applicable
law, and that if shares of Common Stock are issued without such
registration, a legend to this effect may be endorsed upon the
securities so issued.
3. OTHER PROVISIONS. The option agreements authorized under
the Plan shall contain such other provisions, including, without
limitation, restrictions upon the exercise of the option or
restrictions required by any applicable securities laws, as the
Board shall deem advisable.
4. APPLICATION OF FUNDS. The proceeds received by the
Company from the sale of Common Stock pursuant to the exercise of
options will be used for general corporate purposes.
5. NO OBLIGATION TO EXERCISE OPTION. The granting of an
option shall impose no obligation upon the optionee to exercise
such option.
(The remainder of this page left blank intentionally)
<PAGE>
IN WITNESS WHEREOF, AMERICAN FREIGHTWAYS CORPORATION, by its
duly authorized officer, has executed this Plan on the date
indicated below.
Dated July 24, 1997 By: Tom Garrison
Officer
<PAGE>
AMERICAN FREIGHTWAYS CORPORATION
APPOINTED NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
SECTION 1
1. This 1997 Non-Employee Director Stock Option Plan (the
"Plan") is intended to attract and retain the services of a non-
employee director ("Director") of American Freightways Corporation
(the "Company"), for the benefit of the Company and its
shareholders and to provide additional incentive for such persons
to continue to work for the best interests of the Company and its
shareholders. This Plan is intended exclusively for the benefit of
persons who are appointed by the Board (defined below) to fill an
existing vacancy on such Board. The effective date of the Plan is
May 20, 1997.
2. ADMINISTRATION. The Plan shall be administered by the
Board of Directors of the Company (the "Board"). The Board shall
have the power to construe the Plan, to determine all questions
arising thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem
desirable.
The interpretation and construction by the Board of any
provisions of the Plan or of any option granted under it shall be
final. No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any
option granted under it.
3. ELIGIBILITY. Each person who shall have been appointed
by the Board to fill an then-existing vacancy shall automatically
be granted options to acquire 2,000 shares of the Company's common
stock (subject to further adjustment as provided herein) as of the
date of such appointment and on each succeeding first day of
February, provided, that such automatic option grants shall be made
only if the recipient director (i) is not otherwise an employee of
the Company or any subsidiary on the date of grant, (ii) is a
member of the Company's Board of Directors on the date such option
is granted. Effective February 1, 1998 grants of options under
this Plan shall be for 6,000 shares of the Company's common stock.
The dates on which options are granted hereunder are referred
to herein as the "Grant Date."
All options granted to any Directors under this Section 3
shall vest at the rate of 33.3% per year beginning on the first
anniversary of the Grant Date.
No person may receive in a single year grants of options under
this Plan and grants of options under the Company's Elected Non-
Employee Director Stock Option Plan.
4. SHARES OF STOCK SUBJECT TO THE PLAN. The shares that may
be issued under the Plan shall be authorized and unissued or
reacquired shares of the Company's common stock (the "Common
Stock"). The aggregate number of shares which may be issued under
the Plan shall not exceed 22,000 shares of Common Stock, unless an
adjustment is required in accordance with Section 3.
<PAGE>
5. AMENDMENT OR TERMINATION OF THE PLAN. The Board of
Directors may, insofar as permitted by law, from time to time,
suspend or terminate the Plan or revise or amend it in any respect
whatsoever, except that no such amendment shall alter or impair or
diminish any rights or obligations under any option theretofore
granted under the Plan without the consent of the person to whom
such option was granted. In addition no such amendment shall be
effective without shareholder approval if such approval is required
in order to assure the Plan's continued qualification under Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as
amended. The Plan's provisions regarding the formula for
determining the amount, exercise price, and timing of options to be
granted under the Plan shall in no event be amended more than once
every six months, other than to comport with changes in the
Internal Revenue Code of 1986, as amended.
6. EXPIRATION OF PLAN. Options may be granted under the
Plan until February 1, 1999. Notwithstanding the foregoing, each
option granted under the Plan shall remain in effect until such
option has been satisfied by the issuance of shares or terminated
in accordance with its terms and the terms of the Plan.
7. NONASSIGNABILITY. No option shall be assignable or
transferable by the grantee except by will or by the laws of
descent and distribution. During the lifetime of the optionee, the
option shall be exercisable only by him or her, and no other person
shall acquire any rights therein.
8. WITHHOLDING TAXES. Whenever shares of Common Stock are
to be issued under the Plan, the Company shall, at its option,
require the optionee to remit to the Company an amount sufficient
to satisfy federal, state and local withholding tax requirements
prior to the delivery of any certificate or certificates for such
shares.
9. DEFINITION OF "FAIR MARKET VALUE". For the purposes of
this Plan, the term "fair market value," when used in reference to
the date of grant of an option shall be the mean:
If the Shares of the Company are listed on a national
securities exchange (including the New York, American or NASDAQ
National Market System) in the United States on the date any Option
is granted, the fair market value per Share shall be deemed to be
the average of the high and low sale prices per share of such
Shares of the Company on such national securities exchange in the
United States on such date, as published by the Wall Street Journal
or other reliable publication, but if the Shares of the Company are
not traded on such date or such national securities exchange is not
open for business on such date, the fair market value per Share
shall be the average of such high and low sale prices on the last
preceding date on which such exchange shall have been open for
business and the Shares of the Company were traded. If the Shares
of the Company are listed on more than one national securities
exchange in the United States on the date any such Option is
granted, the Committee shall determine, in its discretion, which
national securities exchange shall be used for the purpose of
determining the fair market value per Share.
<PAGE>
If at any date any Option is granted a public market exists
for the Shares of the Company but such Shares are not listed on a
national securities exchange in the United States, the fair market
value per Share shall be deemed to be the mean between the closing
bid and asked quotations in the over-the-counter market for such
Shares of the Company in the United States on the date such Option
is granted. If there are no bid and asked quotations for such
Shares on such date, the fair market value per Share shall be
deemed to be the mean between the closing bid and asked quotations
in the over-the-counter market in the United States for such Shares
of the Company on the closest date preceding the date such Option
is granted, for which such quotations are available.
SECTION 2
STOCK OPTIONS
1. AWARD OF STOCK OPTIONS. Awards of stock options shall be
made under the Plan under all the terms and conditions contained
herein. Each option granted under the Plan shall be evidenced by
an option agreement duly executed on behalf of the Company and by
the recipient, which option agreements shall comply with and be
subject to the terms and conditions of the Plan. Any option
agreement may contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the Board.
2. TERM OF OPTIONS AND EFFECT OF TERMINATION.
Notwithstanding any other provision of the Plan, no option granted
under the Plan shall be exercisable after the expiration of ten
years from the date of its grant.
In the event that any outstanding option under the Plan
expires by reason of lapse of time or otherwise is terminated for
any reason, the shares of Common Stock subject to any such option
which have not been issued pursuant to the exercise of the option
shall again become available in the pool of shares of Common Stock
for which options may be granted under the Plan.
3. TERMS AND CONDITIONS OF OPTIONS. Options granted
pursuant to the Plan shall be evidenced by agreements in such form
as the Board shall from time to time determine, which agreements
shall comply with the following terms and conditions.
A. Number of Shares. Each option agreement shall state the
number of shares to which the option pertains.
B. Option Price. Each option agreement shall state the
option price per share (or the method by which such price shall be
computed), which shall be equal to 100% of the Fair Market Value of
a share of the Common Stock on the date such option is granted.
<PAGE>
C. Medium and Time of Payment. The option price shall be
payable upon the exercise of an option in the legal tender of the
United States. Upon receipt of payment, the Company shall deliver
to the optionee (or person entitled to exercise the option) a
certificate or certificates for the shares of Common Stock to which
the option pertains.
D. Exercise of Options. Options granted under the Plan
shall vest and become exercisable in 33.3% increments per year,
beginning on the first anniversary of the Grant Date of the Option.
To the extent that an option has become exercisable and
subject to the restrictions and limitations set forth in this Plan
and any option agreement, it may be exercised in whole or such
lesser amount as may be authorized by the option agreement. If
exercised in part, any vested, unexercised portion of an option
shall continue to be held by the optionee and may thereafter be
exercised as provided herein.
E. Termination of Director. If an optionee ceases to be a
director for any reason, any option held by such person may be
exercised at any time within 90 days after the date on which such
person ceased to be a director, but only to the extent the option
was vested and exercisable at such date.
Any such option granted hereunder may be exercised by the
executors or administrators of the optionee's estate or by any
person or persons who shall have acquired the option directly from
the optionee by his will or the applicable law of descent and
distribution.
SECTION 3
RECAPITALIZATIONS AND REORGANIZATIONS
The number of shares of Common Stock covered by the Plan, the
number of shares and price per share of each outstanding option,
and the number of shares subject to each grant provided for in
Section 1 hereof shall be proportionately adjusted for any increase
or decrease in the number of issued and outstanding shares of
Common Stock resulting from a subdivision or consolidation of
shares or the payment of a stock dividend or any other increase or
decrease in the number of issued and outstanding shares of Common
Stock effected without receipt of consideration by the Company.
If the Company shall be the surviving corporation in any
merger or consolidation, each outstanding option shall pertain to
and apply to the securities to which a holder of the same number of
shares of Common Stock that are subject to that option would have
been entitled. A dissolution or liquidation of the Company, or a
merger or consolidation in which the Company is not the surviving
corporation, shall cause each outstanding option to terminate,
unless the agreement of merger or consolidation shall otherwise
provide; provided that, in the event such dissolution, liquidation,
merger or consolidation will cause outstanding options to
terminate, optionee shall have the right immediately
<PAGE>
prior to such dissolution, liquidation, merger or consolidation to
exercise his option in whole or in part without regard to any
limitations on the exercisability of such option other than the
expiration date of the option.
To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the
Board, whose determination in that respect shall be final, binding
and conclusive.
SECTION 4
MISCELLANEOUS PROVISIONS
1. RIGHTS AS A SHAREHOLDER. An optionee or a transferee of
an option as such shall have no rights as a shareholder with
respect to any shares covered by an option until the date of the
receipt of payment (including any amounts required by the Company
pursuant to Subsection 10 of Section 1) by the Company.
2. PURCHASE FOR INVESTMENT. Unless the shares of Common
Stock to be issued upon exercise of an option granted under the
Plan have been effectively registered under the Securities Act of
1933, as amended (the "Securities Act"), the Company shall be under
no obligation to issue any shares of Common Stock covered by any
option unless the person who exercises such option, in whole or in
part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel to the
Company and upon which, in the opinion of such counsel, the Company
may reasonably rely, that he is acquiring the shares of Common
Stock issued to him pursuant to such exercise of the option for his
own account as an investment and not with a view to, or for sale in
connection with, the distribution of any such shares of Common
Stock, and that he will make no transfer of the same except in
compliance with any rules and regulations in force at the time of
such transfer under the Securities Act, or any other applicable
law, and that if shares of Common Stock are issued without such
registration, a legend to this effect may be endorsed upon the
securities so issued.
3. OTHER PROVISIONS. The option agreements authorized under
the Plan shall contain such other provisions, including, without
limitation, restrictions upon the exercise of the option or
restrictions required by any applicable securities laws, as the
Board shall deem advisable.
4. APPLICATION OF FUNDS. The proceeds received by the
Company from the sale of Common Stock pursuant to the exercise of
options will be used for general corporate purposes.
5. NO OBLIGATION TO EXERCISE OPTION. The granting of an
option shall impose no obligation upon the optionee to exercise
such option.
(The remainder of this page left blank intentionally)
<PAGE>
IN WITNESS WHEREOF, AMERICAN FREIGHTWAYS CORPORATION, by its
duly authorized officer, has executed this Plan on the date
indicated below.
Dated July 24, 1997 By: Tom Garrison
Officer
