SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 27, 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 0-19791
USFREIGHTWAYS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3790696
(State of Incorporation) (IRS Employer
Identification No.)
9700 Higgins Road, Rosemont, Illinois 60018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
including area code: (847) 696-0200
(Former name or former address, if changed since the 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 of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of November 5, 1997, 26,055,339 shares of common stock were outstanding.
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements.
USFreightways Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in thousands)
<TABLE>
<CAPTION>
September 27, December 28,
1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 28,704 $ 4,090
Accounts receivable, net 189,804 157,874
Other 40,950 41,613
----------------- -------------------
Total current assets 259,458 203,577
----------------- -------------------
Net property and equipment 425,443 395,500
Net intangible assets 78,429 79,559
Other assets 9,780 9,872
----------------- -------------------
Total assets $ 773,110 $ 688,508
----------------- -------------------
Liabilities and Stockholders' Equity
Current liabilities:
Current bank debt $ 110 $ 333
Accounts payable 55,465 41,734
Other current liabilities 137,986 102,281
----------------- -------------------
Total current liabilities 193,561 144,348
----------------- -------------------
Long-term liabilities:
Long-term bank debt -0- 78,000
Notes payable 100,000 100,000
Other long-term liabilities 100,347 96,900
----------------- -------------------
Total long-term liabilities 200,347 274,900
----------------- -------------------
Common stockholders' equity 379,202 269,260
----------------- -------------------
Total liabilities and stockholders' equity $ 773,110 $ 688,508
----------------- -------------------
</TABLE>
<PAGE>
USFreightways Corporation
Consolidated Statements of Income
Unaudited (Dollars in thousands, except per-share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------------------------- -----------------------------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
- -------------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C>
Operating revenue $ 393,462 $ 343,203 $ 1,130,042 $ 988,997
Operating expenses:
Salaries, wages and benefits 246,288 216,932 713,358 630,513
Purchased transportation 14,548 12,234 40,392 35,863
Operating expenses and supplies 48,404 44,434 143,219 133,592
Operating taxes and licenses 15,342 14,025 45,501 41,932
Insurance and claims 7,357 5,573 22,307 17,010
Communications and utilities 4,256 3,790 13,028 11,475
Depreciation and equipment leases 17,432 16,777 51,401 48,099
Building and office equipment rents 4,460 4,046 13,120 11,554
Amortization of intangible assets 660 644 1,971 1,821
Other operating expenses 2,810 2,220 7,854 6,967
----------------- ----------------- ------------------- --------------------
Total operating expenses 361,557 320,675 1,052,151 938,826
----------------- ----------------- ------------------- --------------------
Income from operations 31,905 22,528 77,891 50,171
----------------- ----------------- ------------------- --------------------
Non-operating income (expense):
Interest expense (1,956) (3,322) (6,554) (9,072)
Interest income 380 155 770 488
Other, net (85) (196) (40) (516)
----------------- ----------------- ------------------- --------------------
Total non-operating expense (1,661) (3,363) (5,824) (9,100)
----------------- ----------------- ------------------- --------------------
Income from operations
before income taxes 30,244 19,165 72,067 41,071
Income tax expense 12,702 8,141 30,234 17,561
----------------- ----------------- ------------------- --------------------
Net income $ 17,542 $ 11,024 $ 41,833 $ 23,510
----------------- ----------------- ------------------- --------------------
Average shares outstanding 26,298,153 22,655,243 25,625,642 22,311,770
Earnings per common share:
Net income $ 0.67 $ 0.49 $ 1.63 $ 1.05
----------------- ----------------- ------------------- --------------------
</TABLE>
<PAGE>
USFreightways Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
<TABLE>
<CAPTION>
Nine months ended
--------------------------------------
September 27, September 28,
1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 41,833 $ 23,510
Adjustments to net income:
Depreciation and amortization 52,120 47,179
Other items affecting cash 19,210 (16,917)
from operating activities
----------------- ------------------
Net cash provided by operating activities 113,163 53,772
----------------- ------------------
Cash flows from investing activities:
Capital expenditures, net of
proceeds on sales (78,758) (70,711)
Acquisition of Transus and Interamerican - (31,265)
----------------- ------------------
Net cash used in investing activities (78,758) (101,976)
----------------- ------------------
Cash flows from financing activities:
Dividends paid (6,926) (6,149)
Proceeds from sale of common stock 69,431 -
Proceeds from sale of treasury stock 5,927 2,407
Proceeds from long-term debt - 52,000
Payments on long-term debt (78,223) 428
----------------- ------------------
Net cash provided by (used in) financing activities (9,791) 48,686
----------------- ------------------
Net increase in cash 24,614 482
----------------- ------------------
Cash at beginning of period 4,090 1,707
----------------- ------------------
Cash at end of period $ 28,704 $ 2,189
----------------- ------------------
</TABLE>
The financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The statements are unaudited but, in the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The Company's
results of operations are affected by the seasonal aspects of the regional LTL
trucking business. Therefore, operating results for the three months and nine
months ended September 27, 1997 are not necessarily indicative of the results
that may be expected for the year ending January 3, 1998. For further
information, refer to consolidated financial statements and footnotes thereto
included in the registrant's annual report on Form 10-K for the year ended
December 28, 1996.
<PAGE>
REVENUE AND OPERATING RATIOS
Unaudited (Dollars in thousands)
<TABLE>
<CAPTION>
Quarter ended Nine months ended
September 27, 1997 September 27, 1997
and September 28, 1996 and September 28, 1996
------------------------------------------------------------------------------
Company (Region) Revenue Operating Ratio (b) Revenue Operating Ratio (b)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Holland (Midwest) 97 $ 180,758 89.8 % $ 520,708 90.7 %
96 153,725 90.6 440,800 91.4
Red Star (Northeast) 97 50,001 98.9 144,984 99.5
96 48,571 101.6 147,961 102.8
Reddaway (West Coast, Northwest) 97 53,072 89.7 146,455 93.0
96 46,383 92.2 132,506 94.6
Bestway (Southwest) 97 34,533 85.7 98,465 86.6
96 28,416 88.9 84,321 89.4
Dugan (Plains, South) 97 44,041 95.2 127,206 95.5
96 38,543 96.1 111,755 97.8
Logistics Operations 97 26,455 92.8 77,764 94.3
96 22,969 94.7 62,073 97.3
</TABLE>
b) Operating ratio is direct operating costs as a percentage of revenue.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operation.
USFreightways Corporation ("the Company")
reported record net income for the 13 weeks ended September 27, 1997 of
$17,542,000, a 59% increase over the $11,024,000 which was reported for the
thirteen weeks ended September 28,1996. Net income per share of 67 cents for the
1997 quarter, on an average of 26,298,153 shares, is the highest ever earnings
per share in the Company's history and represents a 37% increase over the 49
cents per share on 22,655,243 average shares outstanding for the third quarter
of 1996. Record revenue for the 1997 quarter of $393,462,000 increased 14.6%
when compared to the $343,203,000 for the same quarter of 1996. In the regional
trucking group, LTL revenue increased 15.5% and truckload revenue increased
7.8%.
LTL shipments in the 1997 quarter increased by 9.8% and the average revenue
per LTL shipment increased 3.4% compared to last year, after estimating the
impact of the unusual increase in shipments of less than two hundred pounds,
which resulted from the sixteen day UPS strike in August.
Revenue in the current year's quarter in the logistics group amounted to
$26,455,000, an increase of 15.2%. Operating income improved 56.2% and the
operating ratio improved to 92.8% in the current year's quarter, compared to
94.7% for the same period of 1996.
Revenue for the nine months ended September 27th amounted to
$1,130,042,000, an increase of 14.3% over the same period of the previous year.
Net income for the nine month period in 1997 amounted to $41,833,000, equivalent
to $1.63 per share, compared to $1.05 per share for the 1996 nine month period.
The Company is extremely pleased with the record results achieved in
the third quarter of the current year, which is directly attributable to a
relatively strong US economy, a stable pricing environment, an ability to
increase market share in the Company's various business enterprises, and a
continuing emphasis on cost reduction in all units of the Company. During the
third quarter of the current year, all of the Company's regional trucking
companies improved their operating ratios compared to the same period of the
previous year and, overall as a group, the operating ratio improved to 91.3 from
93.1 in the same quarter of the previous year. The reduction in operating ratios
and corresponding improvement in operating income was led by excellent
performance at USF Bestway, USF Reddaway and USF Holland, where operating ratios
of 85.7, 89.7 and 89.8 respectively, were achieved. USF Dugan continued to
improve, attaining a 14.3% increase in revenue, a 38.9% increase in operating
income, with a moderate improvement in the operating ratio. USF Red Star
achieved modest profitability for the fourth straight quarter.
On September 12th, substantially all of the assets of Comet Transport,
the Company's truckload subsidiary, were sold to CRST, a longhaul truckload
trucking company. On the same date, the Company also entered into a 3 year
agreement with CRST to provide longhaul truckload service for each of the
Company's regional trucking subsidiaries for their partnership freight. Proceeds
from the sale were slightly above book value and, therefore, no loss was
incurred on the disposal of this business.
Subsequent to the end of the fiscal quarter, the Company concluded an
agreement to acquire all of the issued and outstanding shares of SEKO Worldwide
and subsidiary companies. SEKO Worldwide is a domestic and international freight
forwarder with forty-eight facilities in the United States, and provides service
to seventy countries through both exclusive and non-exclusive agent facilities.
Consolidated revenue for SEKO Worldwide for the year ended December 31, 1996
amounted to $105,000,000, and for the 1997 year, is annualizing at approximately
$120,000,000. The Company is enthusiastic about the acquisition of SEKO
Worldwide which will permit the USFreightways group of companies to accelerate
its 1998 growth rate, and to provide both international and domestic freight
forwarding services to the Company's customers. <PAGE>
The outlook for the last quarter of this year is positive and the
Company expects to continue to see an improvement in its profitability over the
same period of the previous year, assuming there is no material change in the
stable pricing environment or the level of economic activity.
Capital expenditures for the current year's quarter amounted to
approximately $42 million, of which $30 million was for revenue equipment and
$12 million was for terminal facilities and miscellaneous equipment, which
compares to capital expenditures of $27 million for the third quarter of 1996.
Year-to-date capital expenditures through September were $90 million, which
compares to 1996 capital expenditures for the nine month period of $101 million
(which included $27 million for the acquisition of Transus).
On February 10, 1997, the Company sold an additional 3,105,000 shares
of its common stock through a public offering. The sale generated approximately
$69,000,000, net of expenses, in new equity.
A dividend of 9 1/3 cents per share was paid October 3, 1997 to
shareholders of record on September 19, 1997.
This release contains forward looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially. These risks and uncertainties are detailed from time to time in
reports filed by the Company with the Securities and Exchange Commission
including forms 8K, 10Q and 10K.
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a party to a number of proceedings brought
under the Comprehensive Environmental Response, Compensation
and Liability Act, (CERCLA). The Company has been made a party
to these proceedings as an alleged generator of waste disposed
of at hazardous waste disposal sites. In each case, the
Government alleges that the parties are jointly and severally
liable for the cleanup costs. Although joint and several
liability is alleged, these proceedings are frequently
resolved on the basis of the quantity of waste disposed of at
the site by the generator. The Company's potential liability
varies greatly from site to site. For some sites the potential
liability is de minimis and for others the costs of cleanup
have not yet been determined. While it is not feasible to
predict or determine the outcome of these proceedings or
similar proceedings brought by state agencies or private
litigants, in the opinion of management, the ultimate recovery
or liability, if any, resulting from such litigation,
individually or in the aggregate, will not materially
adversely affect the Company's financial condition or results
of operations and, to the Company's best knowledge, such
liability, if any, will represent less than 1% of its
revenues.
Steven Mark Whitworth v. TNT Bestway Transportation, Inc.
f/k/a TNT Bestway Inc. and William Orr, Case No.
96-3935-A, 14th Judicial District Court, Dallas County, Texas.
As previously reported on Form 8-K filed January 7,1997, on or
about November 1, 1996, a judgment was entered against the
Company's subsidiary, USF Bestway Inc. for $3,500,000 in
actual damages and $1,750,000 in attorneys fees together with
court costs and interest. USF Bestway Inc. has appealed the
judgment to the Dallas Court of Appeals.
Management of the Company believes that it has good grounds
for obtaining a reversal of the judgment on appeal because it
believes, among other reasons, that the judgment entered on
the basis of the procedural technicality of counsel's failure
to comply with the requirements of Texas law concerning the
signature of pleadings by counsel will not be sustained by a
reviewing court. The Company further believes the judgment
will be vacated and the matter remanded for a trial on the
merits and that, in any event, the judgment, if sustained,
will not have a material adverse effect on the Company's
financial condition. In the event the judgment is sustained on
appeal, management of the Company's subsidiary, USF Bestway
Inc. intends to pursue potential causes of action against all
appropriate parties.
Also, the Company is involved in other litigation arising in
the ordinary course of business, primarily involving claims
for bodily injuries and property damages. The Company
maintains insurance coverage to insure against these types of
claims. In the opinion of management, the ultimate recovery or
liability, if any, resulting from such litigation,
individually or in the aggregate, will not materially
adversely affect the Company's financial condition or results
of operations.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
1. Exhibit 27-Financial Data Schedule.
(b) Current Reports on Form 8-K were filed:
1. On September 19, 1997, the Company filed a
Current Report on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized. Dated the 27th day of
October, 1997.
USFREIGHTWAYS CORPORATION
By: /s/ Christopher L. Ellis
---------------------
Christopher L. Ellis
Senior Vice President, Finance and
Chief Financial Officer
By: /s/ Robert S. Owen
----------------
Robert S. Owen
Controller and Principal
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-27-1997
<CASH> 28,704
<SECURITIES> 0
<RECEIVABLES> 189,804
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 259,458
<PP&E> 425,443
<DEPRECIATION> 0
<TOTAL-ASSETS> 773,110
<CURRENT-LIABILITIES> 193,561
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 379,202
<TOTAL-LIABILITY-AND-EQUITY> 773,110
<SALES> 0
<TOTAL-REVENUES> 1,130,042
<CGS> 0
<TOTAL-COSTS> 1,052,151
<OTHER-EXPENSES> (730)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,554
<INCOME-PRETAX> 72,067
<INCOME-TAX> 30,234
<INCOME-CONTINUING> 41,833
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,833
<EPS-PRIMARY> 0
<EPS-DILUTED> 1.63
</TABLE>
