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
JUNE 28, 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 July 31, 1997, 25,985,246 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>
June 28, December 28,
1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 11,987 $ 4,090
Accounts receivable, net 175,510 157,874
Other 45,394 41,613
----------------- -------------------
Total current assets 232,891 203,577
----------------- -------------------
Net property and equipment 410,002 395,500
Net intangible assets 78,724 79,559
Other assets 9,068 9,872
----------------- -------------------
Total assets $ 730,685 $ 688,508
----------------- -------------------
Liabilities and Stockholders' Equity
Current liabilities:
Current bank debt $ 194 $ 333
Accounts payable 44,539 41,734
Other current liabilities 128,134 102,281
----------------- -------------------
Total current liabilities 172,867 144,348
----------------- -------------------
Long-term liabilities:
Long-term bank debt -0- 78,000
Notes payable 100,000 100,000
Other long-term liabilities 96,789 96,900
----------------- -------------------
Total long-term liabilities 196,789 274,900
----------------- -------------------
Common stockholders' equity 361,029 269,260
----------------- -------------------
Total liabilities and stockholders' equity $ 730,685 $ 688,508
----------------- -------------------
</TABLE>
<PAGE>
USFreightways Corporation
Consolidated Statements of Income
Unaudited (Dollars in thousands, except per-share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------------- -----------------------------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
- -------------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C>
Operating revenue $ 380,763 $ 332,089 $ 736,580 $ 645,794
Operating expenses:
Salaries, wages and benefits 240,114 210,097 467,070 413,581
Purchased transportation 13,502 12,647 25,844 23,629
Operating expenses and supplies 47,782 45,666 94,815 89,158
Operating taxes and licenses 15,186 13,967 30,159 27,907
Insurance and claims 7,881 5,997 14,950 11,437
Communications and utilities 4,399 3,994 8,772 7,685
Depreciation and equipment leases 17,276 15,785 33,969 31,322
Building and office equipment rents 4,367 3,707 8,660 7,508
Amortization of intangible assets 658 597 1,311 1,177
Other operating expenses 2,683 2,401 5,044 4,747
----------------- ----------------- ------------------- --------------------
Total operating expenses 353,848 314,858 690,594 618,151
----------------- ----------------- ------------------- --------------------
Income from operations 26,915 17,231 45,986 27,643
----------------- ----------------- ------------------- --------------------
Non-operating income (expense):
Interest expense (2,016) (2,834) (4,598) (5,750)
Interest income 226 159 390 333
Other, net (54) (280) 45 (320)
----------------- ----------------- ------------------- --------------------
Total non-operating expense (1,844) (2,955) (4,163) (5,737)
----------------- ----------------- ------------------- --------------------
Income from operations
before income taxes 25,071 14,276 41,823 21,906
Income tax expense 10,530 6,139 17,532 9,420
----------------- ----------------- ------------------- --------------------
Net income $ 14,541 $ 8,137 $ 24,291 $ 12,486
----------------- ----------------- ------------------- --------------------
Average shares outstanding 26,129,479 22,216,893 25,351,923 22,174,060
Earnings per common share:
Net income $ 0.56 $ 0.37 $ 0.96 $ 0.56
----------------- ----------------- ------------------- --------------------
</TABLE>
<PAGE>
USFreightways Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended
--------------------------------------
June 28, June 29,
1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 24,291 $ 12,486
Adjustments to net income:
Depreciation and amortization 34,279 30,702
Other items affecting cash 6,431 (12,969)
from operating activities
----------------- ------------------
Net cash provided by operating activities 65,001 30,219
----------------- ------------------
Cash flows from investing activities:
Capital expenditures, net of
proceeds on sales (46,747) (45,499)
Acquisition of Transus - (27,265)
----------------- ------------------
Net cash used in investing activities (46,747) (72,764)
----------------- ------------------
Cash flows from financing activities:
Dividends paid (4,514) (4,095)
Proceeds from sale of common stock 69,760 -
Proceeds from sale of treasury stock 2,536 1,921
Proceeds from long-term debt - 48,000
Payments on long-term debt (78,139) (139)
----------------- ------------------
Net cash provided by (used in) financing activities (10,357) 45,687
----------------- ------------------
Net increase in cash 7,897 3,142
----------------- ------------------
Cash at beginning of period 4,090 1,707
----------------- ------------------
Cash at end of period $ 11,987 $ 4,849
----------------- ------------------
</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 six months ended June 28, 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 Six months ended
June 28, 1997 June 28, 1997
and June 29, 1996 and June 29, 1996
------------------------------------------------------------------------------
Company (Region) Revenue Operating Ratio (b) Revenue Operating Ratio (b)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Holland (Midwest) 97 $ 176,220 89.9 % $ 339,950 91.1 %
96 147,855 91.0 287,075 91.9
Red Star (Northeast) 97 48,588 99.7 94,983 99.8
96 50,307 102.3 99,391 103.4
Reddaway (West Coast, Northwest) 97 48,397 92.9 93,383 94.8
96 44,257 94.1 86,123 95.9
Bestway (Southwest) 97 33,512 86.0 63,932 87.2
96 28,380 89.3 55,905 89.6
Dugan (Plains, South) 97 42,597 95.4 83,165 95.6
96 37,927 97.7 73,212 98.8
Logistics Operations 97 26,144 95.2 51,309 95.0
96 20,266 99.5 39,105 98.8
</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 net income for the thirteen weeks ended June 28, 1997 of
$14,541,000, a 79% increase over the $8,137,000 which was reported for
the thirteen weeks ended June 29, 1996. Net income per share for the
1997 quarter, on an average of 26,129,479 shares, was equivalent to 56
cents per share, a 51% increase, compared to the 37 cents per share on
22,216,893 average shares outstanding in the second quarter of 1996.
Revenue for the 1997 quarter increased by 14.7% to $380,763,000 from
$332,089,000 for the same period in 1996. In the regional trucking
group, LTL revenue increased 13.8% and truckload revenue increased
9.3%. LTL shipments in the 1997 quarter increased 10.1%, average
weight per shipment increased 2.5%, and the average revenue per LTL
shipment increased 3.3% compared to last year.
Revenue for the thirteen weeks of the current year in the
logistics group amounted to $26,144,000, an increase of 29.0%, and the
operating ratio improved from 99.5% in the second quarter of 1996 to
95.2% for the current year's quarter.
Revenue for the six months ended June 28, 1997 amounted to
$736,580,000, an increase of 14.1% over the same period of the
previous year. Net income for the six month period ended in 1997
amounted to $24,291,000, equivalent to 96 cents per share compared to
56 cents per share for the 1996 six month period.
The significant improvement in earnings per share, both in
the current year's quarter and for the 1997 six month period is
attributable to a strong U.S. economy, a stable pricing environment,
and a continuing emphasis on cost reduction in all business units of
the Company. During the 1997 second quarter, the combined operating
ratio of the regional trucking group improved to 92% from 94% for the
same period of the 1996 calendar year. USF Holland and USF Bestway led
the improvement in operating ratio. Both of these units had an
outstanding quarter as USF Bestway improved its operating ratio from
89.3% in 1996 to 86% in the current year's quarter on a revenue
increase of 18.1%. USF Holland improved its operating ratio from 91%
in the 1996 quarter to 89.9% in the current year's quarter on a 19.2%
increase in revenue. USF Dugan and USF Reddaway continued the profit
improvement reported in the first quarter of the current year. USF
Reddaway's operating ratio improved to 92.9% from 94.1% for the same
quarter of 1996 on a revenue increase of 9.4%. USF Dugan improved its
operating ratio to 95.4% in the current year's quarter from 97.7% for
the same period of last year on a revenue increase of 12.3%.
The Company is encouraged with the continuing progress at USF
Red Star where modest profitability was achieved for the third
straight quarter, the Company is, nevertheless, disappointed that the
contemplated acquisition of a small regional carrier in the
Northeastern United States which would have been merged with Red Star,
did not materialize. Despite this, management at Red Star did an
excellent job in achieving an improvement in the operating ratio from
102.3% in the 1996 quarter to 99.7% in the 1997 quarter. Although
overall revenue at USF Red Star declined 3.4% compared to the previous
year, the continued emphasis on yield resulted in an increase in the
LTL revenue per shipment of 5.4%. Management at Red Star is committed
to the continuing improvement in the operating results of this
subsidiary and the Company is aggressively seeking out opportunities
to increase USF Red Star's revenue and density in its Northeastern
service area.
The significant improvement in both net income and earnings
per share in the current year, both for the second quarter and the six
months to the end of June, is encouraging. The outlook for the balance
of 1997 is positive and the Company expects to continue to see an
improvement in its profitability, assuming no material change in the
stable pricing environment and level of economic activity.
Capital expenditures for the current year's quarter amounted
to approximately $27 million of which $20 million was for revenue
equipment and $7 million for terminal facilities and miscellaneous
equipment, which compares to capital expenditures of $25 million for
the 1996 quarter. For the six months ended June 28, 1997, capital
expenditures approximated $48 million, which compares to total capital
expenditures for the 1996 six month period of approximately $74
million (which included $27 million for the acquisition of Transus).
A dividend of 9 1/3 cents per share was paid July 3, 1997 to
shareholders of record on April 20, 1997.
This release contains forward looking statements that is
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. Accordingly, 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.
<PAGE>
Item 4 Submission of Matters to a Vote of Security Holders.
(a) On May 2, 1997, the annual meeting of stockholders of
USFreightways Corporation was held pursuant to notice.
(b) N/A
(c)(1) Election of Directors
Robert V. Delaney FOR: 22,161,974
WITHHOLD: 79,474
Robert P. Neuschel FOR: 22,160,988
WITHHOLD: 80,460
(c)(2) Amendment to Stock Option Plan for Non-Employee Directors
FOR: 19,879,774
AGAINST: 1,286,818
ABSTENTIONS: 1,074,855
(c)(3) Approval of the USFreightways Corporation Long-Term
Incentive Plan
FOR: 15,191,603
AGAINST: 5,985,325
ABSTENTIONS: 1,064,519
(d) N/A
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
1. Exhibit 10.1-USFreightways Long-Term Incentive
Plan (incorporated by reference from Exhibit 4.4 to
Registration Statement No. 333-28357 filed on Form
S-8 on June 3, 1997).
2. Exhibit 10.2- Stock Option Plan for Non-Employee
Directors amended and restated as of January 1,
1997 (incorporated by reference from Exhibit 4.4 to
Post-Effective Amendment No. 1 to
Registration Statement No. 33-79150 filed on Form S-8
on May 9, 1997).
.
(b) Current Reports on Form 8-K were filed:
1. No current reports on Form 8-K were filed during the
quarter.
<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 31st day of July, 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> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> JUN-28-1997
<CASH> 11,987
<SECURITIES> 0
<RECEIVABLES> 175,510
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 232,891
<PP&E> 410,002
<DEPRECIATION> 0
<TOTAL-ASSETS> 730,685
<CURRENT-LIABILITIES> 172,867
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 361,029
<TOTAL-LIABILITY-AND-EQUITY> 730,685
<SALES> 0
<TOTAL-REVENUES> 736,580
<CGS> 0
<TOTAL-COSTS> 690,594
<OTHER-EXPENSES> (435)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,598
<INCOME-PRETAX> 41,823
<INCOME-TAX> 17,532
<INCOME-CONTINUING> 24,291
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,291
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.96
</TABLE>
