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
APRIL 4, 1998, 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
Not applicable
(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 April 20, 1998, 26,148,286 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>
April 4, January 3,
1998 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 5,095 $ 6,471
Accounts receivable, net 203,450 187,554
Other 48,616 43,091
----------------- -------------------
Total current assets 257,161 237,116
----------------- -------------------
Net property and equipment 465,864 448,315
Net intangible assets 105,080 104,407
Other assets 9,343 9,697
----------------- -------------------
Total assets $ 837,448 $ 799,535
----------------- -------------------
Liabilities and Stockholders' Equity
Current liabilities:
Current bank debt $ - $ 650
Accounts payable 61,243 62,895
Other current liabilities 152,919 118,169
----------------- -------------------
Total current liabilities 214,162 181,714
----------------- -------------------
Long-term liabilities:
Long-term bank debt 5,000 15,000
Notes payable 100,000 100,000
Other long-term liabilities 113,535 110,621
----------------- -------------------
Total long-term liabilities 218,535 225,621
----------------- -------------------
Common stockholders' equity 404,751 392,200
----------------- -------------------
Total liabilities and stockholders' equity $ 837,448 $ 799,535
----------------- -------------------
</TABLE>
<PAGE>
USFreightways Corporation
Consolidated Statements of Income
Unaudited (Dollars in thousands, except per-share amounts)
<TABLE>
<CAPTION>
Three months ended
-------------------------------------
April 4, March 28,
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Operating revenue $ 442,339 $ 355,817
Operating expenses:
Salaries, wages and benefits 264,765 226,956
Other operating expenses 81,776 73,595
Purchased transportation 42,178 12,342
Insurance and claims 8,363 7,069
Depreciation and amortization 19,534 16,784
----------------- -----------------
Total operating expenses 416,616 336,746
----------------- -----------------
Income from operations 25,723 19,071
----------------- -----------------
Non-operating income (expense):
Interest expense (2,108) (2,582)
Interest income 233 164
Other, net (178) 99
----------------- -----------------
Total non-operating expense (2,053) (2,319)
----------------- -----------------
Net income before income taxes 23,670 16,752
Income tax expense 9,941 7,002
----------------- -----------------
Net income $ 13,729 $ 9,750
----------------- -----------------
Average shares outstanding - basic 26,116,663 24,276,484
Average shares outstanding - diluted 26,554,118 24,591,349
Basic earnings per common share: $ 0.53 $ 0.40
Diluted earnings per common share: $ 0.52 $ 0.40
----------------- -----------------
</TABLE>
<PAGE>
USFreightways Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended
--------------------------------------
April 4, March 29,
1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 13,729 $ 9,750
Adjustments to net income:
Depreciation and amortization 19,534 16,784
Other items affecting cash 14,267 1,799
from operating activities
----------------- ------------------
Net cash provided by operating activities 47,530 28,333
----------------- ------------------
Cash flows from investing activities:
Capital expenditures, net of
proceeds on sales (35,585) (20,694)
Acquisition ( 1,500) -
----------------- ------------------
Net cash used in investing activities (37,085) (20,694)
----------------- ------------------
Cash flows from financing activities:
Dividends paid (2,433) (2,108)
Proceeds from sale of common stock - 69,760
Proceeds from sale of treasury stock 1,262 1,105
Proceeds from long-term debt - 917
Payments on long-term debt (10,650) (78,000)
----------------- ------------------
Net cash provided by (used in) financing activities (11,821) (8,326)
----------------- ------------------
Net decrease in cash (1,376) (687)
----------------- ------------------
Cash at beginning of period 6,471 4,090
----------------- ------------------
Cash at end of period $ 5,095 $ 3,403
----------------- ------------------
</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
ended April 4, 1998 are not necessarily indicative of the results
that may be expected for the year ending January 2, 1999. 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
January 3, 1998.
FASB Statement No. 130, Reporting Comprehensive Income, became effective
for the beginning of the Company's 1998 fiscal year. Total comprehensive
income is the total of net income and all other nonowner changes in equity in
a period. In the first quarter of 1998 and the first quarter of 1997, the
Company's total comprehensive income is equivalent to its net income.
The AICPA Accounting Standards Executive Committee Statement of Position (SOP)
98-5, Reporting on the Costs of Start-Up Activities will become effective for
the Company's 1999 fiscal year first quarter. SOP 98-5 concludes that the
costs of start-up activities, including organization costs, should be
expensed as incurred, and all prior capitalized costs written off. Reporting
under SOP 98-5 will have no material effect on the Company's financial results.
<PAGE>
Segment Reporting
April 4, March 28,
Three Months Ended 1998 1997
- -------------------------------------------------------------------------------
Revenue
LTL Group:
USF Holland $ 197,495 $ 163,730
USF Reddaway 51,441 44,986
USF Red Star 50,673 46,395
USF Dugan 45,546 40,568
USF Bestway 34,141 30,420
- -------------------------------------------------------------------------------
Sub total LTL Group 379,296 326,099
Logistics subsidiaries 28,739 25,165
Freight forwarding 34,304 2,719
Corporate and other - 1,834
- -------------------------------------------------------------------------------
Total Revenue $ 442,339 $ 355,817
Income From Operations
LTL Group:
USF Holland $ 17,399 $ 12,413
USF Reddaway 3,128 1,421
USF Red Star 184 86
USF Dugan 1,392 1,687
USF Bestway 4,321 3,513
- -------------------------------------------------------------------------------
Sub total LTL Group 26,424 19,120
Logistics subsidiaries 1,759 1,296
Freight forwarding 624 20
Corporate and other (2,139) (712)
Amortization of intangibles (945) (653)
- --------------------------------------------------------------------------------
Total Income from Operations $ 25,723 $ 19,071
- -------------------------------------------------------------------------------
<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 April 4, 1998 of $13,729,000, a 41% increase over the
$9,750,000 which was reported for the thirteen weeks which ended March 29, 1997.
There were three more working days in the 1998 quarter compared to the similar
period for 1997. The 1997 quarter included the New Year's holiday week and Good
Friday, whereas neither of these holidays occurred in the 1998 quarter.
Net income per share for the current year's quarter was equivalent to
52 cents diluted earnings per share, and 53 cents basic earnings per share, a
30% increase compared to 40 cents on both a diluted and basic basis for the same
quarter of 1997.
Revenue for the 1998 quarter increased by 24.3% to $442,339,000 from
$355,817,000 for the first quarter of 1997. USF Seko Worldwide, the Company's
domestic and international freight forwarder, which was acquired on September
30, 1997, contributed $30,772,000 revenue in the 1998 quarter. Excluding the
acquisition of USF Seko Worldwide, revenue increased 15.7% in the current year
compared to the same period of the previous year.
Less-than-truckload (LTL) revenue for the quarter at the regional
trucking subsidiaries increased 16.3% over the 1997 first quarter, LTL shipments
increased 11.7%, and LTL tonnage increased 13.5%. LTL revenue per shipment
increased from $101.99 to $106.22 and the weight per shipment increased from
1,126 pounds to 1,144 pounds.
The logistics group continued its substantial growth rate in the
current year's first quarter. Revenue for the thirteen weeks of the current year
amounted to $28,739,000, an increase of 14.2%, and the operating ratio improved
to 93.9 from 94.8 in the first quarter of 1997.
A relatively mild winter, price stability, and a reasonably buoyant
economy has helped the Company record the highest first quarter net income in
its history. The Company's regional truck lines continue to perform at generally
acceptable levels and USF Holland, USF Bestway and USF Reddaway showed
significant improvement in both operating ratio and operating income in the
1998 quarter compared to the same period of the previous year. The combined
operating ratio for the five regional trucking subsidiaries improved from
94.1% in 1997 to 93.0% in the current year. The Company's logistics business
achieved record results increasing operating income to $1,759,000 from
$1,296,000 in the 1997 quarter. The significant improvement in both revenue and
operating income at USF Logistics results from increased revenue from new
contracts and customers and a reduction in overhead which occurred when its
business was reorganized along product lines. USF Seko Worldwide generated
$30,772,000 in revenue for the current year' quarter which is an increase of
22.2% compared to last year's quarter, although it was not part of the
USFreightways group. Similarly, USF Seko Worldwide improved operating income to
$578,000 from $243,000 for the 1997 quarter.
On April 3rd, USF Red Star, the Company's Northeastern LTL regional
subsidiary consummated an arrangement to acquire the revenue of Vallerie
Transportation Services for $1,500,000 in cash from the Company's working
capital. Vallerie was a Norwalk, Ct. based provider of less-than-truckload
services to the New England and upper mid-Atlantic states. The Company expects
that the Vallerie acquisition will add approximately $10,000,000 in annual
revenue to USF Red Star's revenue base. In addition to acquiring the revenue
and the customer list, a significant number of Vallerie employees, including
the entire sales force, joined USF Red Star.
<PAGE>
Management's Discussion and Analysis of Financial
Conditions and Results of Operation. (Cont'd.)
Capital expenditures for the 1998 quarter amounted to approximately
$36 million of which $22 million was for revenue equipment and $11 million for
terminal facilities. Last year for the same quarter, capital expenditures
amounted to $21 million of which $17 million was for revenue equipment and $1
million for terminal facilities. The Company anticipates that capital
expenditures for the balance of 1998 will approximate $100,000,000 mainly for
revenue equipment and purchase and or improvements of terminal facilities.
On April 8, 1998, 70 percent of the voting members of the IBT union
(Teamsters) approved a new national contract that will be effective
(from April 1, 1998) for five years and provides, among other things, a first
year $750 bonus, in lieu of a first year pay increase. Total wage, pension and
health and welfare increases amount to approximately 2.8% per year over the
five years of the contract. The Company's unionized LTL carriers (USF Holland
and USF Red Star) have agreed to accept the terms of the contract. The
ratification of this agreement, with USF Holland and USF Red Star, is subject
to finalization of regional contract supplements which the Company
expects to have completed before the end of the second quarter of 1998.
A dividend of 9 1/3 cents per share was paid April 10, 1998 to
shareholders of record on March 27, 1998.
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 revenue.
On April 19, 1996, Steven Mark Whitworth ("Plaintiff") a
former employee of USF Bestway Inc., a subsidiary of the
Company ("USF Bestway", brought suit against USF Bestway
and one of its employees, alleging claims of fraud and
promissory estoppel arising from Plaintiff's previous
employment as a driver with USF Bestway, 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. On or about
October 2. 1996, Plaintiff amended his petition and added
claims of wrongful discharge and conspiracy to wrongfully
discharge.
On October 7, 1996, Plaintiff moved for summary judgment,
claiming that he was entitled to a judgment of $3,500,000 in
actual damages and $1,750,000 in attorney fees based on (i)
the USF Bestway's alleged untimely responses to Plaintiff's
requests for admissions and (ii) the USF Bestway's alleged
failure to comply with the requirements of Texas law
concerning the signature of pleadings by counsel in connection
with the responses to Plaintiff's requests for admissions.
Following a hearing on November 1, 1996, the trial court
granted Plaintiff's motion for summary judgment and entered
judgment in favor of Plaintiff and against the USF Bestway,
for $3,500,000 in actual damages $1,750,000 in attorneys' fees
together with court costs and interest.
On November 27, 1996, USF Bestway moved for reconsideration of
the judgment and for a new trial. At a January 7, 1997 hearing
on this motion, the trial court denied the motion for
reconsideration and for new trial, but ruled that the
responses to the Plaintiff's requests for admissions were
timely. USF Bestway has posted a superedeas bond to prevent
enforcement of the judgment pending appeal and perfected its
appeal 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 and further believes, the judgment well be
vacated and the matter remanded for a trial on the merits and
that, in any event, will not have a material adverse effect on
USF Bestway's financial condition. In the event the judgment
is sustained on appeal, management of USF Bestway 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 damage. 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 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 January 13, 1998 reporting the appointment of
a President and Chief Operating Officer.
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 24th day of
April, 1998.
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> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> APR-04-1998
<CASH> 5,095
<SECURITIES> 0
<RECEIVABLES> 203,450
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 257,161
<PP&E> 465,864
<DEPRECIATION> 0
<TOTAL-ASSETS> 837,448
<CURRENT-LIABILITIES> 214,162
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 404,751
<TOTAL-LIABILITY-AND-EQUITY> 837,448
<SALES> 0
<TOTAL-REVENUES> 442,339
<CGS> 0
<TOTAL-COSTS> 416,616
<OTHER-EXPENSES> (55)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,108
<INCOME-PRETAX> 23,670
<INCOME-TAX> 9,941
<INCOME-CONTINUING> 13,729
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,729
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.52
</TABLE>
