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 1, 2000, 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.)
8550 W. Bryn Mawr Ave., Chicago, Illinois 60631
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
including area code: (773) 824-1000
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 May 3, 2000, 26,604,777 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 1, December 31,
2000 1999
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 9,162 $ 6,862
Accounts receivable, net 304,122 293,989
Other 71,057 62,077
----------------- -------------------
Total current assets 384,341 362,928
----------------- -------------------
Net property and equipment 691,581 660,510
Net intangible assets 174,430 174,538
Other assets 15,329 14,191
----------------- -------------------
Total assets $ 1,265,681 $ 1,121,167
----------------- -------------------
Liabilities and Stockholders' Equity
Current liabilities:
Current debt $ 17,044 $ 20,561
Notes payable 100,000 100,000
Accounts payable 80,340 89,193
Other current liabilities 200,400 160,590
----------------- ------------------
Total current liabilities 397,784 370,344
----------------- ------------------
Long-term liabilities:
Long-term debt 36,848 33,137
Notes payable 100,000 100,000
Other long-term liabilities 150,983 149,827
----------------- ------------------
Total long-term liabilities 287,831 282,964
----------------- ------------------
Common stockholders' equity 580,066 558,859
----------------- ------------------
Total liabilities and stockholders' equity $ 1,265,681 $ 1,121,167
----------------- ------------------
</TABLE>
<PAGE>
USFreightways Corporation
Consolidated Statements of Income
Unaudited (Dollars in thousands, except per-share amounts)
<TABLE>
<CAPTION>
Three months ended
-------------------------------------
April 1, April 3,
2000 1999
- -----------------------------------------------------------------------------
<S> <C> <C>
Operating revenue
LTL Trucking $ 460,804 $ 410,797
TL Trucking 19,488 10,286
Logistics 67,125 41,022
Freight Forwarding 60,804 51,124
----------------- ----------------
Total operating revenue $ 608,221 $ 513,229
Operating expenses:
LTL Trucking 422,621 380,653
TL Trucking 18,543 9,601
Logistics 62,883 38,291
Freight Forwarding 60,088 49,674
Corporate and other 3,327 2,779
----------------- ----------------
Total operating expenses 567,462 480,998
----------------- ----------------
Income from operations 40,759 32,231
----------------- ----------------
Non-operating income (expense):
Interest expense (4,571) (2,812)
Interest income 192 232
Other, net 493 24
---------------- ---------------
Total non-operating expense (3,886) (2,556)
---------------- ---------------
Net income before income taxes 36,873 29,675
Income tax expense 14,823 12,167
Minority interest, net of taxes (266) -
----------------- ---------------
Net income $ 22,316 $ 17,508
----------------- ---------------
Average shares outstanding - basic 26,509,438 26,313,897
Average shares outstanding - diluted 27,456,591 26,988,930
Basic earnings per common share: $ 0.84 $ 0.67
Diluted earnings per common share: $ 0.81 $ 0.65
----------------- ------------------
</TABLE>
<PAGE>
USFreightways Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended
--------------------------------------
April 1, April 3,
2000 1999
- -----------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 22,316 $ 17,508
Adjustments to net income:
Depreciation and amortization 26,519 22,462
Other items affecting cash 5,548 4,517
from operating activities
----------------- ---------------
Net cash provided by operating activities 54,383 44,487
----------------- ---------------
Cash flows from investing activities:
Capital expenditures (45,830) (30,293)
Proceeds on sales 1,960 1,020
Acquisitions (7,300) (31,300)
----------------- ----------------
Net cash used in investing activities (51,170) (60,573)
----------------- ----------------
Cash flows from financing activities:
Dividends paid (2,473) (2,452)
Proceeds from sale of treasury stock 1,366 1,415
Proceeds from long-term debt 40,000 25,000
Payments on long-term debt (40,498) (1,780)
Net change in short-term debt 692 (5,497)
----------------- ----------------
Net cash provided by (used in) financing activities (913) 16,686
----------------- ----------------
Net increase/(decrease) in cash 2,300 600
----------------- ----------------
Cash at beginning of period 6,862 5,548
----------------- -----------------
Cash at end of period $ 9,162 $ 6,148
----------------- -----------------
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
1. General
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 trucking and
air freight industries. Therefore, operating results for the three months ended
April 1, 2000 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2000. 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 31, 1999.
2. Earnings per share
Basic earnings per share are calculated on income available to common
stockholders divided by the weighted-average number of common shares outstanding
during the period. Diluted earnings per share are calculated using earnings
available to each share of common stock outstanding during the period and to
each share that would have been outstanding assuming the issuance of common
shares for all dilutive potential common shares outstanding during the reporting
period. Unexercised stock options, calculated under the treasury stock method,
is the only reconciling item between the Company's basic and diluted earnings
per share. The number of options included in the denominator, used to calculate
diluted earnings per share are 947,153 and 675,033 for the first quarters of
2000 and 1999 respectively.
3. Acquisitions
On January 10, 2000, USF Glen Moore, the Company's truckload (TL) carrier,
acquired (for approximately $7 million in cash) all of the shares of Tri-Star
Transportation, Inc, a Tennessee based TL carrier. Tri-Star operates 170
tractor/trailer units and while not included in the Company's Fiscal 1999
revenue, generated $28 million in revenue for 1999, with approximately two-
thirds coming from dedicated fleet operations.
On January 18, 2000 the Company announced an agreement to acquire all of
the shares of Transport Corporation of America, Inc. (a stock-for-stock
transaction). By mutual agreement of the boards of directors of each company,
the agreement was terminated on February 8, 2000.
4. Long-Term Debt
On January 31, 2000, the Company filed a Form S-3 registration statement
that allowed for the sale of up to $400,000,000 in guaranteed debt securities.
5. Other
On March 15, 2000, the Company announced the formation of USF Worldwide
Logistics, a new operating group that brings together the Company's logistics
and freight forwarding business units into one cohesive organization.
6. Subsequent events
On April 19, 2000, the Company sold $150,000,000 in 8 1/2% guaranteed notes
due April 15, 2010 as part of the $400,000,000 Form S-3 registration statement
filed on January 31, 2000. The net proceeds from the sale of the guaranteed
notes, after deducting underwriting fees and other expenses were approximately
$149,000,000, were used to repay $100,000,000 in 6 5/8% notes that matured May
1, 2000 and to reduce other unsecured lines of credit.
<PAGE>
<TABLE>
<CAPTION>
5. Segment Reporting Three Months Ended
April 1, April 3,
2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Revenue
LTL Group:
USF Holland $ 246,617 $ 219,950
USF Reddaway 62,532 55,135
USF Red Star 65,184 53,774
USF Dugan 50,589 47,097
USF Bestway 35,882 34,841
- -------------------------------------------------------------------------------
Sub total LTL Group 460,804 410,797
Truckload - Glen Moore 19,488 10,286
Logistics subsidiaries 67,125 41,022
Freight forwarding 60,804 51,124
Corporate and other - -
- -------------------------------------------------------------------------------
Total Revenue $ 608,221 $ 513,229
Income From Operations
LTL Group:
USF Holland $ 25,801 $ 21,258
USF Reddaway 4,650 3,504
USF Red Star 1,355 305
USF Dugan 2,712 1,187
USF Bestway 3,665 3,890
- -------------------------------------------------------------------------------
Sub total LTL Group 38,183 30,144
Truckload - Glen Moore 945 685
Logistics subsidiaries 4,242 2,731
Freight forwarding 716 1,450
Corporate and other (1,658) (1,417)
Amortization of intangibles (1,669) (1,362)
- -------------------------------------------------------------------------------
Total Income from Operations $ 40,759 $ 32,231
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations.
Results of Operations
USFreightways Corporation ("the Company") reported net income for the
thirteen weeks ended April 1, 2000 of $22,316,000, a 27% increase over the
$17,508,000 which was reported for the thirteen weeks which ended April 3, 1999.
This is the fifteenth consecutive quarter that earnings have increased over the
same quarter of the previous year.
Net income per share for the current year's quarter was equivalent to 81
cents diluted earnings per share, a 25% increase compared to the 65 cents
diluted earnings per share for the same quarter of 1999. The current year's
quarter included an after tax charge of 2.5 cents per share for the start-up
costs for USF Asia Group and legal and other professional costs incurred in
connection with the aborted merger with Transport Corporation of America, Inc.
Revenue for the 2000 quarter increased by 18.5% to $608,221,000 from
$513,229,000 for the first quarter of 1999. USF Processors, acquired March 1,
1999 and Tri-Star Transportation, Inc.acquired by USF Glen Moore early in
January this year collectively contributed approximately $22,000,000 additional
revenue.
Revenue and net income for the 2000 quarter improved compared to the same
period of the previous year, although revenue and operating earnings this year
were negatively impacted by adverse weather in weeks three and four this year
and by rising fuel costs.
Less-than-truckload (LTL) revenue for the current quarter at the regional
trucking subsidiaries increased 12.1% over the 1999 first quarter, LTL shipments
increased 9.8% and LTL tonnage increased 9.4%. LTL revenue per shipment
increased from $108.75 to $110.94 and the weight per shipment decreased from
1,151 pounds to 1,147 pounds.
Operating earnings for the regional trucking group increased 26.7% to
$38,183,000 in 2000 compared to $30,144,000 for the same period of 1999. The
consolidated operating ratio improved to 91.7 from 92.7 last year led by USF
Holland with an operating ratio of 89.5 this year compared to 90.3 in the
previous year and improvements also at USF Dugan, USF Red Star and USF Reddaway.
Improvements in costs occurred in Labor, Workers' Compensation, Insurance and
Claims and Depreciation expenses, but were partially offset by increases in
Operating Expenses and Supplies due to rising fuel costs net of fuel surcharges.
The increase in the price of fuel in excess of surcharge recoveries was
equivalent to four cents a share.
USF Glen Moore, the Company's TL carrier, recorded operating earnings of
$945,000 at an operating ratio of 95.1 compared to $685,000 and an operating
ratio of 93.3 in 1999 as fuel increased from 13.3% of revenue in 1999 to 15.1%
in the current year equivalent to approximately one cent a share.
Revenue in the Logistics group increased by 63.6% to $67,125,000 in the
current quarter from $41,022,000 million in the prior year. USF Processsors
contributed revenue in the 2000 quarter amounting to approximately $18.7 million
compared to $4.1 million in last year's quarter, from its acquistion on March 1,
1999. Other existing logistics' contracts increased revenue by $5.6 million over
the prior year's quarter. USF Distribution Services increased revenue by $6.0
million of which expansion into its centers in Dallas, Kansas City, Montgomery,
Fontana and Oklahoma City (that were not open in the 1999 first quarter)
contributed $4.1 million, while other existing distribution centers increased
revenue by $1.9 million. Earnings in the Logistics group increased 55.3% over
the prior year's quarter to $4.2 million from $2.7 million due to earnings
increases at USF Processors, USF Distribution Services and higher profits from
existing customers' business.
<PAGE>
Revenue in the Freight Forwarding group increased 18.9% to $60,804,000 from
$51,124,000 in the prior year's quarter. The group's operating earnings
decreased to $716,000 from $1,450,000 for the 1999 quarter. Results in the
Freight Forwarding group include USF Asia, the trading name given to a joint
venture formed in October 1999 of which USF Worldwide(a wholly owned subisidiary
in the Freight Forwarding group)is a partner, which recorded first quarter
revenue of approximately $1.2 million and an operating loss before tax of
$890,000 (due to start-up costs) before reduction for minority interest.
On January 10th, USF Glen Moore, the Company's truckload (TL) carrier,
acquired (for approximately $7 million in cash) all of the shares of Tri-Star
Transportation, Inc, a Tennessee based TL carrier. Tri-Star operates 170
tractor/trailer units and while not included in the Company's Fiscal 1999
revenue, generated $28 million in revenue for 1999, with approximately two-
thirds coming from dedicated fleet operations.
On January 18th, the Company announced an agreement to acquire all of the
shares of Transport Corporation of America, Inc. (a stock-for-stock
transaction). By mutual agreement of the boards of directors of each company,
the agreement was terminated on February 8th.
On March 15th, the Company announced the formation of USF Worldwide
Logistics, a new operating group that brings together the Company's logistics
and freight forwarding business units into one cohesive organization.
Liquidity and Capital Resources
Cash flows from operating activities contributed $54.4 million during the
current quarter compared to $44.5 million in last year's quarter.
Net capital expenditures for the 2000 quarter amounted to approximately $51
million including $37.4 million for revenue equipment, $3.5 million for terminal
facilities, and the balance for other capital items plus the acquisition of
Tri-Star Transportation. Last year for the same quarter, net capital
expenditures amounted to $60.6 million, mainly for revenue equipment, terminal
facilities and the USF Processors acquisition.
Bank borrowings increased only slightly during the quarter.
On January 31, 2000, the Company filed a Form S-3 registration statement
that allowed for the sale of up to $400,000,000 in guaranteed debt securities.
On April 19, 2000, the Company sold $150,000,000 in 8 1/2% guaranteed notes
due April 15, 2010 as part of the $400,000,000 Form S-3 registration statement
filed on January 31, 2000. The net proceeds from the sale of the guaranteed
notes, after deducting underwriting fees and other expenses was approximately
$149,000,000, was used to repay $100,000,000 in 6 5/8% notes that matured May 1,
2000 and to reduce other unsecured lines of credit.
A dividend of 9 1/3 cents per share equivalent to $2.5 million was paid on
April 7, 2000 to shareholders of record on March 24, 2000.
<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. 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.
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. A Current Report on Form 8-K was filed on January 20, 2000 and February
9, 2000.
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 9th day of
May, 2000.
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
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27 FINANCIAL DATA SCHEDULE (FDS)
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> APR-01-2000
<CASH> 9,162
<SECURITIES> 0
<RECEIVABLES> 304,122
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 384,341
<PP&E> 691,581
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,265,681
<CURRENT-LIABILITIES> 397,784
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 580,066
<TOTAL-LIABILITY-AND-EQUITY> 1,265,681
<SALES> 0
<TOTAL-REVENUES> 608,221
<CGS> 0
<TOTAL-COSTS> 567,462
<OTHER-EXPENSES> (685)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,571
<INCOME-PRETAX> 36,873
<INCOME-TAX> 14,823
<INCOME-CONTINUING> 22,316
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,316
<EPS-BASIC> 0.84
<EPS-DILUTED> 0.81
</TABLE>
