-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JEk1bGgj+XtI/+sqRZwk94hCmjjykUbNfSk+6n0RohXaY9k79rNpnnAL29vT3p2l YKoLYRg/4rTXX70JU1g6bQ== 0000846729-97-000005.txt : 19970804 0000846729-97-000005.hdr.sgml : 19970804 ACCESSION NUMBER: 0000846729-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970801 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN FREIGHTWAYS CORP CENTRAL INDEX KEY: 0000846729 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 742391754 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17570 FILM NUMBER: 97649847 BUSINESS ADDRESS: STREET 1: 2200 FORWARD DR CITY: HARRISON STATE: AR ZIP: 72601 BUSINESS PHONE: 5017419000 MAIL ADDRESS: STREET 1: 2200 FORWARD DR CITY: HARRISON STATE: AR ZIP: 72601 10-Q 1 FORM 10-Q 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. PART I. FINANCIAL INFORMATION Item 1. Financial Statements AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (000's omitted) JUNE 30, December 31, 1997 1996 ---------- ---------- (UNAUDITED) (Note) 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 ========== ==========
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. AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (000's omitted, except per share data) Three Months Ended Six Months Ended June 30 June 30 1997 1996 1997 1996 ------------------ ------------------ 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 ================== ==================
See notes to condensed consolidated financial statements. AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30 1997 1996 ------------------------- (000's omitted) 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 ========== ==========
See notes to condensed consolidated financial statements. 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 Three months ended Six months ended June 30 June 30, 1997 1996 1997 1996 ---------------------------------------- (000's omitted except per share amounts) 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 ======= ======= ======= =======
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. 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: Three Months Ended Six Months Ended June 30 June 30 1997 1996 1997 1996 ---------------------------------- 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% ==================================
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. 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. 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. 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. 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 EX-27 2 FINANCIAL DATA SCHEDULE
5 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. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 4,062 0 80,633 1,542 2,370 107,947 662,223 204,542 568,602 78,343 219,451 0 0 314 215,755 568,602 0 412,140 0 390,166 0 0 8,260 13,888 5,444 8,444 0 0 0 8,444 .27 .27 Provision for Doubtful accounts included in costs and expenses applicable to revenues.
EX-10 3 AMEND AND REST ELECTED NON-EMP DIRECTOR STK OPT PL 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. 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. 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. 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 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) 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 EX-10 4 APPOINTED NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN 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. 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. 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. 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 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) 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 -----END PRIVACY-ENHANCED MESSAGE-----