10-Q/A 1 f10q-a.txt FIRST QUARTER REPORT 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 MARCH 31, 2001, 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 7, 2001, 26,262,153 shares of common stock were outstanding. PART I: FINANCIAL INFORMATION Item 1. Financial Statements. USFreightways Corporation Condensed Consolidated Balance Sheets Unaudited (Dollars in thousands)
March 31, December 31, 2001 2000 ----------------------------------------------------------------------------------------------------- Assets Current assets: Cash $ 9,325 $ 5,248 Accounts receivable, net 321,849 323,517 Other 74,611 67,596 ----------------- ------------------- Total current assets 405,785 396,361 ----------------- ------------------- Net property and equipment 737,376 750,485 Net intangible assets 179,988 181,978 Other assets 21,602 22,250 ----------------- ------------------- Total assets $ 1,344,751 $ 1,351,074 ----------------- ------------------- Liabilities and Stockholders' Equity Current liabilities: Current bank debt $ 2,247 $ 28,991 Accounts payable 80,716 90,741 Other current liabilities 191,379 172,443 ----------------- ------------------ Total current liabilities 274,342 292,175 ----------------- ------------------ Long-term liabilities: Long-term bank debt 4,567 10,137 Notes payable 250,000 250,000 Other long-term liabilities 164,512 163,047 ----------------- ------------------ Total long-term liabilities 419,079 423,184 ----------------- ------------------ Minority interest 1,022 539 Common stockholders' equity 650,308 635,176 ----------------- ------------------ Total liabilities and stockholders' equity $ 1,344,751 $ 1,351,074 ----------------- ------------------
USFreightways Corporation Consolidated Statements of Income Unaudited (Dollars in thousands, except per-share amounts)
Three months ended ------------------------------------- March 31, April 1, 2001 2000 ----------------------------------------------------------------------------- Operating revenue LTL Trucking $ 459,019 $ 470,864 TL Trucking 24,668 19,897 Logistics 71,159 67,125 Freight Forwarding 66,547 60,804 ----------------- ---------------- Total operating revenue $ 621,393 $ 618,690 Operating expenses: LTL Trucking 434,921 432,681 TL Trucking 23,832 18,952 Logistics 68,378 62,883 Freight Forwarding 69,841 60,088 Corporate and other 4,610 3,327 ----------------- ---------------- Total operating expenses 601,582 577,931 ----------------- ---------------- Income from operations 19,811 40,759 ----------------- ---------------- Non-operating income (expense): Interest expense (5,580) (4,571) Interest income 134 192 Other, net 36 493 ---------------- --------------- Total non-operating expense (5,410) (3,886) ---------------- --------------- Net income before income taxes 14,401 36,873 Income tax expense (5,680) (14,823) Minority interest (270) 266 ----------------- --------------- Net income $ 8,451 $ 22,316 ----------------- --------------- Average shares outstanding - basic 26,191,561 26,509,438 Average shares outstanding - diluted 26,775,002 27,456,591 Basic earnings per common share: $ 0.32 $ 0.84 Diluted earnings per common share: $ 0.32 $ 0.81 ----------------- ------------------
USFreightways Corporation Condensed Consolidated Statements of Cash Flows Unaudited (Dollars in thousands)
Three months ended ---------------------------- March 31, April 1, 2001 2000 -------------------------------------------------------------------------------------- Cash flows from operating activities: Net Income $ 8,451 $ 22,316 Adjustments to net income: Depreciation and amortization 28,256 26,519 Other items affecting cash 5,460 5,548 from operating activities -------------- ------------- Net cash provided by operating activities 42,167 54,383 -------------- ------------- Cash flows from investing activities: Capital expenditures (15,667) (45,830) Proceeds on sales 2,786 1,960 Acquisitions - (7,300) -------------- ------------- Net cash used in investing activities (12,881) (51,170) -------------- ------------- Cash flows from financing activities: Dividends paid (2,415) (2,473) Proceeds from sale of treasury stock 9,520 1,366 Proceeds from long-term debt 10,000 40,000 Payments on long-term debt (15,570) (40,498) Net change in short-term debt (26,744) 692 -------------- ------------- Net cash provided by (used in) financing activities (25,209) (913) -------------- ------------- Net increase/(decrease) in cash 4,077 2,300 -------------- ------------- Cash at beginning of period 5,248 6,862 -------------- ------------- Cash at end of period $ 9,325 $ 9,162 -------------- -------------
USFreightways Corporation Condensed Consolidated Statements of Changes in Common Stockholders' Equity Unaudited (Dollars in thousands)
Three Months Ended ----------------- March 31, April 1, 2001 2000 Balance as of December 31 2000 and 1999 respectively $ 635,176 $ 558,859 Net income 8,451 22,316 Foreign currency translation adjustments (389) - -------- ------- Comprehensive income $ 8,062 $ 22,316 Proceeds from sale of treasury stock 9,520 1,366 Dividends declared ( 2,450) ( 2,475) ---------- ---------- Balance as of March 31, 2001 and April 1, 2000 $ 650,308 $ 580,066 respectively ========== ==========
Notes to Condensed Consolidated Financial Statements (Dollars in thousands, except per share amounts) (Unaudited) 1. Summary of significant accounting policies General - The consolidated financial statements include the accounts of USFreightways and its wholly owned subsidiaries (the Company). 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 March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2000. 2. Earnings per share Basic earnings per share are calculated on net income divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share are calculated by dividing net income by this weighted-average number of common shares outstanding plus the shares that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares. 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 583,441 and 947,153 for the first quarters of 2001 and 2000 respectively. 3. Debt The Company's debt includes $100 million of unsecured guaranteed notes due May 1, 2009 and $150 million of guaranteed notes due April 15, 2010. On January 31, 2000, the Company filed a Form S-3 registration statement that allowed for the sale of up to $400 million in additional guaranteed notes. On April 25, 2000, the Company sold $150 million in 8 1/2% guaranteed notes due April 15, 2010 as part of the $400 million Form S-3 registration statement filed on January 31, 2000 The guaranteed notes are fully and unconditionally guaranteed, on a joint and several basis, on an unsecured senior basis, by all of the Company's direct and indirect domestic subsidiaries (the "Subsidiary Guarantors"). The Company is a holding company and during the period presented substantially all of the assets were the stock of the Subsidiary Guarantors, and substantially all of the operations were conducted by the Subsidiary Guarantors. Accordingly, the aggregate assets, liabilities, earnings and equity of the Subsidiary Guarantors were substantially equivalent to the assets, liabilities, earnings and equity of the Company on a consolidated basis. Management of the Company believes that separate financial statements of, and other disclosures with respect to, the Subsidiary Guarantors are not meaningful or material to investors. 4. Stock repurchases On July 24, 2000, the Company announced the authorized buyback of up to 1 million additional shares of its common stock in either public market or private transactions. This repurchase program is not yet completed. There have been no shares repurchased in the first quarter of 2001. As of March 31, 2001, the Company had repurchased 454,200 shares.
5. Segment Reporting Three Months Ended Unaudited (dollars in thousands) Mar. 31, Apr. 1, 2001 2000 ------------------------------------------------------------------------------- Revenue LTL Group: USF Holland $ 239,320 $ 251,745 USF Reddaway 65,109 63,588 USF Red Star 64,405 66,830 USF Dugan 51,291 51,802 USF Bestway 38,894 36,899 ------------------------------------------------------------------------------- Sub total LTL Group 459,019 470,864 Truckload - Glen Moore 24,668 19,897 Logistics subsidiaries 71,159 67,125 Freight forwarding 66,547 60,804 Corporate and other - - ------------------------------------------------------------------------------- Total Revenue $ 621,393 $ 618,690 Income From Operations LTL Group: USF Holland $ 16,750 $ 25,801 USF Reddaway 3,839 4,650 USF Red Star (584) 1,355 USF Dugan 1,724 2,712 USF Bestway 2,369 3,665 ------------------------------------------------------------------------------- Sub total LTL Group 24,098 38,183 Truckload - Glen Moore 836 945 Logistics subsidiaries 2,781 4,242 Freight forwarding (3,294) 716 Corporate and other (2,873) (1,658) Amortization of intangibles (1,737) (1,669) ------------------------------------------------------------------------------- Total Income from Operations $ 19,811 $ 40,759 ------------------------------------------------------------------------------
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 quarter ended March 31, 2001 of $8.5 million, a 62% decrease compared to $22.3 million that was reported for the quarter that ended April 1, 2000. There were 64 working days in the current quarter compared to 65 working days in last year's first quarter. Net income per share for the current year's quarter was equivalent to 32 cents diluted earnings per share. Net income per share for the 2000 quarter amounted to 81 cents diluted earnings per share. Net income for the current year's quarter was negatively impacted (as announced by a press release dated April 19, 2001) by the continued slowing of the economy that affected results in all the Company's lines of businesses, continued losses at USF Worldwide, the Company's domestic and international freight forwarding business and to a lesser extent, bad weather during the current quarter. Revenue for the 2001 quarter increased by 0.4% to $621.4 million from $618.7 million for the first quarter of 2000. Revenue increases in the logistics business, distribution service centers, the UK freight forwarder, Asia and truckload revenue were offset by decreases in the regional trucking subsidiaries group, the return logistics business and USF Worldwide. Less-than-truckload (LTL) revenue for the current quarter at the regional trucking subsidiaries decreased 1.8%, including the fuel surcharges (see the note below relating to the inclusion of fuel surcharges into revenue as promulgated under SAB No. 101), compared to the 2000 first quarter; LTL shipments decreased 2.8% and LTL tonnage decreased 5.1%. LTL revenue per shipment increased from $113.36 to $114.55 and the weight per shipment decreased from 1,147 pounds to 1,121 pounds. Volume levels in last year's quarter benefited from a very strong second half of the quarter. Whereas, in the current year, volume levels were negatively impacted by the slowdown in the economy and particularly at USF Holland due to a slowdown in the automotive industry and other heavy manufacturing based in the central United States. Operating earnings for the regional trucking subsidiaries, in the current year's quarter, decreased 36.9% to $24.1 million compared to $38.2 million for the same period of 2000. The consolidated operating ratio for the LTL group deteriorated to 94.8 from 91.9 last year. Due to current ecomomic conditions, the regional trucking subsidiaries has reduced its work force by approximately 5.3% (amounting to 950 workers) since November of 2000. Despite the work force reductions, labor and fringe related benefits increased due to annual contractual increases at the Company's unionized carriers (USF Holland and USF Red Star). In addition, the regional trucking subsidiaries incurred increases in group health costs ranging from 12% to 30%. Claims and other operating expenses also increased as a percentage of revenue compared to last year's quarter. Fuel expense as a percentage of revenue improved slightly in the current year's quarter. USF Glen Moore, the Company's truckload (TL) carrier reported operating earnings of $0.8 million at an operating ratio of 96.6 compared to $0.9 and an operating ratio of 95.2 in 2000. Improvements in Labor and Operating costs were more than offset by increases in Fringes, Depreciation and Fuel expense. Revenue in the Logistics group increased by 6.0% to $71.2 million in the current quarter from $67.1 million in the prior year. USF Processors contributed lower revenue in the 2001 quarter amounting to approximately $17.0 million compared to approximately $18.7 million in last year's quarter as a major customer concluded a period of significantly increased volumes. USF Distribution Services increased revenue by approximately $2.5 million of which expansion into its new center in Baltimore (that was not opened in the first quarter of 2000)amounted to $0.6 million, while growth in existing centers in Kansas City, Chicago, Irwindale, Fontana and Oklahoma City contributed approximately $1.9 million. USF Logistics increased revenue by $3.2 million mainly in its food, retail and international business sectors. Earnings in the Logistics group decreased by 34.4% compared to the prior year's quarter to $2.8 million from $4.2 million as USF Processors reported lower earnings as a result of lower revenue (see paragraph above) and also as a result of a less profitable mix of business in the Food and Consumer sectors at USF Logistics. Revenue in the Freight Forwarding group increased 9.4% to $66.5 million from $60.8 million in the prior year's quarter. The group reported an operating loss of $3.3 million in 2001 compared to an operating profit of $0.7 million in the 2000 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 and USF Worldwide Logistics Limited ("Limited")(a UK freight forwarder). USF Asia recorded first quarter revenue of approximately $4.4 million and an operating loss of $0.7 million compared to revenue of $1.2 million and an operating loss of $0.9 million last year. Limited recorded revenue of approximately $8.5 million and an operating profit of $0.1 million. Additionally, in the first quarter, USF Worldwide reported an operating loss of $2.7 million as its gross margins deteriorated due to a decline in revenue of $6.0 million. Liquidity and Capital Resources Cash flows from operating activities contributed $42.5 million during the current quarter compared to $54.4 million during the same period last year. Net capital expenditures for the 2001 quarter amounted to approximately $12.9 million including $4.2 million for revenue equipment, $2.5 million for terminal facilities, and the balance for other capital items. Last year for the same period, net capital expenditures amounted to approximately $51.2 million, including $37.4 million for revenue equipment, $3.5 million for terminal facilities, and the balance for other capital items and the acquisition of Tri-Star Transportation. Cash flows provided by financing activities included $9.5 million of proceeds from the sale of treasury stock that resulted primarily from the exercise of stock options. Total borrowings decreased by $32.3 million during the first quarter of 2001 and the Company's debt to capital ratio improved to 28.3% compared to 31.3% at December 31, 2000. The Company's debt includes $150 million of unsecured guaranteed notes that were floated in late April, 2000 and are due on April 15, 2010 and $100 million of unsecured guaranteed notes due May 1, 2009. On January 31, 2000, the Company filed a Form S-3 registration statement that allowed for the sale of up to $400 million in additional guaranteed notes. On April 25, 2000, the Company sold $150 million in 8 1/2% guaranteed notes due April 15, 2010 as part of the $400 million 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 million, was used to repay $100 million in 6 5/8% notes that matured May 1, 2000, to reduce other unsecured lines of credit and to purchase an interest rate hedge. The guaranteed notes are fully and unconditionally guaranteed, on a joint and several basis, on an unsecured senior basis, by all of the Company's direct and indirect domestic subsidiaries (the "Subsidiary Guarantors"). The Company is a holding company and during the period presented substantially all of the assets were the stock of the Subsidiary Guarantors, and substantially all of the operations were conducted by the Subsidiary Guarantors. Accordingly, the aggregate assets, liabilities, earnings and equity of the Subsidiary Guarantors were substantially equivalent to the assets, liabilities, earnings and equity of the Company on a consolidated basis. Management of the Company believes that separate financial statements of, and other disclosures with respect to, the Subsidiary Guarantors are not meaningful or material to investors. On July 24, 2000, the Company announced the authorized buyback of up to 1 million additional shares of its common stock in either public market or private transactions. This repurchase program is not yet completed. There have been no shares repurchased in the first quarter of 2001. As of March 31, 2001, the Company had repurchased 454,200 shares. A dividend of 9 1/3 cents per share equivalent to $2.5 million was paid on April 6, 2001 to shareholders of record on March 23, 2001. Market Risk The Company is exposed to the impact of interest rate changes. The Company's exposure to changes in interest rates is limited to borrowings under a line of credit agreement which has variable interest rates tied to the LIBOR rate. The average annual interest rates on borrowings under this credit agreement were approximately 6.2% in the first quarter of 2001. In addition, the Company has $100 million of unsecured guaranteed notes with a 6 1/2% fixed annual interest rate and $150 million of unsecured guaranteed notes with an 8 1/2% interest rate at March 31, 2001. The Company estimates that the carrying value of the notes approximated their market value at March 31, 2001. The Company has no hedging instruments outstanding. From time to time, the Company invests excess cash in overnight money market accounts. Recent Accounting Pronouncements In the 2000 fourth quarter, the Company reclassified fuel surcharges invoiced to customers as revenue according to guidelines established under the Securities and Exchange Commission's Staff Accounting Bulletin ("SAB") Number 101 "Revenue Recognition in Financial Statements". Prior to the 2000 fourth quarter, the fuel surcharges were presented as a reduction of fuel costs. The Company, therefore, has restated the fourth quarter 1999 and the first three quarters of 2000 revenue and expenses in accordance with SAB Number 101. The implementation of SAB Number 101 had no effect on income from operations or net income. 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 10.1-USFreightways Corporation Long-Term Incentive Plan, as restated and amended March 8, 2001. 2. Exhibit 10.2-USFreightways Corporation Stock Option Plan for Non-Employee Directors, as restated and amended March 8, 2001. 3. Exhibit 10.3-Form of Severance Protection Agreement, dated as of February 28, 2001. (b) Current Reports on Form 8-K were filed: 1. None. 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 15th day of May, 2001. 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