-----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, AmG3gfHh6gtUvsInduawRKoCVRB/pxzM+DCtN8Q0wygaspPwdECJLaeiAuWsBp9x y0x+L6ryMJpCXW1NZF74KA== 0000881791-02-000005.txt : 20020510 0000881791-02-000005.hdr.sgml : 20020510 ACCESSION NUMBER: 0000881791-02-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020330 FILED AS OF DATE: 20020510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: USFREIGHTWAYS CORP CENTRAL INDEX KEY: 0000881791 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 363790696 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19791 FILM NUMBER: 02641366 BUSINESS ADDRESS: STREET 1: 8550 W BRYN MAWR AVE STREET 2: SUITE 700 CITY: CHICAGO STATE: IL ZIP: 60631 BUSINESS PHONE: 8476960200 MAIL ADDRESS: STREET 1: 9700 HIGGINS ROAD SUITE 570 CITY: ROSEMONT STATE: IL ZIP: 60018 FORMER COMPANY: FORMER CONFORMED NAME: TNT FREIGHTWAYS CORP DATE OF NAME CHANGE: 19930328 10-Q 1 f10q1q2002.txt FIRST QUARTER 10Q 2002 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 30, 2002, 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.,Suite 700 60631 Chicago, Illinois (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 April 25, 2002, 26,875,311 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 30, December 31, 2002 2001 - ----------------------------------------------------------------------------------------------------- Assets Current assets: Cash $ 57,564 $ 79,534 Accounts receivable, net 304,164 295,876 Other 69,769 70,840 ----------------- ------------------- Total current assets 431,497 446,250 ----------------- ------------------- Net property and equipment 732,216 732,520 Goodwill 100,476 171,708 Other intangible assets, net 2,672 3,016 Notes receivable 11,036 5,036 Other assets 23,176 20,134 ----------------- ------------------- Total assets $ 1,301,073 $ 1,378,664 ----------------- ------------------- Liabilities and Stockholders' Equity Current liabilities: Current bank debt $ 878 $ 1,037 Accounts payable 80,379 89,979 Other current liabilities 184,224 174,695 ----------------- ------------------ Total current liabilities 265,481 265,711 ----------------- ------------------ Long-term liabilities: Long-term bank debt 2,523 2,774 Notes payable 250,000 250,000 Other long-term liabilities 170,768 170,672 ----------------- ------------------ Total long-term liabilities 423,291 423,446 ----------------- ------------------ Minority interest - 1,855 Common stockholders' equity 612,301 687,652 ----------------- ------------------ Total liabilities and stockholders' equity $ 1,301,073 $ 1,378,664 ----------------- ------------------
USFreightways Corporation Consolidated Statements of Income Unaudited (Dollars in thousands, except per-share amounts)
Three months ended ------------------------------------- March 30, March 31, 2002 2001 - ----------------------------------------------------------------------------- Revenue LTL Trucking $ 430,218 $ 459,019 TL Trucking 25,317 24,668 Logistics 66,552 71,159 Freight Forwarding 55,646 66,547 Corporate and other - - ----------------- ---------------- Total operating revenue $ 577,733 $ 621,393 Operating expenses: LTL Trucking 413,353 434,921 TL Trucking 24,428 23,832 Logistics 64,262 68,378 Freight Forwarding 56,851 69,841 Corporate and other 6,110 4,610 ----------------- ---------------- Total operating expenses 565,004 601,582 ----------------- ---------------- Income from operations 12,729 19,811 ----------------- ---------------- Non-operating income (expense): Interest expense (5,226) (5,580) Interest income 354 134 Other, net (12,925) 36 ---------------- --------------- Total non-operating expense (17,797) (5,410) ---------------- --------------- Net income before income taxes (5,068) 14,401 Income tax expense (2,595) (5,680) Minority interest - (270) ----------------- --------------- Income/(Loss) before cumulative effect of accounting change $ (7,663) $ 8,451 Cumulative effect of change in accounting for goodwill $ (70,022) $ - --------------- ------------- Net income/(Loss) $ (77,685) $ 8,451 --------------- ------------- Income/(Loss) per share before cumulative effect - Basic $ (0.29) $ 0.32 Income/(Loss) per share before cumulative effect - Diluted $ (0.29) $ 0.32 (Loss) per share - cumulative effect - Basic $ (2.61) $ 0.00 (Loss) per share - cumulative effect - Diluted $ (2.61) $ 0.00 Net income/(Loss)per share - Basic: $ (2.90) $ 0.32 Net income/(Loss) per share - Diluted: $ (2.90) $ 0.32 Average shares outstanding - basic 26,798,022 26,191,561 Average shares outstanding - diluted 26,798,022 26,775,002 ----------------- ------------------
USFreightways Corporation Condensed Consolidated Statements of Cash Flows Unaudited (Dollars in thousands)
Three months ended ---------------------------- March 30, March 31, 2002 2001 - -------------------------------------------------------------------------------------- Cash flows from operating activities: Net Income/(Loss) $ (77,685) $ 8,451 Adjustments to net income: Depreciation and amortization 25,247 28,256 Cumulative effect of change in accounting 70,022 - for goodwill Cash payment to Asia 10,000 - Other items affecting cash (11,622) 5,460 from operating activities -------------- ------------- Net cash provided by operating activities 15,962 42,167 -------------- ------------- Cash flows from investing activities: Capital expenditures (26,649) (15,667) Proceeds on sales on property and equipment 2,628 2,786 Disposition of USF Asia (16,000) - -------------- ------------- Net cash used in investing activities (40,021) (12,881) -------------- ------------- Cash flows from financing activities: Dividends paid (2,478) (2,415) Proceeds from sale/(repurchase) of stock 4,977 9,520 Proceeds from long-term debt - 10,000 Payments on long-term debt (251) (15,570) Net change in short-term debt (159) (26,744) -------------- ------------- Net cash provided by (used in) financing activities 2,089 (25,209) -------------- ------------- Net increase/(decrease) in cash (21,970) 4,077 -------------- ------------- Cash at beginning of period 79,534 5,248 -------------- ------------- Cash at end of period $ 57,564 $ 9,325 -------------- -------------
USFreightways Corporation Condensed Consolidated Statements of Changes in Common Stockholders' Equity Unaudited (Dollars in thousands)
Three Months Ended ----------------- March 30, March 31, 2002 2001 Balance as of December 31 2001 and 2000 respectively $ 687,652 $ 635,176 Net income/(Loss) (77,685) 8,451 Foreign currency translation adjustments (135) (389) -------- ------- Comprehensive income $ (77,820) $ 8,062 Proceeds from sale/ (repurchase) of stock 4,977 9,520 Dividends declared (2,508) (2,450) ---------- ---------- Balance as of March 30, 2002 and March 31, 2001 $ 612,301 $ 650,308 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 our wholly owned subsidiaries. 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. Our consolidated financial statements for prior periods have been reclassified to conform with the current presentation. Our 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 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information, refer to consolidated financial statements and footnotes thereto included in our annual report on Form 10-K for the year ended December 31, 2001. 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 our basic and diluted earnings per share. For the first quarter of 2002, the diluted loss per share calculation excludes the effect of the unexercised stock options because their inclusion would be anti-dilutive. The number of options included in the denominator, used to calculate diluted earnings per share, are 583,441 for the first quarter 2001. 3. Debt Our debt includes $100 million of unsecured guaranteed notes due May 1, 2009 and $150 million of unsecured guaranteed notes due April 15, 2010. Our guaranteed notes are fully and unconditionally guaranteed, on a joint and several basis, on an unsecured senior basis, by all our direct and indirect domestic subsidiaries (the "Subsidiary Guarantors"). We are 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 shown in our consolidated statements. Our management 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, we announced the authorized buyback of up to 1 million additional shares of our common stock in either public market or private transactions. This repurchase program is not yet completed. There were no shares repurchased in the first quarter of 2002 or the first quarter of 2001. As of March 30, 2002, we had repurchased 454,200 shares. 5. Notes receivable USF Asia Group, Ltd. On January 18, 2002 we relinquished our interest in USF Asia Group, Ltd., USF Worldwide's freight forwarding joint venture in Asia. A one-time payment of $10 million was made to Asia Challenge, Ltd., a Hong Kong based logistics company and USF Worldwide's former joint venture partner. We also provided $6 million in loans to Asia. The loans included a $3.0 million secured loan and a $3.0 million unsecured loan. The secured loan is backed by at least 51% of the common voting shares of USF Asia Group, Ltd. Both loans are due on June 30, 2005 and each bears interest at the six-month LIBOR plus 1%. Interest is payable quarterly. Net income before income taxes was reduced by approximately $12.8 million in the current quarter as a result of this transaction. Auto Warehousing Company ("AWC") We have notes receivable from AWC, a company that we owned until 1993, totaling $5.7 million ($0.7 million in accounts receivable)as of March 30, 2002 and December 31, 2001. The notes are due August 28, 2003 and bear interest at the three month LIBOR plus 7/8%. Interest is payable quarterly and is current. Principal payments of $0.7 million are due annually in May of each year with a final installment of approximately $3.6 million due on August 28, 2003. The notes are secured by a lien on all assets of AWC and a personal guarantee by AWC's owner including a pledge by the owner of 100% of his stock in AWC. Our notes receivable are secondary to loans due from AWC to US Bank totaling approximately $5.4 million. As a result of financial difficulties being experienced by AWC, AWC has had and may continue to have difficulty making timely principal payments to us as required by the notes.The last principal payment was made in May 2000. AWC is pursuing various actions, including corporate and debt restructuring (including its obligation to us), that if successful could better enable AWC to meet its financial obligations. We have evaluated the carrying value of these notes receivable, and based on AWC's ongoing restructuring efforts and operating results, we believe the notes receivable from AWC will ultimately be realized. We will continue to review the value considering the operations of AWC and the results of its restructuring efforts. 6. Accounting for Goodwill under SFAS 142 Under Statement of Financial Accounting Standards (SFAS) 142 "Goodwill and Other Intangible Assets", previously recorded goodwill and other intangible assets with indefinite lives will no longer be amortized but will be subject to impairment tests annually. As a result of implementing this new standard on January 1, 2002, we recorded an impairment charge of $70 million at USF Worldwide, our freight forwarding segment. The charge was shown as a cumulative effect of change in accounting for goodwill in the current quarter. Also, effective January 1, 2002 amortization of goodwill ceased under the standard. In the first quarter of 2001, we amortized $1.3 million of goodwill. Quarters Ended ($000's except for earnings March 30, 2002 March 31, 2001 per-share amounts) ______________ ______________ Reported net income/ (Loss) $ (77,685) $ 8,451 Add back: Goodwill amortization - 1,339 ______________ ______________ Adjusted net income/(Loss) $ (77,685) $ 9,790 ============== ============== Basic earnings per share: Reported net income/(Loss) $ (2.90) $ 0.32 Goodwill amortization 0.00 0.05 _____________ ______________ Adjusted net income/(Loss) $ (2.90) $ 0.37 ============= ============== Diluted earnings per share: Reported net income/(Loss) $ (2.90) $ 0.32 Goodwill amortization 0.00 0.05 _____________ ______________ Adjusted net income/(Loss) $ (2.90) $ 0.37 ============= ============== 7. Recent Accounting Pronouncements In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". The standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which the obligation is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. The standard is effective for 2003. We are currently reviewing the requirements of this new standard and have not yet determined its impact, if any, on our financial position or results of operations.
8. Segment Reporting Three Months Ended Unaudited (dollars in thousands) March 30, March 31, 2002 2001 - ------------------------------------------------------------------------------- Revenue LTL Group: USF Holland $ 224,275 $ 239,320 USF Reddaway 61,705 65,109 USF Red Star 60,090 64,405 USF Dugan 49,990 51,291 USF Bestway 34,158 38,894 - ------------------------------------------------------------------------------- Sub total LTL Group 430,218 459,019 Truckload - Glen Moore 25,317 24,668 Logistics subsidiaries 66,552 71,159 Freight forwarding 55,646 66,547 Corporate and other - - - ------------------------------------------------------------------------------- Total Revenue $ 577,733 $ 621,393 Income From Operations LTL Group: USF Holland $ 13,580 $ 16,750 USF Reddaway 3,691 3,839 USF Red Star (2,427) (584) USF Dugan 627 1,724 USF Bestway 1,394 2,369 - ------------------------------------------------------------------------------- Sub total LTL Group 16,865 24,098 Truckload - Glen Moore 889 836 Logistics subsidiaries 2,290 2,781 Freight forwarding (1,205) (3,294) Corporate and other (5,721) (2,873) Amortization of intangibles (389) (1,737) - ------------------------------------------------------------------------------- Total Income from Operations $ 12,729 $ 19,811 - ------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations. Results of Operations We ("USFreightways Corporation") reported a net loss for the quarter ended March 30, 2002 of $77.7 million, compared to net income of $8.4 million that was reported for the quarter ended March 31, 2001. The net loss per share for the current year's quarter was equivalent to ($2.84) diluted earnings per share. Net income per share for the 2001 quarter amounted to $0.32 diluted earnings per share. Net income for the current year's quarter included a charge of $12.8 million for relinquishing our interest in USF Asia and a charge of $70.0 million related to goodwill impairment at USF Worldwide, our freight forwarding segment, upon implementation on January 1, 2002 of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets". Earnings before these two charges amounted to $5.1 million equivalent to $0.19 diluted earnings per share. $72.8 million, of the total $82.8 million charges taken, were non-cash while the remaining $10 million was a cash related charge. Both charges were announced in press releases earlier in the first quarter of 2002. The results of the first quarter in 2002 and 2001 were negatively impacted by the sluggishness of the economy, that affected the results mainly in our Less-than-truckload (LTL) segment and continued losses in our freight forwarding segment, though the current loss was sharply reduced from the loss in the 2001 first quarter. Revenue for the 2002 first quarter decreased by 7.0% to $577.7 million from $621.4 million for the first quarter of 2001. Revenue decreased across all our lines of business except for our Truckload (TL) carrier which showed a slight increase in the 2002 quarter compared to the 2001 quarter. Total revenue for the current quarter at the regional trucking subsidiaries decreased 6.3% to $430.2 million compared to $459.0 million in the 2001 first quarter. Because Good Friday occurred in the current year's first quarter but in the second quarter of 2001, there were slightly less than 63 working days in the current year's quarter compared to 64 for last year's first quarter. Total revenue in the 2002 first quarter was virtually the same as the total revenue reported in the fourth quarter of 2001. Fuel surcharges, which are included in the reported revenue, declined by approximately 2.1% as a percent of revenue compared to last year's first quarter as fuel prices declined. LTL revenue before fuel surcharges declined by approximately 3.6% in the 2002 quarter compared to the 2001 first quarter. LTL shipments decreased 3.0% and LTL tonnage decreased 4.2%. LTL revenue per shipment decreased 2.8%from $114.55 to $111.37 as the average weight per shipment decreased 1.3% from 1,120 pounds to 1,106 pounds. On a comparable daily basis, for the 2002 first quarter compared to the 2001 first quarter, LTL shipments decreased approximately 0.6%, LTL tonnage decreased 1.9% and LTL revenue per shipment before fuel surcharges decreased 0.7% while LTL revenue per hundredweight before fuel surcharges increased 0.6%. Likewise, on a comparable daily basis, March shipments and tonnage improved slightly compared to those in March 2001. Operating earnings for the regional trucking subsidiaries, in the current year's quarter, decreased 30.0% to $16.9 million compared to $24.1 million for the same period of 2001. The consolidated operating ratio for the LTL group increased to 96.1 from 94.7 in the first quarter of 2001. Despite the sluggish economy and the reduction in the number of working days, USF Reddaway recorded a slightly improved operating ratio, on a 5.2% decline in revenue, in the current quarter of 94.0 compared to last year's first quarter operating ratio of 94.1 and USF Holland, which operates in the central states where the economy (that is heavily influenced by manufacturing-particularly in the automotive area) has been the most adversely impacted, where revenue decreased by 6.3% compared to last year's first quarter reported an operating ratio of 93.9 compared to 93.0 in the 2001 first quarter. USF Bestway reported a decline in revenue of 12.2% compared to last year's first quarter, but on a comparative daily basis and before fuel surcharges revenue declined by 7.8%. In spite of this revenue decrease, USF Bestway's operating ratio was 95.9 compared to 93.9 in the 2001 first quarter. The current operating ratio for USF Bestway (95.9) was just slightly above the 95.6 operating ratio reported in the 2001 fourth quarter on 2.1% lower revenue in the current quarter compared to the 2001 fourth quarter. USF Dugan recorded a revenue decrease of 2.5% in the current quarter compared to the 2001 first quarter. On a comparable daily basis and before fuel surcharges, USF Dugan's revenue increased by 2.6%. USF Dugan operated at a 98.7 in the 2002 first quarter compared to 96.6 in last year's first quarter. USF Red Star recorded a 104.0 operating ratio in the 2002 first quarter compared to 100.9 in the 2001 first quarter. This increase in operating ratio was largely due to a significant drop in volumes in January and early February of 2002. A USF Red Star competitor closed operations in late February 2002, and the extra business enabled USF Red Star to operate close to break even in March 2002. USF Glen Moore, our TL carrier recorded a 2.6% revenue increase to $25.3 million in the 2002 first quarter with operating earnings of $0.9 million and an operating ratio of 96.5 compared to $0.8 million profit and an operating ratio of 96.6 in the 2001 first quarter. Revenue in the Logistics group decreased by 6.5% to $66.6 million in the current quarter from $71.2 million in the prior year. USF Processors contributed lower revenue in the 2002 quarter amounting to approximately $9.6 million compared to approximately $17.0 million in last year's quarter as volumes from a major customer were significantly reduced. Revenue from a combined USF Logistics and USF Distribution Services increased by 5.1%. Earnings in the Logistics group decreased by 17.7% from $2.8 million in the 2001 first quarter to $2.3 million in the 2002 first quarter. Revenue in the Freight Forwarding segment decreased 16.4% to $55.6 million from $66.5 million in the 2001 first quarter. $4.4 million of revenue was reported in USF Asia in the 2001 first quarter, whereas there was no revenue reported in the 2002 first quarter because we relinquished our interest in USF Asia in the first week of the 2002 first quarter. The segment's management team has reduced fixed costs and made organizational changes that have begun to show improved results. The segment reported an operating loss of $1.2 million in the 2002 first quarter compared to a $3.3 million loss in the 2001 first quarter. Corporate and other expenses increased by $1.5 million in the 2002 first quarter to $6.1 million compared to $4.6 million in the 2001 first quarter. Due to implementation of SFAS No. 142, amortization of non-goodwill intangible assets in the 2002 first quarter amounted to $0.4 million compared to $1.7 million amortization on all intangible assets in the 2001 first quarter. Corporate expenses increased to $5.7 million in the 2002 first quarter compared to $2.9 million in the 2001 first quarter as our information technology group (IT) increased non-capital expenses by $2.7 million in the current quarter as the IT group continued to upgrade IT systems and infrastructure. The IT group continues to recruit industry-leading talent. Liquidity and Capital Resources Cash flows from operating activities contributed $16.0 million during the 2002 first quarter compared to $42.2 million during the same period last year.In the 2002 first quarter, cash flows from operating activities were negatively impacted by our net loss of $77.7 million and an increase in accounts receivable amounting to $8.3 million. Offsetting the aforementioned were the non-cash write-off of goodwill at USF Worldwide amounting to $70.0 million and depreciation of property and equipment and amortization of non-goodwill intangibles of approximately $25.2 million. (See table below) Quarter ended March 30, 2002 ____________________________ Cash flows from operating activities: Income before unusual charges $ 5,097 Subtract unusual charges: Cash payment - Asia (10,000) Non-cash Asia write-off (2,760) Non-cash goodwill write-off (70,022) _________ Net loss $(77,685) Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization $ 25,247 Increase in accounts receivable and other current assets (9,866) Cash payment to Asia recorded under 10,000 investing activities Goodwill write-off 70,022 Other, net (1,756) _________ Net cash provided by operating activities $ 15,962 _________ Capital expenditures for the 2002 first quarter amounted to approximately $26.6 million including additions of $9.7 million for revenue equipment, $8.6 million for terminal facilities, $8.3 million for information technology and for other capital items. Last year for the same period, capital expenditures amounted to approximately $15.7 million, including additions of $4.2 million for revenue equipment, $2.5 million for terminal facilities, $5.8 million for IT equipment and $3.2 million for other capital items. Other cash flows used in investing activities included a $10.0 million cash payment to USF Worldwide's former joint venture partner in Asia when we relinquished our interest in the joint venture and $6.0 million in loans to USF Asia Group, Ltd. Cash flows provided by financing activities included $5.0 million of proceeds from the sale of stock that resulted primarily from the exercise of stock options occurring in the first quarter. Total borrowings decreased by $0.4 million during the first quarter of 2002 and we had approximately $50.2 million invested in overnight money market deposits. Our net debt to capital ratio was 24.2% at March 30, 2002 compared to 20.2% at December 31, 2001. Our 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. Our guaranteed notes are fully and unconditionally guaranteed, on a joint and several basis, on an unsecured senior basis, by all our direct and indirect domestic subsidiaries (the "Subsidiary Guarantors"). We are 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 shown in our consolidated statements. Our management 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, we announced the authorized buyback of up to 1 million additional shares of our common stock. This repurchase program is not yet completed. There were no shares repurchased in the first quarter of 2002 or the first quarter of 2001. As of March 30, 2002, we had repurchased 454,200 shares. A dividend of 9 1/3 cents per share equivalent to $2.5 million was paid on April 5, 2002 to shareholders of record on March 22, 2002. Quantitative and Qualitative Disclosures about Market Risk We are exposed to the impact of interest rate changes. Our 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. There have been no borrowings under this agreement in the 2002 first quarter. The weighted average annual interest rates on borrowings under this credit agreement were 6.3% in 2001. In addition, we have $150 million of unsecured notes with an 8 1/2% fixed annual interest rate and $100 million of unsecured notes with a 6 1/2% fixed annual interest rate at March 30, 2002. We estimate that the fair value of the notes approximated their carrying value at March 30, 2002. We have no hedging instruments. From time to time, we invest excess cash in overnight money market accounts. At March 30, 2002, we had invested approximately $50 million in overnight money market accounts that yielded approximately 2.0%. Recent Accounting Pronouncement In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". The standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which the obligation is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. The standard is effective for 2003. We are currently reviewing the requirements of this new standard and have not yet determined its impact, if any, on our financial position or results of operations. 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 Stock Option Plan for Non-Employee Directors. (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 2nd day of May, 2002. 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 EX-10 2 fdraft.txt EXHIBIT 10.1 USFREIGHTWAYS CORPORATION STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS RESTATED AS OF MARCH 8, 2001 AND AMENDED AS OF APRIL 18, 2002 I.DEFINITIONS AND PURPOSE A.Definitions: Unless otherwise specified or unless the context otherwise requires, the following terms, as used in this Plan, have the following meanings: 1.Affiliate means a corporation which, for purposes of Section 422 of the Code, is a parent or subsidiary of the Company, direct or indirect. 2.Board means the Board of Directors of the Company. 3.Code means the Internal Revenue Code of 1986, as amended. 4.Committee means the committee to which the Board delegates the power to act under or pursuant to the provisions of the Plan, or the Board if no committee is selected. 5.Company means USFreightways Corporation, a Delaware corporation, and includes any successor or assignee corporation or corporations into which the Company may be merged, changed, or consolidated; any corporation for whose securities the securities of the Company shall be exchanged; and any assignee of or successor to substantially all other assets of the Company. 6.Disability means a permanent and total disability as defined in Section 22(e) (3) of the Code. 7.Eligible Director means each person who is a director of the Company, and who is not an employee of the Company or any Affiliate of the Company and who has not been an employee of the Company or any Affiliate of the Company for all or any part of the preceding fiscal year. For purposes of the Plan, an Eligible Director shall be deemed to include the employer of such Eligible Director, or any delegatee mandated by his employer, if the Eligible Director is required, as a condition of his employment, to provide that any Option granted hereunder be made to the employer or its delegatee. 8.Option means a right or option granted under the Plan, which right or option shall not be intended to qualify as an incentive stock option as defined in Section 422 of the Code. 9.Option Agreement means an agreement between the Company and a Participant executed and delivered pursuant to the Plan. 10.Participant means an Eligible Director to whom an Option is granted under the Plan. 11.Plan means this Stock Option Plan for Non-Employee Directors, as amended from time to time. 12.Shares means the following shares of the capital stock of the Company as to which Options have been or may be granted under the Plan: authorized and unissued common stock, $0.01 par value, treasury shares held by the Company or any shares of capital stock into which the Shares are changed or for which they are exchanged within the provisions of Article VI of the Plan. B.Purpose of the Plan: The Plan intended to promote the interests of the Company and its stockholders by attracting and retaining highly qualified independent directors through an investment interest in the Company's future success. II.SHARES SUBJECT TO THE PLAN The aggregate number of Shares as to which Options may be granted from time to time shall be Six Hundred Thousand (600,000) Shares. If an Option ceases to be "outstanding", in whole or in part, the Shares which were subject to such Option, if the Option was not exercised, shall be available for the granting of other Options. Any Option, if the Option was not exercised, shall be available for the granting of other Options. Any Option shall be treated as "outstanding" until such Option is exercised in full, or terminates or expires under the provisions of the Plan or Option Agreement. Subject to the provisions of Article VI, the aggregate number of Shares as to which Options may be granted shall be subject to change only by means of an amendment of the Plan duly adopted by the Company and approved by the stockholders of the Company within such time period as may be required by the Securities Exchange Act of 1934, as amended from time to time. III.ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee. Subject to the provisions of the Plan, the Committee is authorized to: A.Interpret the provisions of the Plan or any Option or Option Agreement and to make all rules and determinations which it deems necessary or advisable for the administration of the Plan; B.Determine the Eligible Directors to whom Options shall be granted; C.Determine the number of Shares for which an Option or Options shall be granted; D.Provide for the acceleration of the right to exercise an Option (or any portion thereof); and E.Specify the terms and conditions upon which Options may be granted. The interpretation and construction by the Committee of any provisions of the Plan or of any Option granted under it shall be final. IV.ELIGIBILITY FOR PARTICIPATION Each Participant must be an Eligible Director of the Company at the time an Option is granted. Each Eligible Director shall be granted, at the later of the effective date of the Plan or the date such director becomes an Eligible Director, and at such other time or times as described in Article V, an Option to purchase Shares under the Plan. In addition to the formula-based Shares set forth in Article V, the Committee may at any time and from time to time grant one or more additional Options to one or more Eligible Directors ("Discretionary Options") and may designate the number of Shares to be subject to each Discretionary Option so granted, provided however that no grant of a Discretionary Option to purchase Shares shall permit unrestricted ownership of Shares by the Eligible Director for at least six (6) months from the date of grant of the Discretionary Option, unless the Committee determines that the grant of such Discretionary Option to purchase Shares otherwise satisfies the then current Rule 16b-3 requirements under the Securities Exchange Act of 1934. V.TERMS AND CONDITIONS OF OPTIONS Each Option shall be set forth in an Option Agreement, duly executed on behalf of the Company and by the participant to whom such Option is granted. Except for the setting of the Option price under Paragraph A of this Article V, no Option shall be granted and no purported grant of any Option shall be effective until such Option Agreement shall have been duly executed on behalf of the Company and by the Participant. Each such Option Agreement shall be subject to at least the following terms and conditions: A.OPTION PRICE: The exercise price of the Shares covered by each Option granted under the Plan shall be equal to 100% of the "fair market value" of the Shares on the date of the granted Option. If the Shares are listed on any national securities exchange, the fair market value shall be the mean average of the high and low sales prices, if any, on the largest such exchange on the date of the grant of the Option, or, if none, on the most recent trade date thirty (30) days or less prior to the date of the grant of the Option. If the Shares are not then listed on any such exchange, the fair market value of such Shares shall be the closing "Ask" prices, if any, as reported on the National Association of Securities Dealers automated Quotation System ("NASDAQ") for the date of the grant of the Option, or if none, on the most recent trade date thirty (30) days or less prior to the date of the grant of the Option for which such quotations are reported. If the Shares are not then either listed on any such exchange or quoted on NASDAQ, the fair market value shall be the mean between the average of the "Bid" and the average of the "Ask" prices, if any, as reported in the National daily Quotation Service for the date of the grant of the Option, or, if none, for the most recent trade date thirty (30) days or less prior to the date of the grant of the Option for which such quotations are reported. 1. NUMBER OF SHARES: Each Eligible Director shall automatically, on the date such director becomes an Eligible Director, be granted an Option under this Plan to acquire 10,000 Shares. In addition to the foregoing, each Eligible Director may from time to time be granted by the Committee, in its discretion, a Discretionary Option. C.TERM OF OPTION: No Option granted under the Plan shall be exercisable after the expiration of ten (10) years from the date of the grant. D.DATE OF EXERCISE: Options granted to an Eligible Director under the Plan on the date the director first becomes an Eligible Director shall become exercisable cumulatively in accordance with the following schedule: Years Elapsed Since Cumulative Number of Shares for Which Date of Grant Option May be Exercised ___________________ _____________________________________ Less than 1 0 1 2,000 2 4,000 3 6,000 4 8,000 5 or more 10,000 The foregoing schedule notwithstanding, if a Participant shall cease to be a director of the Company because of death or Disability, all Shares for which an Option has been granted shall become immediately exercisable and shall be exercisable in accordance with Paragraph F. Notwithstanding anything herein to the contrary, upon the authorization of the grant of a Discretionary Option, or at anytime thereafter, the Committee may prescribe the date or dates on which the Discretionary Option becomes exercisable, and may provide that the Discretionary Option become exercisable in installments over a period of years, or upon the attainment of stated goals. E.MEDIUM OF PAYMENT: The Option price shall be paid on the date of purchase specified in the notice of exercise, as set forth in Paragraph G. It shall be paid in the legal tender of the United States, or, at the election of the Participant, by surrender to the Company of previously owned shares with an aggregate fair market value (on the date of the exercise) equal to the Option price to be paid; provided, however, that if such shares were acquired pursuant to an incentive stock option plan (as defined in Code Section 422) of the Company or Affiliate, then the applicable holding period requirements of said Section 422 have been met with respect to such shares, and, provided further, that if (i) such shares were granted pursuant to an option, then such option must have been granted at least six (6) months prior to the exercise of the Option hereunder; and (ii), such shares were purchased other than through the grant and exercise of an option, such shares were owned by the Participant for more than six (6) months prior to the exercise of the Option hereunder. F.TERMINATION OF STATUS: 1.In the event that a Participant shall cease to be a director of the Company for any reason other than death, Disability, or voluntary termination as a director of the Company on or after the attainment of his or her 65th birthday, his or her Option shall be exercisable, only to the extent that it was exercisable at the date he or she ceased to be a director and only until the first to occur of one (1) year after such date or until the date on which the Option otherwise expires according to its terms. 2.In the event that a Participant shall cease to be a director of the Company because of death or Disability, his or her Option may be exercised in its entirety (notwithstanding the vesting schedule set forth in Paragraph D of this Article V or in any Option Agreement) within the originally prescribed term of the Option by the Participant or by any person or persons designated by the Participant as the executors or administrators of the Participant's estate, or by any person or persons who shall have acquired the Option directly from the Participant by his or her will or the applicable law of descent and distribution. 3.In the event that a Participant shall cease to be a director of the Company because of voluntary termination as a director of the Company on or after the attainment of his or her 65th birthday and that Participant has served as a director of the Company for five (5) years or more, his or her Option may be exercised in its entirety (notwithstanding the vesting schedule set forth in Paragraph D of this Article V or in any Option Agreement) within the originally prescribed term of the Option by the Participant; provided that the Committee, in its sole discretion, approves the exercise of the Option in its entirety. 4.In the event that a Participant shall cease to be a director of the Company because of voluntary termination as a director of the Company on or after the attainment of his or her 72nd birthday and that Participant has not served as a director of the Company for five (5) years, his or her Option shall be exercisable (notwithstanding the vesting schedule set forth in Paragraph D of this Article V or in any Option Agreement) within the originally prescribed term of the Option by the Participant, to the extent that (a) it was exercisable at the date he or she ceased to be a director and (b) if the Option was exercisable periodically, to the extent of any additional rights that would have become exercisable (had the Participant not voluntarily terminated as a director of the Company) during successive one year periods from the Participant's date of termination for each year the Participant served as a director of the Company. G.EXERCISE OF OPTION AND ISSUE OF STOCK: Option shall be exercised by giving written notice to the Company. Such written notice shall: (1) be signed by the person exercising the Option, (2) state the number of Shares with respect to which the Option is being exercised, and (3) specify a date (other than a Saturday, Sunday or legal holiday) not less than five (5) nor more than ten (10) days after the date of such written notice, as the date on which the Shares will be purchased. Such tender and conveyance shall take place at the principal office of the Company during ordinary business hours, or at such other hour and place agreed upon by the Company and the person or persons exercising the Option. On the date specified in such written notice (which date may be extended by the Company in order to comply with any law or regulation which requires the Company to take any action with respect to the Option Shares prior to the issuance thereof, whether pursuant to the provisions of Article VI or otherwise), the Company shall accept payment for the Option Shares and shall deliver to the person or persons exercising the Option in exchange therefor an appropriate certificate or certificates for paid non- assessable Shares. In the event of any failure to take up and pay for the number of Shares specified in such written notice on the date set forth therein (or on the extended date as above provided), the right to exercise the Option shall terminate with respect to such number of Shares, but shall continue with respect to the remaining Shares covered by the Option and not yet acquired pursuant thereto. H.RIGHTS AS A STOCKHOLDER: No Participant to whom an Option has been granted shall have rights as a stockholder with respect to any Shares covered by such Option except as to such Shares as have been issued to or registered in the Company's share register in the name of such Participant upon the due exercise of the Option and tender of the full Option price. I.ASSIGNABILITY AND TRANSFERABILITY OF OPTION: By its terms, an Option granted to a participant shall not be transferable by the Participant and shall be exercisable, during the Participant's lifetime, only by such Participant. Such Option shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment, or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of any Option or of any rights granted thereunder contrary to the provisions of this Paragraph I, or the levy of any attachment or similar process upon an Option or such rights, shall be null and void. VI.ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event that the outstanding shares of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization , merger, consolidation, recapitalization, reclassification, change in par value, stock split-up, combination of shares or dividend payable in capital stock , or the like, appropriate adjustments to prevent dilution or enlargement of the rights granted to, or available for, Participants shall be made in the number and kind of shares for the purchase of which Options may be granted under the Plan, and, in addition, appropriate adjustment shall be made in the number and kind of Shares and in the Option price per share subject to outstanding options. Notwithstanding anything herein to the contrary, in the event of an offer for the Company's shares, the adoption of a plan of merger or consolidation under which all of the shares of the Company would be eliminated, or a sale of substantially all of the Company's assets, a Participant shall be entitled to exercise immediately all or any portion of the Shares to which he or she received an Option, regardless of the number of years elapsed since the date of the grant . VII.DISSOLUTION OR LIQUIDATION OF THE COMPANY Upon the dissolution or liquidation of the Company other than in connection with a transaction to which the preceding Article VI is applicable, all Options granted hereunder shall terminate and become null and void; provided, however, that if the rights of a Participant under the applicable Options have not otherwise terminated and expired, the Participant shall have the right immediately prior to such dissolution or liquidation to exercise any Option granted hereunder to the extent that the right to purchase Shares thereunder has become exercisable as of the date immediately prior to such dissolution or liquidation. VIII.TERMINATION OF THE PLAN The Plan shall terminate fifteen (15) years from the date of its adoption. The Plan may be terminated at an earlier date by vote of the Board; provided, however, that any such earlier termination shall not affect any Options granted or Option Agreements executed prior to the effective date of such termination. Except as may otherwise by provided for under Articles VI and VII, and notwithstanding anything in this Plan to the contrary, any Options granted prior to the effective date of the Plan's termination may be exercised, if otherwise exercisable until ten (10) years have elapsed from the date the Option is granted, and the provisions of the Plan with respect to the full and final authority of the Committee under the Plan shall continue to control. IX.AMENDMENT OF THE PLAN The Plan may be amended by the Board and such amendment shall become effective upon adoption by the Board; provided, however, that any amendment to Article II above or that otherwise requires the approval of the stockholders of the Company in accordance with the Rule 16b-3 requirements of the Securities Exchange Act of 1934, as amended from time to time, shall be subject to approval of the stockholders within the requisite time period of such Act, and provided,further, that the Plan may not be amended more frequently than once every six (6) months, unless an amendment is necessary to comply with the Code or the Employee Retirement Income Security Act of 1974, as amended, and is otherwise permitted by Rule 16b-3. X.INDEMNIFICATION OF COMMITTEE In addition to such other rights of indemnification as they may have as directors or members of the Committee, the members of the Committee shall be indemnified by the Company against all reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken by them as members of the Committee and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that the Committee member is liable for gross negligence or willful misconduct in the performance of his or her duties. To receive such indemnification, a Committee member must first offer in writing to the Company the opportunity, at his own expense, to defend any such action, suit or proceeding. XI.RESTRICTIONS If the Company shall determine, in its discretion, that the Shares under the Plan must be registered or qualified under any applicable state or federal securities law before they may be offered or sold to the Participant, or that the consent or approval of any governmental regulatory body is necessary or desirable in connection with the issuance of such Shares, such Option may not be exercised by the Participant unless the Shares have been so registered, qualified, or listed, or until such consent or approval shall have been obtained, free of any conditions not acceptable to the Company. The Company shall use reasonable efforts to qualify the Shares, obtain the benefit of any applicable exemption from such qualification, or obtain any such consent or approval, provided that no Participant shall have any right to require the company to undertake any registration or other action which the Company determines, in its sole discretion, to be unduly burdensome. XII.SAVINGS CLAUSE This Plan intended to comply in all respects with applicable law and regulations, including Rule 16b-3 of the Securities and Exchange Commission. In case any one or more provisions of this Plan shall be held invalid, illegal, or unenforceable in any respect under applicable law and regulation (including Rule 16b-3), the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal, or unenforceable provisions shall be deemed null and void; however, to the extent permitted by law, any provision that could be deemed null and void shall first be construed, interpreted, or revised retroactively to permit this Plan to be construed in compliance with all applicable law (including Rule16b-3) so as to foster the intent of this Plan. Notwithstanding anything herein to the contrary, no grant of, or Option to purchase, Shares shall permit unrestricted ownership of Shares by the Participant for at least six (6) months from the date of grant or Option to purchase. XIII.EFFECTIVE DATE This Plan shall become effective upon adoption by the Board. The adoption of the Plan shall be subject to subsequent approval by the stockholders of the Company at the next annual meeting of the company's stockholders unless such approval is not required by any rules or regulations promulgated by the Securities and Exchange Commission under Section 16(b) of the Securities Exchange Act of 1934, as amended from time to time. Notwithstanding the foregoing, if the Plan shall have been approved by the Board prior to such annual meeting, Options shall be granted to Eligible Directors prior to the date of such annual meeting in accordance with Article V, subject to such subsequent stockholder approval but such Options shall not become exercisable until such approval is obtained or its is determined that such approval is not required. XIV.GOVERNING LAW This Plan shall be governed by the laws of the State of Delaware and construed in accordance therewith. Originally adopted and effective on the 29th day of October, 1993 by the Board of Directors. Restated this 8th day of March 2001 by the Board of Directors and amended as of the 18th day of April 2002. -----END PRIVACY-ENHANCED MESSAGE-----