-----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, Da9JA+kHXCJgOQCIIwbS2L5MuVkkFaHyzwxiw0ie+uHrTDZr1YItDPiWDKOOuYXk kCt+qPGv/m6nPbNcNQQzsg== 0000881791-99-000007.txt : 19990517 0000881791-99-000007.hdr.sgml : 19990517 ACCESSION NUMBER: 0000881791-99-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990514 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: SEC FILE NUMBER: 000-19791 FILM NUMBER: 99621622 BUSINESS ADDRESS: STREET 1: 9700 HIGGINS RD STE 570 CITY: ROSEMONT STATE: IL ZIP: 60018 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 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 APRIL 3, 1999, OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO _______________ Commission File Number 0-19791 USFREIGHTWAYS CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-3790696 (State of Incorporation) (IRS Employer Identification No.) 9700 Higgins Road, Rosemont, Illinois 60018 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (847) 696-0200 Not applicable (Former name or former address, if changed since the last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of May 12, 1999, 26,399,727 shares of common stock were outstanding. PART I: FINANCIAL INFORMATION Item 1. Financial Statements. USFreightways Corporation Condensed Consolidated Balance Sheets Unaudited (Dollars in thousands)
April 3, December 31, 1999 1998 - ----------------------------------------------------------------------------------------------------- Assets Current assets: Cash $ 6,148 $ 5,548 Accounts receivable, net 240,624 218,942 Other 60,434 55,359 ----------------- ------------------- Total current assets 307,206 279,849 ----------------- ------------------- Net property and equipment 554,875 544,282 Net intangible assets 161,615 140,201 Other assets 10,788 10,341 ----------------- ------------------- Total assets $ 1,034,484 $ 974,673 ----------------- ------------------- Liabilities and Stockholders' Equity Current liabilities: Current debt $ 5,163 $ 10,660 Accounts payable 67,903 78,757 Other current liabilities 172,986 139,460 ----------------- ------------------ Total current liabilities 246,052 228,877 ----------------- ------------------ Long-term liabilities: Long-term debt 74,316 51,096 Notes payable 100,000 100,000 Other long-term liabilities 138,517 135,566 ----------------- ------------------ Total long-term liabilities 312,833 286,662 ----------------- ------------------ Common stockholders' equity 475,599 459,134 ----------------- ------------------ Total liabilities and stockholders' equity $ 1,034,484 $ 974,673 ----------------- ------------------
USFreightways Corporation Consolidated Statements of Income Unaudited (Dollars in thousands, except per-share amounts)
Three months ended ------------------------------------- April 3, April 4, 1999 1998 - ----------------------------------------------------------------------------- Operating revenue LTL Trucking $ 410,797 $ 379,296 TL Trucking 10,286 - Logistics 41,022 28,739 Freight Forwarding 51,124 34,304 ----------------- ---------------- Total operating revenue $ 513,229 $ 442,339 Operating expenses: LTL Trucking 380,653 352,871 TL Trucking 9,601 - Logistics 38,291 26,980 Freight Forwarding 49,674 33,680 Corporate and other 2,779 3,085 ----------------- ---------------- Total operating expenses 480,998 416,616 ----------------- ---------------- Income from operations 32,231 25,723 ----------------- ---------------- Non-operating income (expense): Interest expense (2,812) (2,108) Interest income 232 233 Other, net 24 (178) ---------------- --------------- Total non-operating expense (2,556) (2,053) ---------------- --------------- Net income before income taxes 29,675 23,670 Income tax expense 12,167 9,941 ----------------- --------------- Net income $ 17,508 $ 13,729 ----------------- --------------- Average shares outstanding - basic 26,313,897 26,116,663 Average shares outstanding - diluted 26,988,930 26,554,118 Basic earnings per common share: $ 0.67 $ 0.53 Diluted earnings per common share: $ 0.65 $ 0.52 ----------------- ------------------
USFreightways Corporation Condensed Consolidated Statements of Cash Flows Unaudited (Dollars in thousands)
Three months ended -------------------------------------- April 3, April 4, 1999 1998 - ----------------------------------------------------------------------------------- Cash flows from operating activities: Net Income $ 17,508 $ 13,729 Adjustments to net income: Depreciation and amortization 22,462 19,534 Other items affecting cash 4,517 14,267 from operating activities ----------------- --------------- Net cash provided by operating activities 44,487 47,530 ----------------- --------------- Cash flows from investing activities: Capital expenditures (30,293) (36,324) Proceeds on sales 1,020 739 Acquisitions (31,300) (1,500) ----------------- ---------------- Net cash used in investing activities (60,573) (37,085) ----------------- ---------------- Cash flows from financing activities: Dividends paid (2,452) (2,433) Proceeds from sale of treasury stock 1,415 1,262 Proceeds from long-term debt 25,000 Payments on long-term debt (1,780) (10,000) Net change in short-term debt (5,497) (650) ----------------- ---------------- Net cash provided by (used in) financing activities 16,686 (11,821) ----------------- ---------------- Net increase/(decrease) in cash 600 (1,376) ----------------- ---------------- Cash at beginning of period 5,548 6,471 ----------------- ----------------- Cash at end of period $ 6,148 $ 5,095 ----------------- -----------------
Notes to Condensed Consolidated Financial Statements (Dollars in thousands, except per share amounts) (Unaudited) 1. General The financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The statements are unaudited but, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The Company's results of operations are affected by the seasonal aspects of the regional LTL trucking business. Therefore, operating results for the three months ended April 3, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. For further information, refer to consolidated financial statements and footnotes thereto included in the registrant's annual report on Form 10-K for the year ended December 31, 1998. 2. Earnings per share Basic earnings per share are calculated on income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share are calculated using earnings available to each share of common stock outstanding during the period and to each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the reporting period. Unexercised stock options, calculated under the treasury stock method, is the only reconciling item between the Company's basic and diluted weighted earnings per share. The number of options included in the denominator, used to calculate diluted earnings per share are 675,033 and 437,455 for the first quarters of 1999 and 1998 respectively. 3. Acquisitions On March 2nd, USF Logistics, the Company's logistics business unit, acquired (for cash) all of the ownership interests of Processors Unlimited Company, Ltd. (PUC) a provider of reverse logistics services to the grocery and drug industries. PUC has annualized revenue of approximately $46 million and employs over 1,000 individuals at 46 locations throughout Canada and the United States. 4. Subsequent events On April 10, 1999, USF Red Star, a subsidiary of the Company, completed an asset purchase transaction with CBL Trucking, a New England and mid-Atlantic LTL carrier. Certain members of CBL's management team, the majority of its sales force and almost all of CBL's drivers have since joined the Red Star labor force. As a result of this transaction, the former CBL customers will receive enhanced direct service territory and nationwide coverage through the Company's other regional LTL carriers. Red Star began servicing CBL's former customers on April 18, 1999. On April 29, 1999, the Company issued $100 million of Guaranteed Notes due May 1 2009 with a coupon rate of 6.50% and at a spread of 140 basis points above the 10-year Treasury notes. Net proceeds from the sale will be used to reduce the unsecured lines of credit that the Company has with various banks. Until the net proceeds are applied for specific purposes, the Company may invest them in marketable securities. On May 6, 1999, the four business units that operate under the Company's freight forwarding group announced that they will begin operating under the name - USF Worldwide.
5. Segment Reporting Three Months Ended April 3, April 4, 1999 1998 - ------------------------------------------------------------------------------- Revenue LTL Group: USF Holland $ 219,950 $ 197,495 USF Reddaway 55,135 51,441 USF Red Star 53,774 50,673 USF Dugan 47,097 45,546 USF Bestway 34,841 34,141 - ------------------------------------------------------------------------------- Sub total LTL Group 410,797 379,296 Truckload - Glen Moore 10,286 - Logistics subsidiaries 41,022 28,739 Freight forwarding 51,124 34,304 Corporate and other - - - ------------------------------------------------------------------------------- Total Revenue $ 513,229 $ 442,339 Income From Operations LTL Group: USF Holland $ 21,258 $ 17,399 USF Reddaway 3,504 3,128 USF Red Star 305 184 USF Dugan 1,187 1,392 USF Bestway 3,890 4,322 - ------------------------------------------------------------------------------- Sub total LTL Group 30,144 26,425 Truckload - Glen Moore 685 - Logistics subsidiaries 2,731 1,759 Freight forwarding 1,450 624 Corporate and other (1,417) (2,140) Amortization of intangibles (1,362) (945) - ------------------------------------------------------------------------------- Total Income from Operations $ 32,231 $ 25,723 - -------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations. Results of Operations USFreightways Corporation ("the Company") reported net income for the thirteen weeks ended April 3, 1999 of $17,508,000, a 28% increase over the $13,729,000 which was reported for the thirteen weeks which ended April 4, 1998. This is the eleventh consecutive quarter that earnings have increased over the same quarter of the previous year. The current year's quarter included both the New Year's and Good Friday holidays, neither of which occurred in the 1998 quarter. Net income per share for the current year's quarter was equivalent to 65 cents diluted earnings per share, a 25% increase compared to the 52 cents diluted earnings per share for the same quarter of 1998. Revenue for the 1999 quarter increased by 16% to $513,229,000 from $442,339,000 for the first quarter of 1998. Golden Eagle, Glen Moore and Processors Unlimited Company, Ltd. ("PUC") which were acquired since the first quarter of 1998, contributed revenue of $30,426,000 in the current year's quarter. Revenue and net income for the 1999 quarter improved compared to the same period of the previous year, although revenue and operating earnings this year were adversely impacted by more severe winter weather conditions than what was experienced during the relatively mild winter of 1998. Less-than-truckload (LTL) revenue for the current quarter at the regional trucking subsidiaries, on equivalent working days, increased 9.3% over the 1998 first quarter, LTL shipments increased 7.1% and LTL tonnage increased 8.1%. LTL revenue per shipment increased from $106.58 to $108.74 and the weight per shipment increased from 1,141 pounds to 1,151 pounds. Operating earnings for the regional trucking group increased 14% to $30,144,000 in 1999 compared to $26,425,000 for the same period of 1998. The consolidated operating ratio improved to 92.7 from 93.0 last year led by USF Holland with an operating ratio of 90.3 this year compared to 91.2 in the previous year. Improvements in costs occurred in Operating Expenses and Supplies (despite rising fuel costs in the current quarter), Workers' Compensation and Operating Taxes and Licenses, but were partially offset by increases in Labor expenses. Glen Moore Trucking, the Company's truckload carrier that was acquired on August 31, 1998, contributed revenue of $10.3 million and operated at 93.3 for the quarter. Revenue in the Logistics group increased by 42.7% to $41.0 million in the current quarter from $28.7 million in the prior year. PUC contributed revenue, since its acquisition on March 2nd, of $4.1 million and operated at an 88.4 operating ratio for the March period. Other existing logistics' contracts increased revenue by $3.9 million over the prior year's quarter. The logistics segment's distribution business unit increased revenue by $3.8 million of which its Moore & Son acquisition (Oct. 15, 1998) contributed $1.6 million, while other distribution centers increased revenue by $2.1 million. Earnings in the Logistics group increased 55.2% over the prior year's quarter to $2.7 million from $1.8 million due to earnings from PUC, Moore & Son and higher profits from existing customers' business. Revenue in the Freight Forwarding group increased 49.0% to $51.1 million from $34.3 million in the prior year's quarter due in large part to $16.0 million in revenue contributed from the group's recent Golden Eagle acquisition (Nov. 12, 1998). The group's profits improved by 132% to $1.4 million from $0.6 million the prior year's quarter. On March 2nd, USF Logistics, the Company's logistics business unit, acquired (for cash) all of the ownership interests of PUC a provider of reverse logistics services to the grocery and drug industries. PUC has annualized revenue of approximately $46 million and employs over 1,000 individuals at 46 locations throughout Canada and the United States. On March 31st, USF Seko Worldwide, one of the Company's freight forwarding business units, acquired (for cash) the business of Airgo Freight, Inc. its former agent in the Seattle Washington area. This acquisition had no effect on revenue or profits for the quarter as the purchase occurred at the end of the quarter. On April 10th, USF Red Star, the Company's Northeastern LTL regional subsidiary, completed an asset purchase transaction (for cash) with CBL Trucking, a New England and Mid-Atlantic LTL Carrier. Liquidity and Capital Resources Cash flows from operating activities contributed $44.5 million during the current quarter compared to $47.5 million in last year's quarter. Net capital expenditures for the 1999 quarter amounted to approximately $61 million including $19.5 million for revenue equipment, $6.5 million for terminal facilities, and the balance for other capital items plus the acquisition of Processors Unlimited. Last year for the same quarter, net capital expenditures amounted to $37.1 million, mainly for revenue equipment, terminal facilities and a small acquisition. Bank borrowings increased by $17.7 million during the quarter. The proceeds were used to partially fund the PUC acquisition. On April 29, 1999, the Company issued $100 million of Guaranteed Notes due May 1, 2009 with a coupon rate of 6.50% and at a spread of 140 basis points above the 10-year Treasury notes. Net proceeds from the sale will be used to reduce the unsecured lines of credit that the Company has with various banks. Until the net proceeds are applied for specific purposes, the Company may invest them in marketable securities. A dividend of 9 1/3 cents per share equivalent to $2.5 million was paid on April 9, 1999 to shareholders of record on March 26, 1999. Year 2000 The Company has been and continues to address the universal situation commonly referred to as the "Year 2000 Problem". The "Year 2000 Problem" is related to the inability of certain computer systems, software and embedded technologies to properly recognize and process date-related information surrounding the Year 2000. In 1996, the Company initiated a comprehensive review of its computerized Information Technology (IT) and non-information technology systems to identify systems that could be affected by the Year 2000 problems and has implemented a plan to resolve the identified issues. The Year 2000 issues were analyzed by identifying and assessing all systems, software and embedded technologies and business partners with internal business critical systems given a higher priority. The Company defines a system as business critical if a failure would cause a significant service disruption or could cause a material adverse effect on the Company's operations or financial results. As of March 31, 1999, the Company has modified or replaced 95% of its business critical systems and 94% of all systems. In the opinion of management, the remainder of the business critical systems will have little or no effect on the Company's ability to service the majority of its customers. The business critical systems have been unit tested by IT staff members and many have been evaluated using a detailed Year 2000 test plan. Further testing and verification on the systems will continue throughout 1999. The Company has established an internal Year 2000 audit team to audit the process and results of the Year 2000 efforts of the Company's subsidiaries. The Company has expended approximately $1 million as of March 31, 1999 to ensure Year 2000 compliance. The total cost to ensure Year 2000 compliance is estimated to be less than $2 million. The cost estimate is based on the Company's structure and those subsidiaries it owns at the present time. The acquisition of any additional operating entity may significantly impact the total cost as it has been estimated. The Company expects to have contingency plans developed for business critical systems by July 31, 1999. The contingency plans have been tested or will be tested for plan completeness and accuracy. Should there be any disruptions of business critical systems or critical business partners, the Company expects to be able to continue its operations through telephonic and facsimile communications. Therefore, some contingency plans may require additional labor that may impact the Company's operating costs. The Company has been contacting business partners whose Year 2000 non- compliance could adversely affect the Company's operations, employees, or customers. As a provider of transportation and logistics services, the Company's operations are dependent on telecommunication, financial and utility services provided by several entities. The Company is unaware of any of these entities or of any significant supplier to not be Year 2000 compliant. The Company believes the most likely worst case scenario would be the failure of a material business partner to be Year 2000 compliant. Therefore, the Company will continue to work with and monitor the progress of its partners and formulate a contingency plan when the Company does not believe the business partner will be compliant. The Company's assessment of its Year 2000 issues involves some assumptions. These assumptions revolved primarily around the Year 2000 representation from third parties with which the Company has business relationships, and where the Company has not been able to independently verify these representations. This release contains forward-looking statements, which are subject to certain risks, and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed from time to time in reports filed by the Company with the Securities and Exchange Commission including forms 8K, 10Q and 10K. 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. On April 19, 1996, Steven Mark Whitworth ("Plaintiff") a former employee of USF Bestway Inc., a subsidiary of the Company ("USF Bestway"), brought suit against USF Bestway and one of its employees, alleging claims of fraud and promissory estoppel arising from Plaintiff's previous employment as a driver with USF Bestway, Steven Mark Whitworth v. TNT Bestway Transportation, Inc. f/k/a .TNT Bestway Inc. and William Orr, Case No. 96-3935-A, 14th Judicial District Court, Dallas County, Texas. On or about October 2, 1996, Plaintiff amended his petition and added claims of wrongful discharge and conspiracy to wrongfully discharge. On October 7, 1996, Plaintiff moved for summary judgment, claiming that he was entitled to a judgment of $3,500,000 in actual damages and $1,750,000 in attorney fees based on (i) the USF Bestway's alleged untimely responses to Plaintiff's requests for admissions and (ii) the USF Bestway's alleged failure to comply with the requirements of Texas law concerning the signature of pleadings by counsel in connection with the responses to Plaintiff's requests for admissions. Following a hearing on November 1, 1996, the trial court granted Plaintiff's motion for summary judgment and entered judgment in favor of Plaintiff and against the USF Bestway, for $3,500,000 in actual damages $1,750,000 in attorneys' fees together with court costs and interest. On November 27, 1996, USF Bestway moved for reconsideration of the judgment and for a new trial. At a January 7, 1997 hearing on this motion, the trial court denied the motion for reconsideration and for new trial, but ruled that the responses to the Plaintiff's requests for admissions were timely. USF Bestway has posted a superedeas bond to prevent enforcement of the judgment pending appeal and perfected its appeal to the Dallas Court of Appeals. The appeal was heard on March 10, 1999. No decision has been rendered as of yet. Management of the Company believes that it has good grounds for obtaining a reversal of the judgment on appeal because it believes, among other reasons, that the judgment entered on the basis of the procedural technicality of counsel's failure to comply with the requirements of Texas law concerning the signature of pleadings by counsel, will not be sustained by a reviewing court and further believes, the judgment will be vacated and the matter remanded for a trial on the merits and that, in any event, will not have a material adverse effect on USF Bestway's financial condition. In the event the judgment is sustained on appeal, management of USF Bestway intends to pursue potential causes of action against all appropriate parties. Also, the Company is involved in other litigation arising in the ordinary course of business, primarily involving claims for bodily injuries and property damage. In the opinion of management, the ultimate recovery or liability, if any, resulting from such litigation, individually or in the aggregate, will not materially adversely affect the Company's financial condition or results of operations. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 1. Exhibit 27-Financial Data Schedule. (b) Current Reports on Form 8-K were filed: 1. No current reports on Form 8-K were filed during the quarter 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 14th day of May, 1999. 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-27 2 FDS WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. EXHIBIT 27 FINANCIAL DATA SCHEDULE (FDS)
5 1000 3-MOS DEC-31-1999 JAN-01-1999 APR-03-1999 6,148 0 240,624 0 0 307,206 554,875 0 1,034,484 246,052 0 0 0 0 475,599 1,034,484 0 513,229 0 480,998 (256) 0 2,812 29,675 12,167 17,508 0 0 0 17,508 0.67 0.65
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