UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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 No. 34-0-17570
AMERICAN FREIGHTWAYS CORPORATION
(Exact name of registrant as specified in its charter)
Arkansas 74-2391754
State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
2200 Forward Drive, Harrison, Arkansas 72601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (870) 741-9000
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act 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. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of common stock outstanding at September 30, 1998:
31,638,553.
<PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
SEPTEMBER 30, December 31,
1998 1997
---------------------------
(UNAUDITED) (Note)
ASSETS
Current assets
Cash and cash equivalents $ 1,854 $ 1,755
Trade receivables, less allowance
for doubtful accounts
(1998-$1,794; 1997-$1,774) 93,959 78,700
Operating supplies and inventories 3,969 2,882
Prepaid expenses 12,686 8,671
Deferred income taxes 17,626 13,306
Income taxes receivable - 1
---------- ----------
Total current assets 130,094 105,315
Property and equipment 758,314 699,176
Accumulated depreciation
and amortization (270,389) (230,870)
---------- ----------
487,925 468,306
Other assets 2,157 1,952
---------- ----------
$ 620,176 $ 575,573
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 16,387 $ 12,910
Accrued expenses 73,724 54,114
Federal and state income taxes 3,082 -
Current portion of long-term debt 11,676 11,497
---------- ----------
Total current liabilities 104,869 78,521
Long-term debt, less current
portion (Note B) 202,173 210,411
Deferred income taxes 65,993 59,225
Shareholders' equity
Common stock, par value $.01 per share--
authorized 250,000 shares; issued and
outstanding 31,639 in 1998 and
31,568 in 1997 316 316
Additional paid-in capital 105,536 104,832
Retained earnings 141,289 122,268
---------- ----------
247,141 227,416
---------- ----------
$ 620,176 $ 575,573
========== ==========
Note: The condensed consolidated balance sheet at December 31, 1997,
has been derived from the audited consolidated financial statements
at that date.
See notes to condensed consolidated financial statements.
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(000's omitted, except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
------------------ ------------------
OPERATING REVENUE $254,047 $233,760 $731,098 $645,899
OPERATING EXPENSES AND COSTS
Salaries, wages and benefits 153,923 140,582 446,900 389,159
Operating supplies and expenses 20,325 17,845 60,506 55,021
Operating taxes and licenses 10,809 8,828 31,250 26,306
Insurance 7,902 6,462 22,419 19,876
Communications and utilities 4,446 3,673 13,157 10,748
Depreciation and amortization 14,047 13,237 41,627 39,107
Rents and purchased transportation 14,964 16,275 42,399 39,772
Other 10,419 9,873 30,436 26,951
------------------ ------------------
236,835 216,775 688,694 606,940
------------------ ------------------
OPERATING INCOME 17,212 16,985 42,404 38,959
OTHER INCOME (EXPENSE)
Interest expense (3,848) (4,005) (11,861) (12,265)
Interest income 135 79 263 201
Gain (loss) on disposal
of assets 238 (105) 1,079 (72)
Other, net 30 31 83 50
------------------ ------------------
(3,445) (4,000) (10,436) (12,086)
INCOME BEFORE INCOME TAXES 13,767 12,985 31,968 26,873
------------------ ------------------
FEDERAL AND STATE INCOME TAXES
Current 5,117 3,170 10,500 6,550
Deferred 459 1,920 2,447 3,984
------------------ ------------------
5,576 5,090 12,947 10,534
------------------ ------------------
NET INCOME $ 8,191 $ 7,895 $ 19,021 $ 16,339
================== ==================
PER SHARE (NOTE D)
Net income-basic $ 0.26 $ 0.25 $ 0.60 $ 0.52
Net income-assuming dilution $ 0.26 $ 0.25 $ 0.60 $ 0.52
================== ==================
AVERAGE SHARES OUTSTANDING (NOTE D)
Basic 31,639 31,414 31,606 31,324
Assuming dilution 31,670 31,811 31,682 31,633
================== ==================
See notes to condensed consolidated financial statements.
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(000's omitted)
Nine Months Ended
September 30
1998 1997
----------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 67,792 $ 61,788
INVESTING ACTIVITIES
Proceeds from sales of assets 2,818 2,452
Capital expenditures (63,144) (48,188)
---------- ----------
Net cash used by investing activities (60,326) (45,736)
FINANCING ACTIVITIES
Principal payments on long-term debt (25,716) (62,712)
Proceeds from notes payable and
long-term borrowings 17,657 48,400
Proceeds from issuance of common stock 692 1,724
---------- ----------
Net cash used by financing activities (7,367) (12,588)
---------- ----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS $ 99 $ 3,464
========== ==========
See notes to condensed consolidated financial statements.
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1998
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results of the nine month period ended September 30, 1998, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1998. For further information, refer to
the Company's consolidated financial statements and footnotes
thereto included in Form 10-K for the year ended December 31, 1997.
NOTE B - LONG-TERM DEBT
As of September 30, 1998, the Company has outstanding borrowings of
$59,000,000 under its existing $160,000,000 unsecured revolving
line of credit. The proceeds of these borrowings were used for the
purchase of revenue equipment and for the purchase and construction
of Customer Center facilities. At September 30, 1998, the amount
available for borrowing under the line of credit was $101,000,000.
In addition to this credit facility, the Company has obtained
letters of credit totaling $3,976,000 to provide collateral on its
self-insurance plan.
As of September 30, 1998, the Company has outstanding borrowings of
$127,250,000 under an uncommitted Master Shelf Agreement which
provides for the issuance of up to $140,000,000 of senior
promissory notes with an average life not to exceed twelve years.
In addition, the Company has outstanding an unsecured senior note
for $20,000,000 payable in equal annual installments of $5,000,000
through November 2001.
NOTE C - COMMITMENTS
Commitments for the purchase of revenue equipment and the purchase
or construction of Customer Centers aggregated approximately
$21,123,000 at September 30, 1998.
NOTE D - EARNINGS PER SHARE
Net income for purposes of basic earnings per share and earnings
per share--assuming dilution was $8,191,000 and $7,895,000 for the
three month periods ended September 30, 1998 and 1997,
respectively. For the nine month periods ended September 30, 1998
and 1997, net income for purposes of basic earnings per share and
earnings per share--assuming dilution was $19,021,000 and
$16,339,000, respectively. A reconciliation of average shares
outstanding for these periods is presented below:
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---------------------------------------
(In Thousands) (In Thousands)
Average shares outstanding-basic 31,639 31,414 31,606 31,324
Effect of dilutive stock options 31 397 76 309
-------- -------- -------- --------
Average shares outstanding-
assuming dilution 31,670 31,811 31,682 31,633
======== ======== ======== ========
NOTE E - RECENT ACCOUNTING PRONOUNCEMENTS
The impact of adoption of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" which is
effective for fiscal years beginning after December 15, 1997 was
not material.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 (SFAS 133),
"Accounting for Derivative Instruments and Hedging Activities."
The Statement is effective for all quarters of fiscal years
beginning after June 15, 1999 and establishes accounting and
reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability at
its fair value. The Company does not anticipate that the adoption
of SFAS 133 will have a material effect on earnings or the
financial position of the Company.
NOTE F - RECENT EVENTS
On October 20, 1998, the Company announced that its Board of
Directors has authorized the repurchase of up to $20 million of the
Company's common stock. The repurchases will be made through open
market trades from time to time based upon market conditions.
On August 26, 1998, the Company announced that its Board of
Directors adopted a Shareholders' Rights Plan in which rights to
purchase shares of American Freightways Common Stock will be
distributed as a dividend, one Right per share, to record owners of
American Freightways Common Stock as of the close of business on
August 31, 1998. The Plan is designed to require that any
potential acquiror seeking to obtain control of American
Freightways treats all American Freightways shareholders fairly and
equally and to deter the use of coercive takeover tactics.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table sets forth, for the periods indicated, the
percentages of operating expenses and other items to operating
revenue:
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
---- ---- ---- ----
Operating revenue 100.0% 100.0% 100.0% 100.0%
Operating expenses and costs:
Salaries, wages and benefits 60.6% 60.1% 61.1% 60.3%
Operating supplies and expenses 8.0% 7.6% 8.3% 8.5%
Operating taxes and licenses 4.3% 3.8% 4.3% 4.1%
Insurance 3.1% 2.8% 3.1% 3.1%
Communications and utilities 1.7% 1.6% 1.8% 1.6%
Depreciation and amortization 5.5% 5.6% 5.7% 6.0%
Rents and purchased
transportation 5.9% 7.0% 5.8% 6.2%
Other 4.1% 4.2% 4.1% 4.2%
---- ---- ---- ----
Total operating expenses
and costs 93.2% 92.7% 94.2% 94.0%
---- ---- ---- ----
Operating income 6.8% 7.3% 5.8% 6.0%
Interest expense (1.5%) (1.7%) (1.6%) (1.9%)
Other income, net 0.1% 0.0% 0.2% 0.0%
---- ---- ---- ----
Income before income taxes 5.4% 5.6% 4.4% 4.1%
Income taxes 2.2% 2.2% 1.8% 1.6%
---- ---- ---- ----
Net income 3.2% 3.4% 2.6% 2.5%
==== ==== ==== ====
RESULTS OF OPERATIONS
Operating Revenue
- -----------------
Operating revenue for the nine months ended September 30, 1998 was
$731,098,000, up 13.2%, compared to $645,899,000 for the nine
months ended September 30, 1997. Operating revenue for the three
months ended September 30, 1998 was $254,047,000, up 8.7%, compared
to $233,760,000 for the three months ended September 30, 1997. The
growth in operating revenue was primarily the result of increased
revenue per hundred weight and increased tonnage from new and
existing customers.
Tonnage handled by the Company during the nine and three months
ended September 30, 1998, increased 10.4% and 6.2%, respectively,
over the same time periods of 1997. This increase in tonnage was
mainly a result of the following:
- - The Company continued to increase its market penetration into
existing service territories, particularly those geographic areas
added during 1995, 1996 and 1997. During 1995, the Company
expanded its all-points coverage to the states of Colorado,
Florida, Iowa, Nebraska, North Carolina, South Carolina and
Wisconsin. 1996 expansions included the states of Delaware,
Maryland, Minnesota, Virginia and West Virginia. Effective August
4, 1997, all-points coverage was added to the state of New Mexico.
- - The continued increase in intrastate tonnage following the
deregulation of intrastate commerce effective January 1, 1995.
- - Effective January 1, 1998, the Company increased its all-
points coverage to 28 states with the addition of the state of
Michigan.
Revenue per hundred weight for the first nine months of 1998 was up
2.5% from levels experienced in the first nine months of 1997.
Factors most impacting revenue per hundred weight were:
- - A general rate increase of approximately 5.5% effective
January 1, 1998. General rate increases initially affect
approximately 45% of the Company's revenues. The remaining
revenues are derived from contracts and guarantees and are
negotiated throughout the year.
- - A fuel surcharge, included in revenue, was in effect during
the first nine months of 1997, but not in effect for the majority
of 1998. The Company initiated a fuel surcharge beginning
September 6, 1996 to help recover the increased costs of fuel.
This surcharge is tied to the Department of Energy's National
Diesel Fuel Index and was 0.7% for LTL shipments as of September
30, 1997. The surcharge is designed to suspend at the time this
national index moves below $1.15 per gallon. Effective January 7,
1998, the fuel surcharge was suspended and remains suspended as of
September 30, 1998.
Even though inventory adjustments in the softening consumer goods
sector of the economy appeared to have reduced demand for less-than-
truckload services, management expects that growth in operating
revenue is sustainable in the near term. Although the Company is
constantly evaluating future expansions, a major focus for growth
in operating revenue in the near term will be further penetration
of existing markets. As a result, any near-term percentage growth
in operating revenue will likely be less than that experienced in
recent years.
Operating Expenses
- ------------------
Operating expenses as a percentage of operating revenue increased
slightly to 94.2% for the nine months ended September 30, 1998 from
94.0% in the nine months ended September 30, 1997. Operating
expenses as a percentage of operating revenue increased to 93.2% in
the three months ended September 30, 1998 from 92.7% in the three
months ended September 30, 1997. The following categories of
expenses declined as a percentage of revenue for the first nine
months of 1998 as compared to the same time period during 1997:
- - Depreciation and amortization as a percentage of operating
revenue improved to 5.7% in the nine months ended September 30,
1998 from 6.0% in the nine months ended September 30, 1997. This
improvement was largely due to the increased usage of operating
lease financing of revenue equipment.
- - Rents and purchased transportation as a percentage of
operating revenue declined to 5.8% in the nine months ended
September 30, 1998 from 6.2% in the nine months ended September 30,
1997. The improvement was a result of three principal reasons: 1)
Short-term transportation equipment rental declined as compared
with the third quarter of 1997. The August 1997 strike by the
International Brotherhood of Teamsters against United Parcel
Service created an increase in freight volumes resulting in a
temporary need for additional revenue equipment. 2) During the
third quarter of 1998 the Company decreased its utilization of
owner operators in its pick up and delivery operations, and
3) the Company's usage of purchased transportation in selected line-
haul lanes has declined in relation to overall mileage. These
improvements were partially offset by increased usage of operating
lease financing. Management expects rents and purchased
transportation as a percentage of operating revenue to remain at
current levels.
The improvements in operating expenses as a percentage of operating
revenue were offset by increases in the following area:
- - Salaries, wages and benefits as a percentage of revenue
increased to 61.1% in the nine months ended September 30, 1998 from
60.3% in the nine months ended September 30, 1997. This increase
was largely the result of increased costs in the areas of workmen's
compensation and health care. After benefiting from relatively low
claims in these areas during the first nine months of 1997, the
level of claims in 1998 returned to a level more typically
experienced by the Company. Management expects that during the
remainder of 1998, these expenses will remain at current levels.
Comparing the first nine months of 1998 to the same period of 1997,
salaries and wages as a percentage of operating revenue remained
relatively flat despite general wage increases of 3.5% in March
1998 and 1.6% in September 1998. During the remainder of 1998,
management anticipates that ongoing educational programs and
changes in operations will result in productivity gains in the form
of improved pickup and delivery density, increased line haul load
factor and more direct line haul schedules. However, these gains
cannot be assured and are subject to a variety of factors, which
may or may not be within the control of management.
Other
- -----
Interest expense as a percentage of operating revenue decreased to
1.6% in the nine months ended September 30, 1998, compared to 1.9%
in the nine months ended September 30, 1997. This improvement is
primarily the result of lower interest rates and of reducing total
debt to $213,849,000 as of September 30, 1998 from $223,926,000 as
of September 30, 1997.
The year to date results for 1998 were favorably impacted by a gain
of $822,000 before taxes as a result of the sale of a surplus
property.
The effective tax rate of the Company was 40.5% for the nine months
ended September 30, 1998, up from 39.2% for the same time period of
1997. This increase was due to increased federal tax rates on
higher levels of income, as well as higher state tax rates.
Net income for the nine months ended September 30, 1998, was
$19,021,000, up 16.4%, from $16,339,000 for the nine months ended
September 30, 1997. Net income for the three months ended
September 30, 1998, was $8,191,000, up 3.7%, from $7,895,000 for
the three months ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Capital requirements during the nine months ended September 30,
1998 consisted primarily of $60,326,000 in investing activities.
The Company invested $63,144,000 in capital expenditures during the
nine months ended September 30, 1998 comprised of $14,602,000 in
additional revenue equipment, $28,939,000 in new Customer Center
facilities or the expansion of existing facilities and $19,603,000
in other equipment. Management expects capital expenditures for
the full year of 1998 will be approximately $90,000,000. However,
the amount of capital expenditures required in 1998 will be
dependent on the progress of several major Customer Center
construction projects. At September 30, 1998, the Company had
commitments for land, Customer Centers, revenue and other equipment
of approximately $21,123,000. These commitments were mostly for
the completion of projects in process at September 30, 1998.
The Company provided for its capital resource requirements in the
nine months ended September 30, 1998 predominantly with cash from
operations. Cash from operations totaled $67,792,000 in the nine
months ended September 30, 1998 compared to $61,788,000 provided by
operations in the nine months ended September 30, 1997. Net
financing activities required an additional $7,367,000 of cash flow
in the nine months ended September 30, 1998. Two primary sources
of credit financing were available to the Company: the revolving
line of credit and the Master Shelf facility.
- - The Company experiences periodic cash flow fluctuations common
to the industry. Cash outflows are heaviest during the first part
of any given year while cash inflows are normally weighted towards
the last two quarters of the year. To smooth these fluctuations
and to provide flexibility to fund future growth, the Company
utilizes a variable-rate, unsecured revolving line of credit of
$160,000,000 provided by NationsBank of Texas, N.A. (agent), Chase
Bank of Texas, N.A., Wachovia Bank of Georgia, N.A., ABN-AMRO Bank
N.V. and The First National Bank of Chicago. At September 30,
1998, $59,000,000 was outstanding on the revolving line of credit,
leaving $101,000,000 available for borrowing. The Company also had
$15,000,000 available under its short-term, unsecured revolving
$15,000,000 line of credit with NationsBank of Texas, N.A. This
line of credit is also used to obtain letters of credit required
for its self-insurance program. At September 30, 1998, the Company
had obtained letters of credit totaling $3,976,000 for this
purpose.
- - To assist in financing longer-lived assets, the Company has an
uncommitted Master Shelf Agreement with the Prudential Insurance
Company of America which provides for the issuance of up to
$140,000,000 in medium to long-term unsecured notes at an
interest rate calculated at issuance. At September 30, 1998,
the Company had $127,250,000 outstanding under this facility.
Management expects that the Company's existing working capital and
its available lines of credit are sufficient to meet the Company's
commitments as of September 30, 1998, and to fund current operating
and capital needs. However, if additional financing is required,
management believes it will be available.
The Company uses off-balance sheet financing in the form of
operating leases primarily in the following areas; land and
structures, revenue equipment and other equipment. At September
30, 1998, future rental commitments on operating leases were
$108,207,000. The Company prefers to utilize operating leases for
these areas and plans to use them in the future when such financing
is available and suitable.
Future rental commitments on operating leases are as follows:
Land and Revenue Other
Total Structures Equipment Equipment
------------------------------------------
1998 $ 10,329 $ 1,525 $ 3,030 $ 5,774
1999 29,073 4,739 12,119 12,215
2000 25,683 2,836 12,119 10,728
2001 16,883 1,880 11,343 3,660
2002 12,845 1,054 11,589 202
Thereafter 13,394 1,433 11,961 ---
------------------------------------------
Total $108,207 $ 13,467 $ 62,161 $ 32,579
------------------------------------------
YEAR 2000 ISSUES
The Company recognizes the Year 2000 problem and has developed a
Board of Director sponsored Project Plan that identifies all date
related issues relating to the Company's Information Technology
(IT) applications, end user supported applications, IT
infrastructure, embedded devices and business partners. The
Project Plan provides that all application modifications and
infrastructure upgrades will be complete by December 31, 1998.
Final testing and production implementation are expected to be
completed by June 30, 1999. Additionally, our mission critical
systems, written in house, are already Year 2000 compliant. The
Company intends to have all purchased software Year 2000 compliant
upgrades installed by the December 31, 1998 timeframe.
Expenditures related to the Company's Year 2000 initiatives have
not been and are not expected to be material to the Company's
results of operations or financial position.
The Company has initiated discussions with its significant
customers and suppliers to determine the extent to which the
Company's interface systems would be vulnerable to those third
parties' failure to remediate their own Year 2000 issues. The
Company has not received written assurances from its significant
customers and suppliers that their systems will be timely converted
and would not have an adverse effect on the Company's systems. It
is not possible at this time to quantify the amount of business
that might be lost or the costs that could be incurred by the
Company as a result of the Company's significant customers' and
suppliers' failure to remediate their Year 2000 issues.
In addition, parts of the global infrastructure, including national
banking systems, electrical power, communications and governmental
activities, may not be fully functional after 1999. Infrastructure
failures could significantly reduce the Company's ability at
affected locations to serve its customers as effectively as they
are now being served. The Company has identified elements of the
infrastructure that are critical to its operations and is obtaining
information as to their expected Year 2000 readiness.
To date, the Company has not established a contingency plan for
possible Year 2000 issues. The Company will establish, where
needed, contingency plans based on our actual testing experience.
While the Company believes its efforts to address the Year 2000
Issue will be successful in avoiding any material adverse effect on
the Company's operations or financial condition, it recognizes that
failure to resolve Year 2000 Issues on a timely basis could
significantly limit its ability to process its daily business
transactions for a period of time, especially if such failure is
coupled with third party or infrastructure failures. Similarly,
the Company could be significantly affected by the failure of one
or more significant business partners or components of the
infrastructure to conduct their respective operations after 1999.
Adverse effects could include, but are not limited to, loss of
communication links with Customer Centers, loss of electric power,
inability to process transactions, or engage in similar normal
business activities.
The foregoing statements regarding the Company's state of
readiness, costs of conversion, risks and contingency plans for
Year 2000 are based on management's current estimates and
evaluations using available information. There can be no
assurances that management's estimates and evaluations will prove
to be accurate, and actual results could differ materially from
those currently anticipated. Factors which might cause material
changes include, but are not limited to, the availability of Year
2000 personnel, the readiness of third parties and the Company's
ability to respond to unforeseen Year 2000 complications.
ENVIRONMENTAL
At September 30, 1998, the Company had no outstanding inquiries
with any state or federal environmental agency.
RECENT EVENTS
On October 20, 1998, the Company announced that its Board of
Directors has authorized the repurchase of up to $20 million of the
Company's common stock. The repurchases will be made through open
market trades from time to time based upon market conditions.
On September 10, 1998, the Company announced that effective
November 1, 1998, the Company will institute a general rate
increase ranging from 5.5% to 5.9%, as well as increase minimum
charge floors by $2.00. The increase applies to the Company's
interstate and intrastate common carrier freight rates published in
its 5000 series tariff. The Company derives somewhat less than 50%
of its revenue from the 5000 tariff.
On August 26, 1998, the Company announced that its Board of
Directors adopted a Shareholders' Rights Plan in which Rights to
purchase shares of American Freightways Common Stock will be
distributed as a dividend, one Right per share, to record owners of
American Freightways Common Stock as of the close of business on
August 31, 1998. The Plan is designed to require that any
potential acquiror seeking to obtain control of American
Freightways treats all American Freightways shareholders fairly and
equally and to deter the use of coercive takeover tactics.
FORWARD-LOOKING STATEMENTS
The Management's Discussion and Analysis Section of this report
contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-
looking statements rely on a number of assumptions concerning
future events, and are subject to a number of uncertainties and
other factors, many of which are outside of AF's control, that
could cause actual results to differ materially from such
statements. These include, but are not limited to: general
economic conditions and demand for goods, particularly such
competition on pricing, revenues, and margins; the acceptance of
service offerings that offer higher margins than traditional
service offerings and costs of fuel and equipment.
Item 3. Quantitative and Qualitative Disclosures
About Market Risk
Not applicable.
INDEX
AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets--September 30, 1998 and
December 31, 1997
Condensed consolidated statements of income-Three months ended
September 30, 1998 and 1997; Nine months ended September 30,
1998 and 1997
Condensed consolidated statements of cash flows--Nine months
ended September 30, 1998 and 1997
Notes to condensed consolidated financial statements--
September 30, 1998
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
- ---------------------------
Item 5. Other Information
Effective June 29, 1998, the Securities and Exchange
Commission amended Rule 14a-4(c) under the Securities and Exchange
Act of 1934 (the "1934 Act") which governs the Company's use of
discretionary proxy voting authority with respect to stockholder
proposals that are not being included in the Company's proxy
solicitation materials pursuant to Rule 14a-8 of the 1934 Act. New
Rule 14a-4(c)(1) provides that if a stockholder wishing to make a
proposal fails to notify the Company at least 45 days prior to the
month and day of mailing their prior year's proxy statement (or by
an earlier or later date established by an overriding advance
notice provision contained in the Company's charter or bylaws),
then the management proxies named in the form of proxy distributed
in connection with the Company's proxy statement would be allowed
to use their discretionary voting authority to address the matter
submitted by the proponent, without discussion of the matter in the
proxy statement. In addition, if a stockholder desires to include
a proposal in the Company's proxy statement for the 1999 Annual
Meeting, the proposal must be received by the Company on or before
January 23, 1999, and must comply with the requirements of Rule 14a-
8 of the Securities and Exchange Commission.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(10) Shareholder Rights Agreement and exhibits dated
August 26, 1998
(27) Financial Data Schedule
(b) Reports on Form 8-K
Current report on 8-K dated August 31, 1998 (Adoption of
Shareholder Rights Plan)
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN FREIGHTWAYS CORPORATION
--------------------------------
(Registrant)
Date:November 4, 1998 /s/Frank Conner
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Frank Conner
Executive Vice President-Accounting &
Finance and Chief Financial Officer