PAGE F1
Financial Highlights
(Thousands of dollars, except per share amounts)
Fiscal Year 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
Revenue
LTL Trucking $ 1,913,675 $ 1,750,309 $ 1,540,162
TL Trucking 86,317 44,715 12,877
Logistics 276,958 206,881 130,323
Freight Forwarding 261,749 225,010 151,531
Corporate and other - - -
- ---------------------------------------------------------------------------------------------------------------------------
Total Revenue $ 2,538,699 $ 2,226,915 $ 1,834,893
- ---------------------------------------------------------------------------------------------------------------------------
Income from Operations (loss)
LTL Trucking $ 173,539 $ 171,910 $ 127,242
TL Trucking 4,671 3,147 1,138
Logistics 16,680 16,873 7,976
Freight Forwarding (4,081) 8,175 4,925
Corporate and other (13,578) (11,237) (11,848)
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Operations $ 177,231 $ 188,868 $ 129,433
- ---------------------------------------------------------------------------------------------------------------------------
Interest Expense $ (21,282) $ (14,003) $ (8,784)
- ---------------------------------------------------------------------------------------------------------------------------
Net Income $ 96,798 $ 104,240 $ 71,445
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Per Share - Diluted $ 3.61 $ 3.79 $ 2.70
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets $ 1,351,074 $ 1,212,167 $ 974,673
- ---------------------------------------------------------------------------------------------------------------------------
Return on Average Stockholders' Equity 16.2% 20.5% 16.8%
- ---------------------------------------------------------------------------------------------------------------------------
PAGE F2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
USFreightways Corporation ("the Company") provides comprehensive supply chain
management services through its operating subsidiaries. Regional
less-than-truckload ("LTL") general commodities carriers provide overnight and
second-day delivery throughout the United States and into Canada. Logistics
subsidiaries provide integrated supply chain solutions, value added logistics
solutions, reverse logistics services and complete warehouse fulfillment
services to its customers. The Company also provides domestic and international
freight forwarding, import and export air and ocean services as well as premium
regional and national truckload ("TL") service. Principal subsidiaries in the
Regional LTL group are USF Holland Inc. ("Holland"), USF Bestway Inc.
("Bestway"), USF Red Star Inc. ("Red Star"), USF Reddaway Inc. ("Reddaway") and
USF Dugan Inc. ("Dugan"). USF Worldwide Logistics consists of Logistics and
Freight Forwarding Groups. The Logistics group consists of USF Logistics Inc.
("Logistics"), USF Processors Inc ("Processors") and USF Distribution Services
Inc. ("Distribution Services"); the Freight Forwarding group includes several
companies that all now trade under the name USF Worldwide Inc. ("Worldwide");
USF Glen Moore Transport Inc. ("Glen Moore") is the Company's TL carrier.
Results of Operations
Operating revenue of the Company for 2000 was a record $2.54 billion, a 14.0%
increase over total operating revenue of $ 2.23 billion for 1999. Income from
operations decreased by 6.2% from $ 188.9 million in 1999 to $177.2 million in
2000. Net income per share decreased by 4.7% to $3.61 (diluted) in 2000 compared
to $3.79 (diluted) in 1999.
Operating revenue of the Company for 1999 was $2.23 billion, a 21.4% increase
over total operating revenue of $ 1.83 billion for 1998. Income from operations
increased by 45.9% from $ 129.4 million in 1998 to a record $188.9 million in
1999. Net income per share increased by 40.4% to $3.79 (diluted) in 1999
compared to $2.70 (diluted) in 1998.
Regional LTL
Revenue in the LTL group for 2000 increased by 9.3% to $1.91 billion from $1.75
billion in 1999. In accordance with guidelines established by the Securities and
Exchange Commission's ("SEC") Staff Accounting Bulletin ("SAB") Number 101
"Revenue Recognition in Financial Statements", beginning with the 2000 fourth
quarter, the Company reclassified fuel surcharges invoiced to customers as
revenue. Therefore, the Company has restated the fourth quarter of 1999 and the
first three-quarters of 2000 revenue and operating expense figures. Prior to the
2000 fourth quarter, the fuel surcharges were accounted for as a reduction in
fuel costs. The implementation of SAB Number 101 had no effect on net income,
but increased revenue and operating expenses by $60.4 million in 2000 and $4.5
million in 1999. In 2000, revenue from the LTL group amounted to 75.4% of the
Company's operating revenue compared to 78.6% in 1999. LTL revenue increased
9.6%, LTL shipments increased 4.6%, LTL tonnage increased 3.8% and LTL revenue
per hundredweight increased 5.6%. In 2000, the LTL group enacted a general rate
increase of approximately 5.8% in late August. The LTL group enacted a 5.7%
general rate increase in October 1999. General rate increases apply to
approximately 50% of the LTL group's revenue base. The remaining 50% of the
revenue base is subject to contractual agreements which normally result in lower
rate increases.
Operating income in 2000 increased by 0.9% to $173.5 million from $171.9 million
in 1999. Despite a slowing US economy, the modest improvement in operating
results were directly attributable to price stability and a continuing emphasis
on cost containment. The LTL group's ratio of operating expenses compared to
operating revenue (operating ratio) increased to 90.9% compared to 90.2% in
1999. Salaries, wages and benefits decreased to 60.4% of revenue from 61.1% in
1999 as each of the regional LTL carriers continued to improve operational
efficiencies. Fuel expense increased as a percentage of revenue to 5.5% compared
to 3.7% in 1999 due to rising fuel prices. Purchased transportation expense
improved by 0.3% and operating supplies and expenses improved by 0.4%.
Depreciation, terminal rents, operating taxes and licenses and insurance and
claims collectively improved by 0.2% to 10.7% of revenue in 2000 compared to
10.9% in 1999.
Revenue in the LTL group in 1999 increased by 13.6% to $1.75 billion from $1.54
billion in 1998. In 1999, revenue from the LTL group amounted to 78.6% of the
Company's operating revenue compared to 83.9% in 1998. LTL revenue increased
13.5%, LTL shipments increased 9.8%, LTL tonnage increased 10.9% and LTL revenue
per hundredweight increased 2.3%. The LTL group enacted a 5.7% general rate
increase in October 1999.
PAGE F3
Operating income in 1999 increased by 35.1% to $171.9 million from $127.2
million in 1998. Improvements in operating results were directly attributable to
price stability, a strong US economy-particularly in the latter half due to the
Y2K inventory build-up, increases in market share and a continuing emphasis on
cost reduction. The LTL group improved its operating ratio to 90.2% compared to
91.7% in 1998. Salaries, wages and benefits improved to 61.1% of 1999 revenue
compared to 63.9% of 1998 revenue as Holland, Red Star and Reddaway, mainly,
continued to improve operational efficiencies. Fuel expenses were 3.7% of 1999
revenue compared to 3.4% of 1998 revenue primarily due to higher prices in the
fourth quarter of 1999. Depreciation, terminal rents, operating taxes, licenses
and operating supplies and expenses collectively improved by approximately 0.6%
to 17.1% of 1999 revenue compared to 17.7% of 1998 revenue.
Approximately 86% of Holland's and Red Star's employees are members of the
Teamsters' union and are subject to a collective bargaining agreement. In 1998,
the Teamsters ratified a five-year agreement that expires at the end of March
2003. This agreement provided for, among other things, customary increases in
wages, pension and health benefits.
Truckload
The Company's TL carrier, Glen Moore, is headquartered in Carlisle, PA and
operates in both regional and nationwide markets. Glen Moore contributed $86.3
million in revenue in 2000 and its operating ratio was 94.6%, generating $4.7
million in operating profits compared to $44.7 million in revenue and an
operating ratio of 93.0% in 1999. TL operations accounted for 3.4% of the
Company's 2000 operating revenue compared to 2.0% of 1999 revenue. Operating
income, in 1999, was $3.1 million and its operating ratio was 93.0%. Glen
Moore's revenue increase is mainly attributable to its two acquisitions. Glen
Moore currently operates 599 tractors and 1,885 trailers.
On January 10, 2000, Glen Moore acquired Tri-Star Transportation, a Tennessee
based TL carrier that operated 170 tractor/trailer units. Though not included in
the Company's 1999 revenue, Tri-Star generated $28 million in revenue for 1999,
with approximately two-thirds coming from dedicated fleet operations. On August
2, 1999, Glen Moore acquired Underwood Trucking ("Underwood") an Indiana based
TL carrier which was merged into Glen Moore. At its acquisition date, Underwood
was operating approximately 50 tractors and 250 trailers and was generating
approximately $3.6 million in annual revenue.
Logistics
Revenue in the Logistics group, comprised of dedicated carriage, assembly and
distribution, supply chain management, contractual warehousing and reverse
logistics services increased by $70.1 million (a 33.9% increase) to $277.0
million in 2000 compared to $206.9 million in 1999. Assembly and distribution
revenue increased in 2000 from 1999 primarily through growth at existing
distribution centers coupled with revenue from new distribution centers in
Baltimore, MD and Oklahoma City, OK and full year revenue from other
distribution centers that were opened in the second half of 1999. Assembly and
distribution operating profits increased by 42.9% to $7.3 million in 2000.
Contractual and warehousing revenue increased in 2000 to $128.7 million from
$110.2 million in 1999 primarily through the addition of new customers and
expanded business with existing customers. Reverse logistics services revenue,
at USF Processors ("Processors") which was acquired in March 1999, amounted to
$70.6 million in 2000 compared to $43.6 million in 1999. Most of Processors'
revenue growth came from extraordinary volumes from a major customer. Increased
spending for information technology and higher costs at Processors, to handle
these extraordinary volumes, contributed to the group's diminished profits. In
2000, the Logistics group accounted for 10.9% of the Company's operating revenue
compared to 9.3% in 1999. Operating income for the Logistics group decreased by
1.1% to $16.7 million from $16.9 million in 1999. The group's operating ratio
was 94.0% in 2000 compared to 91.8% in 1999. Purchased transportation expenses
increased to 11.1% of 2000 revenue compared to 7.1% of 1999 revenue as the
distribution business increased its dependence on outsourced deliveries.
Operating taxes and licenses improved to 1.6% of 2000 revenue compared to 2.1%
in 1999. Depreciation increased to 3.9% of 2000 revenue compared to 3.6% in
1999. Building rents increased to 6.4% of 2000 revenue compared to 5.5% in 1999
as the Logistics group used more leased facilities, especially in the Processors
operations. Salaries, wages and benefits decreased to 50.0% of 2000 revenue
compared to 51.7% in 1999 due in part to the change in the distribution
dependence on outsourced deliveries from employee deliveries, but largely
offsetting this improvement was increased labor at Processors to handle
extraordinary volumes from a large customer. Processors' business is more labor
intensive than other traditional transportation businesses.
PAGE F4
Revenue in the Logistics group increased by $76.6 million (a 58.8% increase) to
$206.9 million in 1999 compared to $130.3 million in 1998. Assembly and
distribution revenue increased in 1999 from 1998 primarily through growth at
existing distribution centers coupled with revenue from new distribution centers
, along with revenue obtained since July 1999 from the acquisition of Special
Dispatch of Dallas, a Dallas, TX based assembly and distribution business.
Contractual and warehousing revenue increased in 1999 from 1998 primarily
through the addition of new customers and expanded business with existing
customers. Reverse logistics services and software revenue was contributed by
Processors which was acquired in March, 1999. Processors contributed
approximately $43.6 million in revenue in 1999. In 1999, the Logistics group
accounted for 9.3% of the Company's operating revenue compared to 7.1% in 1998.
Operating income for the group increased by 111.5% to $16.9 million from $8.0
million in 1998. The group's operating ratio was 91.8% in 1999 and 93.9% in
1998. Operating expenses and supplies improved to 13.6% of 1999 revenue compared
to 15.3% in 1998. Operating taxes and licenses improved to 2.1% of 1999 revenue
compared to 3.1% in 1998. Depreciation improved to 3.6% of 1999 revenue compared
to 4.9% in 1998. Building rents increased to 5.5% of 1999 revenue compared to
4.6% in 1998 and salaries, wages and benefits increased to 54.3% of 1999 revenue
compared to 53.4% in 1998. Most of these changes were brought on as a result of
the Processors' acquisition. Processors rents, rather than owns, its operating
sites and has a small amount of depreciable fixed assets.
Freight Forwarding
USF Worldwide ("Worldwide") is the trading name for the domestic and
international freight forwarding businesses of the Company that includes USF
Asia ("Asia"), USF Worldwide Logistics Ltd.("LTD") and the combination of the
domestic and international freight forwarding businesses formed by the
acquisitions of Seko and the Golden Eagle Group in 1997 and 1998 respectively.
In August, 2000, Worldwide acquired LTD (formerly known as Ultimex Global
Logistics PLC) a freight forwarder located in London, England.
Worldwide's revenue increased by $36.7 million (a 16.3% increase) to $261.7
million from $225.0 million in 1999. The increase was derived primarily from
$11.7 million generated in Asia and $9.3 million generated from LTD; neither
of which was included in 1999 revenue. Worldwide accounted for 10.3% of the
Company's 2000 operating revenue compared to 10.1% of the Company's 1999
operating revenue. Operating income decreased by $12.3 million to a loss of $4.1
million (an operating ratio of 101.6% in 2000 compared to 96.4% in 1999. Asia
lost $3.8 million (before minority interest of 50%) in 2000 as it completed its
major expansion of offices throughout twelve countries in Asia. The domestic and
international freight forwarding business segment lost $0.5 million in 2000 due
mainly to deteriorations in domestic freight volumes and related margins along
with added expenses in information technology infrastructure in combining seven
freight management systems into a single viable system.
Worldwide's 1999 revenue increased by $73.5 million (a 48.5% increase) to $225.0
million from $151.5 million in 1998. The increase was derived primarily from
international freight forwarding revenue for a full year in 1999 from the Golden
Eagle Group that was acquired in November, 1998. Golden Eagle contributed $64.3
million in 1999 and $9.8 million in 1998. In October 1999, Worldwide formed a
partnership under the trading name of USF Asia Group. Worldwide accounted for
10.1% of the Company's 1999 operating revenue compared to 8.3% of the Company's
1998 revenue. Operating income increased to $8.2 million net of a $0.5 million
charge for costs associated with the startup of USF Asia. Worldwide's operating
ratio was 96.4% in 1999 compared to 96.7% in 1998.
PAGE F5
Interest and Other Non-Operating
Net interest expense for 2000 amounted to $20.4 million (interest expense of
$21.3 million and interest income of $0.9 million) compared to $12.9 million
(interest expense of $14.0 million and interest income of $1.1 million) in 1999.
The Company's average outstanding debt in 2000 and 1999 was $270.2 million and
$197.2 million, respectively. The $73.0 million increase in average debt
outstanding and the increase in the rate associated with the newly issued notes,
mentioned below, were responsible for the $7.3 million increase in interest
expense in 2000 compared to 1999.
The principal debts of the Company are $150 million in 8 1/2% guaranteed notes,
issued April 25, 2000, that mature April 15, 2010 and $100 million in 6 1/2%
guaranteed notes, issued May 1, 1999, that mature May 1, 2009. In addition to
these notes, the Company had borrowings under a $200 million revolving credit
facility that expires in 2002 and borrowings under three uncommitted lines of
credit ("bank debt"). The average interest rate on the Company's bank debt for
2000 was approximately 6.6% compared to 5.5% in 1999.
Net interest expense for 1998 amounted to $8.0 million (interest expense of $8.8
million and interest income of $0.8 million). The average amount of outstanding
debt in 1998 was $117.0 million
Other, net in 2000 amounted to $2.5 million compared to a loss in 1999 of $0.4
million. Included in the 2000 amount were gains from the sales of two terminals
owned by Holland and Reddaway.
Liquidity and Capital Resources
The Company generated $187.9 million in cash flows from operating activities
during 2000. Capital expenditures during the year amounted to $193.2 million, of
which $120.9 million was for revenue equipment, $42.6 million for terminals and
$29.7 million for other assets. In addition, the Company paid $16.4 million in
cash for the acquisitions of Tri-Star Transportation, Inc. and Ultimex Global
Logistics PLC. Capital expenditures for 1999 amounted to $202.5 million, of
which $111.7 million was for revenue equipment, $60.9 million was for terminals
and $29.9 million for other assets plus $50.7 million in cash for the
acquisitions of Processors Unlimited Company, Ltd., CBL Trucking Inc., Special
Dispatch of Dallas, Inc., Underwood Trucking Inc. and several small independent
contractors in the Freight Forwarding group. In light of current business
levels, management expects that capital expenditures during the year ending
December 31, 2001 will approximate $125 million to $175 million, excluding
acquisitions.
On January 31, 2000, the Company filed a Form S-3 registration statement that
allowed for the sale of up to $400 million in additional guaranteed notes.
On April 25, 2000, the Company issued $150 million of 8 1/2% unsecured
guaranteed notes that are due April 15,2010. Interest is paid semi-annually. The
notes may be redeemed prior to maturity and have no sinking fund requirements.
If the notes are redeemed prior to maturity, the purchase price is the greater
of (1) 100% of the principal amount of the guaranteed notes to be redeemed or
(2) the sum of the present values of the remaining scheduled payments on such
guaranteed notes, discounted to the redemption date, on a semi-annual basis at
the treasury rate plus 37.5 basis points plus accrued interest on the principal
amount being redeemed to the redemption date. Net proceeds from the sale of the
notes amounted to $149 million. $100 million of the net proceeds were used to
pay off 6 5/8% notes that matured on May 1, 2000.
The Company issued unsecured guaranteed notes of $100 million on May 1, 1999
that are due May 1,2009 and bear interest at 6 1/2%, payable semi-annually. The
notes may be redeemed prior to maturity and have no sinking fund requirements.
If the notes are redeemed prior to maturity, the purchase price is the greater
of (1) 100% of the principal amount of the guaranteed notes to be redeemed or
(2) the sum of the present values of the remaining scheduled payments on such
guaranteed notes, discounted to the redemption date, on a semi-annual basis at
the treasury rate plus 37.5 basis points plus accrued interest on the principal
amount being redeemed to the redemption date. Net proceeds from the sale of the
notes amounted to $98.5 million.
The guaranteed notes are fully and unconditionally guaranteed, on a joint and
several basis, on an unsecured senior basis, by all of the Company's direct and
indirect domestic subsidiaries (the "Subsidiary Guarantors"). The Company is a
holding company and during the period presented substantially all of the assets
were the stock of the Subsidiary Guarantors, and substantially all of the
operations were conducted by the Subsidiary Guarantors. Accordingly, the
aggregate assets, liabilities, earnings and equity of the Subsidiary Guarantors
were substantially equivalent to the assets, liabilities, earnings and equity of
the Company on a consolidated basis. Management of the Company believes that
separate financial statements of, and other disclosures with respect to, the
Subsidiary Guarantors are not meaningful or material to investors.
PAGE F6
The Company has a $200 million revolving credit facility with a syndicate of
commercial banks. The facility expires in 2002 and allows up to $100 million for
standby letters of credit to cover the Company's self-insurance program, and has
optional pricing of interest rates, including LIBOR or Prime base rates. The
facility has an annual fee and contains customary financial covenants including
maintenance of minimum net worth and funded debt to cash flow. During 2000, all
borrowings were drawn at LIBOR base rates, with a weighted average interest rate
for the year of 6.3%, excluding fees charged on the facility. At December 31,
2000 the Company had borrowed $5 million and had $48.4 million in outstanding
letters of credit under this facility.
In addition to the revolving credit facility, the Company maintains three
uncommitted lines of credit, which provide $50 million short-term funds at rates
approximating LIBOR. These facilities are used in concert with a centralized
cash management system to finance short-term working capital needs, thereby
enabling the Company to maintain minimal cash balances. At December 31, 2000,
the Company had borrowed $26.1 million under these facilities.
In management's opinion, cash flows from operating activities and funding from
its revolving credit facilities are adequate to finance the Company's
anticipated business activity in 2001.
At December 31, 2000 the Company had commitments to purchase approximately $2.5
million in land and improvements, $2.5 million for transportation equipment and
$1.4 million for other equipment.
During 2000, the Company repurchased approximately 1 million of its shares under
two repurchase programs authorized by its board of directors. The average
repurchase price was approximately $24 per share. At December 31, 2000, the
Company has authorization to purchase an additional 0.5 million shares.
During 2000, the Company declared cash dividends of $9.8 million
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB), issued SFAS No.
133. In June 2000, FASB further clarified SFAS No. 133 through issuance of SFAS
No. 138. SFAS No. 133 and 138 establish accounting and reporting standards for
derivative instruments and for hedging activities. The effective date for SFAS
Nos. 133 and 138 was January 1, 2001. Adoption of SFAS Nos. 133 and 138 had no
effect on the Company's financial statements as it has no derivatives or hedging
instruments.
Other
The Company uses underground storage tanks at certain terminal facilities and
maintains a comprehensive policy of testing, upgrading, replacing or eliminating
these tanks to protect the environment and comply with various Federal and state
laws. Whenever any contamination is detected, the Company takes prompt remedial
action to remove the contaminants. It is management's opinion that the total
costs related to all known incidents have been provided for in the financial
statements and management is not aware of any potential contamination incidents
that would have a material effect on the results of the Company.
Market Risk
The Company is exposed to the impact of interest rate changes. The Company's
exposure to changes in interest rates is limited to borrowings under a line of
credit agreement which has variable interest rates tied to the LIBOR rate. The
weighted average annual interest rates on borrowings under this credit agreement
were 6.3% and 5.4% in 2000 and 1999 respectively. In addition, the Company has
$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
December 31, 2000. The Company estimates that the fair value of the notes
approximated their carrying value at December 31, 2000. The Company has no
hedging instruments. From time to time, the Company invests excess cash in
overnight money market accounts.
PAGE F7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
USFreightways Corporation:
We have audited the accompanying consolidated balance sheets of USFreightways
Corporation (a Delaware corporation) and subsidiaries as of December 31, 2000
and 1999 and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of USFreightways
Corporation and subsidiaries as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.
Arthur Andersen LLP
Chicago, Illinois
January 23, 2001
PAGE F8
CONSOLIDATED BALANCE SHEETS As of December 31, 2000 and December 31, 1999
(Thousands of dollars, except per share amounts)
December 31, December 31,
2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash $ 5,248 $ 6,862
Accounts receivable, less allowances of $11,168 and $10,623 323,517 293,989
Operating supplies and prepaid expenses 31,977 27,624
Deferred income taxes (note 4) 35,619 34,453
----------- --------
Total current assets 396,361 362,928
Property and equipment:
Land 99,330 85,657
Buildings and leasehold improvements 243,501 224,828
Equipment 877,240 764,347
Other 86,644 70,757
--------- --------
1,306,715 1,145,589
Less accumulated depreciation (556,230) (485,079)
--------- ----------
Total property and equipment 750,485 660,510
Intangible assets, net of accumulated amortization of $39,053 and $32,210 181,978 174,538
Other assets 22,250 14,191
--------- ----------
$ 1,351,074 $ 1,212,167
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current debt (note 3) $ 28,991 $ 20,561
Notes payable (note 3) - 100,000
Accounts payable 90,741 89,193
Accrued salaries, wages and benefits 90,077 79,156
Accrued claims and other 82,135 77,310
Income taxes payable 231 4,124
------- ----------
Total current liabilities 292,175 370,344
Long-term debt, less current maturities (note 3) 10,137 33,137
Notes payable (note 3) 250,000 100,000
Accrued claims and other 75,948 76,777
Deferred income taxes (note 4) 87,099 73,050
------- ----------
715,359 653,308
Minority interest 539 -
Stockholders' equity:
Cumulative preferred stock, $0.01 par value per share: 20,000,000 authorized,
none issued - -
Common stock, $0.01 par value per share: 80,000,000 authorized,
26,746,454 and 26,544,439 issued and 25,881,778 and 26,498,976 outstanding 258 265
Paid in capital 265,634 256,081
Retained earnings 390,040 303,032
Treasury stock, 864,676 and 45,463 shares respectively (20,571) (519)
Accumulated other comprehensive loss (185) -
-------- --------
Total stockholders' equity 635,176 558,859
------- ---------
$ 1,351,074 $ 1,212,167
--------- ---------
See accompanying notes to consolidated financial statements.
PAGE F9
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2000, December 31, 1999 and December 31, 1998
(Thousands of dollars, except per share amounts)
Year 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------
Operating revenue
LTL Trucking $ 1,913,675 $ 1,750,309 $ 1,540,162
TL Trucking 86,317 44,715 12,877
Logistics 276,958 206,881 130,323
Freight Forwarding 261,749 225,010 151,531
Corporate and other - - -
--------------- --------------- ---------------
2,538,699 2,226,915 1,834,893
--------------- --------------- ---------------
Operating expenses
LTL Trucking 1,740,136 1,578,399 1,412,920
TL Trucking 81,646 41,568 11,739
Logistics 260,278 190,008 122,347
Freight Forwarding 265,830 216,835 146,606
Corporate and other 13,578 11,237 11,848
--------------- --------------- ---------------
2,361,468 2,038,047 1,705,460
--------------- --------------- ---------------
Income from operations 177,231 188,868 129,433
--------------- -------------- -------------
Non-operating income (expense):
Interest expense (21,282) (14,003) (8,784)
Interest income 894 1,129 757
Other, net 2,509 (414) 88
------------ ------------- -------------
Total non-operating expense (17,879) (13,288) (7,939)
--------------- ------------- ------------
Net income before income taxes and minority interest 159,352 175,580 121,494
Income tax expense (note 4) (64,262) (71,340) (50,049)
Minority interest 1,708 - -
--------------- --------------- ---------------
Net income $ 96,798 $ 104,240 $ 71,445
-------------- ----------- --------------
Average shares outstanding-basic 26,337,734 26,416,631 26,209,281
Average shares outstanding-diluted 26,828,046 27,478,479 26,495,714
Basic earnings per common share: $ 3.68 $ 3.95 $ 2.73
Diluted earnings per common share: $ 3.61 $ 3.79 $ 2.70
--------------------- ---------------- -------------
See accompanying notes to consolidated financial statements.
PAGE F10
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 2000, December 31, 1999 and December 31, 1998
(Thousands of dollars, except per share amounts)
Accumulated
Compre- Other Total
Common Paid in Retained Treasury hensive Comprehensive Stockholders'
Stock Capital Earnings Stock Income Income Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Balance January 3, 1998 $ 265 $ 251,224 $ 147,007 $ (6,296) $392,200
Net income -- -- 71,445 -- 71,445 71,445
Dividends declared -- -- (9,790) -- ______ (9,790)
Employee stock transactions
and other -- 2,318 -- 2,961 5,279
---------------------------------------------------------------------------------------------------
Balance December 31, 1998 $ 265 $253,542 $ 208,662 $ (3,335) $ 459,134
Net income -- -- 104,240 -- 104,240 104,240
Dividends declared -- -- (9,870) -- _______ (9,870)
Employee stock transactions
and other -- 2,539 -- 2,816 5,355
-------------------------------------------------------------------------------------------------
Balance December 31, 1999 $ 265 $ 256,081 $ 303,032 $ (519) $ 558,859
Comprehensive income
Net income -- -- 96,798 -- 96,798 96,798
Unrealized loss on foreign currency (185) (185) (185)
Transactions ------
Comprehensive income 96,613
Dividends declared -- -- (9,790) -- (9,790)
Employee stock transactions (7) 9,553 -- 2,880 12,426
and other
Repurchase of common stock (22,932) (22,932)
----------------------------------------------------------------------------------------------------
Balance December 31, 2000 $ 258 $ 265,634 $ 390,040 $ (20,571) $ (185) $ 635,176
---------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
PAGE F11
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2000, December 31, 1999, and December 31,1998
(Thousands of dollars, except per share amounts)
Year 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income from continuing operations $ 96,798 $104,240 $ 71,445
Reconciliation to net cash provided by operating activities:
Depreciation and amortization 111,822 95,312 81,537
Gains from sale of property and equipment (6,264) (1,958) (3,522)
Deferred taxes 10,899 4,506 3,442
Changes in assets and liabilities excluding acquisitions:
Accounts receivable (20,434) (63,651) (14,423)
Other current assets (3,841) (3,691) 238
Accounts payable (4,282) 7,707 6,091
Accrued liabilities 2,721 18,311 17,632
Other, net 469 2,845 ( 9,271)
------ ------ ------
Net cash provided by operating activities 187,888 163,621 153,169
------- ------- -------
Cash flows from investing activities:
Capital expenditures (193,159) (202,474) (157,476)
Proceeds from sale of property and equipment 16,462 4,933 10,457
Acquisitions (16,419) (50,666) (42,081)
-------- -------- --------
Net cash used in investing activities (193,116) (248,207) (189,100)
Cash flows from financing activities:
Dividends paid (9,847) (9,849) (9,771)
Proceeds from issuance of common stock 8,207 5,355 5,279
Repurchase of common stock (22,932)
Net proceeds from sale of notes 149,025 98,452 -
Proceeds from long-term bank debt 90,000 155,000 89,500
Payments on long-term bank debt (210,839) (163,058) (50,000)
------- ------- ------
Net cash provided by financing activities 3,614 85,900 35,008
------- ------- ------
Net increase (decrease) in cash (1,614) 1,314 (923)
Cash at beginning of year 6,862 5,548 6,471
------- ------- -------
Cash at end of year $ 5,248 $ 6,862 $ 5,548
------- ------- -------
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest $ 17,981 $ 12,348 $ 8,753
Income taxes 52,524 66,782 44,558
Non-cash transactions: equity, notes issued and debt assumed $ 9,769 $ 1,388 $ 24,298
in connection with acquisitions
See accompanying notes to consolidated financial statements.
PAGE F12
Notes to Consolidated Financial Statements (Thousands of dollars, except per
share amounts)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Overview
USFreightways Corporation ("the Company"), a Delaware corporation is a full
service provider of transportation services and innovative logistics solutions.
This is accomplished through the Company's operating subsidiaries. Regional
less-than-truckload ("LTL") general commodities carriers provide overnight and
second-day delivery throughout the United States and into Canada. Logistics
subsidiaries provide solutions to customers' logistics and distribution
requirements. The Company also provides domestic and international freight
forwarding as well as premium regional and national truckload ("TL") service.
Basis of Presentation
The consolidated financial statements include the accounts of USFreightways and
its wholly owned subsidiaries (the Company). Intercompany balances and
transactions have been eliminated. The Company's consolidated statements of
operations for prior years have been reclassified to conform with the current
presentation.
Revenue Recognition
Revenue for less-than-truckload and truckload operations is recognized when
freight is picked up from the customer. In the 2000 fourth quarter, the Company
reclassified fuel surcharges invoiced to customers as revenue according to
guidelines established under the Securities and Exchange Commission's Staff
Accounting Bulletin ("SAB") Number 101 "Revenue Recognition in Financial
Statements". Prior to the 2000 fourth quarter, the fuel surcharges were
presented as a reduction of fuel costs. The Company, therefore, has restated
the fourth quarter 1999 and the first three quarters of 2000 revenue and
expenses in accordance with SAB Number 101 (See note 10). The implementation of
SAB Number 101 had no effect on income from operations or net income. Freight
forwarding revenue is generally recognized upon shipment. Logistics revenue from
warehousing is recognized under the terms of the various contracts and revenue
from dedicated fleet shipments is recognized upon delivery, which is generally
the same day as the pickup. In all cases, estimated expenses of performing the
total transportation services are accrued concurrently with the revenue
recognition.
Cash
The Company considers demand deposits and highly liquid investments purchased
with original maturities of three months or less as cash.
Property and equipment
Purchases of property and equipment are carried at cost, net of accumulated
depreciation. Depreciation is computed using the straight-line method over
periods ranging from three to twelve years for the majority of equipment and 30
years for buildings. Maintenance and repairs are charged to operations
currently, while expenditures that add to the life of the equipment are
capitalized. When revenue equipment is traded, a gain or loss on the trade of
the equipment is recognized.
Intangible assets
These costs primarily represent goodwill which is amortized on a straight-line
basis up to 40 years. The carrying value of goodwill is reviewed whenever events
or changes in circumstances indicate that the carrying value may not be
recoverable through projected undiscounted future operating cash flows. No
reduction of the carrying value has been required for any year.
PAGE F13
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 for the period. Unexercised stock options, calculated
under the treasury stock method, are the only reconciling items between the
Company's basic and diluted earnings per share. The number of options, included
in the denominator, used to calculate diluted earnings per share are 490,312,
1,061,848 and 286,433 for the years 2000, 1999, and 1998 respectively.
Foreign Currency Translation
The financial statements of the Company's foreign subsidiaries are measured
using the local currency as the functional currency. Assets and liabilities of
these subsidiaries are translated at exchange rates as of the balance sheet
date. Revenue and expenses are translated at average rates of exchange during
the period. The resulting cumulative translation adjustments, at December 31,
2000 of ($185), are included in the Company's total stockholders' equity.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenue and expenses and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with accounting principles generally accepted in the
United States. Actual results could differ from those estimates.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB), issued SFAS No.
133. In June 2000, FASB further clarified SFAS No. 133 through issuance of SFAS
No. 138. SFAS No. 133 and 138 establish accounting and reporting standards for
derivative instruments and for hedging activities. The effective date for SFAS
Nos. 133 and 138 was January 1, 2001. Adoption of SFAS Nos. 133 and 138 had no
effect on the Company's financial statements as it has no derivatives or
hedging instruments.
(2) OPERATING LEASES
The Company leases certain terminals, warehouses, vehicles and data processing
equipment under long-term lease agreements that expire in various years through
2011.
The following is a schedule of future minimum rental payments on leases that
have initial or remaining non-cancelable lease terms in excess of one year at
December 31, 2000:
Year
- -----------------------------------------------------------------------------
Payments
--------
2001 $ 22,133
2002 19,694
2003 12,342
2004 7,322
2005 5,298
Subsequent years 8,918
--------------
$ 75,707
--------------
Rental expense in the accompanying consolidated statements of operations for
2000, 1999, and 1998 was $35,798, $29,667 and $22,595, respectively.
PAGE F14
(3) LONG-TERM DEBT
Long-term debt at December 31, 2000 and December 31, 1999 consists of the
following:
December 31, December 31,
2000 1999
- ------------------------------------------------------------------- -------------- -------------
Unsecured notes (a) $ 250,000 $ 200,000
Unsecured lines of credit (b) 31,100 46,500
Other 8,028 7,198
--------- ------------
289,128 253,698
Less current maturities 28,991 120,561
--------------------- --------------------
$ 260,137 $ 133,137
--------------------- --------------------
(a) Unsecured notes of $100,000 that bore interest at 6 5/8%, payable
semi-annually, were paid in full on May 1, 2000. The Company issued guaranteed
unsecured notes of $150,000 on April 25, 2000 that are due April 15,2010 and
bear interest at 8 1/2%, payable semi-annually. The notes are subject to
redemption in whole or part any time prior to maturity and have no sinking fund
requirements. The Company also issued guaranteed unsecured notes of $100,000 on
May 1, 1999 that are due May 1,2009 and bear interest at 6 1/2%, payable
semi-annually. The notes are subject to redemption in whole or part any time
prior to maturity and have no sinking fund requirements. Based upon the
Company's incremental borrowing rates for similar types of borrowing
arrangements, the fair value of the notes at December 31, 2000 was approximately
$250,000.
On January 31, 2000, the Company filed a Form S-3 registration statement that
allowed for the sale of up to $400,000 in additional guaranteed notes. The
guaranteed notes are fully and unconditionally guaranteed, on a joint and
several basis, on an unsecured senior basis, by all of the Company's direct and
indirect domestic subsidiaries (the "Subsidiary Guarantors"). The Company is a
holding company and during the period presented substantially all of the assets
were the stock of the Subsidiary Guarantors, and substantially all of the
operations were conducted by the Subsidiary Guarantors. Accordingly, the
aggregate assets, liabilities, earnings and equity of the Subsidiary Guarantors
were substantially equivalent to the assets, liabilities, earnings and equity of
the Company on a consolidated basis. Management of the Company believes that
separate financial statements of, and other disclosures with respect to, the
Subsidiary Guarantors are not meaningful or material to investors.
(b) The Company has a $200,000 revolving credit facility through a syndicate of
commercial banks. The facility expires in 2002 and allows up to $100,000 for
standby letters of credit to cover the Company's self-insurance program, and has
optional pricing of interest rates, including LIBOR or Prime base rates. The
facility has an annual fee and contains customary financial covenants including
maintenance of minimum net worth and funded debt to cash flow. During 2000, all
borrowings were drawn at LIBOR base rates, with a weighted average interest rate
for the year of 6.3%, excluding fees charged on the facility. At December 31,
2000 the Company had borrowed $5,000 and had $48,365 outstanding letters of
credit under this facility. In addition to the revolving credit facility, the
Company maintains three uncommitted lines of credit, which provide $50,000
short-term funds at rates approximating LIBOR. These facilities are used in
concert with a centralized cash management system to finance short-term working
capital needs; thereby enabling the Company to maintain minimal cash balances.
At December 31, 2000 the Company had borrowed $26,100 under these facilities.
The aggregate annual maturities of debt at December 31, 2000 are as follows:
Amount
Year
- --------------------------------------------------------------------------------
2001 $ 28,991
2002 6,012
2003 1,326
2004 637
2005 2,162
Subsequent
years 250,000
-------------
$ 289,128
-------------
PAGE F15
(4) INCOME TAXES
A reconciliation of the statutory Federal income tax rate with the effective
income tax rate is as follows:
Year: 2000 1999 1998
- --------------------------------------------------------------------------- --------------- ----- ---------
Federal income tax at statutory rate (35%) $ 55,773 $ 61,453 $ 42,523
State income tax, net of federal tax benefit 6,646 7,136 6,115
Goodwill amortization 1,649 1,536 1,120
Other 194 1,215 291
----- ---- -----
Total income tax expense $ 64,262 $ 71,340 $ 50,049
------ ------ ------
The components of the provision for income taxes are as follows:
Year: 2000 1999 1998
- --------------------------------------------------------------------------------- ------------- -------
Current expense:
Federal $ 43,285 $ 56,285 $ 36,814
State 8,094 10,549 8,106
------- -------- -------
51,379 66,834 44,920
------ ------ ------
Deferred expense:
Federal $ 10,752 $ 7,800 $ 3,283
State 2,131 (3,294) 1,846
------ ------ -----
$ 12,883 $ 4,506 5,129
------ ----- -----
Total income tax expense $ 64,262 $ 71,340 $ 50,049
------ ------ ------
The following is a summary of the components of the deferred tax assets and
liabilities at December 31, 2000 and December 31, 1999:
December 31, 2000 December 31, 1999
- ------------------------------------------------------------------------------------------- ---------------------
Deferred tax assets:
Allowance for doubtful accounts and revenue adjustments $ 4,289 $ 2,663
Insurance and claims 40,139 39,794
Vacation pay 10,283 8,840
Other 5,208 6,256
----- -----
$ 59,919 $ 57,553
------ ------
Deferred tax liabilities:
Property and equipment, principally due to accelerated depreciation $ 111,399 $ 96,150
------- ------
Net deferred tax liabilities $ 51,480 $ 38,597
------- ------
(5) EMPLOYEE BENEFIT PLANS
The Company maintains a salary deferral 401(k) plan covering substantially all
employees who are not members of a collective bargaining unit and who meet
specified service requirements. Contributions are based upon participants'
salary deferrals and compensation and are made within Internal Revenue Service
limitations. For 2000, 1999, and 1998, Company contributions for these plans
were $10,907, $9,536, and $8,290, respectively. The Company does not offer
post-employment or post-retirement benefits.
The Company contributes to several union-sponsored multi-employer pension plans.
These plans are not administered by the Company, and contributions are
determined in accordance with provisions of negotiated labor contracts. The
Multi-employer Pension Plan Amendments Act of 1980 established a continuing
liability to such union-sponsored pension plans for an allocated share of each
plan's unfunded vested benefits upon substantial or total withdrawal by the
Company or upon termination of the pension plans. To date, no withdrawal or
termination has occurred or is contemplated. For 2000, 1999, and 1998, Company
contributions for these pension plans were $84,269, $72,536, and $60,748,
respectively.
The Company maintains a non-qualified deferred compensation plan for the benefit
of a select group of the Company's management. The purpose of the plan is to
enhance the ability of the Company to attract and retain qualified management
personnel by providing an opportunity to defer a portion of their compensation
that cannot be deferred under the Company's 401(k) plan.
The Company maintains a supplemental executive retirement plan (defined
contribution) to provide benefits to a select group of management who contribute
materially to the continued growth, development and future business of the
Company. In 2000, the Company contributed $1.5 million to this plan. The Company
has established a grantor trust (Rabbi Trust) to provide funding for benefits
payable under the deferred compensation and supplemental executive retirement
plans.
PAGE F16
(6) COMMON STOCK
The Company maintains an employee stock purchase plan which provides for the
purchase of an aggregate of not more than 900,000 shares of the Company's common
stock. Each eligible employee may designate the amount of regular payroll
deductions, subject to a yearly maximum, that is used to purchase shares at 90%
of the month-end market price. At December 31, 2000, 764,171 shares had been
issued under this plan.
The Company maintains stock option plans that provide for the granting of
options to key employees and non-employee directors to purchase an aggregate of
not more than 4,710,000 shares of the Company's common stock. Stock options
issued pursuant to the plans are exercisable for periods up to 10 years from the
date an option is granted. At December 31, 2000 there were 61,943 shares
available for granting under the plans.
During 2000, the Company issued 337,002 common shares through the exercise of
stock options or the purchase, by employees, through its employee stock purchase
program and the Company repurchased, under two board authorized repurchase
programs, 954,200 common shares in the open market for approximately $22.9
million. In 1999 and 1998, respectively, the Company issued 209,632 and 208,885
common shares through the exercise of stock options or the purchase, by
employees, through its employee stock purchase program.
SFAS No. 123 ("Accounting for Stock Based Compensation") establishes a fair
value based method of accounting for stock options. The company has elected to
continue using the intrinsic value method prescribed under APB 25 as permitted
by SFAS No. 123. If the Company had elected to recognize compensation cost based
on the fair value of the options granted at grant date, as prescribed by SFAS
No. 123, net income and earnings per share would have been reduced to the pro
forma amounts indicated in the table below:
Year 2000 1999 1998
- -------------------------------------------------------------------------- ----- ------------- ---- ---
Net income - as reported $ 97,798 $ 104,240 $ 71,445
Net income - pro forma 90,531 100,681 69,736
Basic earnings per share - as reported 3.68 3.95 2.73
Basic earnings per share - pro forma 3.44 3.81 2.66
Diluted earnings per share - as reported 3.61 3.79 2.70
Diluted earnings per share - pro forma 3.44 3.66 2.63
As prescribed under SFAS No. 123, pro forma net income amounts presented above
reflect only options granted after January 1, 1995 since compensation costs for
options granted prior to that date are not considered. Compensation cost for
options granted since January 1, 1995 is reflected over the options' vesting
periods ranging from two to five years.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in fiscal years 2000, 1999, and 1998: dividend yield
ranging from 0.93% to 1.21%; expected volatility ranging from 43.69% to 110.64%;
risk-free interest rates at grant date ranging from 4.97% to 7.42%; and expected
lives ranging from 4.28 to 5.61 years.
A summary of the status of the Company's stock option plans is presented below:
Year 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Weighted-avg Shares Weighted-avg Shares Weighted-avg
Exercise Price Exercise Price Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year 3,276,890 $ 27.92 2,727,790 $ 24.13 1,435,730 $ 23.67
Granted 1,347,500 25.81 693,000 41.05 1,550,000 25.10
Exercised (145,666) 23.08 (135,900) 17.94 (54,290) 16.73
Forfeited (830,784) 27.88 (8,000) 43.30 (203,450) 30.23
------------ --- ---------- -------------
Outstanding at end of year 3,647,940 27.75 3,276,890 27.92 2,727,990 24.13
------------ ------------- -------------
Options exercisable at year end 1,248,990 25.23 671,990 22.27 581,790 20.19
------------ ------------- -------------
Weighted-average fair value of
options granted during the year $ 12.54 $ 16.84 $ 11.66
PAGE F17
The following table summarizes information about stock options outstanding at
December 31, 2000:
Outstanding Options Options Exercisable
Weighted-Avg
Range of Remaining Number
Number Outstanding Contractual Life Weighted-Avg Exercisable at Weighted-Avg
Exercise Prices at 12/31/00 (years) Exercise Price 12/31/00 Exercise Price
- ---------------------------- -------------------- --------------------- ---------------------- ------------------- ----------------
$ 13.00-15.00 82,000 1.78 $ 13.87 82,000 $ 13.87
18.25-19.63 362,500 5.54 19.63 317,700 19.63
22.50-24.94 1,786,440 7.71 24.59 389,940 24.35
25.88-27.69 305,000 9.10 26.17 66,250 25.94
30.50-35.00 621,500 6.83 31.48 344,100 31.45
42.88-44.69 480,500 8.75 43.76 49,000 42.88
45.01-46.63 10,000 9.32 46.63 - -
-------------------- -------------------
3,647,940 7.47 27.75 1,248,990 25.23
-------------------- -------------------
The Company has a stockholder rights plan designed to deter coercive takeover
tactics and to prevent an acquiror from gaining control of the Company without
offering a fair price to all of the Company's stockholders. In the event of a
non-permitted transaction, the Company would declare a distribution of one right
for each share of common stock outstanding to stockholders and generally to
shares issuable under the Company's stock option plans. In the event of a
proposed takeover meeting certain conditions, the rights could be exercised by
all holders other than the takeover bidder at an exercise price of half of the
current market price of the Company's common stock. This would have the effect
of significantly diluting the holdings of the takeover bidder. These rights
expire on February 3, 2004.
(7) COMMITMENTS AND CONTINGENCIES
The Company is routinely involved in a number of legal proceedings and claims
arising in the ordinary course of business, primarily involving claims for
bodily injury and property damage incurred in the transportation of freight. The
estimated liability for claims included in liabilities, both current and
long-term, reflects the estimated ultimate cost of self-insured claims incurred,
but not paid, for bodily injury, property damage, cargo loss and damage, and
workers' compensation. In the opinion of management, the outcome of these
matters is not expected to have any material adverse effect on the consolidated
financial position or results of operations of the Company and have been
adequately provided for in the financial statements.
At December 31, 2000, the Company had capital purchase commitments of
approximately $2,503 for land and improvements, $2,543 for transportation
equipment, and $1,374 for other equipment.
(8) ACQUISITIONS
During 2000, under the purchase method of accounting, the Company acquired all
of the outstanding shares of Tri-Star Transportation, Inc., a Tennessee based
truckload carrier and Ultimex Global Logistics PLC, a London, England based
freight forwarder. Total consideration for all 2000 acquisitions amounted to
$26,188 of cash and debt incurred.
PAGE F18
(9) Business Segments
The Company has nine reportable business segments: the five regional LTL
trucking companies , TL trucking, Logistics, Freight forwarding and Corporate
and other. The LTL trucking group provides overnight and second-day delivery of
general commodities throughout the United States and into Canada. The Company's
TL subsidiary provides premium regional and national TL services. The Company's
logistics subsidiaries provide solutions to customers' logistics and
distribution requirements. The Company's freight forwarding subsidiaries provide
domestic and international air and ocean freight service through both exclusive
and non-exclusive agents. The Corporate and other group includes mainly the
costs for the Company's head office and risk management groups. The reportable
business segments are managed separately because each business has differing
customer requirements, either as a result of the regional environment of the
country or differences in products and services offered.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Intangible assets are included in
each segment's reportable assets, but the amortization of these intangible
assets is not included in the determination of a segment's operating profit or
loss. The Company evaluates performance based on profit or loss from operations
before income taxes, interest, amortization of intangibles and other
non-operating income (expenses).
---------------- ---------------- ----------------
Year 2000 1999 1998
---------------- ---------------- ----------------
Revenue
LTL Group:
USF Holland $ 1,001,250 $ 914,920 $ 794,012
USF Reddaway 276,915 244,576 215,531
USF Red Star 275,841 250,021 212,365
USF Dugan 204,481 193,844 181,971
USF Bestway 155,188 146,948 136,283
---------------- ---------------- ----------------
Total LTL Group 1,913,675 1,750,309 1,540,162
TL 86,317 44,715 12,877
Logistics 276,958 206,881 130,323
Freight forwarding 261,749 225,010 151,531
Corporate and other - - -
---------------- ---------------- ----------------
Total Revenue $ 2,538,699 $ 2,226,915 $ 1,834,893
================ ================ ================
Income From Operations
LTL Group:
USF Holland $ 108,431 $ 111,203 $ 82,580
USF Reddaway 31,456 28,221 18,909
USF Red Star 8,905 7,275 3,581
USF Dugan 10,554 8,678 6,661
USF Bestway 14,193 16,533 15,511
---------------- ---------------- ----------------
Total LTL Group
173,539 171,910 127,242
TL 4,671 3,147 1,138
Logistics 16,680 16,873 7,976
Freight forwarding (4,081) 8,175 4,925
Corporate and other (6,735) (4,744) (7,555)
Amortization of intangibles (6,843) (6,493) (4,293)
---------------- ---------------- ----------------
Total Income from Operations $ 177,231 $ 188,868 $ 129,433
================ ================ ================
PAGE F19
Year 2000 1999 1998
------------------ ------------------ ----------
Assets
LTL Group:
USF Holland $ 462,469 $ 433,887 $ 337,477
USF Reddaway 151,509 131,254 117,326
USF Red Star 159,331 159,804 146,431
USF Dugan 97,832 98,212 92,969
USF Bestway 93,344 80,347 65,815
---------------- ---------------- ----------------
Total LTL Group 964,485 903,504 760,018
TL 83,287 44,054 32,680
Logistics 143,684 129,809 70,588
Freight forwarding 144,551 126,111 97,326
Corporate and other 15,067 8,689 14,061
---------------- ---------------- ----------------
Total Assets $ 1,351,074 $ 1,212,167 $ 974,673
================ ================ ================
------------------ ------------------ ------------------
Long Lived Asset Expenditures
LTL Group:
USF Holland $ 71,643 $ 111,254 $ 83,908
USF Reddaway 24,613 17,511 21,105
USF Red Star 15,489 13,788 16,358
USF Dugan 8,826 9,932 13,707
USF Bestway 15,935 16,982 9,134
------------------ ------------------ -----------------
Total LTL Group 136,506 169,467 144,212
TL 25,125 10,994 1,844
Logistics 23,807 18,976 9,830
Freight forwarding 3,061 1,931 669
Corporate and other 4,660 1,106 921
------------------ ------------------ ------------------
Total Long Lived Asset Expenditures $ 193,159 $ 202,474 $ 157,476
================== ================== =================
Depreciation Expense
LTL Group:
USF Holland $ 43,021 $ 36,669 $ 32,662
USF Reddaway 12,710 12,048 11,613
USF Red Star 10,095 9,748 8,633
USF Dugan 11,402 10,857 10,420
USF Bestway 6,199 5,540 5,100
------------------ ------------------ ------------------
Total LTL Group 83,427 74,862 68,428
TL 7,698 4,083 1,019
Logistics 10,817 7,799 6,436
Freight forwarding 1,888 1,381 842
Corporate and other 1,149 694 519
------------------ ------------------ ------------------
Total Depreciation Expense $ 104,979 $ 88,819 $ 77,244
================== ================== ==================
PAGE F20
(10) QUARTERLY FINANCIAL INFORMATION (unaudited)
Quarters First Second Third Fourth Total
- -----
2000
Operating revenue * $ 618,690 $ 634,034 $ 642,230 $ 643,745 $ 2,538,699
Income from Operations 40,759 50,593 45,688 40,191 177,231
Net income 22,316 27,498 24,347 22,637 96,798
Net income per share - basic 0.84 1.04 0.93 0.87 3.68
Net income per share - diluted 0.81 1.01 0.92 0.87 3.61
Dividends declared per share 0.0933 0.0933 0.0933 0.0933 .3733
Market price per share 28.25-45.94 24.56-46.62 20.75-33.75 19.37-30.08 19.37-46.62
* Included in operating revenue are the following fuel surcharges invoiced to
customers - see note 1.
$ 10,469 $ 12,155 $ 16,183 $ 21,591 $ 60,398
1999
Operating revenue * $ 513,229 $ 548,856 $ 571,946 $ 592,884 $ 2,226,915
Income from Operations 32,231 47,787 53,304 55,546 188,868
Net income 17,508 26,271 29,723 30,738 104,240
Net income per share - basic 0.67 1.00 1.12 1.16 3.95
Net income per share - diluted 0.65 0.96 1.07 1.11 3.79
Dividends declared per share 0.0933 0.0933 0.0933 0.0933 .3733
Market price per share 28.87-34.87 27.31-47.37 42.09-51.75 41.06-49.87 27.31-51.75
* Included in operating revenue are the following fuel surcharges invoiced to
customers - see note 1.
$ - $ - $ - $ 4,473 $ 4,473
PAGE F21
SELECTED CONSOLIDATED FINANCIAL DATA
(Thousands of dollars, except per share amounts)
(1) (1)
Year 2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
Operating Revenue $ 2,538,699 $ 2,226,915 $ 1,834,893 $ 1,565,249 $ 1,330,972
Income from operations 177,231 188,868 129,433 105,010 67,128(2)
-------- ------------ ------------ ------------ --------
Interest expense (21,282) (14,003) (8,784) (8,461) (12,144)
Interest income 894 1,129 757 1,038 649
Other non-operating income
(expense) 2,509 (414) 88 (92) (704)
Net income before income taxes 159,352 175,580 121,494 97,495 54,929
and minority interest
Minority interest 1,708 - - - -
Income tax expense (64,262) (71,340) (50,049) (40,914) (23,451)
-------------------------------------------------------------------------------------------
Net income $ 96,798 $ 104,240 $ 71,445 $ 56,581 $ 31,478(2)
-------------------------------------------------------------------------------------------
Basic Earnings Per Share
Net income per share 3.68 3.95 2.73 2.21 1.41(2)
Diluted Earnings Per Share
Net income per share 3.61 3.79 2.70 2.19 1.40(2)
Cash dividends declared
per share $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37
OPERATING STATISTICS
LTL Trucking Companies
(in thousands)
Total tons 10,552 10,220 9,177 8,579 7,732
Total shipments 15,470 14,797 13,468 12,857 11,590
BALANCE SHEETS
ASSETS:
Current assets $ 396,361 $ 362,928 $ 279,849 $ 237,116 $ 203,577
Property and equipment, net 750,485 660,510 544,282 448,315 395,500
Intangible assets, net 181,978 174,538 140,201 104,407 79,559
Other assets 22,250 14,191 10,341 9,697 9,872
--------------------------------------------------------------------------------------
Total assets $ 1,351,074 $ 1,212,167 $ 974,673 $ 799,535 $ 688,508
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities $ 292,175 $ 370,344 $ 228,877 $ 181,714 $ 144,348
Long-term debt 260,137 133,137 151,096 115,000 178,000
Other non-current liabilities 163,047 149,827 135,566 110,621 96,900
Minority interest 539 - - - -
Total stockholders' equity 635,176 558,859 459,134 392,200 269,260
---------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity$ 1,351,074 $ 1,212,167 $ 974,673 $ 799,535 $ 688,508
---------------------------------------------------------------------------------------
1 Fiscal years 1997 and prior were 52/53 weeks ending on the Saturday closest to
December 31st. Fiscal year 1997 included 53 weeks.
2 Income from operations, net income and earnings per share include the Red Star
restructuring charge of $4,050, before income tax, equivalent to $0.10 per
share, net of tax.
PAGE F22
STATISTICAL INFORMATION
Operating Operating LTL Tons LTL Terminals Tractors Trailers Employees
Revenue Ratio Shipments
YR. (million) (thousands) (thousands)
-- --------- --------- ----------- ----------- --------- -------- -------- ---------
Holland 00 $1001.3 89.2% 4,885.7 7,777.2 61 4,227 7,104 9,119
99 $914.9 87.8% 4,694.6 7,392.1 60 4,163 6,668 9,003
Red Star 00 $275.8 96.8% 1,136.1 2,305.7 34 1,236 2,840 2,407
99 $250.0 97.1% 1,102.3 2,234.4 34 1,126 2,770 2,441
Reddaway 00 $276.9 88.6% 1,035.9 2,094.5 58 1,203 3,518 2,800
99 $244.6 88.5% 950.1 1,926.4 56 1,118 3,179 2,666
Bestway 00 $155.2 90.8% 658.4 1,275.1 41 681 2,654 1,591
99 $146.9 88.7% 658.5 1,269.0 41 660 2,522 1,521
Dugan 00 $204.5 94.8% 960.8 1,761.5 59 1,032 3,318 1,998
99 $193.8 95.5% 955.4 1,723.4 59 1,062 3,195 2,116
Logistics 00 $277.0 94.0% NA NA 119 628 1,661 4,013
99 $206.9 91.8% NA NA 97 598 1,520 3,682
Worldwide 00 $261.7 101.6% NA NA 58 NA NA 711
99 $225.0 96.4% NA NA 59 NA NA 637
Glen Moore 00 $ 86.3 94.6% NA NA 3 599 1,885 823
99 $ 44.7 93.0% NA NA 2 288 864 464