SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 8, 2001
(Date of earliest event reported)
USFREIGHTWAYS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-19791 36-3790696
(State or other jurisdiction of
incorporation or organization) (Commission File No.) (IRS Employer
Identification Number)
8550 West Bryn Mawr Avenue, Suite 700, Chicago, Illinois 60631
(Address of principal executive offices) (Zip Code)
(773) 824-1000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Item 9. Regulation FD Disclosure.
The following information is included in this document as a result of
USFreightways' policy regarding public disclosure of corporate information.
USFreightways Corporation will make the following information available in
question and answer form on its website, at www.usfreightways.com under the
spirit of the Securities and Exchange Commission's Disclosure Rules effective
October 23, 2000 ("Reg FD").
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER SECURITIES LITIGATION REFORM
ACT OF 1995; CERTAIN CAUTIONARY STATEMENTS
Certain portions of this document contain forward-looking statements which are
based on certain assumptions and expectations of future events that are subject
to risks and uncertainties. Actual future results and trends may differ
materially from historical results or those projected in any forward-looking
statements depending on a variety of factors including, but not limited to,
changes in customer demand for USFreightways' services caused by a general
economic slow-down, inventory build-up, decreased consumer confidence,
volatility in equity markets, energy prices, political changes, or the
unpredictable acts of competitors.
RESPONSES TO SELECTED QUESTIONS REGARDING
THE USFREIGHTWAYS MID-QUARTER CONFERENCE CALL
1. Have you encountered increased price competition from the private regional
firms?
As in all prior periods, there are always competitive forces trying to obtain
market share using price as leverage. However, yields are holding up
surprisingly well given the current state of the economy. In general, there
seems to be rational pricing in the marketplace at this time.
2. LTL rates appear to be holding steady, but is this the case for large
corporate contracts that are expiring now, right in the middle of this
slowdown? As of now, are you planning to go to the market in the Fall with a
GRI? If yes, will the magnitude be similar to previous years, or lower, and
if lower, roughly how much lower?
As in past years, we intend to take a General Rate Increase. The exact amount
and timing will be forthcoming. By and large we expect acceptance of a general
rate increase, although some large accounts under contract may use their volume
to seek lower pricing than the GRI.
3. In terms of the economy, have there been any areas of surprising strength or
weakness either by industry or geography?
We all are well aware by now of the weakness in the automotive sector, and to
date we see little change here. Heavy truck manufacturing reflects the same
weakness. The depth of the chemical industry downturn has provided greater
weakness in this sector than anticipated early in the year. Retail has continued
generally strong through the spring. There are no specific industries where we
see any signs of surprising strength.
From a geographic standpoint the energy crisis in California is having a
negative impact in some areas. The 13 Northeastern states we serve are the
worst with conditions being particularly bad in New England. The Midwest
continues to experience sluggishness throughout our entire service area.
4. I show you generating perhaps twice as much free cash flow in 2001 as in
2000, due mostly to the sharp cuts in capex. If you don't make acquisitions
what will you do with the free cash flow?
We are looking at a number of opportunities for the cash freed up by our current
prudent spending. Timely acquisitions or liquid securities are possibilities.
Depending on the market value of our stock, we may entertain the idea of buying
some of the 500,000 shares of stock outstanding in our current repurchase plan.
5. How many headcount reductions have there been year-to-date/quarter-to-date?
If none, at which point will USFC need to take such measures (timing)?
Headcount is down about 5 1/2% from the peak season last winter - approximately
1,000 people out of 18,000 total in trucking. This reduction is a combination
of natural attrition and layoffs. Overall headcount is down by near 1,900 or 8%.
6. Along the lines of further terminal openings, are there plans to scale back
capital outlays even further than those mentioned on the call? If additional
spending can be cut, what is it likely to entail (i.e. terminals, revenue
equipment, etc.)? Are there further areas of improvement in this area or is
USFC reaching the fixed cost threshold that would result in an erosion of
service levels or impede the company's efforts once the U.S. economy
accelerates?
There are definite cost improvement plans that will continue to contribute to
both the short and long term. We will not allow service to deteriorate. Our
model is immediately flexible to accommodate an upturn.
Our terminal capacity at present is adequate. Any recent complements to capacity
are upgrades; planned build completions are strategic relocations for market
penetration or service enhancements.
As stated in the conference call, for the year, capital expenditures are
projected to be less than $100 million, compared to $193 million for the year
2000. This is due mainly to the reduced need for tractors and trailers and
terminal expansion as we are currently right sized for today's economy. As the
economy warrants, these projects will be continued so that service levels will
remain constant.
7. When USFC publicly stated an expectation of a weakening economy last May,
shrinking shipment size was cited as a key leading indicator. Do you
anticipate that this will be an early indicator of an economic turnaround? If
not, what are the key metrics that you are focused on?
We monitor most of the major economic barometers and indices while participating
in the ISI survey. We find that the best immediate indicator is a direct
dialogue with our customers and the trends we see in daily pickup orders. We
also make comparisons with earlier time periods and time periods year-to-year to
uncover changes in customer shipping patterns. We look at total shipments and
average weight per shipment
8. What specific types of warnings are you getting from retailers?
We are hearing from a number of major retailers that we do business with in the
Midwest and Northeast that things are slow.
9. Can you expound on your answer about USF Worldwide? In other words, do you
expect the losses to exceed the last 2 quarters of $3.3 million, despite some
of the cost reductions?
We expect continued improvement in USF Worldwide operating results as the
challenges relating to the numerous acquisitions are addressed. One of the most
significant challenges ahead of us is in the area of Information Technology. We
currently have multiple operating systems within the USF Worldwide operating
units. We are in the final stages of preparation for transitioning the US
operations to one IT platform. The USF Worldwide operations in the UK are
scheduled for transition in Q3 after which all operating units worldwide will
be on a common IT platform. These improvements along with revenue growth should
lead to profitability over the two-year rebuilding process.
10. How bad is the freight forwarding market in terms of rates and volume
(domestic and international), as we believe it is worse than LTL? I heard
Chris say that international revenue is up, but is that on a same-store-
sales basis, as you've been adding new markets in the past year.
With regard to the US domestic air freight market, we see a shift from our
express services to our deferred services and an overall reduction in weight of
approximately 12% compared to the same period in 2000. The US domestic air
freight market, particularly the deferred services, is consistently price
sensitive. With a few exceptions, we have seen growth in our US export volume
from all of our locations compared to the same period last year.
11. Can you discuss both the near term and long term ramifications of receiving
the Class A license in China? How long do you believe it will take to take
advantage of the license and longer term, will this provide additional
volume opportunities as well as cost savings by eliminating any third
parties?
The Class A License provides USF Worldwide with a marketing edge over other
forwarders who must use a third party Class A licensed forwarder and therefore
cannot control the service, and risk losing the customer. In fact, a majority
of large multinational companies shipping to or from China consider the license
to be a necessary prerequisite in forwarder selection.
In the long term, eliminating the intermediary will improve cost efficiency,
information integrity, and quality standards, also allowing establishment of
direct buying power with carriers to lower costs. The license also allows us
to integrate and directly manage the entire supply chain, thereby expanding
revenue base while providing more responsive, quality service to our customers.
We have some unique opportunity to take advantage of the license. One of the
opportunities is to provide round trip services for companies relocating
manufacturing to China. For example: we are currently handling shipments from a
large US manufacturer, managing export formalities and regulatory compliance
from the US to the destination country (Korea, Japan or the Philippines). After
the products are processed, we offer the same local services that we do at
origin in the US before the products are re-exported to the US. As more
manufacturing relocates to China, our opportunity is to extend these services
worldwide to and from China, which we would not be able to do without a Class A
license. The customer likes it because one company manages the entire process
and carriers like it because we give them round trip business.
12. How has USF Processors addressed the difficulties it faced when handling
large volumes during C00?
The situation referred to in earlier conference calls occurred during 2000 and
was a result of overly aggressive processing projections by USF Processors in
an attempt to assist a customer through a difficult business situation. The
lessons learned from that difficult period have led to new procedures to ensure
that this type of situation does not happen in the future.
13. What types of customers will Processors grow with in the future?
From a market prospective USF Processors is rolling out a new software product
named "Return Manager" that we believe to be a quantum leap ahead of what is
available in the reverse logistics marketplace. When fully deployed it will
position USF Processors to compete effectively in virtually any reverse
logistics market segment.
14. Do you stand to benefit from any special situations (i.e. the Ford recall of
13 million Firestone tires and the shift to other brands)?
The dry winter weather in the west could create more fires in the heat of
summer. This would increase our business activity with the government related
fire agencies. The Winter Olympics are to be staged in Salt Lake City in 2002,
which should stimulate the local economy and our corresponding business towards
the end of this year.
USF Holland did experience some uptick in Bridgestone/Firestone business during
the recall earlier in the spring. There could be some stimulation of Goodyear
LTL from Ford tire recall orders, although TL carriers would likely be the
larger beneficiaries.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this Current Report to be signed on its behalf by
the undersigned hereunto duly authorized.
USFREIGHTWAYS CORPORATION
By: /s/Christopher L. Ellis
Christopher L. Ellis
Senior Vice President, Finance and
Chief Financial Officer
Date: June 8, 2001