SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPT. 29, 2001, OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO
____________
Commission File Number 0-19791
USFREIGHTWAYS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3790696
(State of Incorporation) (IRS Employer Identification No.)
8550 W. Bryn Mawr Ave.,Suite 700 60631
Chicago, Illinois
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
including area code: (773) 824-1000
Not applicable
(Former name or former address, if changed since the last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of November 2, 2001, 26,393,967 shares of common stock were outstanding.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements.
USFreightways Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in thousands)
Sept. 29, December 31,
2001 2000
-----------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 70,594 $ 5,248
Accounts receivable, net 323,434 323,517
Other 71,512 67,596
----------------- -------------------
Total current assets 465,540 396,361
----------------- -------------------
Net property and equipment 725,572 750,485
Net intangible assets 176,809 181,978
Other assets 24,724 22,250
----------------- -------------------
Total assets $ 1,392,645 $ 1,351,074
----------------- -------------------
Liabilities and Stockholders' Equity
Current liabilities:
Current bank debt $ 1,122 $ 28,991
Accounts payable 88,606 90,741
Other current liabilities 206,790 172,443
----------------- ------------------
Total current liabilities 296,518 292,175
----------------- ------------------
Long-term liabilities:
Long-term bank debt 2,734 10,137
Notes payable 250,000 250,000
Other long-term liabilities 171,831 163,047
----------------- ------------------
Total long-term liabilities 424,565 423,184
----------------- ------------------
Minority interest 1,592 539
Common stockholders' equity 669,970 635,176
----------------- ------------------
Total liabilities and stockholders' equity $ 1,392,645 $ 1,351,074
----------------- ------------------
USFreightways Corporation
Consolidated Statements of Income
Unaudited (Dollars in thousands, except per-share amounts)
Three months ended Nine months ended
------------------------------------- ------------------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2001 2000 2001 2000
----------------------------------------------------------------------------- -----------------------------
Operating revenue
LTL Trucking $ 461,391 $ 484,192 $1,385,719 $1,440,030
TL Trucking 24,534 21,808 74,794 62,399
Logistics 67,663 69,802 205,737 202,117
Freight Forwarding 64,992 66,428 197,595 190,408
----------------- ---------------- ---------- ----------
Total operating revenue $ 618,580 $ 642,230 $1,863,845 $1,894,954
Operating expenses:
LTL Trucking 430,692 438,950 1,302,178 1,308,177
TL Trucking 24,169 20,694 72,709 58,745
Logistics 63,223 65,647 196,282 189,665
Freight Forwarding 73,840 68,113 212,629 191,188
Corporate and other 4,728 3,138 14,024 9,085
----------------- ---------------- ---------- ----------
Total operating expenses 596,652 596,542 1,797,822 1,756,860
----------------- ---------------- ---------- ----------
Income from operations 21,928 45,688 66,023 138,094
----------------- ---------------- ---------- ----------
Non-operating income (expense):
Interest expense (5,236) (5,632) (16,218) (15,545)
Interest income 322 203 710 711
Other, net (199) (4) 18 (556)
---------------- --------------- ---------- ----------
Total non-operating expense (5,113) (5,433) (15,490) (15,390)
---------------- --------------- ---------- ----------
Net income before income taxes 16,815 40,255 50,533 122,704
Income tax expense (6,763) (16,410) (20,090) (49,756)
Minority interest (321) 502 (838) 1,213
----------------- --------------- ---------- ---------
Net income $ 9,731 $ 24,347 $ 29,605 $ 74,161
----------------- --------------- ---------- ---------
Average shares outstanding - basic 26,335,517 26,286,058 26,267,763 26,462,064
Average shares outstanding - diluted 26,912,541 26,520,231 26,765,551 27,086,804
Basic earnings per common share: $ 0.37 $ 0.93 $ 1.13 $ 2.80
Diluted earnings per common share: $ 0.36 $ 0.92 $ 1.11 $ 2.74
----------------- ------------------ ---------- ----------
USFreightways Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
Nine months ended
----------------------------
Sept. 29, Sept. 30,
2001 2000
--------------------------------------------------------------------------------------
Cash flows from operating activities:
Net Income $ 29,605 $ 74,161
Adjustments to net income:
Depreciation and amortization 83,552 82,313
Other items affecting cash 33,292 (12,332)
from operating activities
-------------- -------------
Net cash provided by operating activities 146,449 144,142
-------------- -------------
Cash flows from investing activities:
Capital expenditures (58,802) (151,869)
Proceeds on sales 7,677 9,198
Acquisitions - (16,419)
-------------- -------------
Net cash used in investing activities (51,125) (159,090)
-------------- -------------
Cash flows from financing activities:
Dividends paid (7,318) (7,393)
Proceeds from sale of notes - 149,025
Payments on notes - (100,000)
Proceeds from sale/(repurchase) of treasury stock 12,612 (8,778)
Proceeds from long-term debt 10,000 70,000
Payments on long-term debt (17,403) (92,409)
Net change in short-term debt (27,869) 2,463
-------------- -------------
Net cash provided by (used in) financing activities (29,978) 12,908
-------------- -------------
Net increase/(decrease) in cash 65,346 (2,040)
-------------- -------------
Cash at beginning of period 5,248 6,862
-------------- -------------
Cash at end of period $ 70,594 $ 4,822
-------------- -------------
USFreightways Corporation
Condensed Consolidated Statements of Changes in Common Stockholders' Equity
Unaudited (Dollars in thousands)
Nine Months Ended
-----------------
Sept. 29, Sept. 30,
2001 2000
Balance as of December 31 2000 and 1999 respectively $ 635,176 $ 558,859
Net income 29,605 74,161
Foreign currency translation adjustments (57) -
-------- -------
Comprehensive income $ 29,548 $ 74,161
Proceeds from sale/ (repurchase) of treasury stock 12,612 5,740
Dividends declared (7,366) (7,374)
Common shares repurchased (14,520)
---------- ----------
Balance as of Sept. 29, 2001 and Sept. 30, 2000 $ 669,970 $ 616,866
respectively ========== ==========
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
(Unaudited)
1. Summary of significant accounting policies
General -
The consolidated financial statements include the accounts of USFreightways
and its wholly owned subsidiaries (the Company). The financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The statements are unaudited but, in the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The Company's consolidated statements of
operations for prior periods have been reclassified to conform with the current
presentation. The Company's results of operations are affected by the seasonal
aspects of the trucking and air freight industries. Therefore, operating results
for the three and nine months ended Sept. 29, 2001 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2001. For further information, refer to consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 2000.
2. Earnings per share
Basic earnings per share are calculated on net income divided by the
weighted-average number of common shares outstanding during the period. Diluted
earnings per share are calculated by dividing net income by this
weighted-average number of common shares outstanding plus the shares that would
have been outstanding assuming the issuance of common shares for all dilutive
potential common shares. Unexercised stock options, calculated under the
treasury stock method, is the only reconciling item between 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 577,024 and
234,173 for the third quarters of 2001 and 2000 respectively and 497,788 and
624,740 for years to date 2001 and 2000 respectively.
3. Debt
The Company's debt includes $100 million of unsecured guaranteed notes
due May 1, 2009 and $150 million of unsecured guaranteed notes due April 15,
2010.
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 sold $150 million in 8 1/2% guaranteed notes
due April 15, 2010 as part of the $400 million Form S-3 registration statement
filed on January 31, 2000
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.
4. Stock repurchases
On July 24, 2000, the Company announced the authorized buyback of up to 1
million additional shares of its common stock in either public market or private
transactions. This repurchase program is not yet completed. There have been no
shares repurchased in the first nine months of 2001. As of Sept. 29, 2001, the
Company had repurchased 454,200 shares.
5. USF Worldwide
In the 2001 third quarter USF Worldwide, the Company's domestic and
international air frieght forwarder, reported a charge amounting to $5.9 million
relating to severance and other expenses as USF Worldwide downsizes its
operations due to decreased revenue, brought on by the current business
environment, and expenses associated with the implementation of a new freight
management system in the fourth quarter.
6. Recent Accounting Pronouncemnts
Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141 "Business Combinations" and No. 142
"Goodwill and Other Intangible Assets" in July 2001. Among other provisions in
these two statements, all future business combinations will be accounted for
using the purchase method of accounting and use of the pooling-of-interest
method is prohibited. For acquisitions completed after July 1, 2001, goodwill
will not be amortized. In addition, effective January 1, 2002, previously
recorded goodwill and other intangible assets with indefinite lives will no
longer be amortized but will be subject to impairment tests annually. Intangible
assets with finite lives are required to be amortized over their estimated
useful lives. For the three and nine month periods ended Sept. 29, 2001, the
Company recorded amortization of $2.0 million and $5.7 million, respectively.
Management is currently reviewing the final release of these statements to
evaluate the impact on the results of operations and financial statements.
In August 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations. The standard requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which the
obligation is incurred. When the liability is initially recorded, the entity
capitalizes the cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. The standard is effective for 2003. The Company is currently reviewing
the requirements of this new standard and has not yet determined its impact,if
any, on the Company's financial position or results of operations.
In October 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Statement 144 requires that long-lived assets be
measured at the lower of carrying amount or fair value less cost to sell,
whether reported in continuing operations or in discontinued operations. The
standard is effective for 2002 and generally is to be applied prospectively. The
Company is currently reviewing the requirements of this new standard and has not
yet determined its impact,if any, on the Company's financial position or results
of operations.
7. Segment Reporting Three Months Ended Nine Months Ended
Unaudited (dollars in thousands) Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2001 2000 2001 2000
------------------------------------------------------------------------------- ----------------------
Revenue
LTL Group:
USF Holland $ 237,030 $ 250,891 $ 717,410 $ 756,784
USF Reddaway 68,872 72,502 201,832 206,714
USF Red Star 64,488 69,685 194,409 206,440
USF Dugan 53,384 51,143 156,491 154,380
USF Bestway 37,617 39,971 115,577 115,712
------------------------------------------------------------------------------- ---------------------------
Sub total LTL Group 461,391 484,192 1,385,719 1,440,030
Truckload - Glen Moore 24,534 21,808 74,794 62,399
Logistics subsidiaries 67,663 69,802 205,737 202,117
Freight forwarding 64,992 66,428 197,595 190,408
Corporate and other - - - -
------------------------------------------------------------------------------- ---------------------------
Total Revenue $ 618,580 $ 642,230 $ 1,863,845 $ 1,894,954
Income (Loss) From Operations
LTL Group:
USF Holland $ 20,064 $ 27,437 56,826 81,822
USF Reddaway 7,768 9,399 18,476 23,275
USF Red Star (599) 2,661 (2,389) 6,674
USF Dugan 1,219 2,504 4,602 8,769
USF Bestway 2,247 3,241 6,026 11,313
------------------------------------------------------------------------------- ---------------------------
Sub total LTL Group 30,699 45,242 83,541 131,853
Truckload - Glen Moore 365 1,114 2,085 3,654
Logistics subsidiaries 4,440 4,155 9,455 12,452
Freight forwarding (8,848) (1,685) (15,034) (780)
Corporate and other (2,753) (1,391) (8,312) (3,987)
Amortization of intangibles (1,975) (1,747) (5,712) (5,098)
------------------------------------------------------------------------------- ---------------------------
Total Income from Operations $ 21,928 $ 45,688 $ 66,023 $ 138,094
------------------------------------------------------------------------------ ---------------------------
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations.
Results of Operations
USFreightways Corporation ("the Company") reported net income for the
quarter ended September 29, 2001 of $9.7 million, a 60% decrease compared to
$24.4 million that was reported for the quarter that ended September 30, 2000.
Included in the current quarter's net income is a $5.9 million pre-tax charge at
USF Worldwide. There were 63 working days in the current quarter and last year's
third quarter.
Net income per share for the current year's quarter was equivalent to 36
cents diluted earnings per share (49 cents diluted earnings per share before the
USF Worldwide charge mentioned above). Net income per share for the 2000 quarter
amounted to 92 cents diluted earnings per share. Net income for the current
year's quarter, as in the 2001 second quarter, was negatively impacted by the
continuing economic slowdown and the terrorist attacks of September 11th that
affected results in all the Company's lines of businesses, and continued losses
at USF Worldwide, the Company's domestic and international freight forwarding
business.
Revenue for the 2001 quarter decreased by 3.7% to $618.6 million from
$642.2 million for the third quarter of 2000. Revenue increases in the
distribution service centers, the UK freight forwarder, USF Asia and truckload
revenue were offset by decreases in the regional trucking subsidiaries group,
the return logistics business and USF Worldwide.
Less-than-truckload (LTL) revenue for the current quarter at the regional
trucking subsidiaries decreased 3.9%, including the fuel surcharges , compared
to the 2000 third quarter; LTL shipments decreased 4.1% and LTL tonnage
decreased 6.1%. LTL revenue per shipment increased from $115.78 to $115.93 and
the weight per shipment decreased 2.1% from 1,137 pounds to 1,113 pounds. While
all of the LTL trucking companies were affected by the slowdown in the economy,
USF Holland, the Company's largest regional trucking subsidiary, had decreases
in revenue and tonnage of 5.5% and 8.2% respectively compared to last year's
quarter due to a continuing significant slowdown in the automotive industry and
other heavy manufacturing industries based in the central United States. USF Red
Star, the Company's Northeastern regional trucking subsidiary, was more directly
impacted by the terrorits attacks on September 11th and incurred decreases in
revenue and tonnage amounting to 7.5% and 10.6%, respectively.
In the last week of the second quarter, the regional trucking subsidiaries
increased rates to their non-contractual customers by an average 5.9%. As a
result, revenue per hundredweight increased by 2.3% compared to the 2000 third
quarter. A similar rate increase was taken on August 28, 2000. The
non-contractual customer base is approximately one half of the total customers.
Operating earnings for the regional trucking subsidiaries, in the current
year's quarter, decreased 32.1% to $30.7 million compared to $45.2 million for
the same period of 2000. The consolidated operating ratio for the LTL group
increased to 93.3 (one half point less than the 93.8 operating ratio recorded in
the 2001 second quarter) from 90.7 in the third quarter of 2000. Due to current
economic conditions, the regional trucking subsidiaries continue to monitor and
maintain a reduced work force. When compared to November of 2000 which is
normally one of the strongest parts of the year, the work force is approximately
3.8% lower (amounting to 700 workers). Since the end of the third quarter, the
work force has been further reduced bringing total reductions, compared to
September 2000, to approximately 1,000. Despite the work force reductions, labor
and fringe related benefits increased due to annual contractual increases at the
Company's unionized carriers (USF Holland and USF Red Star). Additionally, the
regional trucking subsidiaries continue to experience increases in group health
costs ranging from 12% to 30%. The combined effect from increases in labor and
fringes expenses resulted in an increase in the operating ratio of approximately
2.7 points. Workers' compensation expenses increased as a percentage of revenue
compared to last year's quarter especially at USF Bestway, USF Holland and USF
Dugan. Whereas fuel expense improved in the current year's quarter compared to
last year.
USF Glen Moore, the Company's truckload (TL) carrier reported operating
earnings of $0.4 million at an operating ratio of 98.5 compared to $1.1 million
and an operating ratio of 94.9 in the 2000 quarter as increases in labor,
depreciation and claims expenses were only partially offset by decreases in fuel
costs.
Revenue in the Logistics group decreased by 3.1% to $67.7 million in the
current quarter from $69.8 million in the prior year. USF Processors contributed
lower revenue in the 2001 quarter amounting to approximately $13.4 million
compared to approximately $17.4 million in last year's quarter as volumes from a
major customer were significantly reduced. USF Distribution Services increased
revenue by approximately $1.9 million of which expansion into its new centers in
San Francisco, Orlando and Houston (that were not open in the third quarter of
2000) amounted to $0.9 million, while growth in existing centers in Baltimore,
Irwindale, Fontana and Jersey City contributed approximately $1.0 million. USF
Logistics revenue remained constant in each quarter as gains in Food, and
International business sectors were offset by reductions in its Health and
Technology and Metals sectors.
Earnings in the Logistics group increased by 6.9% compared to the prior
year's quarter to $4.4 million from $4.2 million as USF Logistics reported
improved profits due to lower overhead costs and an improved mix of business in
its Retail and Consumer sectors offset by declines in Metals, Health and
International sectors. USF Distribution, despite incurring startup costs at its
San Francisco, Orlando and Houston centers that were not opened in last year's
third quarter, reported slightly higher profits, and USF Processors reported a
94.2 operating ratio for the quarter despite lower revenue (see paragraph
above).
Revenue in the Freight Forwarding group declined 2.2% to $65.0 million from
$66.4 million in the prior year's quarter. The group reported an operating loss
of $8.8 million (compared to a $2.9 million loss in the 2001 second quarter) in
2001 compared to an operating loss of $1.7 million in the 2000 quarter. Results
in the Freight Forwarding group include USF Worldwide, USF Asia, the Company's
joint venture operation and USF Worldwide Logistics Limited ("Limited"), a UK
freight forwarder. USF Asia continued to grow its operations and recorded third
quarter revenue of approximately $7.3 million and an operating loss of $0.6
million compared to revenue of $4.0 million and an operating loss of $1.0
million last year. Limited, which was acquired in August 2000, recorded revenue
of approximately $7.8 million and an operating profit of $0.3 million. USF
Worldwide reported an operating loss of $8.6 million in the 2001 third quarter
compared to a loss of $0.7 million in the 2000 third quarter as revenue declined
by $10.6 million. Included in Worldwide's third quarter loss was a charge
amounting to $5.9 million relating to severance and other expenses as Worldwide
downsizes its operations due to decreased revenue, brought on by the current
business environment, and expenses associated with the implementation of a new
freight management system in the fourth quarter.
Worldwide's third quarter 2001 loss was slightly less than the 2001 second
quarter loss, before the $5.9 million charge, and gross margins on air freight
forwarding activities were comparable in both quarters.
Corporate and other expenses increased by $1.6 million compared to the 2000
third quarter. Intangible amortization increased by $0.2 million while the
majority of the remaining balance was due to continued efforts to enhance the
Company's information technology.
Liquidity and Capital Resources
Cash flows from operating activities contributed $146.5 million during the
2001 nine months compared to $144.1 million during the same period last year.
Net capital expenditures for the 2001 nine months amounted to approximately
$51.1 million including additions of $7.8 million for revenue equipment, $24.5
million for terminal facilities, $17.0 million for information technology and
for other capital items. Last year for the same period, net capital expenditures
amounted to approximately $159.1 million, including additions of $110.6 million
for revenue equipment, $22.2 million for terminal facilities, $9.8 million for
information technology and for other capital items and the acquisitions of
Tri-Star Transportation and USF Worldwide Limited (the UK freight forwarder).
Cash flows provided by financing activities included $12.6 million of
proceeds from the sale of treasury stock that resulted primarily from the
exercise of stock options occurring mainly in the first quarter.
Total borrowings decreased by $35.3 million during the first nine months of
2001 and the Company's net debt to capital ratio improved to 22.1% compared to
31.3% at December 31, 2000.
The Company's debt includes $150 million of unsecured guaranteed notes that
were floated in late April, 2000 and are due on April 15, 2010 and $100 million
of unsecured guaranteed notes due May 1, 2009.
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 sold $150 million in 8 1/2% guaranteed notes
due April 15, 2010 as part of the $400 million Form S-3 registration statement
filed on January 31, 2000. The net proceeds from the sale of the guaranteed
notes, after deducting underwriting fees and other expenses was approximately
$149 million, was used to repay $100 million in 6 5/8% notes that matured May 1,
2000, to reduce other unsecured lines of credit and to purchase an interest rate
hedge.
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.
On July 24, 2000, the Company announced the authorized buyback of up to 1
million additional shares of its common stock. This repurchase program is not
yet completed. There have been no shares repurchased in the first nine months of
2001. As of Sept. 29, 2001, the Company had repurchased 454,200 shares.
A dividend of 9 1/3 cents per share equivalent to $2.5 million was paid on
October 5, 2001 to shareholders of record on Sept. 21, 2001.
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 average annual interest rates on borrowings under this credit
agreement were approximately 6.2% in the first quarter of 2001.The Company had
no borrowings under this credit agreement in the third quarter of 2001. In
addition, the Company has $100 million of unsecured guaranteed notes with a 6
1/2% fixed annual interest rate and $150 million of unsecured guaranteed notes
with an 8 1/2% interest rate at Sept. 29, 2001. The Company estimates that the
carrying value of the notes approximated their market value at Sept. 29, 2001.
The Company has no hedging instruments outstanding. From time to time, the
Company invests excess cash in overnight money market accounts. At the end of
the third quarter, the Company had approximately $64 million invested in
overnight money market accounts that yielded approximately 3.3%.
Recent Accounting Pronouncements
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") No. 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 No. 101. The implementation of
SAB No. 101 had no effect on income from operations or net income.
Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141 "Business Combinations" and No. 142
"Goodwill and Other Intangible Assets" in July 2001. Among other provisions in
these two statements, all future business combinations will be accounted for
using the purchase method of accounting and use of the pooling-of-interest
method is prohibited. For acquisitions completed after July 1, 2001, goodwill
will not be amortized. In addition, effective January 1, 2002, previously
recorded goodwill and other intangible assets with indefinite lives will no
longer be amortized but will be subject to impairment tests annually. Intangible
assets with finite lives are required to be amortized over their estimated
useful lives. For the three and nine month periods ended Sept. 29, 2001, the
Company recorded amortization of $2.0 million and $5.7 million, respectively.
Management is currently reviewing the final release of these statements to
evaluate the impact on the results of operations and financial statements.
In August 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations. The standard requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which the
obligation is incurred. When the liability is initially recorded, the entity
capitalizes the cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. The standard is effective for 2003. The Company is currently reviewing
the requirements of this new standard and has not yet determined its impact, if
any, on the Company's financial position or results of operations.
In October 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Statement 144 requires that long-lived assets be
measured at the lower of carrying amount or fair value less cost to sell,
whether reported in continuing operations or in discontinued operations. The
standard is effective for 2002 and generally is to be applied prospectively. The
Company is currently reviewing the requirements of this new standard and has not
yet determined its impact, if any, on the Company's financial position or
results of operations.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a party to a number of proceedings brought under
the Comprehensive Environmental Response, Compensation and
Liability Act, (CERCLA). The Company has been made a party to
these proceedings as an alleged generator of waste disposed of
at hazardous waste disposal sites. In each case, the Government
alleges that the parties are jointly and severally liable for
the cleanup costs. Although joint and several liability is
alleged, these proceedings are frequently resolved on the basis
of the quantity of waste disposed of at the site by the
generator. The Company's potential liability varies greatly
from site to site. For some sites the potential liability is de
minimis and for others the costs of cleanup have not yet been
determined. While it is not feasible to predict or determine
the outcome of these proceedings or similar proceedings brought
by state agencies or private litigants, in the opinion of
management, the ultimate recovery or liability, if any,
resulting from such litigation, individually or in the
aggregate, will not materially adversely affect the Company's
financial condition or results of operations and, to the
Company's best knowledge, such liability, if any, will
represent less than 1% of its revenues.
Also, the Company is involved in other litigation arising in
the ordinary course of business, primarily involving claims for
bodily injuries and property damage. In the opinion of
management, the ultimate recovery or liability, if any,
resulting from such litigation, individually or in the
aggregate, will not materially adversely affect the Company's
financial condition or results of operations.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
1. Exhibit 10.1 - Promissory Note of Gerard M. Klaisle,dated
July 31, 2001.
(b) Current Reports on Form 8-K were filed:
1. None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized. Dated the 5th day of
November, 2001.
USFREIGHTWAYS CORPORATION
By: /s/ Christopher L. Ellis
____________________
Christopher L. Ellis
Senior Vice President, Finance and Chief Financial Officer
By: /s/ Robert S. Owen
______________
Robert S. Owen
Controller and Principal Accounting Officer