SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 5, 2003, 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
USF 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
USFreightways Corporation
(Former name or former address, if changed since the last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 12, 2003 27,015,829 shares of common stock were outstanding.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements.
USF Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in Thousands)
As of
________________________________
April 5, December 31,
2003 2002
- -------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 47,298 $ 54,158
Accounts receivable, net 275,109 269,583
Operating supplies and prepaid expenses 41,850 33,180
Deferred income taxes 55,656 53,086
------------ ------------
Total current assets 419,913 410,007
------------ ------------
Property and equipment, net 773,565 760,153
Goodwill 100,955 100,504
Other assets 26,735 24,607
------------ ------------
Total assets $ 1,321,168 $ 1,295,271
------------ ------------
Liabilities and Stockholders' Equity
Current liabilities:
Current debt $ 1,480 $ 367
Accounts payable 66,057 59,691
Accrued salaries, wages and benefits 97,018 89,765
Accrued claims and other 98,037 90,245
------------ -----------
Total current liabilities 262,592 240,068
------------ -----------
Long-term liabilities:
Notes payable and long-term debt 253,065 252,129
Accrued claims and other 86,887 84,079
Deferred income taxes 97,845 99,864
------------ -----------
Total long-term liabilities 437,797 436,072
------------ -----------
Total stockholders' equity 620,779 619,131
---------- -----------
Total liabilities and stockholders' equity $ 1,321,168 $ 1,295,271
----------- -----------
See accompanying Notes to Condensed Consolidated Financial Statements
USF Corporation
Condensed Consolidated Statements of Operations
Unaudited (Dollars in Thousands, Except Per-Share Amounts)
Quarters Ended
_________________________
April 5, March 30,
2003 2002
- -------------------------------------------------------------------------------
Operating revenue:
LTL Trucking $ 488,863 $ 430,218
TL Trucking 31,750 25,317
Logistics 75,675 66,552
Intercompany eliminations (2,586) (1,922)
_______ ________
Total operating revenue 593,702 520,165
Operating expenses:
LTL Trucking 472,051 413,353
TL Trucking 31,227 24,428
Logistics 75,122 64,262
Freight Forwarding-
Asia exit costs - 12,760
Corporate and other 5,236 6,033
Intercompany eliminations (2,586) (1,922)
________ _________
Total operating expenses 581,050 518,914
Income from operations 12,652 1,251
________ _________
Non-operating income (expense)
Interest expense (5,292) (5,111)
Interest income 211 347
Other, net (255) (209)
________ ________
Total non-operating expense (5,336) (4,973)
________ ________
Income/(loss)from continuing operations 7,316 (3,722)
before income taxes, and cumulative
effects of accounting changes
Income tax expense (3,076) (3,079)
_______ _______
Income/(loss) from continuing operations 4,240 (6,801)
before cumulative effects of
accounting changes
Discontinued operations:
Loss from operations, net of tax (7) (862)
benefits of $5 and $484, respectively _______ _______
Income/(loss) before cumulative effect of 4,233 (7,663)
accounting changes
Cumulative effect of change in accounting (1,467) -
for revenue recognition, net of tax
benefits of $1,064
Cumulative effect of change in - (70,022)
accounting for goodwill
______ _______
Net income/(loss) $ 2,766 $ (77,685)
====== =======
Income/(loss)per share from continuing operations:
Basic $ 0.16 $ (0.25)
Diluted 0.16 (0.25)
Loss per share from discontinued operations:
Basic - (0.03)
Diluted - (0.03)
Loss per share - cumulative effects of
changes in accounting:
Basic (0.06) (2.61)
Diluted (0.06) (2.61)
Income/(loss) per share: Basic 0.10 (2.89)
Diluted 0.10 (2.89)
Average shares outstanding:Basic 27,005,067 26,798,022
Diluted 27,124,223 26,798,022
See accompanying Notes to Condensed Consolidated Financial Statements.
USF Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in Thousands)
Quarters Ended
____________________
April 5, March 30,
2003 2002
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net income/(loss) $ 2,766 $ (77,685)
Net loss from discontinued operations 7 862
-------- --------
Income/(loss) from continuing operations after 2,773 (76,823)
cumulative effect of accounting change
Adjustments to reconcile net income/ (loss) from
continuing operations after accounting change to
net cash provided by operating activities:
Depreciation of property and equipment 25,903 24,085
Cumulative effects of accounting changes 1,467 70,022
Amortization of intangible assets 259 312
Deferred taxes (4,589) (7,428)
Gains on sale of property and equipment (722) (533)
Increase/ (decrease) in other items affecting 9,759 (8,663)
cash from operating activities
--------- ---------
Net cash provided by operating activities 34,850 972
--------- ---------
Cash flows from investing activities:
Acquisitions (1,883) -
Capital expenditures (37,436) (26,370)
Proceeds from sale of property and equipment 1,991 2,657
Disposition of USF Asia - (6,000)
--------- ----------
Net cash used in investing activities (37,328) (29,713)
--------- ----------
Cash flows from financing activities:
Dividends paid (5,040) (2,478)
Employee and director stock transactions 1,739 4,977
Repurchase of common stock (336) -
Payments on long-term bank debt (255) (137)
Net change in short-term bank debt (490) (156)
--------- ----------
Net cash (used in)/ provided by financing activities (4,382) 2,206
--------- ----------
Net cash provided by discontinued operations - 7,506
--------- ----------
Net decrease in cash (6,860) (19,029)
--------- ----------
Cash at beginning of period 54,158 72,105
--------- ----------
Cash at end of period $ 47,298 $ 53,076
--------- ----------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 157 $ 65
Income taxes 1,170 6,839
Non-cash transactions: debt assumed in connection 2,794 -
with acquisition
See accompanying Notes to Condensed Consolidated Financial Statements.
USF Corporation
Condensed Consolidated Statements of Changes in Stockholders' Equity
Unaudited (Dollars in Thousands)
Quarters Ended
_______________________
April 5, March 30,
2003 2002
Balance as of December 31, 2002, and 2001, $ 619,131 $ 687,652
respectively
Net income/(loss) 2,766 (77,685)
Foreign currency translation adjustments - (135)
-------- -------
Comprehensive income/(loss) 2,766 (77,820)
Employee and director stock transactions 1,739 4,977
Repurchase of common stock (336) -
Dividends declared (2,521) (2,508)
------- --------
Balance as of April 5, 2003 and
March 30, 2002, respectively $ 620,779 $ 612,301
======= =======
See accompanying Notes to Condensed Consolidated Financial Statements.
Notes to Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share and Per Share Amounts,
unless otherwise indicated)
(Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
These interim financial statements of USF Corporation have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information, the instructions to Quarterly Report on Form
10-Q and Rule 10-01 of Regulation S-X, and should be read in conjunction with
our Annual Report on Form 10-K for the year ended December 31, 2002.
Accordingly, significant accounting policies and other disclosures normally
provided have been omitted since such items are disclosed therein.
In our opinion, the accompanying unaudited condensed consolidated financial
statements reflect all adjustments (including normal recurring adjustments)
necessary to present fairly our consolidated financial position as of April 5,
2003, the consolidated results of our operations for the three-month periods
ended April 5, 2003 and March 30, 2002, and our consolidated cash flows for the
three-month periods ended April 5, 2003 and March 30, 2002. Operating results
for the three-month period ended April 5, 2003 are not necessarily indicative of
the results that may be expected for the year ending December 31, 2003.
Revenue Recognition
Effective January 1, 2003, we changed our method of accounting for revenue
and expense recognition for our less-than-truckload ("LTL") and truckload ("TL")
segments. In 2002, revenue for LTL and TL operations was recognized when freight
was picked up from the customer and direct transportation costs were accrued.
Under the new accounting method, we allocate revenue between reporting periods
for LTL and TL based on relative transit times with expenses recognized as
incurred.
Logistics revenue from warehousing continues to be recognized under the
terms of the various contracts. Revenue from dedicated fleet shipments also
continues to be recognized upon delivery, which is generally the same day as the
pickup. Domestic ocean freight forwarding transportation revenue is recognized
at the time freight is tendered to an ocean going vessel at origin.
2. Earnings per share
Basic earnings/ (loss) per share are calculated on net income/ (loss)
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 are the only
reconciling items between our basic and diluted earnings per share.
The following table presents information necessary to calculate basic and
diluted earnings per share and common equivalent shares.
Quarters ended
______________________________
April 5, 2003 March 30, 2002
_____________ ______________
Weighed-average shares outstanding - basic 27,005,067 26,798,022
Common stock equivalents 119,156 -
__________ __________
Weighted-average shares and equivalent - diluted 27,124,223 26,798,022
========== ==========
Anti-dilutive unexercised stock options excluded 1,496,300 3,015,056
from calculations
3. Debt
Our debt includes $100,000 of unsecured guaranteed notes due May 1, 2009
and $150,000 of unsecured guaranteed notes due April 15, 2010.
Our guaranteed notes are fully and unconditionally guaranteed, on a joint
and several basis, on an unsecured senior basis, by substantially all of our
direct and indirect domestic subsidiaries (the Subsidiary Guarantors ). All of
the assets were owned by the Subsidiary Guarantors and substantially all of our
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
shown in our consolidated financial statements. Our subsidiaries, other than the
Subsidiary Guarantors, are minor. There are no restrictions on our ability to
obtain funds from our subsidiaries by dividend or loan. We, therefore, are not
required to present separate financial statements of our Subsidiary Guarantors,
and other disclosures relating to them.
At April 5, 2003, we have a $200,000 credit facility with a group of banks
that will expire in October 2005. This facility is for working capital, general
corporate funding needs, and up to $125,000 for letters of credit we issue under
our self-insurance program. As of April 5, 2003 we had no borrowings drawn under
the facility, but we had approximately $75,000 in issued letters of credit.
4. Stock repurchases
On July 24, 2000, we announced the authorized buyback of up to 1,000,000
shares of our common stock in either public market or private transactions. This
repurchase program is not yet completed. In February of 2003, we repurchased
14,000 common shares in the public market. The purchase price was $24 per share.
From July 24, 2000 through April 5, 2003, we have repurchased 468,200 shares.
5. Goodwill and other intangible assets
Under Statement of Financial Accounting Standards (SFAS) No. 142 "Goodwill
and Other Intangible Assets", previously recorded goodwill and other intangible
assets with indefinite lives are no longer amortized but are subject to
impairment tests annually. Effective January 1, 2002 amortization of goodwill
ceased under the standard. After implementing this new standard on January 1,
2002, we recorded an impairment charge of $70,000 at USF Worldwide, our
discontinued freight forwarding segment. The charge was shown as a cumulative
effect of change in accounting for goodwill in the 2002 first quarter.
Goodwill and other intangible assets consist of the following:
As of As of
April 5, 2003 March 30, 2002
_______________________ ________________________
Gross Gross
Average Carrying Accumulated Carrying Accumulated
Life (Yrs) Amount Amortization Amount Amortization
__________ ________ ____________ _________ ____________
Amortized intangible assets:
Customer lists 5 $ 6,073 $ (5,337) $ 6,073 $ (4,173)
Non-competes 5 5,156 (5,156) 5,156 (5,138)
________ _________ _______ __________
Total $ 11,229 $(10,493) $ 11,229 $ (9,311)
====== ======= ====== ========
Aggregate amortization expense for the quarters ended April 5, 2003 and March
30, 2002 was $259 and $312, respectively.Estimated amortization expense for 2003
will be approximately $793.
The changes in carrying amounts of goodwill for the quarter ended April 5, 2003
are as follows:
LTL TL Logistics Corporate
And other
Segment Segment Segment Segment Total
_______ _______ _________ __________ ________
Balance as of January 1, 2003 $ 57,273 $ 10,574 $ 32,657 $ - $100,504
Additions - 451 - - 451
________ ________ ________ ________ ________
Balance as of April 5, 2003 $ 57,273 $ 11,025 $ 32,657 $ - $100,955
====== ====== ====== ===== =======
See Footnote 7 - Acquisition, for further details relating to goodwill
additions during the first quarter of 2003.
6. Recent Accounting Pronouncements
On November 25, 2002, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness to Others
("Interpretation"), which elaborates on the disclosures to be made by a
guarantor about its obligations under certain guarantees issued. It also
clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The Interpretation expands on the accounting guidance of
Statement of Financial Accounting Standards ("SFAS") No. 5, Accounting for
Contingencies, SFAS No. 57 Related Party Disclosures, and SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The Interpretation also
incorporates, without change, the provisions of FASB Interpretation No. 34,
Disclosure of Indirect Guarantees of Indebtedness of Others, which it
supersedes. The Interpretation does identify several situations where the
recognition of a liability at inception for a guarantor's obligation is not
required. The initial recognition and measurement provisions of Interpretation
45 apply on, a prospective basis to guarantees issued or modified after December
31, 2002, regardless of the guarantor's fiscal year-end. The disclosures are
effective for financial statements of interim or annual periods ending after
December 15, 2002. Adoption of this Interpretation did not have a material
impact on our financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123". This Statement amends FASB Statement No. 123, "Accounting for Stock-Based
Compensation" to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. Finally,
this Statement amends Accounting Principals Board ("APB") Opinion No. 28,
"Interim Financial Reporting" to require disclosure about those effects in
interim financial information. The amendments to Statement No. 123 in paragraphs
2(a) - 2(e) of this Statement are effective for financial statements for fiscal
years ending after December 15, 2002. The amendment to Statement No. 123 in
paragraph 2(f) of this Statement and the amendment to Opinion No. 28 in
paragraph 3 is effective for financial reports containing condensed financial
statements for interim periods beginning after December 15, 2002. As is allowed,
the Company is adopting only the disclosure requirements under SFAS No. 148.
7. Acquisition
In February 2003, USF Glen Moore acquired the stock of System 81 Express,
Inc. a truckload carrier based in Tennessee for approximately $4,700 in cash and
assumed debt. After conducting a preliminary purchase price allocation, we
estimate that resultant goodwill will be $451. Contingent payments, to the
former owners of System 81 Express, of approximately $320 based upon driver and
revenue retention goals may be paid during the 2003 second quarter. System 81
Express owned and or operated 136 tractors and 260 trailers and reported revenue
in 2002 of approximately $16,000. The acquisition contributed approximately
$1,300 in revenue to USF Glen Moore's total revenue during the first quarter of
2003.
8. Segment Reporting Quarters Ended
(Dollars in Thousands) _________________________
April 5, March 30,
2003 2002
- ------------------------------------------------------------------------------
Revenue
LTL Group:
USF Holland $ 258,575 $ 224,275
USF Reddaway 71,349 61,705
USF Red Star 60,297 60,090
USF Dugan 59,215 49,990
USF Bestway 39,427 34,158
- -------------------------------------------------------------------------------
Subtotal LTL Group 488,863 430,218
Truckload - USF Glen Moore 31,750 25,317
Logistics 75,675 66,552
Intercompany eliminations (2,586) (1,922)
Corporate and other - -
- -------------------------------------------------------------------------------
Total revenue from continuing operations $ 593,702 $ 520,165
Income/(loss) from operations
LTL Group:
USF Holland $ 15,650 $ 13,580
USF Reddaway 5,627 3,691
USF Red Star (5,294) (2,427)
USF Dugan (501) 627
USF Bestway 1,330 1,394
- -------------------------------------------------------------------------------
Subtotal LTL Group 16,812 16,865
Truckload - USF Glen Moore 523 889
Logistics 553 2,290
Freight forwarding - Asia exit costs - (12,760)
Corporate and other (4,977) (5,721)
Amortization of intangibles (259) (312)
- -------------------------------------------------------------------------------
Total income from operations $ 12,652 $ 1,251
- -------------------------------------------------------------------------------
9. Stock-based Compensation
SFAS No. 123, "Accounting for Stock Based Compensation" establishes a fair
value based method of accounting for stock options. We have elected to continue
using the intrinsic value method prescribed under Accounting Principles Board
No. 25 as permitted by SFAS No. 123. If we had elected to recognize compensation
cost based on the fair value of the options at grant date, as prescribed by SFAS
No. 123, our net income and earnings per share would have been reduced to the
proforma amounts indicated in the table below:
Quarters Ended
______________________
April 5, March 30,
2003 2002
______ ________
Net income / (loss), as reported $ 2,766 $ (77,685)
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax benefits (1,263) (1,275)
_________ _________
Pro forma net income/ (loss) $ 1,503 $ (79,960)
Earnings/ (loss) per share:
Basic - as reported $ 0.10 $ (2.89)
Basic - proforma $ 0.06 $ (2.95)
Diluted - as reported $ 0.10 $ (2.89)
Diluted - proforma $ 0.06 $ (2.95)
10. Discontinued Freight Forwarding Segment (Presented in Financial Statements
as Discontinued Operations)
On October 30, 2002, we sold our freight forwarding businesses, USF
Worldwide, Inc. and USF Worldwide Logistics (UK) to GPS Logistics, Inc. and Seko
Worldwide Acquisitions LLC (collectively "the Transferees"). As part of the
agreement, the Transferees returned their interest in certain assets (now
operating as our Ocean forwarding division within our Logistics segment) to us
late in December 2002. The results of the freight forwarding business that was
sold are presented in our financial statements as Discontinued Operations.
As part of our divestiture of the USF Worldwide Group, our non-core freight
forwarding business, $6,000 in loans made to Asia in January 2002 were forgiven.
11. Subsequent Event
On April 14, 2003, USF Red Star acquired, for $3,000 in cash, certain
assets and the business of Plymouth Rock Transportation Corporation, a
Massachusetts based LTL carrier that provided overnight freight service to 11
Northeastern states. Contingent purchase price payments may be made to the
former owners of Plymouth Rock Transportation Corporation if certain retained
revenue goals are achieved. The earliest contingent purchase price payment would
be made in the 2004 third quarter.
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations.
RESULTS OF OPERATIONS
We ("USF Corporation") reported net income for the quarter ended April 5,
2003 of $2.8 million, compared to a net loss of $77.7 million that was reported
for the quarter ended March 30, 2002.
The net income per share for the current year's quarter was equivalent to
$0.10 diluted earnings per share. The net loss per share for the 2002 quarter
amounted to $2.89. Earnings in the current quarter from continuing operations
includes less-than-truckload ("LTL") regional trucking companies, truckload
("TL"), logistics and Corporate and Other segments amounted to $0.16 diluted
earnings per share compared to a $0.25 diluted loss per share in the 2002 first
quarter. Included in the 2002 first quarter loss from continuing operations was
a $12.8 million charge (equivalent to $0.47 diluted loss per share) to
relinquish our interest in a non-core Asian joint venture. Before this charge,
diluted earnings per share from continuing core operations were $0.22. In the
2003 quarter, we reported a small after tax loss relating to contractual
services provided to our former freight forwarding segment (reported as
discontinued operations - see Footnote 10) compared to an after tax loss from
discontinued operations of $0.9 million (equivalent to a $0.03 loss per diluted
share) in the 2002 quarter. On January 1, 2003, we changed our method of
accounting for revenue recognition in our LTL and TL segments, resulting in an
after tax cumulative effect of change in accounting charge of $1.5 million
(equivalent to a loss of $0.06 per diluted share) - see Footnote 1 and LTL
discussion below. In the 2002 quarter, we reported a cumulative effect of change
in accounting (required under Statement of Financial Accounting Standards
("SFAS") No. 142 "Goodwill and Other Intangible Assets") for goodwill impairment
that amounted to $70 million (equivalent to a $2.61 loss per diluted share) in
our discontinued operations segment.
We reported revenue from continuing operations for the 2003 first quarter
of $593.7 million, a 14.1% increase over the $520.2 million reported for the
2002 first quarter. This year's quarter included 67 working days compared to
62.5 working days in the 2002 first quarter. On a daily basis, total operating
revenue increased 6.5% over last year's quarter.
LESS-THAN-TRUCKLOAD
On January 1, 2003, we changed the method of accounting for revenue
recognition in our LTL and TL business segments. Instead of recognizing revenue
and direct transportation costs at pick up, revenue is now recognized by the
allocation of revenue between reporting periods based on the relative transit
time in each reporting period with expenses recognized as incurred.
Total revenue for the current quarter at the regional trucking subsidiaries
increased 13.6% to $488.9 million compared to $430.2 million in the 2002 first
quarter. Revenue from our USF PremierPlus SM ("PremierPlus") product (revenue
from shipments moving between our regional trucking subsidiaries) which
accounted for 9.8% of total revenue in the regional trucking subsidiaries in the
2002 first quarter increased by 46% and accounted for 12.7% of total revenue in
the current quarter.
As mentioned above, there were 67 and 62.5 working days, respectively, in
the current year's and last year's quarter. On a comparable working day basis,
total revenue in the 2003 first quarter increased by 6.0% over the first quarter
of 2002. Fuel surcharges, which are included in the reported revenue, increased
by 442% percent to $20.6 million in the current quarter from $3.7 million in
last year's first quarter. First quarter 2003 revenue before fuel surcharges
increased approximately 9.8% compared to the 13.6% increase reported above,
which includes fuel surcharges.
Beginning this quarter, we are supplying on our Web site (www.ir.usfc.com)
LTL operating statistics in a new format which, we believe, more accurately
reflects shipment and pricing details. Specifically, PremierPlus shipments
(long haul shipments that are handled by two USF regional companies) are now
presented as a single shipment in the statistics, with the revenue and shipment
being attributed to the originating trucking company. Additionally, these
statistics are presented on an as-billed basis and not as presented in the
financial statements. Differences between the operating statistics data and
reported revenue in the financial statements result from, among other items,
revenue recognition between accounting periods, adjustments for volume discounts
that are not attributable to specific invoices and other adjustments to invoices
that occur during later periods.
In prior quarters, the operating statistics presented PremierPlus shipments
in each of our LTL companies that handled the shipment and attributed each
company its portion of the revenue. While this prior treatment was consistent
throughout all reporting periods and also consistent with statistics as filed
with the U.S. Department of Transportation on its quarterly Form QFR, the total
shipment count for our overall LTL trucking group was greater than the actual
shipments handled. This revised presentation eliminates this double counting of
PremierPlus shipments.
LTL shipments increased 6.9% over last year's first quarter and LTL tonnage
increased 7.7%. Billed LTL revenue per shipment increased 7.5% from $118.95 to
$127.84, including fuel surcharges. Billed LTL revenue per hundredweight also
increased by 6.7%, from $10.57 to $11.27. Average weight per LTL shipment was
1,134 pounds in the current quarter compared to 1,126 pounds in the 2002 first
quarter. Per working day LTL shipments and LTL tons were essentially flat
compared to last year. Overall average length of haul increased 5.4% in the
current quarter to 488 miles compared to 463 miles in last year's first quarter.
Operating earnings for the regional trucking subsidiaries, in the current
year's quarter, were $16.8 million compared to $16.9 million for the same period
of 2002. The consolidated operating ratio - direct operating costs as a
percentage of revenue("OR") for the LTL group increased to 96.6 from 96.1 in the
first quarter of 2002. Earnings were affected by a very difficult economic
environment and severe adverse winter weather (mainly in the USF Red Star and
USF Dugan service areas) that reduced earnings by approximately three cents per
share. Nevertheless,USF Reddaway reported improved first quarter results,
growing revenue by 15.6% and improving its OR in the current quarter to 92.1
compared to last year's 94.0 as it improved operating efficiencies and reduced
labor costs as a percentage of revenue. USF Holland increased revenue by 15.3%
(11.4% before fuel surcharge revenue) and operating profits by 15.2%, it also
reported an OR of 93.9, the same as last year's. USF Holland's operating ratio
was maintained as increased fuel costs as a percentage of revenue were offset by
lower labor costs. USF Bestway's revenue increased by 15.4%, but its OR
increased to 96.6 in the quarter compared to 95.9 last year, primarily from
higher purchased transportation expenses. USF Dugan's revenue grew 18.4% (13.9%
before fuel surcharge revenue) and it reported an OR of 100.8 compared to 98.7
in 2002 as fuel, labor and purchased transportation expenses increased due in
part to severe winter weather. USF Red Star's results were adversely impacted by
severe winter weather in the current quarter and also the phase out of low yield
business from one of its largest customers (see further USF Red Star discussion
below). As a result, USF Red Star reported a first quarter OR of 108.8 compared
to 104.0 last year on virtually the same revenue.
USF Red Star has begun efforts to return to profitability. Included in
these efforts is the gradual elimination during the first quarter 2003 of
approximately $30 million of low yield revenue and associated costs from its
largest customer. However, the costs, mainly vehicles and employees, to service
this business lag revenue decreases.
Replacement revenue was obtained when USF Red Star acquired, in mid-April,
certain assets and the business of Plymouth Rock Transportation Corporation; a
Massachusetts based LTL carrier that provided overnight freight service to 11
Northeastern states. Plymouth Rock reported approximately $37 million of annual
revenue in Fiscal 2002. USF Red Star expects to retain a majority of this
revenue and that it will be profitable. This acquisition had no effect on USF
Red Star's first quarter results.
TRUCKLOAD
USF Glen Moore recorded a 25.4% revenue increase (19.4% before fuel
surcharge revenue) to $31.7 million in the current quarter compared to $25.3
million in the 2002 first quarter. USF Glen Moore's operating earnings were $0.5
million and it had an OR of 98.3, compared to $0.9 million profit and an OR of
96.5 in last year's first quarter. This year's OR was negatively impacted by
approximately 2.0 operating points from rising fuel costs. The TL industry,
generally, has more difficulty in recouping fuel price increases than the LTL
industry. At the beginning of the 2003 first quarter, USF Glen Moore increased
the estimate for depreciable lives for a portion of its tractor fleet to match
service life experience. Tractor lives were extended from five to seven years
and as a result, USF Glen Moore recorded a current quarter decrease in
depreciation expense of approximately $0.6 million. In late February 2003, USF
Glen Moore acquired System 81, a small truckload company based in Tennessee,
which contributed approximately $1.3 million in revenue in the 2003 first
quarter (see Acquisition Footnote 7).
LOGISTICS
Revenue for the Logistics group was $75.7 million, a 13.8% increase
compared to last year's first quarter of $66.5 million. Its ocean forwarding
division that was acquired late in 2002 (see Footnote 10 -Discontinued Freight
Forwarding Segment) generated $7.1 million of the revenue increase and was
profitable. The group recorded an operating profit of $0.6 million compared to
$2.3 million last year. Included in this year's first quarter results was a $2.0
million charge relating to the bankruptcy of one of its customers - Fleming
Companies, Inc. Profits in the cross-dock division, that are heavily influenced
by its retail customer base, were lower in the 2003 first quarter compared to
last year's first quarter as a result of a sluggish economy. USF Processors
contributed $9.1 million in revenue in the current quarter compared to $9.6
million last year and reported a small profit in the current quarter which was a
significant improvement over a loss reported last year as it finalized claims
from one of its largest customers.
FREIGHT FORWARDING - ASIA EXIT COSTS
Freight Forwarding - Asia exit costs are the $12.8 million charge taken in
the 2002 first quarter to relinquish our interest in USF Asia; our former
non-core Asian joint venture. (see also Footnote 10 - Discontinued Operations).
CORPORATE AND OTHER
Corporate and Other expenses decreased by $0.8 million to $5.2 million in
the 2003 first quarter compared to $6.0 million in the 2002 first quarter. Net
expenses in our information technology group ("IT") were lower than last year,
as several major software development projects that were begun in 2002 and were
in the non-capitalizable initial phases last year (under accounting rule SOP
98-1), are now moving into phases where these development costs may be
capitalized.
In addition, expenses related to large insurance claims that are reserved
at the corporate level were lower in the current quarter compared to last
year's first quarter due to improved claims' experience.
Amortization of non-goodwill intangible assets amounted to $0.2 million in
the current quarter compared to $0.3 million in last year's first quarter.
Discontinued Operations
On October 30, 2002, we sold our non-core freight forwarding businesses,
USF Worldwide, Inc. and USF Worldwide Logistics (UK). Results of operations in
the 2002 first quarter are reported under discontinued operations in our
statements of operations and cash flows (See Footnote 10 - Discontinued
Operations).
Income Taxes
Income tax expense is calculated on income from continuing operations
before income taxes and cumulative effects of accounting changes and before the
$12.8 million Asia exit costs (in the 2002 first quarter as there were no tax
benefits associated with this charge). There were also no tax benefits
associated with the $70 million cumulative effect of change in accounting for
goodwill in the 2002 first quarter. State income tax refunds, in the 2002 first
quarter, lowered the effective tax rate.
The following table provides an analysis of the effective tax rates for the
first quarters of 2003 and 2002:
First Qtr. First Qtr.
2003 2002
_______ ______
Reported income/ (loss) from continuing operations 7,316 (3,722)
before income taxes, and cumulative effects of
accounting changes
Add back Asia exit costs - 12,760
_____ ______
Income subject to income taxes 7,316 9,038
Income tax expense (3,076) (3,079)
Effective tax rate - reported 42.0% 34.1%
Subtract from income taxes:
Net state tax refunds received - 636
_____ _____
Adjusted income tax expense (3,076) (3,715)
Effective tax rate - adjusted 42.0% 41.1%
OTHER MATTERS
A five-year National Master Freight Agreement ("NMFA") was negotiated and
ratified by the International Brotherhood of Teamsters replacing the agreement
that expired March 31, 2003. This agreement affects USF Holland and USF Red Star
primarily.
Mr. Samuel K. Skinner, our Chairman, President and Chief Executive Officer,
announced on April 1, 2003 his intended retirement from USF. The search for a
new Chief Executive Officer is underway and a selection is expected this summer.
In order to ensure a smooth succession to Mr. Skinner, a transition committee
has been formed consisting of Mr. Skinner; Neil Springer, our lead director;
Chris Ellis, our Chief Financial Officer; Gerrard Klaisle, our Senior Vice
President, Human Resources; Pete Neydon, President of our Eastern Carrier Group
and Jared McArthur, President of our Western Carrier Group.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities contributed $34.8 million during the
first quarter of 2003 compared to $1 million during the same period last year.
Our net loss of $77.7 million in the 2002 first quarter included a non-cash
charge for a write-off of goodwill of $70 million in our discontinued operations
and a $12.8 million charge (including a $10 million cash payment) to relinquish
our interest in our non-core Asian joint venture. Non-cash expenses in net
income included depreciation of property and equipment and amortization of
non-goodwill intangibles along with the aforementioned non-cash goodwill
write-off of $70 million.
Other items affecting cash from operating activities included in the
increase /(decrease) in accounts receivable and other for the 2003 first quarter
amounting to $5.8 million, including an increase of $3.6 million in accounts
receivable, an increase of $4.6 million in deferred tax assets and an increase
in other current assets of $8.4 million. These were offset by increases in
accounts payable and other liabilities amounting to $22.8 million. Last year's
net increase in accounts receivable and other amounting to $ (15.7) million,
were due mainly to increases in accounts receivables of $6.2 million and $ 7.4
million of increases in deferred tax assets.
Capital expenditures for the 2003 first quarter amounted to approximately
$37 million including additions of $12 million for revenue equipment, $12
million for terminal facilities, $10 million for information technology and $3
million for other capital items. Last year for the same period, capital
expenditures amounted to approximately $26 million, including additions of $10
million for revenue equipment, $8 million for terminal facilities, $2 million
for IT equipment and $6 million for other capital items.
USF Glen Moore acquired System 81, a Tennessee based truckload carrier, in
February 2003 for $1.9 million in cash and assumed debt of $2.8 million.
Total borrowings decreased by $0.7 million during the first quarter of 2003
and we had approximately $42.9 million invested in overnight money market
deposits. Our net debt to capital ratio (decreasing debt by cash) was 25.0% at
April 5, 2003 compared to 24.3% at December 31, 2002.
Our 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.
Our guaranteed notes are fully and unconditionally guaranteed, on a joint
and several basis, on an unsecured senior basis, by substantially all of our
direct and indirect domestic subsidiaries (the Subsidiary Guarantors ). All of
the assets were owned by the Subsidiary Guarantors and substantially all of our
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
shown in our consolidated financial statements. Our subsidiaries, other than the
Subsidiary Guarantors, are minor. There are no restrictions on our ability to
obtain funds from our subsidiaries by dividend or loan. We, therefore, are not
required to present separate financial statements of our Subsidiary Guarantors,
and other disclosures relating to them.
At April 5, 2003, we have a $200 million credit facility with a group of
banks that will expire in October 2005. This facility is for working capital,
general corporate funding needs, and up to $125 million for letters of credit we
issue under our self-insurance program. As of April 5, 2003 we had no borrowings
drawn under the facility, but we had approximately $75 million in issued letters
of credit.
The facility bears interest at LIBOR plus a margin depending on our debt
rating. In addition, there are other fees associated with the facility and
certain financial covenants including minimum net worth and maximum funded debt
to adjusted cash flow.
On July 24, 2000, we announced the authorized buyback of up to 1 million
shares of our common stock in either public market or private transactions. This
repurchase program is not yet completed. In February of 2003, we repurchased
14,000 common shares in the public market at $24 per share. There were no
shares repurchased in the first quarter of 2002. From July 24, 2000 through
April 05, 2003, we have repurchased 468,200 shares.
A dividend of 9 1/3 cents per share equivalent to $2.5 million was paid on
April 3, 2003 to shareholders of record on March 21, 2003. Our 2002 fourth
quarter dividend of $2.5 million was paid on January 3, 2003.
RECENT ACCOUNTING PRONOUNCEMENTS
On November 25, 2002, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness to Others
("Interpretation"), which elaborates on the disclosures to be made by a
guarantor about its obligations under certain guarantees issued. It also
clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The Interpretation expands on the accounting guidance of
Statement of Financial Accounting Standards ("SFAS") No. 5, Accounting for
Contingencies, SFAS No. 57 Related Party Disclosures, and SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The Interpretation also
incorporates, without change, the provisions of FASB Interpretation No. 34,
Disclosure of Indirect Guarantees of Indebtedness of Others, which it
supersedes. The Interpretation does identify several situations where the
recognition of a liability at inception for a guarantor's obligation is not
required. The initial recognition and measurement provisions of Interpretation
45 apply on a prospective basis to guarantees issued or modified after December
31, 2002, regardless of the guarantor's fiscal year-end. The disclosures are
effective for financial statements of interim or annual periods ending after
December 15, 2002. Adoption of this Interpretation did not have a material
impact on our financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123". This Statement amends FASB Statement No. 123, "Accounting for Stock-Based
Compensation" to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. Finally,
this Statement amends Accounting Principals Board ("APB") Opinion No. 28,
"Interim Financial Reporting" to require disclosure about those effects in
interim financial information. The amendments to Statement No. 123 in paragraphs
2(a) - 2(e) of this Statement are effective for financial statements for fiscal
years ending after December 15, 2002. The amendment to Statement No. 123 in
paragraph 2(f) of this Statement and the amendment to Opinion No. 28 in
paragraph 3 is effective for financial reports containing condensed financial
statements for interim periods beginning after December 15, 2002. As is allowed,
the Company is adopting only the disclosure requirements under SFAS No. 148.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to the impact of interest rate changes. Our 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. There have
been no borrowings under this agreement in the 2003 first quarter nor during
2002. In addition, we have $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 April 5, 2003. We have no hedging instruments. From time
to time, we invest excess cash in overnight money market accounts. At April 5,
2003, we had invested approximately $43 million in overnight money market
accounts that yielded approximately 1.1% per annum.
At April 5, 2003, we have a $200 million credit facility with a group of
banks that will expire in October 2005. This facility is for working capital,
general corporate funding needs, and up to $125 million for letters of credit we
issue under our self-insurance program. As of April 5, 2003 we had no borrowings
drawn under the facility, but we had approximately $75 million in issued letters
of credit.
The facility bears interest at LIBOR plus a margin depending on our debt
rating. In addition, there are other fees associated with the facility and
certain financial covenants including minimum net worth and maximum funded debt
to adjusted cash flow.
Item 4. Controls and Procedures
In order to ensure information for disclosure in our filings of periodic
reports with the Securities and Exchange Commission is identified, recorded,
processed, summarized and reported on a timely basis, we have adopted disclosure
controls and procedures. Our Chief Executive Officer, Samuel K. Skinner, and our
Chief Financial Officer, Christopher L. Ellis, have reviewed and evaluated our
disclosure controls and procedures as of May 12, 2003 and have concluded that
our disclosure controls and procedures were adequate as of that date.
There have been no significant changes in our internal controls, which we
define to include our control environment, control procedures, and accounting
systems, or in other factors that could significantly affect our internal
controls, since May 12, 2003.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
Our trucking subsidiaries are parties to a number of proceedings brought
under the Comprehensive Environmental Response, Compensation and Liability Act,
(CERCLA). They have been made parties 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. Our 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. It is not feasible to
predict or determine the outcome of these or similar proceedings brought by
state agencies or private litigants. However, we believe the ultimate recovery
or liability, if any, resulting from such litigation, individually or in total,
would not materially adversely affect our financial condition or results of
operations. We believe such liability, if any, would represent less than 1% of
our annual revenue.
Our USF Dugan subsidiary is currently the subject of a criminal
investigation by the City of Houston and an administrative investigation by the
Texas Commission on Environmental Quality arising from inadvertent diesel
releases from USF Dugan's Northfield facility located in Houston, Texas. USF
Dugan has taken measures to respond to the environmental effects of these
releases and to curtail further releases. USF Dugan has also brought suit
against the environmental consultant who reviewed the Northfield facility prior
to USF Dugan's acquisition of the property in 1998. We believe the ultimate
liability, if any, resulting from such litigation, individually or in total,
would not materially adversely affect our financial condition or results of
operations.
Also, we are involved in other litigation arising in the ordinary course of
business, primarily involving claims for bodily injury, property damage, and
workers' compensation. We believe the ultimate recovery or liability, if any,
resulting from such litigation, individually or in total, would not materially
adversely affect our financial condition or results of operations.
Item 2. Changes in Securities and Use of Proceeds.
N/A
Item 3. Defaults Upon Senior Securities.
N/A
Item 4. Submission of Matters to a Vote of Security Holders.
N/A
Item 5. Other Information.
N/A
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
18. Letter re: Change in Accounting Principle
99.1 Statement of Chief Executive Officer Pursuant to Section
1350(a) of Title 18, United States Code (furnished not filed
with this Quarterly Report on Form 10-Q)
99.2 Statement of Chief Financial Officer Pursuant to Section
1350(a) of Title 18, United States Code (furnished not filed
with this Quarterly Report on Form 10-Q)
(b) Current Reports on Form 8-K were filed:
1. A Current Report on Form 8-K was filed on April 1,
2003 announcing that USF Corporation's Chairman, President
and Chief Executive Officer, Samuel K. Skinner intended to
retire.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, we have duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized. Dated the 12th day of May, 2003.
USF 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
CERTIFICATIONS
I, Samuel K. Skinner, certify that:
1. I have reviewed this quarterly report on Form 10-Q of USF Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 12, 2003
/s/ Samuel K. Skinner
_____________________
Samuel K. Skinner
President and Chief Executive
Officer
CERTIFICATIONS
I, Christopher L. Ellis, certify that:
1. I have reviewed this quarterly report on Form 10-Q of USF Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of the registrant's board of directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 12, 2003
/s/ Christopher L. Ellis
________________________
Christopher L. Ellis
Senior Vice President, Finance, and
Chief Financial Officer
EXHIBIT 18.
LETTER RE: CHANGE IN ACCOUNTING PRINICPLE
May 9, 2003
USF Corporation
8550 West Bryn Mawr Avenue
Chicago, Illinois 60631
Dear Sirs/Madams:
At your request, we have read the description included in your Quarterly Report
on Form 10-Q to the Securities and Exchange Commission for the quarter ended
April 5, 2003, of the facts relating to the Company's change from its method of
accounting in which revenue is recognized when freight is accepted from the
customer with accrual of the estimated direct costs to complete the delivery to
the method of accounting in which revenue is recognized based upon the relative
transit time in each reporting period with expenses recognized as incurred. We
believe, on the basis of the facts so set forth and other information furnished
to us by appropriate officials of the Company, that the accounting change
described in your Form 10-Q is to an alternative accounting principle that is
preferable under the circumstances.
We have not audited any consolidated financial statements of USF Corporation and
its subsidiaries as of any date or for any period subsequent to December 31,
2002. Therefore, we are unable to express, and we do not express, an opinion on
the facts set forth in the above-mentioned Form 10-Q, on the related information
furnished to us by officials of the Company, or on the financial position,
results of operations, or cash flows of USF Corporation and its subsidiaries as
of any date or for any period subsequent to December 31, 2002.
Sincerely,
/s/ Deloitte & Touche LLP
_____________________
Deloitte & Touche LLP
Chicago, Illinois
EXHIBIT 99.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350(a)
In connection with the accompanying Quarterly Report on Form 10-Q of USF
Corporation for the quarter ended April 5, 2003, I, Samuel K. Skinner, President
and Chief Executive Officer of USF Corporation, hereby certify pursuant to 18
U.S.C. Section 1350(a), as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, to the best of my knowledge and belief, that:
(1) such Quarterly Report on Form 10-Q for the quarter ended April 5, 2003,
fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) the information contained in such Quarterly Report on Form 10-Q for the
quarter ended April 5, 2003, fairly presents, in all material respects, the
financial condition and results of operations of USF Corporation.
A signed original of this written statement required by Section 906 has been
provided to USF Corporation and will be retained by USF Corporation and
furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Samuel K. Skinner
________________
Samuel K. Skinner
President and Chief Executive Officer
Date: May 12, 2003
EXHIBIT 99.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350(a)
In connection with the accompanying Quarterly Report on Form 10-Q of USF
Corporation for the quarter ended April 5, 2003, I, Christopher L. Ellis, Senior
Vice President, Finance and Chief Financial Officer of USF Corporation, hereby
certify pursuant to 18 U.S.C. Section 1350(a), as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief,
that:
(1) such Quarterly Report on Form 10-Q for the quarter ended April 5, 2003,
fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) the information contained in such Quarterly Report on Form 10-Q for the
quarter ended April 5, 2003, fairly presents, in all material respects, the
financial condition and results of operations of USF Corporation.
A signed original of this written statement required by Section 906 has been
provided to USF Corporation and will be retained by USF Corporation and
furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Christopher L. Ellis
____________________
Christopher L. Ellis
Senior Vice President, Finance and Chief Financial Officer
Date: May 12, 2003