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
JUNE 29, 1996, 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.)
9700 Higgins Road, Rosemont, Illinois 60018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
including area code: (847) 696-0200
TNT Freightways 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 August 9, 1996, 22,521,098 shares of common stock were outstanding.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements.
USFreightways Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in thousands)
June 29, December 30,
1996 1995
- --------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 4,849 $ 1,707
Accounts receivable, net 151,658 118,107
Other 43,487 38,797
-------------- --------------
Total current assets 199,994 158,611
-------------- --------------
Net property and equipment 380,088 338,846
Net intangible assets 70,950 69,918
Other assets 10,410 10,819
-------------- --------------
Total assets $ 661,442 $ 578,194
-------------- --------------
Liabilities and Stockholders' Equity
Current liabilities:
Current bank debt $ 333 $ 333
Accounts payable 39,608 36,209
Other current liabilities 108,898 91,942
-------------- --------------
Total current liabilities 148,839 128,484
-------------- --------------
Long-term liabilities:
Long-term bank debt 85,194 37,333
Notes payable 100,000 100,000
Other long-term liabilities 83,954 79,225
-------------- --------------
Total long-term liabilities 269,148 216,558
-------------- --------------
Common stockholders' equity 243,455 233,152
-------------- --------------
Total liabilities and stockholders' equity $ 661,442 $ 578,194
-------------- --------------
USFreightways Corporation
Consolidated Statements of Income
Unaudited (Dollars in thousands, except per-share amounts)
Three months ended
--------------------------------------
June 29, July 1,
1996 1995
- --------------------------------------------------------------------------------
Operating revenue $ 332,089 $ 287,193
Operating expenses:
Salaries, wages and benefits 210,097 182,384
Purchased transportation 12,647 11,032
Operating expenses and supplies 45,666 36,201
Operating taxes and licenses 13,967 12,240
Insurance and claims 5,997 4,315
Communications and utilities 3,994 3,200
Depreciation and equipment leases 15,785 12,382
Building and office equipment rents 3,707 3,274
Amortization of intangible assets 597 714
Other operating expenses 2,401 1,989
----------------- -----------------
Total operating expenses 314,858 267,731
----------------- -----------------
Income from operations 17,231 19,462
----------------- -----------------
Non-operating income (expense):
Interest expense (2,834) (2,136)
Interest income 159 176
Other, net (280) (366)
----------------- -----------------
Total non-operating expense (2,955) (2,326)
----------------- -----------------
Income before income taxes 14,276 17,136
Income tax expense (6,139) (7,369)
----------------- -----------------
Net income $ 8,137 $ 9,767
----------------- -----------------
Average shares outstanding 22,216,893 22,242,880
Earnings per common share:
Net income $ 0.37 $ 0.44
----------------- -----------------
USFreightways Corporation
Consolidated Statements of Income (Continued)
Unaudited (Dollars in thousands, except per-share amounts)
Six months ended
--------------------------------------
June 29, July 1,
1996 1995
- --------------------------------------------------------------------------------
Operating revenue $ 645,794 $ 566,116
Operating expenses:
Salaries, wages and benefits 413,581 359,628
Purchased transportation 23,629 22,030
Operating expenses and supplies 89,158 71,728
Operating taxes and licenses 27,907 23,912
Insurance and claims 11,437 9,928
Communications and utilities 7,685 6,525
Depreciation and equipment leases 31,322 24,108
Building and office equipment rents 7,508 6,605
Amortization of intangible assets 1,177 1,418
Other operating expenses 4,747 4,335
----------------- -----------------
Total operating expenses 618,151 530,217
----------------- -----------------
Income from operations 27,643 35,899
----------------- -----------------
Non-operating income (expense):
Interest expense (5,750) (4,144)
Interest income 333 379
Other, net (320) (725)
----------------- -----------------
Total non-operating expense (5,737) (4,490)
----------------- -----------------
Income before income taxes 21,906 31,409
Income tax expense (9,420) (13,506)
----------------- -----------------
Net income $ 12,486 $ 17,903
----------------- -----------------
Average shares outstanding 22,174,060 22,213,750
Earnings per common share:
Net income $ 0.56 $ 0.81
----------------- -----------------
USFreightways Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
Six months ended
--------------------------------------
June 29, July 1,
1996 1995
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net Income $ 12,486 $ 17,903
Adjustments to net income:
Depreciation and amortization 30,702 24,032
Other items affecting cash
from operating activities (12,969) (815)
----------------- -----------------
Net cash provided by operating activities 30,219 41,120
----------------- -----------------
Cash flows from investing activities:
Capital expenditures, net of
proceeds on sales (45,499) (53,971)
Acquisition of Transus (27,265) -
----------------- -----------------
Net cash used in investing activities (72,764) (53,971)
Cash flows from financing activities:
Dividends paid (4,095) (4,096)
Net (purchases)/sales of treasury stock 1,921 (1,887)
Proceeds from long-term debt 48,000 18,500
Payments on long-term debt (139) (139)
----------------- -----------------
Net cash provided by
financing activities 45,687 12,378
----------------- -----------------
Net increase (decrease) in cash 3,142 (473)
----------------- -----------------
Cash at beginning of period 1,707 2,055
----------------- -----------------
Cash at end of period $ 4,849 $ 1,582
----------------- -----------------
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
results of operations are affected by the seasonal aspects of the regional LTL
trucking business. Therefore, operating results for the three months and six
months ended June 29, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 28, 1996. For further information,
refer to consolidated financial statements and footnotes thereto included in the
registrant's annual report on Form 10-K for the year ended December 30, 1995.
USFreightways Corporation
Revenue and Operating Ratios
Unaudited (Dollars in thousands)
Three months ended
June 29, 1996
and July 1, 1995
---------------------------------------------
Company (Region) Revenue Operating Ratio (a)
- --------------------------------------------------------------------------------
Holland (Midwest) 96 $ 147,855 91.0%
95 133,174 91.0
Red Star (Northeast) 96 50,307 102.3
95 50,743 99.3
Reddaway (West Coast, Northwest) 96 44,257 94.1
95 40,124 92.5
Bestway (Southwest) 96 28,380 89.3
95 27,285 89.4
Dugan (Plains, South) 96 37,927 97.7
95 18,876 91.5
Logistics Operations 96 20,266 99.5
95 15,950 95.4
Six months ended
June 29, 1996
and July 1, 1995
---------------------------------------------
Company (Region) Revenue Operating Ratio (a)
- --------------------------------------------------------------------------------
Holland (Midwest) 96 $ 287,075 91.9%
95 265,970 91.2
Red Star (Northeast) 96 99,391 103.4
95 98,802 98.8
Reddaway (West Coast, Northwest) 96 86,123 95.9
95 78,271 93.7
Bestway (Southwest) 96 55,905 89.6
95 53,113 89.9
Dugan (Plains, South) 96 73,212 98.8
95 37,795 91.9
Logistics Operations 96 39,105 98.8
95 30,054 95.8
(a) Operating ratio is direct operating costs as a percentage of revenue.
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations.
USFreightways Corporation (the "Company") reported net income for the thirteen
weeks ended June 29, 1996 of 37 cents per share compared to 44 cents per share
for the second quarter of 1995 which ended on July 1st. Net income for the 1996
quarter was $8,137,000 compared to $9,767,000 for the same period of last year.
Revenue in the 1996 quarter increased by 15.6% to $332,089,000 (which included
approximately $16,000,000 attributable to the acquisition of the Transus general
commodities business) from $287,193,000 for the same period of the 1995 year.
The regional trucking group, including Transus, increased less than truckload
(LTL) revenue by 14.6% based on an LTL shipment count increase of 16% and an LTL
tonnage increase of 16.5%. Revenue for the logistics group increased in the
current year's quarter by 27% primarily as a result of new contracts at Logix.
Revenue for the six months ended June 29th 1996 amounted to $645,794,000, an
increase of 14% over the same period of the previous year. Net income for the
six month period ended in 1996 amounted to $12,486,000, equivalent to 56 cents
per share, compared to $17,903,000 (81 cents per share) for the 1995 six month
period.
The level of economic activity improved in the latter half of the quarter, and
as a result, Holland, Dugan and Reddaway had record revenue the last week of
June. The operating results for the regional trucking operations were adversely
affected by the significant increase in fuel prices, particularly in April and
May before fuel surcharges were implemented early in June in all but one of the
regional companies. The net impact after surcharge of the fuel price increases
approximated 5 cents per share. The pricing environment, while it appears to
have stabilized except in Reddaway territory, is still at a level approximately
equal to that for the same quarter of 1995.
The Transus general commodities business has now been successfully integrated
into the Dugan system and while losses were incurred in the early stages of this
acquisition, Dugan is now profitable and continued improvement is anticipated.
The Reddaway/United merger was successfully completed and despite some initial
systems integration problems, the combined companies are operating at acceptable
levels. The combined Reddaway/United results were significantly adversely
affected by severe rate cutting in their service territory by a major West Coast
competitor. Improvement has been made in Red Star where its operating ratio
continues to decline from 104.6 in the first quarter of the current year to
102.3 in the second quarter, but these results are still far from satisfactory.
Although significant overhead and labor costs have been eliminated, additional
cost reductions are anticipated in the latter half of the current year. Holland,
the Company's major subsidiary, had an outstanding quarter considering current
economic conditions and reported a 12% increase in LTL revenue on an LTL
shipment count increase of 12% while maintaining an operating ratio consistent
with that for the prior year's quarter at 91%. The increased fuel cost in
Holland, net of the surcharge implemented, was equivalent to more than 1/2 point
on the operating ratio. The Company's logistics businesses, despite an
acceptable increase in revenue, were not as profitable in the current year's
quarter as they were in the 1995 quarter. During the second quarter of the 1995
year, development costs for the logistics business were absorbed in the head
office while these costs are currently being absorbed at Logix. In addition,
duplicate costs have been incurred at USF Distribution until the new sortation
facility is completed and fully operational. The Company's new startup
businesses, Comet Transport and Caribbean Services, lost money during the
quarter but were virtually in line with the Company's expectations. Interest
costs have increased significantly in the current year's quarter primarily as a
result of the $27,000,000 expended in the Transus acquisition and the increase
in capital expenditures in the regional operating companies, primarily for
revenue and terminal equipment.
While the Company is obviously disappointed that it did not achieve earnings in
the current quarter equivalent to or better than that reported for the same
quarter of 1995, it is nevertheless encouraged by the significant improvement
over the first quarter and the fact that the month of June was very strong from
both a revenue and profit viewpoint. There is no question the general
commodities industry, both LTL and truckload, is going through a difficult time
with overcapacity and very competitive pricing, making improvement in operating
margins difficult. On a positive note, however, the group continues to be one of
the leaders in revenue growth and profit margins and so long as interest rates
are not increased significantly in the second half of the current year, the
Company expects to continue to improve its operating performance.
Capital expenditures for the current year's quarter amounted to approximately
$25,000,000 of which $19,000,000 was for revenue equipment and $6,000,000 for
terminal facilities and miscellaneous equipment, which compares to capital
expenditures of $31,000,000 for the 1995 quarter. For the six months ended June
29th, capital expenditures approximated $74,000,000 which included $27,000,000
for the acquisition of the general commodities business of Transus. For the six
month period ended July 1, 1995, total capital expenditures were approximately
$56,000,000. Long-term debt increased $5,917,000 mainly as a result of the
aforementioned capital expenditures. For the six months ended June 29th,
long-term bank debt increased $47,861,000 primarily due to the acquisition of
Transus and seasonal increases in working capital.
A dividend of 9 1/3 cents per share was paid July 5, 1996 to shareholders of
record of June 21, 1996.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
There are no pending material legal proceedings, other than ordinary litigation
incident to the Company's business, which the Company is a party to or which any
of its property is subject. During the second quarter of 1996, no material
litigation or governmental proceeding was instituted or pending against the
Company arising from any alleged violation of the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA) or other environmental
regulations.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) On May 3, 1996, the annual meeting of stockholders of
USFreightways Corporation was held pursuant to notice.
(b) N/A
(c)(1) Election of Directors
John W. Puth FOR: 18,055,602
WITHHOLD: 23,999
Morley Koffman FOR: 18,054,113
WITHHOLD: 25,488
(c)(2) Amendment to Restated Certificate of Incorporation changing
the name of the Company from TNT Freightways Corporation to
USFreightways Corporation.
FOR: 18,066,865
AGAINST: 5,443
ABSTENTIONS: 7,293
(d) N/A
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
1. Exhibit 3.(I)-Certificate of Amendment of Restated
Certificate of Incorporation of USFreightways
Corporation and Restated Certificate of Incorporation
as amended.
2. Exhibit 3.(II)-Amendment to the By-Laws of
USFreightways Corporation, and By-Laws as restated
on May 3, 1996.
(b) Current Reports on Form 8-K were filed:
1. No current reports on Form 8-K were filed during
the quarter.
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 13th day of
August, 1996.
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