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
MARCH 29, 1997, 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
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 April 16, 1997, 25,797,457 shares of common stock were outstanding.
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements.
USFreightways Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)
March 29, December 28,
1997 1996
- ---------------------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 3,403 $ 4,090
Accounts receivable, net 172,075 157,874
Other 46,194 41,613
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Total current assets 221,672 203,577
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Net property and equipment 400,367 395,500
Net intangible assets 78,906 79,559
Other 9,695 9,872
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Total assets $ 710,640 $ 688,508
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Liabilities and Stockholders' Equity
Current liabilities:
Current bank debt $ 1,250 $ 333
Accounts payable 44,500 41,734
Other current liabilities 124,410 102,281
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Total current liabilities 170,160 144,348
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Long-term liabilities:
Long-term bank debt - 78,000
Notes payable 100,000 100,000
Other long-term liabilities 93,011 96,900
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Total long-term liabilities 193,011 274,900
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Common stockholders' equity 347,469 269,260
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Total liabilities and stockholders' equity $ 710,640 $ 688,508
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USFreightways Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
(dollars in thousands, except per-share amounts)
Three Months Ended
----------------------------------
March 29, March 30,
1997 1996
- -----------------------------------------------------------------------------------------
Operating Revenue $ 355,817 $ 313,705
Operating Expenses:
Salaries, wages and benefits 226,956 203,484
Purchased transportation 12,342 10,982
Operating expenses and supplies 47,033 43,492
Operating taxes and licenses 14,973 13,940
Insurance and claims 7,069 5,440
Communications and utilities 4,373 3,691
Depreciation and equipment leases 16,693 15,537
Building and office equipment rents 4,293 3,801
Amortization of intangible assets 653 580
Other operating expenses 2,361 2,346
-----------------------------------
Total operating expenses 336,746 303,293
-----------------------------------
Operating income 19,071 10,412
-----------------------------------
Non-operating income (expense):
Interest expense (2,582) (2,916)
Interest income 164 174
Other, net 99 (40)
------------------------------------
Total non-operating expense (2,319) (2,782)
------------------------------------
Income before income taxes 16,752 7,630
Income tax expense 7,002 3,281
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Net Income $ 9,750 $ 4,349
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Average Shares Outstanding 24,571,349 22,159,747
Earnings per common share:
Net Income 0.40 0.20
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USFreightways Corporation
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)
-------------------------------------------------------------------------------------------------
Three Months Ended
----------------- -----------------
March 29, March 30,
1997 1996
----------------- -----------------
Cash flows from operating activities:
Net income $ 9,750 $ 4,349
Adjustments to net income:
Depreciation and amortization 16,784 15,181
Other items affecting cash
from operating activities 1,799 (10,848)
----------------- -----------------
Net cash provided by operating activities 28,333 8,682
----------------- -----------------
Cash flows from investing activities:
Capital expenditures, net of proceeds
on sales (20,694) (21,217)
Acquisition of Transus - (27,265)
----------------- -----------------
Net cash used in investing activities (20,694) (48,482)
----------------- -----------------
Cash flows from financing activities:
Dividends paid (2,108) (2,045)
Proceeds from sale of common stock 69,760 -
Proceeds from sale of treasury stock 1,105 1,052
Proceeds from long-term debt 917 47,000
Payments on long-term bank debt (78,000) (5,056)
----------------- -----------------
Net cash provided by (used in) financing activities (8,326) 40,951
----------------- -----------------
Net increase (decrease) in cash (687) 1,151
Cash at beginning of period 4,090 1,707
----------------- -----------------
Cash at end of period $ 3,403 $ 2,858
================= =================
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 ended
March 29, 1997 are not necessarily indicative of the results that may be
expected for the 53 week fiscal year ending January 3, 1998. 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 28, 1996.
Revenue and Operating Ratios
Unaudited (dollars in thousands)
Quarter ended
March 29, 1997
and March 30, 1996
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Company (Region) Revenue Operating Ratio(a)
- -------------------------------------------------------------------------------
Holland (Midwest) 97 163,730 92.4%
96 139,220 92.7
Red Star (Northeast) 97 46,395 99.8
96 49,084 104.6
Reddaway (West Coast, Northwest) 97 44,986 96.8
96 41,866 97.9
Bestway (Southwest) 97 30,420 88.4
96 27,525 89.9
Dugan (Plains, South) 97 40,568 95.8
96 35,285 99.9
Logistics Operations 97 25,165 94.8
96 18,839 98.1
(a) Operating ratio is direct operating costs as a
percentage of revenue.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
USFreightways Corporation ("the Company") reported net income for the 13 weeks
ended March 29, 1997 of $9,750,000, a 124.2% increase over the $4,349,000 which
was reported for the 13 weeks which ended March 30, 1996. During the first
quarter of the current year, the Company issued an additional 3,105,000 shares
of its common stock through a public offering. Net income per share for the 1997
quarter, on an average of 24,591,349 shares, was equivalent to 40 cents per
share which is a 100% increase compared to 20 cents per share on 22,159,747
average shares outstanding in the first quarter of 1996.
Revenue for the 1997 quarter increased by 13.4% to $355,817,000 from
$313,705,000 for the same period of the 1996 year. The regional trucking group
increased less-than-truckload (LTL) revenue by 11.5% on an increased LTL
shipment count of 7.3% and an LTL tonnage increase of 10.5%.
The logistics group continued its substantial growth rates in the current year's
first quarter. Revenue for the thirteen weeks of the current year amounted to
$25,165,000, an increase of 33.6% and the operating ratio improved to 94.8% from
98.1% compared to 1996.
The Company had a significantly improved first quarter compared to the same
period of the previous year. All of the operating units improved
profitability in the current year's quarter compared to the same period of last
year. Net income for the first quarter of the 1996 year was adversely affected,
particularly in Red Star territory, because of heavy winter storms in the
Northeast. Although the Company experienced ice storms in the Southeast and
extensive flooding in the Pacific Northwest last year, the Company had similar
conditions in the West this year impacting both Bestway and Reddaway in the
month of January.
USF Holland achieved record first quarter revenue levels, which resulted in a
revenue increase of 17.6% and a 22.9% increase in operating income. The
operating ratio improved to 92.4% in the 1997 quarter compared to 92.7% last
year. USF Bestway continued its outstanding performance with an operating ratio
of 88.4% in the current year compared to 89.9% in the previous year on revenue
growth of 10.5%. The demise of Merchants of Texas midway through the first
quarter further contributed to the revenue increase at USF Bestway. The improved
operating performance at both USF Dugan and USF Reddaway is particularly
noteworthy as they have successfully integrated the operations of Transus and
United respectively. USF Reddaway recently signed a four year agreement with the
Teamsters union which will provide labor stability through the year 2000.
Probably the most encouraging turnaround is at USF Red Star where, despite a
decline in revenue in the current year's quarter of 5.5%, the operating ratio
was reduced from 104.6% in the 1996 quarter to 99.8% in the 1997 quarter. USF
Red Star incurred a small loss in the month of January, but produced operating
profits both for the months of February and March, primarily as a result of an
increase in revenue per LTL shipment to $98.98 in the current year's quarter
from $92.29 last year.
Each subsidiary has improved its operating income in the current year's
quarter. Although the Company is still in a very competitive business,
price increases which became effective January 2nd have been reasonably well
accepted by the Company's customers and as a result, LTL revenue per shipment
increased to $101.99 from $98.17 in the 1996 quarter, equivalent to 3.9%.
While the Company is encouraged with the excellent improvement in its
operating results, it continues to review and monitor its costs on a recurring
basis. Assuming no decline in the current level of economic activity and no
significant increase in interest rates, which could negatively impact economic
growth, the Company believes it will continue to be one of the leaders in the
regional LTL market.
The successful completion of the public offering of an additional 3,105,000
shares of the Company's common stock, which was concluded on February 10, 1997,
generated approximately $69,000,000, net of expenses in new equity. This
additional capital significantly improves the Company's balance sheet as well as
its leverage capabilities. While proceeds were used to reduce long term debt, it
is the Company's intention to use now available credit facilities to: increase
terminal capacity at USF Holland; continue to make additional investments in our
fast growing logistics business; and, to make appropriate acquisitions, which
will increase density in our regional LTL subsidiaries, particularly at USF Red
Star.
Capital expenditures for the current year's quarter amounted to approximately
$21 million of which $17 million was for revenue equipment and $1 million for
terminal facilities. Last year, for the same quarter, capital expenditures
approximated $49 million, but that included $27 million for the acquisition of
the Transus general commodities business.
A dividend of 9 1/3 cents per share was paid on April 4, 1997 to shareholders of
record on March 21, 1997.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
Other than the Whitworth matter which was reported on by the
Company in an 8-K filed on January 7, 1997, 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. 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 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(b) Current Reports on Form 8-K were filed:
1. On January 7, 1997 reporting a subsequent litigation
matter for the fourth quarter 1996.
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 6th day of May, 1997.
USFREIGHTWAYS CORPORATION
By: /s/ Christopher L. Ellis
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Christopher L. Ellis
Senior Vice President, Finance and
Chief Financial Officer
By: /s/ Robert S. Owen
--------------
Robert S. Owen
Controller and Principal
Accounting Officer