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 JULY 4, 1998, 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 August 11, 1998, 26,231,997 shares of common stock were outstanding.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements.
USFreightways Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in thousands)
July 4, January 3,
1998 1998
- -----------------------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 7,228 $ 6,471
Accounts receivable, net 203,027 187,554
Other 46,497 43,091
----------------- -------------------
Total current assets 256,752 237,116
----------------- -------------------
Net property and equipment 490,593 448,315
Net intangible assets 103,836 104,407
Other assets 10,170 9,697
----------------- -------------------
Total assets $ 861,351 $ 799,535
----------------- -------------------
Liabilities and Stockholders' Equity
Current liabilities:
Current bank debt $ 150 $ 650
Accounts payable 63,300 62,895
Other current liabilities 153,119 118,169
----------------- -------------------
Total current liabilities 216,569 181,714
----------------- -------------------
Long-term liabilities:
Long-term bank debt 10,000 15,000
Notes payable 100,000 100,000
Other long-term liabilities 111,697 110,621
----------------- -------------------
Total long-term liabilities 221,697 225,621
----------------- -------------------
Common stockholders' equity 423,085 392,200
----------------- -------------------
Total liabilities and stockholders' equity $ 861,351 $ 799,535
----------------- -------------------
USFreightways Corporation
Consolidated Statements of Income
Unaudited (Dollars in thousands, except per-share amounts)
Three months ended Six months ended
------------------------------------- -----------------------------------------
July 4, June 28, July 4, June 28,
1998 1997 1998 1997
- -------------------------------------------------------------------------------- -----------------------------------------
Operating revenue $ 447,026 $ 380,763 $ 889,365 $ 736,580
Operating expenses:
Salaries, wages and benefits 266,428 240,114 531,193 467,070
Other Operating expenses 79,072 74,856 160,848 148,451
Purchased transportation 41,871 13,502 84,049 25,844
Insurance and claims 7,464 7,881 15,827 14,950
Depreciation and amortization 19,743 17,495 39,277 34,279
----------------- ----------------- ------------------- --------------------
Total operating expenses 414,578 353,848 831,194 690,594
----------------- ----------------- ------------------- --------------------
Income from operations 32,448 26,915 58,171 45,986
----------------- ----------------- ------------------- --------------------
Non-operating income (expense):
Interest expense (2,026) (2,016) (4,134) (4,598)
Interest income 210 226 443 390
Other, net (49) ( 54) (227) 45
----------------- ----------------- ------------------- --------------------
Total non-operating expense (1,865) (1,844) (3,918) (4,163)
----------------- ----------------- ------------------- --------------------
Net income before income taxes 30,583 25,071 54,253 41,823
Income tax expense 12,539 10,530 22,480 17,532
----------------- ----------------- ------------------- --------------------
Net income $ 18,044 $ 14,541 $ 31,773 $ 24,291
----------------- ----------------- ------------------- --------------------
Average shares outstanding - basic 26,201,994 25,829,398 26,159,329 25,052,941
Average shares outstanding - diluted 26,607,779 26,129,479 26,568,959 25,351,923
Basic earnings per common share: $ 0.69 $ 0.56 $ 1.21 $ 0.97
Diluted earnings per common share: $ 0.68 $ 0.56 $ 1.20 $ 0.96
----------------- ----------------- ------------------- --------------------
USFreightways Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
Six months ended
--------------------------------------
July 4, June 28,
1998 1997
- ---------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net Income $ 31,773 $ 24,291
Adjustments to net income:
Depreciation and amortization 39,277 34,279
Other items affecting cash 15,817 6,431
from operating activities
----------------- ------------------
Net cash provided by operating activities 86,867 65,001
----------------- ------------------
Cash flows from investing activities:
Capital expenditures, net of
proceeds on sales (78,237) (46,747)
Acquisition ( 1,500)
----------------- ------------------
Net cash used in investing activities (79,737) (46,747)
----------------- ------------------
Cash flows from financing activities:
Dividends paid (4,873) (4,514)
Proceeds from sale of common stock - 69,431
Proceeds from sale of treasury stock 4,000 2,865
Proceeds from long-term debt -
Payments on long-term debt ( 5,500) (78,139)
----------------- ------------------
Net cash provided by (used in) financing activities ( 6,373) (10,357)
----------------- ------------------
Net increase in cash 757 7,897
----------------- ------------------
Cash at beginning of period 6,471 4,090
----------------- ------------------
Cash at end of period $ 7,228 $ 11,987
----------------- ------------------
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 July 4, 1998 are not necessarily indicative of the results that may
be expected for the year ending January 2, 1999. 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 January 3, 1998.
Segment Reporting Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------
Revenue
LTL Group:
USF Holland $ 196,152 $ 176,220 $ 393,647 $ 339,950
USF Reddaway 53,263 48,397 104,704 93,383
USF Red Star 53,591 48,588 104,264 94,983
USF Dugan 45,451 42,597 90,997 83,165
USF Bestway 34,111 33,512 68,252 63,932
- ---------------------------------------------------------------------------------------------------------------
Sub total LTL Group 382,568 349,314 761,864 675,413
Logistics subsidiaries 30,835 26,144 59,574 51,309
Freight forwarding 33,623 3,001 67,927 5,720
Corporate and other - 2,304 - 4,138
- ---------------------------------------------------------------------------------------------------------------
Total Revenue $ 447,026 $ 380,763 $ 889,365 $ 736,580
Income From Operations
LTL Group:
USF Holland $ 19,930 $ 17,725 $ 37,329 $ 30,138
USF Reddaway 4,877 3,422 8,005 4,843
USF Red Star 1,115 127 1,299 213
USF Dugan 2,136 1,963 3,528 3,650
USF Bestway 3,945 4,689 8,267 8,202
- ---------------------------------------------------------------------------------------------------------------
Sub total LTL Group 32,003 27,926 58,428 47,046
Logistics subsidiaries 2,046 1,266 3,805 2,562
Freight forwarding 860 - 1,484 20
Corporate and other (1,391) (1,619) (3,531) (2,331)
Amortization of intangibles (1,070) (658) (2,015) (1,311)
- ----------------------------------------------------------------------------------------------------------------
Total Income from Operations $ 32,448 $ 26,915 $ 58,171 $ 45,986
- ----------------------------------------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operation.
USFreightways Corporation ("the Company") reported record
net income for the thirteen weeks ended July 4, 1998 of $18,044,000, a
24% increase over the $14,541,000 which was reported for the thirteen weeks
which ended June 28, 1997.
Net income per share for the current year's quarter was
equivalent to 68 cents diluted earnings per share, and 69 cents basic earnings
per share, a 21% increase compared to 56 cents on a diluted basis and a 23%
increase compared to 56 cents on a basic basis for the same quarter of 1997.
Revenue this year increased by 17.4% to $447,026,000 from
$380,763,000 for the second quarter of 1997. USF Seko Worldwide, the Company's
domestic and international freight forwarder, which was acquired on September
30, 1997, contributed $33,623,000 revenue in the 1998 quarter. There were two
less working days in the second quarter this year compared to the similar period
for 1997, since both July 4th and Good Friday holidays occurred this year,
whereas neither of these holidays were included in the 1997 quarter.
Total revenue for the less-than-truckload (LTL) regional
subsidiaries amounted to $6,170,452 per working day, an increase of 13.1% over
the $5,458,031 per working day for the 1997 quarter. Daily LTL shipment count
increased 8.6% and LTL revenue per shipment of $106.18 was 4.0% higher than for
the comparable period of 1997. Average weight per shipment was 1,137 pounds.
Net income for the six months ended July 4, 1998 amounted to
$31,773,000, compared to $24,291,000 for the 1997 six month period. Earnings for
the six months ended July 4, 1998 were $1.20 per diluted share, a 25% increase
compared to 96 cents per diluted share for the 1997 six month period.
The logistics group had an excellent quarter achieving record
revenue and operating income. Revenue for the thirteen weeks of the current year
amounted to $30,835,000, an increase of 17.9%, and the operating ratio improved
to 93.4% from 95.2% in the second quarter of 1997. Revenue for the six months of
the current year amounted to $59,574,000, an increase of 16.1% over the same
period of last year. Operating income of $3,805,000 and an operating ratio of
93.6% for the six months of the current year compares to $2,562,000 and 95.0%
for the same period of last year.
Operating income for the Company's forwarding operations,
primarily USF Seko Worldwide, for the current year's six month period was
$1,484,000 compared to $1,169,000 on a pro forma basis as if USF Seko Worldwide
was included last year.
Despite a slight downturn in the economy and the adverse
impact of the GM strike, particularly at USF Holland, revenue and net income
improved for the second quarter and six month period compared to the same
periods of the previous year. The GM strike, which commenced June 5, 1998,
reduced revenue in the regional trucking subsidiaries with the most
significant measurable reduction in USF Holland, which was estimated to have
been in excess of $2.0 million. All of the regional trucking subsidiaries
continue to outperform the majority of their competitors. USF Reddaway,
USF Holland, USF Dugan and USF Red Star showed improvement in both operating
ratio and operating income in the second quarter compared to the same period
of the previous year. The combined operating ratio for the five regional
trucking subsidiaries improved from 92.0% in 1997 to 91.6% in the current year.
USF Holland, noted for its excellent service and safety
standards, established a new 'collision free miles' record of over 8.6 million
consecutive miles driven without a collision. The USF Holland linehaul drivers
were also recognized for their excellent safe driving by winning the
Michigan Trucking Association safety award for the second consecutive
year.
Management's Discussion and Analysis of Financial Conditions
and Results of Operation. (Cont'd.)
Although there are indications that the rate of economic
growth has slowed since the first quarter, the outlook for the economy for the
balance of the year remains at levels above the same period of 1997. While a
long duration of the 'GM strike' will have a negative impact on the
transportation industry, the Company's strong balance sheet, low debt,
and strict cost controls permit the Company to adjust to any resultant
economic downturn.
Capital expenditures for the three months of the 1998
quarter amounted to approximately $44 million of which $24 million was
for revenue equipment and $13 million for terminal facilities. Last year
for the same period, capital expenditures amounted to $27 million of which
$20 million was for revenue equipment and $7 million for terminal facilities
and miscellaneous equipment. For the six months ended July 4, 1998,
capital expenditures approximated $80 million which compares to $48 million
for the 1997 six month period.
On July 30, 1998, the Company entered into an agreement to
acquire Glen Moore Transport Inc., a Carlisle, Pennsylvania based truckload
carrier. Glen Moore has annualized revenue of approximately $35 million and
operates 255 tractors and 600 trailers. This agreement is expected to close
during the third quarter of 1998.
The Financial Accounting Standards Board (FASB) has issued
FASB Statement No. 132 ("Employers' Disclosures about Pensions and and Other
Postretirement Benefits") which the Company will adopt in the fourth quarter
of 1998. FASB has also issued Statement 133, "Accounting for Derivative
Instruments and Hedging Activities". The Company is currently evaluating the
impact of these pronouncements; however it does not anticipate that the
adoption of these statements will have a material impact on results of
operations or financial position.
A dividend of 9 1/3 cents per share was paid July 10, 1998
to shareholders of record on June 26, 1998.
This release contains forward-looking statements that are
subject to certain risks and uncertainties that could cause actual results to
differ materially. These risks and uncertainties are detailed from time to time
in reports filed by the Company with the Securities and Exchange Commission
including forms 8K, 10Q and 10K.
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.
On April 19, 1996, Steven Mark Whitworth ("Plaintiff") a
former employee of USF Bestway Inc., a subsidiary of the
Company ("USF Bestway", brought suit against USF Bestway and
one of its employees, alleging claims of fraud and promissory
estoppel arising from Plaintiff's previous employment as a
driver with USF Bestway, Steven Mark Whitworth v. TNT Bestway
Transportation, Inc. f/k/a .TNT Bestway Inc. and William Orr,
Case No. 96-3935-A, 14th Judicial District Court, Dallas
County, Texas. On or about October 2, 1996, Plaintiff amended
his petition and added claims of wrongful discharge and
conspiracy to wrongfully discharge.
On October 7, 1996, Plaintiff moved for summary judgment,
claiming that he was entitled to a judgment of $3,500,000 in
actual damages and $1,750,000 in attorney fees based on (i)
the USF Bestway's alleged untimely responses to Plaintiff's
requests for admissions and (ii) the USF Bestway's alleged
failure to comply with the requirements of Texas law
concerning the signature of pleadings by counsel in connection
with the responses to Plaintiff's requests for admissions.
Following a hearing on November 1, 1996, the trial court
granted Plaintiff's motion for summary judgment and entered
judgment in favor of Plaintiff and against the USF Bestway,
for $3,500,000 in actual damages $1,750,000 in attorneys' fees
together with court costs and interest.
On November 27, 1996, USF Bestway moved for reconsideration of
the judgment and for a new trial. At a January 7, 1997 hearing
on this motion, the trial court denied the motion for
reconsideration and for new trial, but ruled that the
responses to the Plaintiff's requests for admissions were
timely. USF Bestway has posted a superedeas bond to prevent
enforcement of the judgment pending appeal and perfected its
appeal to the Dallas Court of Appeals.
Management of the Company believes that it has good grounds
for obtaining a reversal of the judgment on appeal because it
believes, among other reasons, that the judgment entered on
the basis of the procedural technicality of counsel's failure
to comply with the requirements of Texas law concerning the
signature of pleadings by counsel, will not be sustained by a
reviewing court and further believes, the judgment will be
vacated and the matter remanded for a trial on the merits and
that, in any event, will not have a material adverse effect on
USF Bestway's financial condition. In the event the judgment
is sustained on appeal, management of USF Bestway intends to
pursue potential causes of action against all appropriate
parties.
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 4. Submission of Matters to a Vote of Security Holders.
(a) On May 1, 1998, the annual meeting of stockholders of
USFreightways Corporation was held pursuant to notice.
(b) N/A
(c) Election of Directors
John Campbell Carruth FOR: 22,952,392
WITHHOLD: 124,249
Neil A. Springer FOR: 22,952,593
WITHHOLD: 124,048
William N. Weaver, Jr. FOR: 22,952,479
WITHHOLD: 124,162
(d) N/A
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
1. Exhibit 10.1-Restricted Stock Agreement with John
Campbell Carruth dated April 27, 1998.
2. Exhibit 10.2-Employment Agreement with John
Campbell Carruth dated June 1, 1998,
effective January 3, 1999.
3. Exhibit 27-Financial Data Schedule.
(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 11th
day of August, 1998.
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
EXHIBIT 10.1
USFREIGHTWAYS CORPORATION
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT is made this 27th day of April, 1998 between
USFreightways Corporation, a Delaware corporation (the "Company"), and J.
Campbell Carruth (the "Recipient").
WHEREAS, the Company desires to grant to the Recipient certain
restricted shares of its common capital stock (the "Restricted Stock") under the
Company's Long-Term Incentive Plan (the "Plan"), which has been approved by its
stockholders; and
WHEREAS, the Company and the Recipient understand and agree that any
terms used herein have the same meanings as in the Plan (the "Recipient" being
referred to in the Plan as a "Participant").
NOW, THEREFORE, in consideration of the following mutual covenants and
for other good and valuable consideration, the parties agree as follows:
1. GRANT OF RESTRICTED STOCK
The Company hereby grants to the Recipient 59,480 Shares of Restricted
Stock on the terms and conditions and subject to all the limitations set forth
herein and in the Plan, which is incorporated herein by reference. The Recipient
acknowledges receipt of a copy of the Plan.
2. PURCHASE PRICE
The purchase price of the Restricted Stock shall be deemed to be zero
Dollars per Share. The foregoing notwithstanding, the Recipient shall not,
without the consent of the Company, make any election under Section 83(b) of the
Code to recognize income at the date of grant.
3. CERTIFICATES AND SHAREHOLDER RIGHTS
The Company's Transfer Agent and Registrar shall prepare and issue a
stock certificate containing a legend referring to this Agreement in the
Recipient's name representing the Shares of Restricted Stock that the Recipient
has been granted, which certificate shall be held by the Recipient pursuant to
the terms of this Agreement and the Plan. From and after the issuance of the
certificate, the Recipient shall be the holder of record with respect to the
Restricted Stock, and shall have the right to vote such Restricted Stock and to
receive stock splits, dividends, and distributions with respect to such
Restricted Stock, which splits, dividends, and distributions shall be subject to
the terms and conditions of the Plan and this Agreement.
4. RESTRICTIONS AND VESTING
(a) Until the passage of the time periods or the occurrence of the
events specified in Paragraph 4(b) below, the Recipient shall
not sell, transfer, convey, pledge, encumber, or otherwise
dispose of all or a portion of any interest in the Restricted
Stock.
(b) Subject to the Plan and this Agreement, the restrictions
hereunder shall lapse on the first to occur of the following
dates or events, whichever is applicable:
(i) Number of Shares Date Restrictions Lapse
14,870 April 27, 1999
14,870 April 27, 2000
14,870 April 27, 2001
14,870 April 27, 2002
(ii) Total Number of Shares Event on Which Restrictions Lapse
59,480 Recipient's Death or Disability as
defined in the Plan
(iii) Total Number of Shares Event on Which Restrictions Lapse
59,480 Change of Control
Absent the Company's written notice to the contrary, any
Restricted Stock the restrictions on which have not lapsed upon the
Recipient's termination of employment shall be forfeited immediately if
the Recipient terminates his employment or his employment is terminated
for "cause," as defined in the Employment Agreement to be entered into
between the Recipient and the Company, and this statement shall
constitute the written notice required under the Plan of such
forfeiture.
For purposes of this Paragraph 4, a "Change of Control" shall
be deemed to occur on the earliest of (1) the acquisition by any
entity, person, or group of beneficial ownership, as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, of
more than 50% of the outstanding capital stock of the Company entitled
to vote for the election of directors ("Voting Stock"); (2) the
completion by any entity, person, or group (other than the Company or a
subsidiary of the Company) of a tender offer for more than 50% of the
outstanding Voting Stock of the Company; or (3) the effective time of
(i) a merger or consolidation of the Company with one or more
corporations as a result of which the holders of the outstanding Voting
Stock of the Company immediately prior to such merger hold less than
80% of the Voting Stock of the surviving or resulting corporation, or
(ii) a transfer of all of the property or assets of the Company other
than to an entity of which the Company owns at least 80% of the Voting
Stock.
5. DIVIDENDS
From and after the date the Recipient acquires the Shares, and is
issued a certificate or certificates, the Recipient shall be entitled, with
respect to the Recipient's Shares of Restricted Stock, to any dividends declared
by the Company on its Shares of Common Stock and paid in the form of cash or
other property.
Cash dividends paid with respect to Shares of Restricted Stock shall be
paid to the Recipient. In the case of dividends declared by the Company and
payable in the form of Common Stock or other securities of the Company, then
such securities shall be subject to the terms and conditions of the Plan and
this Agreement, shall be represented by certificates issued in the name of the
Recipient but shall be subject to the restrictions and vesting schedules
specified in Paragraph 4, provided that the restrictions applicable to
securities issued as a dividend on certain Shares shall lapse concurrently with
the restrictions on the underlying Shares.
6. RELEASE OF RESTRICTIONS
At such time as the restrictions on the Shares of Restricted Stock
lapse, or as soon thereafter as may be practicable, the restrictive legend shall
be removed from the certificate or certificates.
7. NOTICES
Any notices required or permitted by the terms of this Agreement or the
Plan shall be given by registered or certified mail, return receipt requested,
addressed as follows:
To the Company: USFreightways Corporation
9700 Higgins Road
Suite 570
Rosemont, IL 60018
Attn: Long-Term Incentive Plan Award Committee
To the Recipient: J. Campbell Carruth
316 Rivershire Ct.
Lincolnshire, Illinois 60069-3814
or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given when
mailed in accordance with the foregoing provisions.
8. GOVERNING LAW
This Agreement shall be construed and enforced in accordance with the
laws of the State of Illinois.
9. BINDING EFFECT
This Agreement shall be binding upon the heirs, executors,
administrators, successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the Company and the Recipient have caused this Agreement to
be executed on its and his behalf effective the day and year first above
written.
USFREIGHTWAYS CORPORATION J. CAMPBELL CARRUTH
Christopher L. Ellis
____________________ ___________________
By: /s/ Christopher L. Ellis By: /s/ J. Campbell Carruth
Its: Senior Vice President,
Chief Financial Officer
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 1st day of June, 1998, effective January 3, 1999 (the "Effective Date"),
by and between USFreightways Corporation, a Delaware corporation (the
"Employer"), and J. Campbell Carruth (the "Executive").
RECITALS
A. The Employer desires that the Executive continue to provide
services for the benefit of the Employer and its affiliates and the Executive
desires to accept such continued employment with the Employer.
B. The Employer and the Executive acknowledge that the Executive will
be a member of the senior management team of the Employer and, as such, will
participate in implementing the Employer's business plan.
NOW, THEREFORE, in consideration of the above premises and the
following mutual covenants and conditions, the parties agree as follows:
1. Employment. The Employer shall employ the Executive as its Chairman,
and the Executive hereby accepts such employment on the following terms and
conditions.
2. Duties. The Executive shall, during the term of this Agreement, have the
duties, responsibilities, powers, and authority customarily associated with the
position of Chairman. The Executive shall report to, and follow the direction
of, the Board of Directors (the "Board"). In addition to, or in lieu of, the
foregoing, the Executive also shall perform such other and unrelated services
and duties as may be agreed upon from time to time by the Board and the
Executive. The Executive shall diligently, competently, and faithfully perform
all duties, and shall use his best efforts to promote the interests of the
Employer. It shall not be considered a violation of the foregoing for the
Executive to serve on corporate, industry, civic, religious or charitable boards
or committees.
3. Executive Loyalty. The Executive shall devote a substantial portion of his
business time to the interests of the Employer, and the Employer shall be
entitled to all benefits and profits arising from or incident to any and all
work, services, and advice provided by the Executive to the Employer. The
Executive and the Employer expressly agree that during the term of this
Agreement, the Executive may engage, directly or indirectly, as a partner,
officer, director, stockholder, advisor, agent, employee, or in any other form
or capacity, in any other business that is not similar to that of the Employer.
The foregoing notwithstanding, nothing herein contained shall be deemed to
prevent the Executive from investing his money in the capital stock or other
securities of any corporation whose stock or securities are publicly-owned or
are regularly traded on any public exchange, nor shall anything herein contained
be deemed to prevent the Executive from investing his money in real estate.
4. Term of Employment. Unless sooner terminated as hereinafter
provided, this Agreement shall be entered into for a period of five (5) years,
commencing on the Effective Date.
5. Compensation.
A. Salary. The Employer shall pay the Executive an annual salary of $500,000,
payable in substantially equal installments in accordance with the Employer's
payroll policy from time to time in effect. The Executive's salary shall be
subject to any payroll or other deductions as may be required to be made
pursuant to law, government order, or by agreement with, or consent of, the
Executive.
B. Other Benefits. During the term of this Agreement, the Employer
shall include the Executive in any life insurance, disability insurance,
medical, dental or health insurance, savings, pension and retirement plans
and other benefit plans or programs (including, if applicable, any
excess benefit or supplemental executive retirement plans) maintained by
the Employer for the benefit of its executives.
6. Expenses. The Employer shall provide the Executive with an expense allowance
of up to $50,000 per year, and all reasonable business, medical, dental and
health expenses shall be reimbursed therefrom, provided the Executive submits
paid receipts or other documentation acceptable to the Employer and as required
by the Internal Revenue Service to qualify as ordinary and necessary business
expenses under the Internal Revenue Code of 1986, as amended.
7. Termination. Notwithstanding anything in Paragraph 4 of this
Agreement to the contrary, the Executive's services shall terminate upon the
first to occur of the following events:
A. At the end of the term of this Agreement.
B. Upon the Executive's date of death or the date the Executive is given written
notice that he has been determined to be disabled by the Employer. For purposes
of this Agreement, the Executive shall be deemed to be disabled if the
Executive, as a result of illness or incapacity, shall be unable to perform
substantially his required duties for a period of four (4) consecutive months or
for any aggregate period of six (6) months in any twelve (12) month period. A
termination of the Executive's employment by the Employer for disability shall
be communicated to the Executive by written notice and shall be effective on the
tenth (10th) business day after receipt of such notice by the Executive, unless
the Executive returns to full-time performance of his duties before such tenth
(10th) business day. The foregoing notwithstanding, if the Executive and the
Employer subsequently agree that, following such termination on account of
disability, the Executive is able to return to his employment, then he shall be
entitled to do so and the term of this Agreement shall be reinstated and again
expire on the fifth anniversary of the Effective Date.
C. On the date the Employer provides the Executive with written notice that he
is being terminated for "cause." For purposes of this Agreement, the Executive
shall be deemed terminated for cause if the Employer terminates the Executive
after the Executive:
(1) shall have committed any felony including, but not limited to
a felony involving fraud, theft, misappropriation,
dishonesty, or embezzlement; or
(2) shall have committed intentional acts that materially impair the
goodwill or business of the Employer or cause material damage to
its property, goodwill, or business.
D. On the date the Executive terminates his employment for any reason, provided
that the Executive shall give the Employer ninety (90) days written notice prior
to such date of his intention to terminate this Agreement.
8. Compensation Upon Termination. If the Executive's services are terminated
pursuant to Paragraph 7, the Executive shall be entitled to his salary through
his final date of active employment. The Executive shall also be entitled to any
benefits mandated under the Consolidated Omnibus Budget Reconciliation Act of
1985 (COBRA) or required under the terms of any death, insurance, or retirement
plan, program, or agreement provided by the Employer and to which the Executive
is a party or in which the Executive is a participant, including, but not
limited to, any short-term or long-term disability plan or program, if
applicable.
9. Notices. Any and all notices required in connection with this Agreement shall
be deemed adequately given only if in writing and (a) personally delivered, or
sent by first class, registered or certified mail, postage prepaid, return
receipt requested, or by recognized overnight courier, (b) sent by facsimile,
provided a hard copy is mailed on that date to the party for whom such notices
are intended, or (c) sent by other means at least as fast and reliable as first
class mail. A written notice shall be deemed to have been given to the recipient
party on the earlier of (a) the date it shall be delivered to the address
required by this Agreement; (b) the date delivery shall have been refused at the
address required by this Agreement; (c) with respect to notices sent by mail or
overnight courier, the date as of which the Postal Service or overnight courier,
as the case may be, shall have indicated such notice to be undeliverable at the
address required by this Agreement; or (d) with respect to a facsimile, the date
on which the facsimile is sent and receipt of which is confirmed. Any and all
notices referred to in this Agreement, or which either party desires to give to
the other, shall be addressed to his residence in the case of the Executive, or
to its principal office in the case of the Employer.
10. Waiver of Breach. A waiver by the Employer of a breach of any
provision of this Agreement by the Executive shall not operate or be
construed as a waiver or estoppel of any subsequent breach by the Executive.
No waiver shall be valid unless in writing and signed by an authorized officer
of the Employer.
11. Assignment. The Executive acknowledges that the services to be
rendered by him are unique and personal. Accordingly, the Executive may not
assign any of his rights or delegate any of his duties or obligations
under this Agreement. The rights and obligations of the Employer under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer.
12. Entire Agreement. This Agreement sets forth the entire and final agreement
and understanding of the parties and contains all of the agreements made between
the parties with respect to the subject matter hereof. This Agreement supersedes
any and all other agreements, either oral or in writing, between the parties
hereto, with respect to the subject matter hereof. No change or modification of
this Agreement shall be valid unless in writing and signed by the Employer and
the Executive.
13. Headings. The headings in this Agreement are inserted for convenience
only and are not to be considered a construction of the provisions hereof.
14. Execution of Agreement. This Agreement may be executed in several
counterparts, each of which shall be considered an original, but which when
taken together, shall constitute one agreement.
15. Recitals. The recitals to this Agreement are incorporated herein
as an integral part hereof and shall be considered as substantive and not
precatory language.
16. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois, without reference to its
conflict of law provisions, and any court action commenced to enforce this
Agreement shall have as its sole and exclusive venue the County of Cook,
Illinois.
IN WITNESS WHEREOF, the parties have set their signatures on the date
first written above.
EMPLOYER: EXECUTIVE:
USFREIGHTWAYS CORPORATION, J. CAMPBELL CARRUTH
a Delaware corporation
Christopher L. Ellis
____________________ ___________________
By: /s/ Christopher L. Ellis By: /s/ J. Campbell Carruth
Its: Senior Vice President, Finance
and Chief Financial Officer