PAGE F1
Financial Highlights
(Thousands of dollars, except per share amounts)
Fiscal Year 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Revenue
LTL Trucking $ 1,540,162 $ 1,409,086 $ 1,213,360
TL Trucking 12,877 - -
Logistics 130,323 106,299 85,601
Freight Forwarding 151,531 44,340 8,400
Corporate and other - 5,524 5,611
- ---------------------------------------------------------------------------------------------------------------------------
Total Revenue $ 1,834,893 $ 1,565,249 $ 1,330,972
- ---------------------------------------------------------------------------------------------------------------------------
Income from Operations (loss)
LTL Trucking $ 127,242 $ 103,150 $ 67,876
TL Trucking 1,138 - -
Logistics 7,976 6,414 2,655
Freight Forwarding 4,925 1,289 33
Corporate and other (11,848) (5,843) (3,436)
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Operations $ 129,433 $ 105,010 $ 67,128
- ---------------------------------------------------------------------------------------------------------------------------
Net Interest Expense $ 8,027 $ 7,423 $ 11,495
- ---------------------------------------------------------------------------------------------------------------------------
Net Income $ 71,445 $ 56,581 $ 31,478
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Per Share - Diluted $ 2.70 $ 2.19 $ 1.40
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets $ 974,673 $ 799,535 $ 688,508
- ---------------------------------------------------------------------------------------------------------------------------
Return on Average Stockholders' Equity 16.8% 17.1% 12.5%
- --------------------------------------------------------------------------------------------------------------------------
PAGE F2
Management's Discussion and Analysis of Financial Conditions and Results
of Operations
USFreightways Corporation ("the Company") is a full service provider of
transportation services and innovative logistics solutions. This is accomplished
through the Company's operating subsidiaries. Regional less-than-truckload
("LTL") general commodities carriers provide overnight and second-day delivery
throughout the United States and into Canada. Logistics subsidiaries provide
solutions to customers' logistics and distribution requirements. The Company
also provides domestic and international freight forwarding as well as premium
regional and national truckload service. Principal subsidiaries in the Regional
LTL group are USF Holland Inc. ("Holland"), USF Bestway Inc. ("Bestway"), USF
Red Star Inc. ("Red Star"), USF Reddaway Inc. ("Reddaway") and USF Dugan Inc.
("Dugan"); the Logistics group consists of USF Logistics Inc. ("Logistics") and
USF Distribution Services Inc. ("Distribution Services"); the Freight Forwarding
group includes USF Seko Worldwide Inc. ("Seko Worldwide"), Golden Eagle Group
("Golden Eagle"); Glen Moore Transport Inc. ("Glen Moore") is the Company's
truckload carrier.
Results of Operations
In 1998, the Company changed its fiscal year-end to December 31st. In prior
years, the fiscal year ended on the Saturday nearest December 31st. The year
ending December 31, 1998 ("Fiscal 1998") included 52 weeks whereas ("Fiscal
1997") included 53 weeks ending on January 3, 1998 and ("Fiscal 1996") included
52 weeks ending on December 28, 1996.
Operating revenue of the Company for Fiscal 1998 was a record $1.84 billion, a
17.2% increase over total operating revenue of $1.56 billion for Fiscal 1997.
Income from operations increased by 23.3% from $105.0 million in Fiscal 1997 to
a record $129.4 million in Fiscal 1998. Net income per share increased by 23.3%
to $2.70 (diluted) in Fiscal 1998 compared to $2.19 (diluted) in Fiscal 1997.
The extra 53rd week of Fiscal 1997 contributed approximately $20.6 million of
revenue, but net income was adversely affected by approximately $0.04 per share
as that week included the New Year's holiday.
Fiscal 1997 operating revenue increased by 17.6% to $1.56 billion compared to
$1.33 billion for Fiscal 1996. Income from operations increased by 56.4% to $
105.0 million in Fiscal 1997 from $ 67.1 million (which included a $4.0 million
restructuring charge at Red Star) in Fiscal 1996. Net income per share increased
to by 56.4% to $2.19 (diluted) in Fiscal 1997 compared to $1.40 (diluted) in
Fiscal 1996.
Regional LTL. Revenue in the LTL group for the 52-week period in Fiscal 1998
increased by 9.3% to $1.54 billion from $1.41 billion in the 53 week Fiscal
1997. In Fiscal 1998, revenue from the LTL group amounted to 83.9% of the
Company's operating revenue compared to 90.0% in Fiscal 1997. For comparable 52
week periods, LTL revenue increased 10.7%, LTL shipments increased 6.0%, LTL
tonnage increased 8.4% and LTL revenue per hundredweight increased 2.1%. In
Fiscal 1998, the LTL group enacted a general rate increase of approximately 5.9%
in January and another general rate increase of approximately 5.9% in the late
fall. The LTL group enacted a 5.9% general rate increase in January 1997 also.
General rate increases apply to approximately 50% of the LTL group's revenue
base. The remaining 50% of the revenue base is subject to contractual agreements
which normally result in lower rate increases.
Operating income in Fiscal 1998 increased by 23.4% to $127.2 million from $103.1
million in Fiscal 1997. Improvements in operating results were directly
attributable to price stability, a modest improvement in the US economy,
increases in market share and a continuing emphasis on cost reduction. The LTL
group improved its ratio of operating expenses compared to operating revenue
(operating ratio) to 91.7% compared to 92.7% in Fiscal 1997. Purchased
transportation decreased to 3.2% of operating revenue from 3.5% in Fiscal 1997
as Dugan improved linehaul efficiencies and relied less on cartage agents and
broker teams to handle its freight and Holland significantly reduced short term
equipment rents. Fuel expenses were 3.4% of Fiscal 1998 revenue compared to 3.8%
of Fiscal 1997 revenue primarily due to lower prices in Fiscal 1998.
PAGE F3
Revenue in the LTL group increased by 14.4% to $1.41 billion in Fiscal 1997, a
53-week period, from $1.23 billion in Fiscal 1996, a 52-week period, primarily
as a result of new customers, closure of certain competitors and expanded
business from existing customers. In Fiscal 1997, LTL shipments increased by
10.9%, LTL tonnage increased by 12.1%, LTL revenue per shipment increased by
3.4% and LTL revenue per hundredweight increased by 2.4% compared to Fiscal
1996. In Fiscal 1996, revenue from the LTL group amounted to 92.5% of the
Company's operating revenue.
Operating income for the LTL group in Fiscal 1997 increased by 52.0% to $103.1
million from $67.9 million in Fiscal 1996 with an improvement in its operating
ratio to 92.7% compared to 94.5% in Fiscal 1996. Fiscal 1996 operating income
included a one-time $4.0 million restructuring charge at Red Star. Before this
charge, the operating ratio for the LTL group was 94.2%. Improvements in
operating income were directly attributable to a relatively mild winter in
Fiscal 1997, price stability, and a strong economy, unlike Fiscal 1996 which was
adversely impacted by severe weather during the winter months, intense industry
competitive pricing and a somewhat sluggish economy during the first half of the
year. The LTL group's salaries, wages and benefits improved to 63.7% of revenue
from 64.2% in Fiscal 1996 as Bestway reduced workers' compensation expenses due
to fewer claims. Additionally, a turnaround achieved at Red Star during the
fourth quarter of Fiscal 1996, following its restructuring, continued through
Fiscal 1997. Red Star, through stricter cost controls, improved its Fiscal 1997
operating ratio to 99.6% from 102.0% (104.1% including the restructuring charge)
in Fiscal 1996. Fuel expenses, net of a fuel surcharge, were 3.8% of Fiscal 1997
revenue compared to 4.2% of Fiscal 1996 revenue due to lower prices in the
latter part of Fiscal 1997. Revenue equipment rentals, operating taxes and
terminal rental expenses collectively improved, as a percentage of revenue, to
5.0% in Fiscal 1997 compared to 5.4% in Fiscal 1996.
Approximately 80% of Holland's and Red Star's employees are members of the
Teamsters' union and are subject to a collective bargaining agreement. In 1998,
the Teamsters ratified a five-year agreement that expires at the end of March
2003. This agreement provided for, among other things, customary increases in
wages, pension and health benefits.
Truckload. The Company's truckload carrier, Glen Moore (acquired on August 31,
1998), contributed $12.9 million in revenue and its operating ratio was 91.2%
generating $1.1 million in operating profits. Glen Moore is a Pennsylvania based
carrier that operates in both regional and nationwide markets with annualized
revenue in Fiscal 1998 of approximately $35 million and operates 236 sleeper
tractors and 625 trailers. Truckload operations accounted for 0.7% of the
Company's Fiscal 1998 operating revenue.
Logistics. Revenue in the Logistics group, comprised of dedicated carriage,
assembly and distribution, supply chain management and contractual warehousing
revenue, increased by $24.0 million (a 22.6% increase) to $130.3 million in
Fiscal 1998 compared to $106.3 million in Fiscal 1997. Assembly and distribution
revenue increased in Fiscal 1998 from Fiscal 1997 primarily through growth at
existing distribution centers coupled with revenue from a new distribution
center in Atlanta, along with revenue obtained since October 1998 from the
acquisition of Moore and Son, a Columbus, Ohio based assembly and distribution
business. Moore & Son contributed approximately $3.8 million in revenue since
its acquisition. Contractual and warehousing revenue increased in Fiscal 1998
from Fiscal 1997 primarily through the addition of new customers and expanded
business with existing customers. In Fiscal 1998, the Logistics group accounted
for 7.1% of the Company's operating revenue compared to 6.8% of Fiscal 1997
revenue. Operating income for the group increased by 24.4% to $8.0 million from
$6.4 million in Fiscal 1997. The group's operating ratio improved slightly to
93.9% in Fiscal 1998 from 94.0% in Fiscal 1997.
Revenue in the Logistics group increased 24.2% to $106.3 million in Fiscal 1997
compared to $85.6 million in Fiscal 1996 primarily due to the addition of new
contractual customers and a full year of revenue at Interamerican, a warehousing
company that was acquired in July 1996. In Fiscal 1996, the Logistics group
accounted for 6.4% of the Company's operating revenue. Operating income for the
group increased by 141.6% to $6.4 million from $2.7 million in Fiscal 1996 due
primarily to a full year of profits at Interamerican. The group's operating
ratio improved 94.0% in Fiscal 1997 from 96.9% in Fiscal 1996.
PAGE F4
Freight Forwarding. Revenue in the Freight Forwarding group increased by $107.2
million (a 242% increase) to $151.5 million from $44.3 million in Fiscal 1997.
The increase was derived primarily at Seko Worldwide, the Company's domestic and
international freight forwarder that was acquired on September 30, 1997, which
generated a full year of revenue in Fiscal 1998, compared to revenue generated
only during the fourth quarter of Fiscal 1997. In addition, the Company acquired
the Golden Eagle Group, a provider of international air and ocean freight
forwarding and logistics services, on November 12, 1998. Golden Eagle
contributed $9.8 million, since its acquisition, of the overall increase in the
Freight Forwarding group's Fiscal 1998 revenue. Golden Eagle's revenue for 1997,
while not included in the Company's Fiscal 1997 revenue, amounted to $84 million
of which approximately 90% was international. The Freight Forwarding group
accounted for 8.3% of the Company's Fiscal 1998 operating revenue compared to
2.8% of the Company's Fiscal 1997 operating revenue. Operating income increased
to $4.9 million from $1.3 million in Fiscal 1997, with an operating ratio of
96.7% in Fiscal 1998 compared to 97.1% in Fiscal 1997. The highly variable cost
structure of the non-asset based freight forwarding business results in
relatively stable margins at various volumes of freight.
Revenue in the Freight Forwarding group increased by $35.9 million to $44.3
million from $8.4 million in Fiscal 1996. Of this increase, Seko Worldwide alone
generated $31.8 million in revenue since its acquisition in September 1997. The
Freight Forwarding group accounted for 0.6% of the Company's Fiscal 1996
operating revenue.
The group's operating income in Fiscal 1997 was $1.3 million with $1.1 million
contributed by Seko Worldwide. This compares to an immaterial profit in Fiscal
1996.
Interest
Net interest expense for Fiscal 1998 amounted to $8.0 million compared to $7.4
million in Fiscal 1997. The principal debt of the Company is $100 million in
notes that mature May 1, 2000 and bear interest of 6 5/8%. The average interest
rate on the Company's bank debt for Fiscal 1998 was approximately 5.8% compared
to 5.9% in Fiscal 1997. Average outstanding bank debt in Fiscal 1998 and Fiscal
1997 was $17 million and $8.9 million, respectively.
Net interest expense for Fiscal 1996 amounted to $11.5 million. The average
amount of outstanding bank debt in Fiscal 1996 was $81.5 million. Average
outstanding bank debt decreased by approximately $69 million in February 1997
following the sale of approximately 3.1 million shares of common stock in a
public offering.
Liquidity and Capital Resources
The Company generated $153.2 million in cash flow from operating activities
during Fiscal 1998. Capital expenditures during the year amounted to $157.5
million, of which $74.3 million was for revenue equipment, $56.7 million for
terminals and $26.5 million for other assets. In addition, the Company paid
$42.1 million in cash for the acquisitions of Glen Moore, Moore and Son,
Vallerie's Transportation Services, and the Golden Eagle Group. Capital
expenditures for Fiscal 1997 amounted to $128.8 million plus $22.8 million in
cash for the acquisitions of Seko Worldwide and Mercury Distribution, an LTL
general commodities carrier located in the Northeast. In light of current
business levels, management expects that capital expenditures during the year
ending December 31, 1999 will approximate $170 million to $200 million,
excluding acquisitions.
The Company has a $200 million revolving credit facility with a syndicate of
commercial banks. The facility expires in 2002 and allows up to $100 million for
standby letters of credit to cover the Company's self-insurance program, and has
optional pricing of interest rates, including LIBOR or Prime base rates. The
facility has an annual fee and contains customary financial covenants including
maintenance of minimum net worth and funded debt to cash flow. During 1998, all
borrowings were drawn at LIBOR base rates, with a weighted average interest rate
for the year of 5.8%, excluding fees charged on the facility. At December 31,
1998 the Company had borrowed $45 million and had $47 million in outstanding
letters of credit under this facility.
In addition to the revolving credit facility, the Company maintains three
uncommitted lines of credit, which provide $40 million short-term funds at rates
approximating LIBOR. These facilities are used in concert with a centralized
cash management system to finance short-term working capital needs; thereby
enabling the Company to maintain minimal cash balances.
In management's opinion, cash flows from operating activities and funding from
its revolving credit facilities are adequate to finance the Company's
anticipated business activity in 1999.
At December 31, 1998 the Company had commitments to purchase approximately $13.7
million in land and improvements, $23.8 million for transportation equipment and
$1.8 million for other equipment.
During 1998, the Company declared cash dividends of $9.8 million.
PAGE F5
Other
The Company uses underground storage tanks at certain terminal facilities and
maintains a comprehensive policy of testing, upgrading, replacing or eliminating
these tanks to protect the environment and comply with various Federal and state
laws. Whenever any contamination is detected, the Company takes prompt remedial
action to remove the contaminants. It is management's opinion that the total
costs related to all known incidents have been provided for in the financial
statements and management is not aware of any potential contamination incidents
that would have a material effect on the results of the Company.
Market Risk
The Company is exposed to the impact of interest rate changes. The Company's
exposure to changes in interest rates is limited to borrowings under a line of
credit agreement which has variable interest rates tied to the LIBOR rate. The
weighted average annual interest rates on borrowings under this credit agreement
were 5.8% and 5.9% in Fiscal 1998 and 1997 respectively. In addition, the
Company has $100 million of unsecured notes with a 6 5/8% fixed annual interest
rate at December 31, 1998. The Company estimates that the carrying value of the
notes approximated its market value at December 31, 1998. The Company has no
hedging instruments. From time to time, the Company invests excess cash in
overnight money market accounts.
Year 2000
The Company has been and continues to address the universal situation commonly
referred to as the "Year 2000 Problem". The "Year 2000 Problem" is related to
the inability of certain computer systems, software and embedded technologies to
properly recognize and process date-related information surrounding the Year
2000.
In 1996, the Company initiated a comprehensive review of its computerized
Information Technology (IT) to identify systems that could be affected by the
Year 2000 problems and has implemented a plan to resolve the identified issues.
The Year 2000 issues were analyzed by identifying and assessing all systems,
software and embedded technologies, with business critical systems given a
higher priority. The Company defines a system as business critical if a failure
would cause a significant service disruption or could cause a material adverse
effect on the Company's operations or financial results. As of December 31,
1998, the Company has remediated 91% of its business critical systems. Further
testing and verification on all systems will continue throughout 1999. The
Company has expended approximately $1 million as of December 31, 1998 to ensure
Year 2000 compliance. The total cost to ensure Year 2000 compliance is estimated
to be less than $2 million. The cost estimate is based on the Company's
structure and those subsidiaries it owns at the present time. The acquisition of
any additional operating entity may significantly impact the total cost as it
has been estimated.
Contingency plans are being developed for business critical systems. The Company
has tested or will be testing for plan completeness and accuracy. Some
contingency plans may require additional labor that may impact the Company's
operating costs.
The Company has been contacting business partners whose Year 2000 non-compliance
could adversely affect the Company's operations, employees, or customers. The
Company believes the most likely worst case scenario would be the failure of a
material business partner to be Year 2000 compliant. Therefore, the Company will
continue to work with and monitor the progress of its partners and formulate a
contingency plan when the Company does not believe the business partner will be
compliant.
The Company's assessment of its Year 2000 issues involves some assumptions.
These assumptions revolved primarily around the Year 2000 representation from
third parties with which the Company has business relationships, and where the
Company has not been able to independently verify these representations.
PAGE F6
Independent Auditors' Report
The Board of Directors and Stockholders,
USFreightways Corporation:
We have audited the accompanying consolidated balance
sheets of USFreightways Corporation and subsidiaries as of December 31, 1998 and
January 3, 1998 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the two years ended December 31, 1998.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of USFreightways
Corporation and subsidiaries as of December 31, 1998 and January 3, 1998 and the
results of their operations and their cash flows for the two years ended
December 31, 1998, in conformity with generally accepted accounting principles.
Arthur Andersen LLP, Chicago, Illinois, January 19, 1999
The Board of Directors and Stockholders,
USFreightways Corporation:
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows for the year ended December 28, 1996 of
USFreightways Corporation and subsidiaries. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of USFreightways
Corporation and subsidiaries as of December 28, 1996 and the results of
operations and cash flows for the year ended December 28, 1996, in conformity
with generally accepted accounting principles.
KPMG LLP, Chicago, Illinois, January 22, 1997
PAGE F7
Consolidated Balance Sheets
Years ended December 31, 1998 and January 3, 1998
(Thousands of dollars)
December 31, January 3,
1998 1998
- ---------------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash $ 5,548 $ 6,471
Accounts receivable, less allowances of $11,159 and $10,067 218,942 187,554
Operating supplies and prepaid expenses 23,067 21,176
Deferred income taxes (note 4) 32,292 21,915
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 279,849 237,116
Property and equipment:
Land 74,933 56,542
Buildings and leasehold improvements 171,229 131,543
Equipment 649,867 563,732
Other 56,994 48,892
- ---------------------------------------------------------------------------------------------------------------------------
953,023 800,709
Less accumulated depreciation (408,741) (352,394)
- ---------------------------------------------------------------------------------------------------------------------------
Total property and equipment 544,282 448,315
Intangible assets, net of accumulated amortization of $25,717 and $21,424 140,201 104,407
Other assets 10,341 9,697
- ---------------------------------------------------------------------------------------------------------------------------
$ 974,673 $ 799,535
Liabilities and Stockholders' Equity Current liabilities:
Current debt (note 3) $ 10,660 $ 650
Accounts payable 78,757 62,895
Accrued salaries, wages and benefits 66,142 55,166
Accrued claims and other 70,017 61,059
Income taxes payable 3,301 1,944
- ---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 228,877 181,714
Long-term debt, less current maturities (note 3) 51,096 15,000
Notes payable (note 3) 100,000 100,000
Accrued claims and other 69,183 58,057
Deferred income taxes (note 4) 66,383 52,564
- ---------------------------------------------------------------------------------------------------------------------------
515,539 407,335
Stockholders' equity:
Cumulative preferred stock, $0.01 par value per share:
20,000,000 authorized, none issued - -
Common stock, $0.01 par value per share:
80,000,000 authorized, 26,289,344 and 26,080,459 issued 265 265
Paid in capital 253,542 251,224
Retained earnings 208,662 147,007
Treasury stock, 255,095 and 463,949 shares (3,335) (6,296)
- ---------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 459,134 392,200
- ---------------------------------------------------------------------------------------------------------------------------
$ 974,673 $ 799,535
See accompanying notes to consolidated financial statements.
PAGE F8
Consolidated Statements of Operations
Fiscal years ended December 31, 1998, January 3, 1998 and December 28, 1996
(Thousands of dollars, except per share amounts)
Fiscal Year 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Operating revenue
LTL Trucking $ 1,540,162 $ 1,409,086 $ 1,231,360
TL Trucking 12,877 - -
Logistics 130,323 106,299 85,601
Freight Forwarding 151,531 44,340 8,400
Corporate and other - 5,524 5,611
- ---------------------------------------------------------------------------------------------------------------------------
Total operating revenue 1,834,893 1,565,249 1,330,972
- ---------------------------------------------------------------------------------------------------------------------------
Operating expenses
LTL Trucking 1,412,920 1,305,936 1,163,484
TL Trucking 11,739 - -
Logistics 122,347 99,885 82,946
Freight Forwarding 146,606 43,051 8,367
Corporate and other 11,848 11,367 9,047
- ---------------------------------------------------------------------------------------------------------------------------
Total operating expenses 1,705,460 1,460,239 1,263,844
- ---------------------------------------------------------------------------------------------------------------------------
Income from operations 129,433 105,010 67,128
- ---------------------------------------------------------------------------------------------------------------------------
Non-operating income (expense):
Interest expense (8,784) (8,461) (12,144)
Interest income 757 1,038 649
Other, net 88 (92) (704)
- ---------------------------------------------------------------------------------------------------------------------------
Total non-operating expense (7,939) (7,515) (12,199)
- ---------------------------------------------------------------------------------------------------------------------------
Net income before income taxes 121,494 97,495 54,929
Income tax expense (note 4) (50,049) (40,914) (23,451)
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 71,445 $ 56,581 $ 31,478
- ---------------------------------------------------------------------------------------------------------------------------
Average shares outstanding-basic 26,209,281 25,544,240 22,249,499
Average shares outstanding-diluted 26,495,714 25,830,674 22,451,280
Basic earnings per common share: $ 2.73 $ 2.21 $ 1.41
- ---------------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share: $ 2.70 $ 2.19 $ 1.40
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
PAGE F9
Consolidated Statements of Stockholders' Equity
Fiscal years ended December 31, 1998, January 3, 1998 and December 28, 1996
(Thousands of dollars)
Total
Common Paid in Retained Treasury Stockholders'
Stock Capital Earnings Stock Equity
- ---------------------------------------------------------------------------------------------------------------------------------
Balance December 30, 1995 $ 234 $ 176,378 $ 76,945 $ (20,405) $ 233,152
Net income - - 31,478 - 31,478
Dividends declared - - (8,315) - (8,315)
Employee stock transactions
and other - 3,891 - 9,054 12,945
- ---------------------------------------------------------------------------------------------------------------------------
Balance December 28, 1996 $ 234 $ 180,269 $ 100,108 $ (11,351) $ 269,260
Net income - - 56,581 - 56,581
Dividends declared - - (9,682) - (9,682)
Issuance of common stock 31 69,400 69,431
Employee stock transactions
and other - 1,555 - 5,055 6,610
- ---------------------------------------------------------------------------------------------------------------------------
Balance January 3, 1998 $ 265 $ 251,224 $ 147,007 $ (6,296) $ 392,200
Net income - - 71,445 - 71,445
Dividends declared - - (9,790) - (9,790)
Employee stock transactions
and other - 2,318 - 2,961 5,279
- ---------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1998 $ 265 $ 253,542 $ 208,662 $ (3,335) $ 459,134
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
PAGE F10
Consolidated Statements of Cash Flows
Fiscal years ended December 31, 1998, January 3, 1998, and December 28, 1996
(Thousands of dollars)
Fiscal Year 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income from continuing operations $ 71,445 $ 56,581 $ 31,478
Reconciliation to net cash provided by operating activities:
Depreciation and amortization 78,015 70,140 62,591
Deferred taxes 3,442 6,569 3,298
Changes in assets and liabilities excluding acquisitions:
Accounts receivable (14,423) (29,680) (39,767)
Other current assets 238 (2,080) 455
Accounts payable 6,091 21,161 5,525
Accrued liabilities 17,632 23,317 21,923
Other, net (9,271) (8,950) 2,096
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 153,169 137,058 87,599
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (157,476) (128,809) (94,057)
Proceeds from sale of property and equipment 10,457 12,887 4,246
Acquisitions (42,081) (22,756) (31,265)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (189,100) (138,678) (121,076)
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Dividends paid (9,771) (9,357) (8,252)
Net proceeds from sale of common stock - 69,431 -
Proceeds from sale of treasury stock 5,279 6,610 3,445
Proceeds from long-term bank debt 95,000 15,000 41,000
Payments on long-term bank debt (55,500) (77,683) (333)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 35,008 4,001 35,860
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (923) 2,381 2,383
Cash at beginning of year 6,471 4,090 1,707
- ---------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 5,548 $ 6,471 $ 4,090
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest $ 8,753 $ 7,823 $ 11,715
Income taxes 44,558 32,389 18,105
Non-cash transactions: equity, notes issued and debt assumed
in connection with acquisitions $ 24,298 $ 4,023 $ 9,500
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
PAGE F11
Notes to Consolidated Financial Statements (Thousands of dollars, except
per share amounts)
1. Summary of Significant Accounting Policies
- ----------------------------------------------------------------------------
Company Overview. USFreightways Corporation ("the Company") is a full service
provider of transportation services and innovative logistics solutions. This is
accomplished through the Company's operating subsidiaries. Regional
less-than-truckload ("LTL") general commodities carriers provide overnight and
second-day delivery throughout the United States and into Canada. Logistics
subsidiaries provide solutions to customers' logistics and distribution
requirements. The Company also provides domestic and international freight
forwarding as well as premium regional and national truckload service.
Basis of Presentation. The consolidated financial statements include the
accounts of USFreightways and its wholly owned subsidiaries (the Company). The
Company's operations are further discussed in periodic SEC filings. Intercompany
balances and transactions have been eliminated. The Company's consolidated
statements of operations for prior years have been reclassified to conform with
the current presentation.
For fiscal year 1998, the Company began reporting on a calendar year basis.
Previously, the Company reported on a 52/53-week fiscal year basis concluding on
the Saturday nearest to December 31. The three fiscal years covered in the
consolidated financial statements ended on December 31, 1998, January 3, 1998,
and December 28, 1996 (Fiscal 1998, 1997 and 1996 respectively).
Revenue Recognition. Transportation revenue is recognized when freight is picked
up from the customer, at which time the related estimated expenses of performing
the total transportation services are accrued.
Cash. The Company considers demand deposits and highly liquid investments
purchased with original maturities of three months or less as cash.
Property and equipment. Purchases of property and equipment are carried at cost,
net of accumulated depreciation. Depreciation is computed using the
straight-line method over periods ranging from three to twelve years for the
majority of equipment and 30 years for buildings. Maintenance and repairs are
charged to current operations, while expenditures that add to the life of the
equipment are capitalized. When revenue equipment is traded, a gain or loss on
the trade of the equipment is recognized.
Intangible assets. These costs primarily represent goodwill which is amortized
on a straight-line basis up to 40 years. The carrying value of goodwill is
reviewed whenever events or changes in circumstances indicate that the carrying
value may not be recoverable through projected undiscounted future operating
cash flows. No reduction of the carrying value has been required for any year.
Earnings Per Share. Basic earnings per share are calculated on income available
to common stockholders divided by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share are calculated using
earnings available to each share of common stock outstanding during the period
and to each share that would have been outstanding assuming the issuance of
common shares for all dilutive potential common shares outstanding during the
reporting period. Unexercised stock options, calculated under the treasury stock
method, is the only reconciling item between the Company's basic and diluted
weighted earnings per share. The number of options, included in the denominator,
used to calculate diluted earnings per share are 286,433; 286,434 and 201,781
for fiscal years 1998, 1997 and 1996 respectively.
Use of Estimates. Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
PAGE F12
2. Operating Leases
- ----------------------------------------------------------------------------
The Company leases certain terminals, vehicles and data processing equipment
under long-term lease agreements that expire in various years through 2011.
The following is a schedule of future minimum rental payments on leases that
have initial or remaining non-cancelable lease terms in excess of one year at
December 31, 1998.
Fiscal Year Payments
- ----------------------------------------------------------------------------
1999 $ 15,910
2000 11,398
2001 7,002
2002 3,858
2003 2,208
Subsequent years 1,168
- ----------------------------------------------------------------------------
$ 41,544
Rental expense in the accompanying consolidated statements of operations for
fiscal years 1998, 1997, and 1996 was $22,595, $21,863, and $20,396,
respectively.
3. Long-Term Debt
- ----------------------------------------------------------------------------
Long-term debt at December 31, 1998 and January 3, 1998 consists of the
following:
December 31, January 3,
1998 1998
- ----------------------------------------------------------------------------
Unsecured notes (a) $ 100,000 $ 100,000
Unsecured lines of credit (b) 55,150 15,650
Other (c) 6,606 -
- ----------------------------------------------------------------------------
161,756 115,650
Less current maturities 10,660 650
- ----------------------------------------------------------------------------
$ 151,096 $ 115,000
(a) Unsecured notes of $100,000 are payable on May 1, 2000 and bear interest at
6 5/8%, payable semi-annually. The notes are not subject to redemption prior to
maturity and have no sinking fund requirements. Based upon the Company's
incremental borrowing rates for similar types of borrowing arrangements, the
fair value of the notes at December 31, 1998 was approximately $100,000.
(b) The Company has a $200,000 revolving credit facility through a syndicate of
commercial banks. The facility expires in 2002 and allows up to $100,000 for
standby letters of credit to cover the Company's self-insurance program, and has
optional pricing of interest rates, including LIBOR or Prime base rates. The
facility has an annual fee and contains customary financial covenants including
maintenance of minimum net worth and funded debt to cash flow. During Fiscal
1998, all borrowings were drawn at LIBOR base rates, with a weighted average
interest rate for the year of 5.8%, excluding fees charged on the facility. At
December 31, 1998 the Company had borrowed $45,150 and had $47,043 outstanding
letters of credit under this facility. In addition to the revolving credit
facility, the Company maintains three uncommitted lines of credit, which provide
$40,000 short-term funds at rates approximating LIBOR. These facilities are used
in concert with a centralized cash management system to finance short-term
working capital needs; thereby enabling the Company to maintain minimal cash
balances.
(c) In August 1998, the Company acquired Glen Moore Transport, Inc. Glen Moore's
headquarters in Carlisle, PA has a mortgage of $2,791 on the property that bears
interest at 7.25% with a final payment due in July 2005. In addition, Glen Moore
has loans payable totaling $3,815 on various pieces of revenue equipment that
bear interest from 7.5% to 14.3% with a final payment due in June 2004.
The aggregate annual maturities of debt at December 31, 1998 are as follows:
Fiscal Year Amount
- ----------------------------------------------------------------------------
1999 $ 10,660
2000 102,528
2001 95
2002 45,365
2003 -
2004 596
2005 2,512
- ----------------------------------------------------------------------------
$ 161,756
PAGE F13
4. Income Taxes
- ----------------------------------------------------------------------------
A reconciliation of the statutory Federal income tax rate with the effective
income tax rate is as follows:
Fiscal Year: 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Federal income tax at statutory rate (35%) $ 42,523 $ 34,123 $ 19,225
State income tax 6,115 4,489 2,724
Goodwill amortization 1,363 955 823
Other 48 1,347 679
- ---------------------------------------------------------------------------------------------------------------------------
Total income tax expense $ 50,049 $ 40,914 $ 23,451
- ---------------------------------------------------------------------------------------------------------------------------
The components of the provision for income taxes are as follows:
Fiscal Year: 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Current expense:
Federal $ 36,814 $ 28,427 $ 15,610
State 8,106 5,918 4,543
- ---------------------------------------------------------------------------------------------------------------------------
44,920 34,345 20,153
- ---------------------------------------------------------------------------------------------------------------------------
Deferred expense:
Accelerated depreciation 10,043 9,099 8,555
Allowance for doubtful accounts and revenue adjustments (1,036) 3,798 (601)
Insurance and claims (3,797) (4,659) (5,036)
Vacation pay (1,254) (1,053) 597
Other 1,173 (616) (217)
- ---------------------------------------------------------------------------------------------------------------------------
5,129 6,569 3,298
- ---------------------------------------------------------------------------------------------------------------------------
Total income tax expense $ 50,049 $ 40,914 $ 23,451
- ---------------------------------------------------------------------------------------------------------------------------
The following is a summary of the components of the deferred tax assets and
liabilities at December 31, 1998 and January 3, 1998:
December 31, January 3,
1998 1998
- ---------------------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Allowance for doubtful accounts and revenue adjustments $ 2,076 $ 1,027
Insurance and claims 34,751 30,953
Vacation pay 8,451 7,196
Other 7,261 3,872
- ---------------------------------------------------------------------------------------------------------------------------
$ 52,539 $ 43,048
- ---------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Property and equipment, principally due to accelerated depreciation $ 86,630 $ 73,697
- ---------------------------------------------------------------------------------------------------------------------------
PAGE F14
5. Employee Benefit Plans
- ----------------------------------------------------------------------------
The Company maintains a salary deferral 401(k) plan covering substantially all
employees who are not members of a collective bargaining unit and who meet
specified service requirements. Contributions are based upon participants'
salary deferrals and compensation and are made within Internal Revenue Service
limitations. For the fiscal years 1998, 1997, and 1996, Company contributions
for these plans were $8,290, $6,550, and $5,715, respectively. The Company does
not offer post-employment or post-retirement benefits.
The Company contributes to several union-sponsored multi-employer pension plans.
These plans are not administered by the Company, and contributions are
determined in accordance with provisions of negotiated labor contracts. The
Multi-employer Pension Plan Amendments Act of 1980 established a continuing
liability to such union-sponsored pension plans for an allocated share of each
plan's unfunded vested benefits upon substantial or total withdrawal by the
Company or upon termination of the pension plans. To date, no withdrawal or
termination has occurred or is contemplated. For the fiscal years 1998, 1997,
and 1996, Company contributions for these pension plans were $60,748, $54,041,
and $45,094, respectively.
6. Common Stock
- ----------------------------------------------------------------------------
The Company maintains an employee stock purchase plan which provides for the
purchase of an aggregate of not more than 900,000 shares of the Company's common
stock. Each eligible employee may designate the amount of regular payroll
deductions, subject to a yearly maximum, that is used to purchase shares at 90%
of the month-end market price. At December 31, 1998; 586,975 shares had been
issued under this plan.
The Company maintains stock option plans that provide for the granting of
options to key employees and non-employee directors to purchase an aggregate of
not more than 3,760,000 shares of the Company's common stock. Stock options
issued pursuant to the plans are exercisable for periods up to 10 years from the
date an option is granted. At December 31, 1998 there were 381,170 shares
available for granting under the plans.
In accordance with the provisions of SFAS No.123, the Company applies APB
Opinion 25 and related interpretations in accounting for its stock option plans,
and accordingly, does not recognize compensation cost. If the Company had
elected to recognize compensation cost based on the fair value of the options
granted at grant date, as prescribed by SFAS No.123, net income and earnings per
share would have been reduced to the pro forma amounts indicated in the table
below:
Fiscal Year 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Net income - as reported $ 71,445 $ 56,581 $ 31,478
Net income - pro forma 69,736 55,808 31,049
Basic earnings per share - as reported 2.73 2.21 1.41
Basic earnings per share - pro forma 2.66 2.18 1.40
Diluted earnings per share - as reported 2.70 2.19 1.40
Diluted earnings per share - pro forma 2.63 2.16 1.38
- ---------------------------------------------------------------------------------------------------------------------------
As prescribed under SFAS No.123, pro forma net income amounts presented above
reflect only options granted after January 1, 1995 since compensation costs for
options granted prior to that date are not considered. Compensation cost for
options granted since January 1, 1995 is reflected over the options' vesting
periods ranging from two to five years.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in fiscal years 1998, 1997, and 1996: dividend yield
ranging from 1.27% to 1.58%; expected volatility ranging from 35.69% to 49.31%;
risk-free interest rates at grant date ranging from 4.97% to 7.46%; and expected
lives ranging from 5.61 to 6.40 years.
PAGE F15
A summary of the status of the Company's stock option plans is presented below:
Fiscal Year 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year 1,435,730 $ 23.67 1,107,250 $ 17.84 758,800 $ 16.21
Granted 1,550,000 25.10 623,500 29.93 479,000 19.49
Exercised (54,290) 16.73 (279,520) 14.98 (92,900) 13.65
Forfeited (203,450) 30.23 (15,500) 16.52 (37,650) 16.16
Outstanding at end of year 2,727,990 24.13 1,435,730 23.67 1,107,250 17.84
Options exercisable at year end 581,790 20.19 402,690 17.74 448,220 15.65
Weighted-average fair value
of options granted during
the year $ 11.66 $ 11.80 $ 8.18
- ----------------------------------------------------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding at
December 31, 1998:
Outstanding Options Options Exercisable
- ---------------------------------------------------------------------------------------------------------------------------
Weighted-Avg
Number Remaining Number
Range of Outstanding at Contractual Life Weighted-Avg Exercisable at Weighted-Avg
Exercise Prices 12/31/98 (years) Exercise Price 12/31/98 Exercise Price
- ---------------------------------------------------------------------------------------------------------------------------
$ 13.00-15.00 143,950 3.78 $ 13.79 143,950 $ 13.79
18.25-19.63 463,000 7.50 19.48 229,600 19.33
22.50-24.94 1,722,540 9.42 24.72 133,540 22.83
25.00-30.50 273,500 8.91 29.92 54,700 29.92
31.81-35.00 125,000 8.97 32.45 20,000 31.81
2,727,990 8.72 24.13 581,790 20.19
- ---------------------------------------------------------------------------------------------------------------------------
PAGE F16
In February, 1994 the Board of Directors approved a stockholder rights plan
designed to deter coercive takeover tactics and to prevent an acquiror from
gaining control of the Company without offering a fair price to all of the
Company's stockholders. At that time, the Company declared a distribution of one
right for each share of common stock outstanding (effected as a stock dividend)
to stockholders of record as of February 11, 1994 and generally to shares
issuable under the Company's stock option plans. Each right entitles holders to
buy one-hundredth (1/100) of a share of the Company's newly designated Series A
Junior Participating Cumulative Preferred Stock, $0.01 par value per share, for
a purchase price of $110.00. Each right is exercisable ten days after the
acquisition of 15% or more of the Company's voting stock, or the commencement of
a tender or exchange offer under which the offeror would own 19.9% or more of
the Company's stock. In the event of a proposed takeover meeting certain
additional conditions, the rights could be exercised by all holders other than
the takeover bidder at an exercise price of half of the current market price of
the Company's common stock. This would have the effect of significantly diluting
the holdings of the takeover bidder. These rights expire on February 3, 2004.
In February 1997, the Company sold 3,105,000 of its shares in a public offering.
The net proceeds from the sale, amounting to approximately $69,000,000, were
initially used to repay outstanding debt under the Company's revolving credit
facility.
7. Commitments and Contingencies
- ----------------------------------------------------------------------------
The Company is routinely involved in a number of legal proceedings and claims
arising in the ordinary course of business, primarily involving claims for
bodily injury and property damage incurred in the transportation of freight. The
estimated liability for claims included in liabilities, both current and
long-term, reflects the estimated ultimate cost of self-insured claims incurred,
but not paid, for bodily injury, property damage, cargo loss and damage, and
workers' compensation. In the opinion of management, the outcome of these
matters is not expected to have any material adverse effect on the consolidated
financial position or results of operations of the Company and have been
adequately provided for in the financial statements.
At December 31, 1998, the Company had capital purchase commitments of
approximately $13,691 for land and improvements, $23,826 for transportation
equipment, and $1,846 for other equipment.
8. Restructuring Charge
- ----------------------------------------------------------------------------
During the fourth quarter 1996, management authorized a one-time restructuring
charge at its USF Red Star subsidiary. The pre-tax restructuring charge of
$4,050 relates primarily to ongoing lease commitments for terminals no longer
occupied and severance paid in connection with the reduction of personnel. The
Company anticipates that no additional charges against its future operations
will be incurred as a result of the restructuring charge. The restructuring
charge is included in the LTL group operating expenses.
9. Acquisitions
- ----------------------------------------------------------------------------
During 1998, under the purchase method of accounting, the Company acquired all
of the outstanding shares of Golden Eagle Group, Inc., an international freight
forwarding company; Glen Moore Transport, Inc., a truckload freight carrier;
Moore and Son Co., a transportation logistics services company; and the general
commodities business of Vallerie's Transportation Service, Inc. for a total of
$66,379 of cash and debt incurred.
During 1997, under the purchase method of accounting, the Company acquired all
of the outstanding shares of SEKO Worldwide, Inc., an airfreight forwarding
company and the general commodities business of Mercury Distribution, Inc. for a
total of $26,779 of cash and debt incurred.
PAGE F17
10. Business Segments
- ----------------------------------------------------------------------------
The Company has eight reportable segments: LTL trucking group (including five
regional carriers), TL trucking, logistics, and freight forwarding. The LTL
trucking group provides overnight and second-day delivery of general commodities
throughout the United States and into Canada. The Company's TL subsidiary
provides premium regional and national truckload services. The Company's
logistics subsidiaries provide solutions to customers' logistics and
distribution requirements. The Company's freight forwarding subsidiaries provide
domestic and international air and ocean freight service through both exclusive
and non-exclusive agents. The reportable segments are managed separately because
each business has differing customer requirements, either as a result of the
regional environment of the country or differences in products and services
offered.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Intangible assets are included in
each segment's reportable assets, but the amortization of these intangible
assets is not included in the determination of a segment's operating profit or
loss. The Company evaluates performance based on profit or loss from operations
before income taxes, interest, amortization of intangibles and other
non-operating income (expenses).
An immaterial amount of revenue is generated outside the United States.
Fiscal Year 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Revenue
LTL Group:
USF Holland $ 794,012 $ 711,137 $ 595,378
USF Reddaway 215,531 198,714 177,998
USF Red Star 212,365 194,823 196,399
USF Dugan 181,971 170,962 148,527
USF Bestway 136,283 133,450 113,058
- ---------------------------------------------------------------------------------------------------------------------------
Sub total LTL Group 1,540,162 1,409,086 1,231,360
TL 12,877 - -
Logistics 130,323 106,299 85,601
Freight forwarding 151,531 44,340 8,400
Corporate and other - 5,524 5,611
- ---------------------------------------------------------------------------------------------------------------------------
Total Revenue $ 1,834,893 $ 1,565,249 $ 1,330,972
- ---------------------------------------------------------------------------------------------------------------------------
Income From Operations
LTL Group:
USF Holland $ 82,580 $ 65,244 $ 51,362
USF Reddaway 18,909 13,457 9,262
USF Red Star 3,581 871 (7,999)
USF Dugan 6,661 6,145 3,237
USF Bestway 15,511 17,433 12,014
- ---------------------------------------------------------------------------------------------------------------------------
Sub total LTL Group 127,242 103,150 67,876
TL 1,138 - -
Logistics 7,976 6,414 2,655
Freight forwarding 4,925 1,289 33
Corporate and other (7,555) (2,936) (959)
Amortization of intangibles (4,293) (2,907) (2,477)
- ---------------------------------------------------------------------------------------------------------------------------
Total Income from Operations $ 129,433 $ 105,010 $ 67,128
- ---------------------------------------------------------------------------------------------------------------------------
PAGE F18
Fiscal Year 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Assets
LTL Group:
USF Holland $ 337,477 $ 276,810 $ 232,003
USF Reddaway 117,326 108,979 104,608
USF Red Star 146,431 137,336 133,014
USF Dugan 92,969 93,737 86,849
USF Bestway 65,815 64,266 54,287
- ---------------------------------------------------------------------------------------------------------------------------
Sub total LTL Group 760,018 681,128 610,761
TL 32,680 - -
Logistics 70,588 59,458 62,753
Freight forwarding 97,326 52,232 2,080
Corporate and other 14,061 6,717 12,914
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets $ 974,673 $ 799,535 $ 688,508
- ---------------------------------------------------------------------------------------------------------------------------
Fiscal Year 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Long Lived Asset Expenditures
LTL Group:
USF Holland $ 83,908 $ 66,637 $ 43,504
USF Reddaway 21,105 19,421 14,865
USF Red Star 16,358 10,439 1,755
USF Dugan 13,707 18,134 9,070
USF Bestway 9,134 8,463 6,978
- ---------------------------------------------------------------------------------------------------------------------------
Sub total LTL Group 144,212 123,094 76,172
TL 1,844 - -
Logistics 9,830 4,799 13,573
Freight forwarding 669 280 107
Corporate and other 921 636 4,205
- ---------------------------------------------------------------------------------------------------------------------------
Total Long Lived Asset Expenditures $ 157,476 $ 128,809 $ 94,057
- ---------------------------------------------------------------------------------------------------------------------------
Depreciation Expense
LTL Group:
USF Holland $ 30,565 $ 27,603 $ 22,612
USF Reddaway 11,267 9,927 8,398
USF Red Star 7,987 7,269 7,832
USF Dugan 10,458 9,887 9,900
USF Bestway 4,723 4,802 4,383
- ---------------------------------------------------------------------------------------------------------------------------
Sub total LTL Group 65,000 59,488 53,125
TL 1,016 - -
Logistics 6,352 5,678 4,711
Freight forwarding 842 277 67
Corporate and other 512 1,790 2,211
- ---------------------------------------------------------------------------------------------------------------------------
Total Depreciation Expense $ 73,722 $ 67,233 $ 60,114
- ---------------------------------------------------------------------------------------------------------------------------
PAGE F19
11. Quarterly Financial Information (unaudited)
Quarters First Second Third Fourth Total
- ---------------------------------------------------------------------------------------------------------------------------
Fiscal 1998
Operating revenue $ 442,339 $ 447,026 $ 469,349 $ 476,179 $ 1,834,893
Income from Operations 25,723 32,448 34,851 36,411 129,433
Net income 13,729 18,044 19,504 20,168 71,445
Net income per share - basic 0.53 0.69 0.74 0.77 2.73
Net income per share - diluted 0.52 0.68 0.74 0.76 2.70
Dividends declared per share 0.0933 0.0933 0.0933 0.0933 .3733
Market price per share (calendar quarter) 32.37-39.50 28.37-37.12 18.44-32.62 17.87-30.12 17.87-39.50
Fiscal 1997
Operating revenue $ 355,817 $ 380,763 $ 393,462 $ 435,207 $ 1,565,249
Income from Operations 19,071 26,915 31,905 27,119 105,010
Net income 9,750 14,541 17,542 14,748 56,581
Net income per share - basic 0.40 0.56 0.68 0.57 2.21
Net income per share - diluted 0.40 0.56 0.67 0.56 2.19
Dividends declared per share 0.0933 0.0933 0.0933 0.0933 .3733
Market price per share (calendar quarter) 22.87-28.00 23.12-29.00 25.75-34.50 29.37-36.75 22.87-36.75
- ---------------------------------------------------------------------------------------------------------------------------
PAGE F20
Selected Consolidated Financial Data (Thousands of dollars, except per
share amounts)
Fiscal Year 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Statements of Operations
Operating revenue $ 1,834,893 $ 1,565,249 $ 1,330,972 $ 1,144,458 $ 1,016,464
Income from operations 129,433 105,010 67,128(1) 67,543 69,666
Interest expense, net (8,027) (7,423) (11,495) (8,177) (8,417)
Other non-operating income (expense) 88 (92) (704) (878) (2,011)
- ---------------------------------------------------------------------------------------------------------------------------
Net income from operations
before income taxes 121,494 97,495 54,929 58,488 59,238
Income tax expense (50,049) (40,914) (23,451) (25,150) (25,882)
- ---------------------------------------------------------------------------------------------------------------------------
Net income from operations 71,445 56,581 31,478 33,338 33,356
Extraordinary item - operating rights - - - - (1,291)
- ---------------------------------------------------------------------------------------------------------------- Director
Net income $ 71,445 $ 56,581 $ 31,478(1) $ 33,338 $ 32,065
- ---------------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share
Net income per share from operations $ 2.73 $ 2.21 $ 1.41(1) $ 1.52 $ 1.53
Net income per share 2.73 2.21 1.41(1) 1.52 1.47
Diluted Earnings Per Share
Net income per share from operations $ 2.70 $ 2.19 $ 1.40(1) $ 1.51 $ 1.51
Net income per share 2.70 2.19 1.40(1) 1.51 1.45
Cash dividends declared per share $ 0.37 $ 0.37 $ 0.37 $ 0.37 $ 0.37
Operating Statistics
LTL Trucking Companies (in thousands)
Total tons 9,179 8,579 7,732 6,835 6,210
Total shipments 13,468 12,857 11,590 10,187 9,045
Balance Sheets
Assets:
Current assets $ 279,849 $ 237,116 $ 203,577 $ 158,611 $ 144,615
Property and equipment, net 544,282 448,315 395,500 338,846 272,264
Intangible assets, net 140,201 104,407 79,559 69,918 72,194
Other assets 10,341 9,697 9,872 10,819 11,929
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $ 974,673 $ 799,535 $ 688,508 $ 578,194 $ 501,002
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity:
Current liabilities $ 228,877 $ 181,714 $ 144,348 $ 128,484 $ 118,447
Long-term debt 151,096 115,000 178,000 137,333 105,667
Other non-current liabilities 135,566 110,621 96,900 79,225 68,794
Total stockholders' equity 459,134 392,200 269,260 233,152 208,094
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 974,673 $ 799,535 $ 688,508 $ 578,194 $ 501,002
- ---------------------------------------------------------------------------------------------------------------------------
(1) Income from operations, net income and earnings per share include the Red
Star restructuring charge of $4,050, before income tax, equivalent to $0.10 per
share, net of tax.
PAGE F21
STATISTICAL INFORMATION
Operating Operating LTL Tons LTL Terminals Tractors Trailers Employees
Revenue Ratio Shipments
YR. (million) (thousands) (thousands)
-- --------- --------- ----------- ----------- --------- -------- -------- ---------
Holland 98 $794.0 89.6% 4,163.9 6,599.1 55 3,645 6,299 8,058
97 $711.1 90.8% 3,826.9 6,163.6 51 3,448 5,998 7,322
Red Star 98 $212.4 98.3% 961.4 1,986.2 27 995 2,231 2,232
97 $194.8 99.6% 898.0 1,887.4 26 1,007 2,190 2,108
Reddaway 98 $215.5 91.2% 858.6 1,766.3 56 1,084 2,956 2,485
97 $198.7 93.2% 810.4 1,745.1 55 1,064 2,781 2,369
Bestway 98 $136.3 88.6% 641.7 1,208.9 26 639 2,314 1,472
97 $133.5 86.9% 630.8 1,211.1 26 590 2,142 1,439
Dugan 98 $182.0 96.3% 914.9 1,686.3 61 1,008 2,985 2,107
97 $171.0 96.4% 877.4 1,642.3 59 961 2,924 2,056
Logistics 98 $130.3 93.9% NA NA NA 514 1,280 1,829
97 $106.3 94.0% NA NA NA 491 1,163 1,534
Seko 98 $151.5 96.7% NA NA NA NA NA 520
97 $ 31.8 96.5% NA NA NA NA NA 148
Glen Moore 98 $ 12.9 91.2% NA NA 1 236 625 383