USFreightways Reports Second Quarter Results
CHICAGO--July 18, 2001--USFreightways Corporation reported revenue for the second quarter ended June 30, 2001 of $623,872,000 compared to $634,034,000 reported for the second quarter which ended July 1, 2000. Net income for the current year's quarter was $11,423,000, or 43 cents diluted earnings per share, compared to $27,498,000 net income for last year's second quarter, equivalent to $1.01 diluted earnings per share.As in the previous quarter, income was negatively impacted across all lines of business due to the continued slowing of the economy and resultant lower volumes and continued losses in the Company's freight forwarding business.
Less-than-truckload (LTL) revenue at the regional trucking subsidiaries decreased 2.9% from the 2000 second quarter, LTL shipments decreased 2.5% and LTL tonnage decreased 4.9%. LTL revenue per shipment decreased 0.4% from $114.03 to $113.57. Average weight per LTL shipment decreased 2.5% to 1,117 pounds compared to 1,145 pounds last year.
In the last week of the quarter, the regional trucking subsidiaries increased rates to their non-contractual customers by an average 5.9%. The non-contractual customer base is approximately one half of total customers.
While all of the LTL trucking companies were affected by the slowdown in the economy, USF Holland had the most impact on the quarter's results with decreases in revenue and tonnage of 5.1% and 7.7% respectively compared to last year's second quarter. The continued significant slowdown in the automotive industry and other heavy manufacturing seen in the first quarter continues to trouble the central United States.
Operating earnings for the regional trucking group were $28,744,000 in the second quarter of 2001 compared to $47,374,000 for the same period of 2000, a 39% decline. The LTL group's operating ratio increased from 90.2 for the second quarter in 2000 to 93.8 in the second quarter of 2001, but is one point less than the 94.8 operating ratio in the first quarter of this year. Despite an approximate 4.5% average reduction in the labor force since November 2000 (equivalent to approximately 800 workers), labor and related fringe benefits increased due to annual contractual increases at our unionized carriers along with increases in group health costs ranging from 12% to 30% across the regional trucking companies. Claims and operating expenses also increased year over year, especially at USF Bestway, whose operating ratio increased from 88.6 to 96.4.
Operating earnings for the logistics group decreased 45% from $4,055,000 in the 2000 quarter to $2,234,000 in the current quarter while revenue increased 2.6% from $65,190,000 to $66,915,000. Profit reductions were primarily due to lower activity at USF Processors as volumes from a major customer were significantly reduced and also a less profitable mix of business in USF Logistics.
USF Worldwide showed continued losses but somewhat less than those in the first quarter of the current year as revenue declined slightly in its domestic and international business. USF Worldwide continues to be impacted by the worldwide slowdown in the freight forwarding industry. However, there was a slight improvement in the gross margins of both areas. Other improvements in labor were offset by increases in fringes expenses. USF Asia continued to show lower losses as volumes increased with their expansion. The Company's UK forwarding operations generated $8.3 million revenue and operated profitably. Samuel K. Skinner, Chairman, President and Chief Executive Officer of USFreightways said, "At USF Worldwide, the new management team continues to reduce fixed costs and make organizational changes that I believe should show benefits throughout the remainder of the year."
USF Glen Moore recorded revenue growth of 23.7% in the quarter compared to the second quarter 2000 and generated an operating ratio of 96.5 compared to 92.3 in the 2000 quarter as labor and depreciation expenses increased in the current year.
Corporate and other expenses increased by $2.1 million compared to the 2000 second quarter. Intangible amortization increased by $0.3 million while the majority of the remaining balance was due to continued efforts to enhance the Company's information technology.
Capital expenditures for the quarter amounted to approximately $19 million mainly for terminals and information technology. Last year, capital expenditures during the quarter amounted to $62 million. Year to date capital expenditures amounted to $35 million compared to $107 million for the same period in 2000.
In light of the current economic conditions and the lower capital expenditures, the Company has reduced its net debt, thereby improving its net debt to capital ratio to 26.1% in the current quarter compared to 31.3% at December 31, 2000.
Just after the end of the quarter, USF Holland received system-wide ISO 9002 registration. With the successful completion of the most recent audits during June, USF Holland has surpassed the required threshold of site audits to project certification across all freight terminal and equipment maintenance locations, as well as its main office functions.
Continuing his comments on the quarter, Skinner said, "Due to the effects of the current economic slowdown, results continue to disappoint on a year over year basis. Realistically, we believe that the slowdown is not over and we will continue to function under less than ideal conditions for at least the remainder of the year. The Company's strategies and tactics for the last half of 2001 have been designed according to these circumstances."
Quarter Quarter Year to Date Year to Date
Ended Ended Ended Ended
June 30, July 1, June 30, July 1,
2001 2000 2001 2000
Revenue
LTL Trucking $ 465,309 $ 484,974 $ 924,328 $ 955,838
TL Trucking 25,592 20,694 50,260 40,591
Logistics 66,915 65,190 138,074 132,315
Freight Forwarding 66,056 63,176 132,603 123,980
--------- --------- --------- ---------
Total Revenue $ 623,872 $ 634,034 $1,245,265 $1,252,724
--------- --------- --------- ---------
Income from operations (loss)
LTL Trucking $ 28,744 $ 47,374 $ 52,842 $ 86,611
TL Trucking 884 1,595 1,720 2,540
Logistics 2,234 4,055 5,015 8,297
Freight Forwarding (2,892) 189 (6,186) 905
Corporate and other (4,686)(a) (2,620)(a) (9,296)(a) (5,947)(a)
--------- --------- --------- ---------
Total Income from
operations $ 24,284 $ 50,593 $ 44,095 $ 92,406
--------- --------- --------- ---------
Interest expense (5,402) (5,342) (10,982) (9,913)
Interest income 254 316 388 508
Other income (expense) 181 9 217 (552)
--------- --------- --------- ---------
Income before income
taxes 19,317 45,576 33,718 82,449
Income taxes (7,647) (18,523) (13,327) (33,346)
Minority interest,
net of taxes (247) 445 (517) 711
--------- --------- --------- ---------
Net income $ 11,423 $ 27,498 $ 19,874 $ 49,814
========= ========= ========= =========
Net income per
share - Basic $ 0.43 $ 1.03 $ 0.76 $ 1.88
Average shares
outstanding -
Basic 26,270,599 26,590,173 26,233,016 26,549,585
Net income per
share - Diluted $ 0.43 $ 1.01 $ 0.74 $ 1.82
Average shares
outstanding -
Diluted 26,652,395 27,297,662 26,700,307 27,372,280
(a) After deduction for amortization of intangibles of $2,000 and
$1,682 in the second quarters of 2001 and 2000 respectively and $3,737
and $3,351 year to date in 2001 and 2000 respectively.
REVENUE and OPERATING RATIOS
Comparison 2001 to 2000
Unaudited (Dollars in thousands)
Quarter Ended Year to Date Ended
June 30, 2001 and June 30, 2001 and
July 1, 2000 July 1, 2000
-------------------- ----------------------
Operating Operating
Company (Region) Revenue Ratio(b) Revenue Ratio(b)
---------------------------------------------- ----------------------
Holland (Midwest) 01 $ 241,060 91.7% $ 480,380 92.3%
00 254,148 89.2% 505,893 89.2%
Bestway (Southwest) 01 39,066 96.4% 77,960 95.1%
00 38,842 88.6% 75,741 89.3%
Red Star (Northeast) 01 65,516 101.8% 129,921 101.4%
00 69,925 96.2% 136,755 97.1%
Reddaway (West Coast,
Northwest) 01 67,851 89.9% 132,960 91.9%
00 70,624 86.9% 134,212 89.7%
Dugan (Plains, South) 01 51,816 96.8% 103,107 96.7%
00 51,435 93.1% 103,237 93.9%
(b) Operating ratio is direct operating costs as a percentage of
revenue.
REVENUE and OPERATING RATIOS
Comparison 2nd Quarter 2001 to 1st Quarter 2001
Unaudited (Dollars in thousands)
Revenue Operating Ratio
------- ---------------
Company 2nd Qtr. 1st Qtr. % Change 2nd Qtr. 1st Qtr.
---------------------------------------- ----------------------
Holland 241,060 239,320 0.7% 91.7% 93.0%
Bestway 39,066 38,894 0.4% 96.4% 93.9%
Red Star 65,516 64,405 1.7% 101.8% 100.9%
Reddaway 67,851 65,109 4.2% 89.9% 94.1%
Dugan 51,816 51,291 1.0% 96.8% 96.6%