USFreightways Reports First Quarter Results
CHICAGO--April 22, 2002--USFreightways Corporation reported revenue for the first quarter ended March 30, 2002 of $577.7 million compared to $621.4 million reported for the first quarter which ended March 31, 2001. Earnings before a charge for the cumulative effect of an accounting change for goodwill and a charge for relinquishing the Company's interest in its joint venture in Asia in the current year's quarter was $5.1 million, or 19 cents diluted earnings per share, compared to $8.4 million net income for last year's first quarter, equivalent to 32 cents diluted earnings per share. The Company reported a net loss after these charges of $77.7 million, equivalent to a loss of $2.84 per diluted share. A charge of $12.8 million was taken to relinquish the Company's interest in its Asia joint venture, and a $70.0 million charge was recorded related to goodwill impairment at USF Worldwide under SFAS 142.Samuel K. Skinner, Chairman, President and Chief Executive Officer of USFreightways, commented, "The results of the first quarter, while somewhat encouraging, continue to be affected by the current sluggish economy. We do believe that there are slight indications that the slowdown is abating as is evidenced by slight March over March improvements in the daily LTL tonnage and shipments. We expect these improvements will continue at a moderate pace throughout the remainder of the year. We are increasing our marketing efforts while continuing our aggressive cost reduction programs."
Income was negatively impacted mainly in the Less-Than-Truckload (LTL) regional trucking subsidiaries due to the continued sluggishness of the economy and resultant lower volumes and losses in the Company's freight forwarding segment though the current loss was sharply reduced from last year's first quarter.
In the regional trucking group, first quarter revenue amounted to $430.2 million, a 6.3% decrease from last year's first quarter revenue of $459.0 million. Because Good Friday occurred in the current year's quarter and in the second quarter of 2001, there were slightly less than 63 working days in the current year's quarter compared to 64 for last year's quarter. However, the current quarter's revenue was virtually the same as the fourth quarter of 2001. Fuel surcharges, which are included in the reported revenue, declined by approximately 2.1% as a percent of revenue compared to last year's first quarter as fuel prices declined. LTL revenue before fuel surcharges declined approximately 3.6% in the current quarter compared to last year's first quarter. Operating earnings for the group were $16.9 million in 2002 compared to $24.1 million for the same period of 2001, a 30% decline. Despite the sluggish economy and the reduction in number of working days, USF Reddaway recorded a slightly improved operating ratio in the current quarter of 94.0 compared to last year's 94.1 and USF Holland, which operates in the central states where the economy has been the most adversely impacted, reported an operating ratio of 93.9 compared to last year's 93.0. The LTL group's operating ratio increased from 94.7 in 2001 to 96.1 this year.
USF Red Star recorded a 104.0 operating ratio for the current quarter, up from 100.9 last year. This was due largely to a dramatic drop in volume for January and early February. A competitor closed operations in late February, however, and the extra business enabled USF Red Star to operate close to break even in March. Management is focused on improving the company's performance in the very competitive Northeast operating environment.
LTL shipments decreased 3.0% and LTL tonnage decreased 4.2%. LTL revenue per shipment decreased 2.8% from $114.55 to $111.37 as average weight per LTL shipment decreased 1.3% to 1,106 pounds compared to 1,120 pounds last year. On a comparable daily basis for the first quarter compared to last year's first quarter, LTL shipments decreased approximately 0.6%, LTL tonnage decreased 1.9% and LTL revenue per shipment before fuel surcharges decreased 0.7%, while LTL revenue per hundredweight before fuel surcharges increased 0.6%. Likewise, on a comparable daily basis, March shipments and tonnage improved slightly compared to March 2001.
Operating earnings for the logistics group decreased 18% from $2.8 million in the 2001 quarter to $2.3 million in this year's quarter while revenue decreased 6% from $71.2 million to $66.6 million. The decrease in revenue and profits is confined to USF Processors where a single customer generated unusually high volumes in last year's first quarter. USF Logistics and USF Distribution successfully completed their planned integration early in the 2002 first quarter.
In the freight forwarding segment, the management team, under the leadership of John Gallahan, has reduced fixed costs and made organizational changes that have begun to show improved results, with the group reporting an operating loss of $1.2 million in the current quarter compared to a $3.3 million loss reported in last year's first quarter.
USF Glen Moore, the Company's truckload carrier, recorded a 2.6% revenue increase to $25.3 million in the current quarter, with operating earnings of $0.9 million and an operating ratio of 96.5, compared to $0.8 million profit and an operating ratio of 96.6 in last year's first quarter.
Corporate and other expenses in the current quarter increased by $1.5 million over last year's quarter. Due to the implementation of SFAS 142, amortization of non-goodwill intangible assets in the current quarter amounted to $0.4 million compared to amortization of goodwill and other intangibles in last year's first quarter of $1.7 million. Corporate expenses increased to $5.7 million in the current quarter compared to $2.9 million last year as the Company's information technology group (IT) increased non-capital expenses by $2.7 million in the current quarter as it continues to upgrade the Company's IT systems and infrastructure. The IT group continues to recruit industry leading talent in order to meet the strategic IT challenges facing the Company.
Capital expenditures for the quarter amounted to approximately $27 million mainly for revenue equipment, terminal facilities and information technology. Last year, capital expenditures amounted to $16 million for revenue equipment and information technology.
At the end of the first quarter, the Company's debt to capital ratio was 29.3% compared to 28.3% at the end of the 2001 first quarter and 27.0% at the end of 2001. The Company had approximately $57.5 million in cash and short-term investments at the quarter's end, thereby reducing the net debt to capital ratio to 24.2% at the end of the first quarter.
March business volumes showed some signs of improvement compared to earlier in the quarter, yet the company remains cautious in its outlook for the remainder of the year. At the current rate of recovery in the economy, we see volumes in the second quarter showing incremental improvements over the first quarter similar to prior years, but probably remaining slightly lower than 2001. Should this trend continue, we expect second quarter earnings in the range of 35-45 diluted cents per share.
Skinner concluded, "During the first quarter USFreightways and its operating companies continued to be recognized for their achievements in transportation. The Company was named once again to FORTUNE magazine's list of Most Admired Companies in America and Forbes Platinum 400 list of companies. Our UK freight forwarding subsidiary was awarded the British International Freight Association Annual Gold Award for the third consecutive year. Microsoft named USF Processors a Certified Partner. Other USF companies were recognized by PPG Industries, Hoffman Engineering, Air Products and Hamilton Sundstrand."
USFreightways provides comprehensive supply chain management services, including high-value next-day, regional and national less-than-truckload (LTL) transportation, logistics, domestic and international freight forwarding and premium regional and national truckload transportation. For more information, contact the Company at www.usfreightways.com.
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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited (Dollars in thousands)
Quarter Quarter
Ended Ended
March 30, March 31,
2002 2001
Revenue
LTL Trucking $ 430,218 $ 459,019
TL Trucking 25,317 24,668
Logistics 66,552 71,159
Freight Forwarding 55,646 66,547
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Total Revenue $ 577,733 $ 621,393
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Income from operations/(Loss)
LTL Trucking $ 16,865 $ 24,098
TL Trucking 889 836
Logistics 2,290 2,781
Freight Forwarding (1,205) (3,294)
Corporate and other (6,110)(1) (4,610)(1)
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Total Income from operations $ 12,729 $ 19,811
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Interest expense (5,226) (5,580)
Interest income 354 134
Other income/(expense), net (12,925)(2) 36
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Income before income taxes (5,068) 14,401
Income taxes (2,595) (5,680)
Minority interest - (270)
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Income/(Loss) before cumulative
effect of accounting change $ (7,663) $ 8,451
Cumulative effect of change in
accounting for goodwill $ (70,022) $ -
----------- -----------
Net income/(Loss) $ (77,685) $ 8,451
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Income/(Loss) per share before
cumulative effect - Basic $ (0.29) $ 0.32
Income/(Loss) per share before
cumulative effect - Diluted $ (0.28) $ 0.32
Net income/(Loss) per share - Basic $ (2.90) $ 0.32
Average shares outstanding - Basic 26,798,022 26,191,561
Net income/(Loss) per share - Diluted $ (2.84) $ 0.32
Average shares outstanding - Diluted 27,313,802 26,775,002
(1) After deduction for amortization of intangibles of $389 and
$1,737 in the first quarters of 2002 and 2001 respectively.
(2) Includes a charge of $12,760.
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Unaudited (Dollars in thousands)
Quarter
Ended
March 30,
2002
Loss before income taxes
Per GAAP $ (5,068)
Charge for Asia Joint Venture 12,760
-----------
Proforma Income before income taxes 7,692
Income taxes (2,595)
-----------
Proforma Net Income $ 5,097
Proforma Net income per share -
Diluted $ 0.19
Charge for Asia Joint Venture (12,760)
Cumulative effect of change in
accounting for goodwill (70,022)
-----------
Net Income per GAAP $ (77,685)
===========
Net income per share - Diluted
Per GAAP $ (2.84)
===========
REVENUE and OPERATING RATIOS
Unaudited (Dollars in thousands)
Quarter Ended
March 30, 2002 and
March 31, 2001
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Operating
Company (Region) Revenue Ratio (3)
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Holland (Midwest) 02 $224,275 93.9%
01 239,320 93.0%
Bestway (Southwest) 02 34,158 95.9%
01 38,894 93.9%
Red Star (Northeast) 02 60,090 104.0%
01 64,405 100.9%
Reddaway (West Coast, Northwest) 02 61,705 94.0%
01 65,109 94.1%
Dugan (Plains, South) 02 49,990 98.7%
01 51,291 96.6%
(3) Operating ratio is direct operating costs as a percentage of
revenue.
REVENUE and OPERATING RATIOS
Comparison 1st Quarter 2002 to 4th Quarter 2001
Unaudited (Dollars in thousands)
-------------------------------- -------------------
Revenue Operating Ratio
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1st Qtr. 4th Qtr. % Change 1st Qtr. 4th Qtr.
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Company
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Holland $ 224,275 $ 219,740 2.1% 93.9% 91.7%
Bestway 34,158 34,889 -2.1% 95.9% 95.6%
Red Star 60,090 61,313 -2.0% 104.0% 101.7%
Reddaway 61,705 64,374 -4.1% 94.0% 90.1%
Dugan 49,990 50,169 -0.4% 98.7% 100.0%
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Total LTL Trucking $ 430,218 $430,485 -0.1% 96.1% 94.2%
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