USFreightways Reports Second Quarter Results
CHICAGO--July 19, 2002--USFreightways Corporation reported revenue for the second quarter ended June 29, 2002 of $626.7 million compared to $623.9 million reported for the second quarter which ended June 30, 2001. Earnings before impairment charges at USF Worldwide Inc., the Company's freight forwarding operation, were $10.5 million, or 38 cents diluted earnings per share, compared to last year's second quarter earnings of $11.4 million, equivalent to 43 cents diluted earnings per share. The Company's net income (after USF Worldwide Inc. charges) amounted to $5.9 million, equivalent to $0.22 per diluted earnings per share.Samuel K. Skinner, Chairman, President and Chief Executive Officer of USFreightways, commented, "The results of the second quarter for our operations other than USF Worldwide, are encouraging, but we continue to be affected by the current sluggish economy. There are indications that the economy is showing a slight recovery, as is evidenced by increases in both tonnage and shipment volumes second quarter over first quarter this year, and also second quarter 2002 over second quarter 2001. We hope these improvements will continue throughout the remainder of the year." Skinner continued, "USF Worldwide's results in its U.S. operations are disappointing. Following extended losses and review of the overall strategy of the USFreightways group, we have concluded that the freight forwarding business, as currently structured, does not fit as one of our core businesses. The investment banking firm of Morgan Stanley has been retained to advise USF Worldwide on its strategic alternatives, including the sale of the company. We hope that this process will be completed by the end of the third quarter."
As previously mentioned, net income was negatively impacted in the freight forwarding segment as USF Worldwide Inc. reported pre-tax charges of $7.8 million ($4.5 million after tax), related to long-lived assets impairment under SFAS 144.
In the regional trucking group, second quarter revenue amounted to $475.2 million, a 2.1% increase from last year's second quarter revenue of $465.3 million. Compared to this year's first quarter, the trucking group's revenue increased by 10.4%. Good Friday, which traditionally is a light business day, fell in the second quarter of 2001, so revenue comparisons to last year are slightly affected. Fuel surcharges, which are included in the reported revenue, declined by approximately 1.1%, as a percent of revenue in the quarter, compared to last year's second quarter, as fuel prices declined. As a result, total trucking group revenue before fuel surcharges increased approximately 3.2% in the current quarter compared to last year's second quarter.
Operating earnings for the Less-Than-Truckload (LTL) trucking group were $28.5 million in 2002 compared to $28.7 million for the same period of 2001, a 0.8% decline. Despite the sluggish economy, USF Reddaway Inc. grew revenue by 1.5% and improved its operating ratio in the current quarter to 89.4 compared to last year's 89.9. USF Bestway Inc. reported an improvement in its operating ratio to 93.8 in the current quarter compared to 96.4 last year primarily through lower claims expenses. USF Holland Inc. which operates in the central states where the economy has been the most adversely impacted, increased revenue by 1.7% and reported an operating ratio of 92.1 (including a gain on sale of land of approximately $0.6 million) compared to last year's 91.7. USF Red Star Inc. recorded a 101.8 operating ratio for the current quarter, the same as last year. A competitor in USF Red Star Inc.'s operating territory closed operations in late February; the additional revenue gained from this closure contributed to USF Red Star Inc.'s improvement in its current quarter operating ratio by 2.2 points compared to a 104.0 in the 2002 first quarter. The LTL trucking group's operating ratio improved to 94.0 from 96.1 in the first quarter this year and was slightly higher than the 93.8 for the second quarter 2001.
LTL shipments increased 4.0% over last year's second quarter and LTL tonnage increased 3.5%. LTL revenue per shipment decreased 1.7% from $113.57 to $111.66, as fuel surcharges decreased by approximately 1.1% and average weight per LTL shipment decreased 0.6% to 1,111 pounds compared to 1,117 pounds last year.
In the last week of the quarter, the regional trucking group increased rates to their non-contractual customers by an average of 5.9% affecting approximately one half of their total customers.
Revenue for the logistics group increased 4% from $66.9 million in last year's second quarter to $69.6 million this year, while operating profit declined slightly as a result of start up costs from four new warehouse operations opened in the quarter.
USF Glen Moore Inc., the Company's truckload carrier, recorded an 11.4% revenue increase to $28.5 million in the current quarter over last year, with operating earnings of $1.5 million and an operating ratio of 94.6, compared to $0.9 million profit and an operating ratio of 96.5 in last year's second quarter.
Corporate and other expenses in the current quarter increased by $4.2 million over last year's quarter, driven primarily by a $3.2 million increase in information technology, as the Company continues to ramp up its investment in advanced technology. Amortization of intangible assets amounted to $2.1 million for the quarter (including a $1.7 million charge under SFAS No. 144) compared to last year's second quarter of $2.0 million, as goodwill is no longer amortized under FASB 142.
Capital expenditures for the quarter amounted to approximately $27.2 million mainly for revenue equipment, terminal facilities and information technology. Last year, capital expenditures amounted to $18.9 million for revenue equipment and information technology.
At the end of the second quarter, the Company's debt to capital ratio was 29.1% compared to 27.8% at the end of the 2001 second quarter and 27.0% at the end of 2001. The Company had approximately $59.0 million in cash and short-term investments at the quarter's end, thereby reducing the net debt to capital ratio to 23.9% at the end of the second quarter.
June volumes in our trucking and logistics businesses improved compared to last year, yet the company remains cautious in its outlook for the third quarter and remainder of the year. At the current rate of recovery in the economy, we see volumes in the third quarter showing improvements over the second quarter 2002 and, therefore, we would expect third quarter earnings to be slightly higher than second quarter earnings.
Skinner concluded, "During the second quarter USF Bestway opened a new state-of-the-art facility in Fontana, California, significantly increasing its capacity in the burgeoning Southern California corridor. USF Logistics opened a new 50,000 square foot service center in Phoenix, Arizona, providing a full range of cross-dock capabilities to customers in that market. USF Logistics also won awards from Williams-Sonoma for "On-Time Service" and "Above and Beyond Performance". Other USF companies recognized for excellence by their customers in the second quarter were USF Reddaway and USF Dugan which both received 2001 Carrier Achievement Awards from Hoffman Enclosures; USF Holland, which was named "2002 Choice Carrier Partner" by Miller Electric and "Excellent Supplier" by TTX; and USF Red Star which was named "2001 Zone Carrier of the Year" by Phillips-Van Heusen.
USFreightways Corporation provides comprehensive supply chain management services, including high-value next-day, regional and national LTL transportation, logistics, domestic and international freight forwarding and premium regional and national truckload transportation. For more information, contact the Company at www.usfc.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 Year to Date Year to Date
Ended Ended Ended Ended
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
Revenue
LTL Trucking $ 475,173 $ 465,309 $ 905,391 $ 924,328
TL Trucking 28,518 25,592 53,835 50,260
Logistics 69,593 66,915 136,145 138,074
Freight Forwarding 55,499 66,056 111,145 132,603
Intercompany
eliminations (2,097) - (4,019) -
------- ------- --------- ---------
Total Revenue $ 626,686 $ 623,872 $ 1,202,497 $ 1,245,265
------- ------- --------- ---------
Income from operations
(loss)
LTL Trucking $ 28,513 $ 28,744 $ 45,378 $ 52,842
TL Trucking 1,529 884 2,418 1,720
Logistics 2,076 2,234 4,366 5,015
Freight Forwarding (9,077) (2,892) (10,282) (6,186)
Corporate and
other (8,898)(a) (4,686)(a) (15,008)(a) (9,296)(a)
------- ------- ------- -------
Total Income from
operations $ 14,143 $ 24,284 $ 26,872 $ 44,095
------- ------- ------- -------
Interest expense (5,229) (5,402) (10,455) (10,982)
Interest income 1,057 254 1,411 388
Other income (expense) (195) 181 (13,120)(b) 217
------- ------- ------- -------
Income before income
taxes 9,776 19,317 4,708 33,718
Income taxes (3,836) (7,647) (6,431) (13,327)
Minority interest - (247) - (517)
------- ------- ------- -------
Income/ (Loss) before
cumulative effect of
accounting change $ 5,940 $ 11,423 $ (1,723) $ 19,874
Cumulative effect of
change in accounting
for goodwill $ - $ - $ (70,022) $ -
------- ------- ------- -------
Net income/ (Loss) $ 5,940 $ 11,423 $ (71,745) $ 19,874
======= ======= ======= =======
Income/(Loss) per share
before cumulative
effect - Basic $ 0.22 $ 0.43 $ (0.06) $ 0.76
Income/(Loss) per share
before cumulative
effect - Diluted $ 0.22 $ 0.43 $ (0.06) $ 0.74
Income/(Loss) per share
cumulative
effect - Basic $ - $ - $ (2.61) $ -
Income/(Loss) per share
cumulative
effect - Diluted $ - $ - $ (2.61) $ -
Net income per
share - Basic $ 0.22 $ 0.43 (2.67) $ 0.76
Average shares
outstanding -
Basic 26,892,426 26,270,599 26,845,749 26,233,016
Net income per
share - Diluted $ 0.22 $ 0.43 $ (2.67) $ 0.74
Average shares
outstanding -
Diluted 27,469,968 26,652,395 26,845,749 26,700,307
(a) After deduction for amortization of intangibles of $2,111 and
$2,000 in the second quarters of 2002 and 2001 respectively and $2,500
and $3,737 year to date in 2002 and 2001 respectively. $1,715 in the
second quarter and year-to-date 2002 relates to SFAS No. 144.
(b) Includes a charge of $12,760 related to relinquishing our
investment in Asia.
Proforma Condensed Consolidated Statement of Income
Unaudited (Dollars in thousands)
Income before income taxes $ 9,776
Per GAAP
Charge for SFAS No. 144 7,804
long-lived assets impairment
-------------
Proforma Income before income taxes 17,580
Income taxes (7,113)
-------------
Proforma Net Income $ 10,467
Proforma Net income per share - $ 0.38
Diluted
Charge for SFAS No. 144 (7,804)
long-lived assets impairment
-------------
Total USF Worldwide related charges (7,804)
Income tax benefit thereon 3,277
-------------
Net Income per GAAP $ 5,940
=============
Net income per share - Diluted
Per GAAP $ 0.22
=============
REVENUE and OPERATING RATIOS
Unaudited (Dollars in thousands)
Quarter Ended Year to Date Ended
June 29, 2002 and June 29, 2002 and
June 30, 2001 June 30, 2001
-------------------- --------------------
Operating Operating
Company Revenue Ratio (a) Revenue Ratio (a)
(Region)
-------------------------------------- --------------------
Holland
(Midwest) 02 $ 245,125 92.1% $ 469,400 93.0%
01 $ 241,060 91.7% $ 480,380 92.3%
Bestway
(Southwest) 02 37,924 93.8% 72,082 94.8%
01 39,066 96.4% 77,960 95.1%
Red Star
(Northeast) 02 69,641 101.8% 129,731 102.8%
01 65,516 101.8% 129,921 101.4%
Reddaway
(West
Coast,
Northwest) 02 68,878 89.4% 130,583 91.6%
01 67,851 89.9% 132,960 91.9%
Dugan
(Plains,
South) 02 53,605 98.4% 103,595 98.6%
01 51,816 96.8% 103,107 96.7%
(a) Operating ratio is direct operating costs as a percentage of
revenue.
REVENUE and OPERATING RATIOS
Comparison 2nd Quarter 2002 to 1st Quarter 2002
Unaudited (Dollars in thousands)
-------------------------------------------------
Revenue Operating Ratio
-------------------------------------------------
Company 2nd Qtr. 1st Qtr. % Change 2nd Qtr. 1st Qtr.
-------------------- ----------------------------
Holland 245,125 224,275 9.3% 92.1% 93.9%
Bestway 37,924 34,158 11.0% 93.8% 95.9%
Red Star 69,641 60,090 15.9% 101.8% 104.0%
Reddaway 68,878 61,705 11.6% 89.4% 94.0%
Dugan 53,605 49,990 7.2% 98.4% 98.7%
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Total LTL
Trucking 475,173 430,218 10.4% 94.0% 96.1%
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