USFreightways Reports Third Quarter Results
CHICAGO--Oct. 23, 2002--USFreightways Corporation reported revenue for the third quarter ended September 28, 2002 of $634.5 million compared to $618.6 million reported for the third quarter which ended September 29, 2001. Earnings from the Company's core operations (LTL, TL, logistics and corporate) were $13.4 million or 49 cents diluted earnings per share, compared to last year's third quarter earnings of $16.0 million, equivalent to 59 cents diluted earnings per share. The Company's net income, including its non-core freight forwarding business, amounted to $5.3 million, equivalent to 19 cents per diluted earnings per share compared to last year's third quarter net income of $9.7 million equivalent to 36 cents diluted earnings per share.The Company announced on October 18, 2002 that it has an agreement to sell its non-core freight forwarding business (USF Worldwide Inc. and USF Worldwide Logistics (UK) Ltd.). The transaction is expected to close on or before October 31, 2002.
Net income was negatively impacted by results in the non-core freight forwarding segment which showed an after tax loss of $8.1 million. Included in the freight forwarding loss is a charge of $4.7 million relating to contractual payments paid to former owners of the UK business. Upon the closing of the sale of the freight forwarding segment in the fourth quarter, the Company expects to take an after tax charge of $10 -12 million.
Samuel K. Skinner, Chairman, President and Chief Executive Officer of USFreightways, commented, "The results of the third quarter for our core operations are somewhat encouraging. During July and August tonnage and revenue at our regional LTL companies were up only slightly over last year as we continue to be affected by the current sluggish economy. However, the LTL business showed healthy volume increases following the close of Consolidated Freightways ("CF") on September 2nd as we picked up a portion of its revenue.
"We are pleased to see our customers are recognizing our new service product, `PremierPlus' as a viable option for longer length of haul LTL loads. We intend to continue working as hard as we can to grow our revenues in this product."
Third quarter revenue in the LTL group amounted to $483.3 million, a 4.7% increase from last year's third quarter revenue of $461.4 million. Revenue in September, on the other hand, increased 8.0% over September 2001. Although we cannot definitively determine the amount of all revenue increases, we estimate that about three-quarters of this increase is attributable to CF's closure.
Fuel surcharges, which are included in the reported revenue, declined by approximately 0.6%, as a percent of revenue in the quarter, compared to last year's third quarter. As a result, total trucking group revenue before fuel surcharges increased approximately 5.3% in this year's quarter compared to last year instead of the 4.7% reported increase.
Operating earnings for the LTL group were $30.6 million in the quarter, essentially flat compared with the $30.7 million for the same period of 2001. The LTL group's operating ratio improved to 93.7 from 94.0 in the second quarter of this year and was higher than the 93.3 for the third quarter of 2001.
LTL shipments increased 5.9% over last year's third quarter and LTL tonnage increased 5.4%. During the month of September, however, LTL tonnage and LTL shipments increased by 7.5% and 8.6%, respectively, compared to September 2001. LTL revenue per shipment decreased 1.2% from $115.93 to $114.58, including fuel surcharges. Before fuel surcharges revenue per hundredweight decreased by 0.3%. Average weight per LTL shipment decreased 0.5% to 1,107 pounds compared to 1,112 pounds last year.
USF Reddaway continued its outstanding performance, growing revenue by 4.6% and improving its operating ratio in the current quarter to 86.8 compared to last year's 88.7. USF Bestway increased revenue by 5.3% and improved its operating ratio to 92.9 in the current quarter compared to 94.0 last year, primarily through lower claims expenses. USF Holland increased revenue by 3.7% and reported an operating ratio of 92.3 compared to last year's 91.5. USF Red Star continued to show continued benefits from the closure of APA earlier this year with a 6.8% revenue increase over last year. However, its OR deteriorated slightly from last year's 100.9 to 101.5 in this year's quarter. USF Dugan also increased revenue by 6.8%, but incurred $0.6 million in costs related to an environmental matter and reported an OR of 99.2. Without these additional costs, USF Dugan would have reported an OR of 98.1 compared to 97.7 in last year's quarter.
Revenue for the logistics group was $67.7 million, virtually the same as last year's third quarter, while operating profits declined to $2.9 million from $4.4 million last year as start up costs from four new warehouse operations and softness in the retail sector impacted their results.
USF Glen Moore, the Company's truckload carrier, recorded a 20.8% revenue increase to $29.6 million in the current quarter over last year. USF Glen Moore had operating earnings of $1.6 million and an operating ratio of 94.7, compared to $0.4 million profit and an operating ratio of 98.5 in last year's third quarter.
Corporate and other expenses in the current quarter increased by $2.5 million over last year's quarter, driven primarily by continued investment in information technology.
Capital expenditures for the quarter amounted to approximately $36.7 million, mainly for revenue equipment. Last year, capital expenditures amounted to $24.2 million, mostly for terminal facilities. Year-to-date expenditures total $90.5 million against $58.8 million year-to-date last year.
At the end of the third quarter, the Company's debt to capital ratio was 28.9% compared to 27.5% at the end of the 2001 third quarter and 27.0% at the end of 2001. The Company had approximately $74.7 million in cash and short-term investments at the quarter's end, thereby reducing the net debt to capital ratio to 22.3%.
Skinner concluded, "With our exit from the freight forwarding segment, management's concentration can now be tightly focused on the growth and profitability of our core businesses. Challenges remain, due mainly to the persistent sluggishness of the economy. September's volumes were mildly encouraging, however, and we would expect core earnings for the fourth quarter to be comparable or just slightly higher than last year."
USFreightways Corporation provides comprehensive supply chain management services, including high-value next-day, regional and national LTL transportation, logistics, 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 OPERATIONS
Unaudited (Dollars in thousands)
Quarter Quarter Year to Date Year to Date
Ended Ended Ended Ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
2002 2001 2002 2001
Revenue
LTL Trucking $ 483,318 $ 461,391 $ 1,388,709 $ 1,385,719
TL Trucking 29,649 24,534 83,484 74,794
Logistics 67,707 67,663 203,852 205,737
Freight Forwarding 56,048 64,992 167,193 197,595
Intercompany
eliminations (2,189) - (6,208) -
--------- ---------- ------------ -----------
Total Revenue $ 634,533 $ 618,580 $ 1,837,030 $ 1,863,845
--------- ---------- ------------ -----------
Income from operations (loss)
LTL Trucking $ 30,589 $ 30,699 $ 75,967 $ 83,541
TL Trucking 1,574 365 3,992 2,085
Logistics 2,884 4,440 7,250 9,455
Freight Forwarding (9,969)(b) (8,848) (33,011)(b) (15,034)
Corporate and other (7,275)(a) (4,728)(a) (22,283)(a) (14,024)(a)
--------- ---------- ------------ -----------
Total Income from
operations $ 17,803 $ 21,928 $ 31,915 $ 66,023
--------- ---------- ------------ -----------
Interest expense (5,185) (5,236) (15,640) (16,218)
Interest income 384 322 1,795 710
Other income (expense) (428) (199) (788) 18
--------- ---------- ------------ -----------
Income before
income taxes 12,574 16,815 17,282 50,533
Income taxes (7,255) (6,763) (13,686) (20,090)
Minority interest - (321) - (838)
--------- ---------- ------------ -----------
Income before
cumulative effect
of accounting
change $ 5,319 $ 9,731 $ 3,596 $ 29,605
Cumulative effect of
change in accounting
for goodwill $ - $ - $ (70,022) $ -
--------- ---------- ------------ -----------
Net income/ (Loss) $ 5,319 $ 9,731 $ (66,426) $ 29,605
========= ========== ============ ===========
Income per share
before cumulative
effect: Basic $ 0.20 $ 0.37 $ 0.13 $ 1.13
Diluted $ 0.19 $ 0.36 $ 0.13 $ 1.11
Loss per share
cumulative effect:
Basic $ - $ - $ (2.60) $ -
Diluted $ - $ - $ (2.60) $ -
Net income/(Loss)
per share:
Basic $ 0.20 $ 0.37 $ (2.47) $ 1.13
Average shares
outstanding:
Basic 26,924,123 26,335,517 26,872,059 26,267,763
Net income/(Loss)
per share:
Diluted $ 0.19 $ 0.36 $ (2.47) $ 1.11
Average shares
outstanding:
Diluted 27,338,300 26,912,541 26,872,059 26,765,551
(a) After deduction for amortization of intangibles of $322 and $1,975
in the third quarters of 2002 and 2001, respectively, and $2,822 and
$5,712 year-to-date in 2002 and 2001, respectively.
(b) Includes charges of $4,699 in the third quarter and year-to-date
2002 relating to payments made to former owners of USF Worldwide UK
and $12,760 in the year-to-date 2002 related to relinquishing our
interest in Asia.
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Unaudited (Dollars in thousands)
Quarter ended September 28, 2002
Income before income taxes per GAAP 12,574
Freight forwarding operations loss before income taxes 10,055
----------
Proforma income before income taxes - core operations 22,629
Income taxes - core operations (9,183)
----------
Proforma net income - core operations 13,446
----------
Proforma diluted net income per share - core operations $ 0.49
----------
Freight forwarding operations loss before income taxes (10,055)
----------
Income tax benefit 1,928
----------
Net income per GAAP 5,319
==========
Diluted net income per share - per GAAP $ 0.19
----------
Note: The Company announced on October 18, 2002 that it has an
agreement to sell its non-core freight forwarding business, with the
transaction expecting to close on or before October 31, 2002. The
results of its non-core freight forwarding business will be reflected
as discontinued operations in the fourth quarter. The above proforma
analysis illustrates the effect of these operations as if the results
had been reported as discontinued operations for the third quarter.
REVENUE and OPERATING RATIOS
Unaudited (Dollars in thousands)
Quarter Ended Year to Date Ended
Sept. 28, 2002 and Sept. 28, 2002 and
Sept. 29, 2001 Sept. 29, 2001
-------------------- --------------------
Company Operating Operating
(Region) Revenue Ratio (a) Revenue Ratio (a)
-------------------------------------- --------------------
Holland
(Midwest) 02 $245,765 92.3% $715,165 92.8%
01 $237,030 91.5% $717,410 92.1%
Bestway
(Southwest) 02 39,600 92.9% 111,682 94.1%
01 37,617 94.0% 115,577 94.8%
Red Star
(Northeast) 02 68,877 101.5% 198,608 102.4%
01 64,488 100.9% 194,409 101.2%
Reddaway
(West Coast,
Northwest) 02 72,065 86.8% 202,648 89.9%
01 68,872 88.7% 201,832 90.8%
Dugan (Plains,
South) 02 57,011 99.2% 160,606 98.8%
01 53,384 97.7% 156,491 97.1%
(a) Operating ratio is direct operating costs as a percentage of
revenue.
REVENUE and OPERATING RATIOS
Comparison 3rd Quarter 2002 to 2nd Quarter 2002
Unaudited (Dollars in thousands)
-------------------------------------------------
Revenue Operating Ratio
-------------------------------------------------
Company 3rd Qtr. 2nd Qtr. % Change 3rd Qtr. 2nd Qtr.
-------------------- ----------------------------
Holland $245,765 $245,125 0.3% 92.3% 92.1%
Bestway 39,600 37,924 4.4% 92.9% 93.8%
Red Star 68,877 69,641 -1.1% 101.5% 101.8%
Reddaway 72,065 68,878 4.6% 86.8% 89.4%
Dugan 57,011 53,605 6.4% 99.2% 98.4%
-------------------- ----------------------------
Total LTL Trucking $483,318 $475,173 1.7% 93.7% 94.0%
-------------------- ----------------------------