USFreightways Reports $.50 per Share from Continuing Operations
CHICAGO--Feb. 3, 2003--USFreightways Corporation reported income of $13.6 million from continuing operations for the fourth quarter ended December 31, 2002, a 27% increase compared to $10.7 million reported for the fourth quarter ended December 31, 2001. Diluted earnings per share for the fourth quarter 2002 were 50 cents per share compared to 40 cents per share for the fourth quarter of 2001.Revenue from continuing operations in the fourth quarter was $580.7 million, an 8% increase over the $537.2 million reported for the fourth quarter of 2001.
During the fourth quarter, the Company concluded the sale of its non-core freight forwarding business (USF Worldwide Inc. and USF Worldwide Logistics (UK) Ltd.) and, as a result, recorded a $14.2 million after-tax charge from discontinued operations, equivalent to 52 cents diluted earnings per share. The results of the sale and comparative periodic results are recorded under the "discontinued operations" heading in the Company's Condensed Consolidated Statements of Operations. For the fourth quarter, 2002, these discontinued operations incurred an after-tax loss of $0.9 million as compared to $2.0 million in 2001.
After taking the one-time charges related to the discontinued operations the Company reported a net loss to shareholders of $0.5 million in the quarter, compared to net income of $8.8 million in last year's fourth quarter.
For the total year, the Company recorded revenue from continuing operations of $2.25 billion, a 1.3% increase over the $2.22 billion for 2001. Income from continuing operations was $33.3 million for 2002, or $1.22 diluted earnings per share, compared to last year's income of $50.0 million equivalent to $1.87 diluted earnings per share. Included in this year's results is a $12.8 million loss, net of tax, from relinquishing our interest in our Asian freight forwarding business, equivalent to 46 cents diluted earnings per share. Excluding this loss the Company's core businesses had earnings in 2002 of $46.0 million, equivalent to $1.68 diluted earnings per share.
In the first quarter 2002 the Company recorded an after-tax charge for impairment of goodwill of $70 million - equivalent to ($2.56) diluted earnings per share - which was presented as a cumulative effect of change in accounting. This impairment occurred in the discontinued freight forwarding business segment. That charge, along with the $30.2 million after-tax losses - equivalent to ($1.11) diluted earnings per share - from discontinued operations, contributed to the Company's net loss to shareholders for the year 2002 of $67 million - equivalent to ($2.45) diluted earnings per share - compared to net income of $38.4 million - equivalent to $1.43 diluted earnings per share - for the year 2001.
Samuel K. Skinner, Chairman, President and Chief Executive Officer of USFreightways, commented, "2002 was the third straight challenging year for the Company and for the economy in general. The sale of our freight forwarding business is now behind us so we can fully focus our management team on further improving performance in our core businesses of trucking and logistics."
Less-Than-Truckload
Operating earnings for the Less-Than-Truckload ("LTL") group were $29.2 million in the quarter, an increase of 16.5% compared to $25.1 million for the fourth quarter of 2001. The LTL group's operating ratio ("OR") in the fourth quarter was 93.9, compared to 94.2 in the fourth quarter of last year and slightly higher than the 93.7 for this year's third quarter.
Said Skinner, "The results of the fourth quarter for our LTL operations are somewhat encouraging. Additional business acquired after the closure of Consolidated Freightways ("CF") in early September continued to support the increase in existing business levels. A substantial portion of this growth occurred in the Company's newly announced "PremierPlus" line of business."
Fourth quarter revenue in the LTL group amounted to $478.2 million, an 11.1% increase over last year's fourth quarter. In the month of September 2002, by comparison, just after CF closed, LTL revenue increased 8.0% over the prior year.
Fuel surcharges, which are included in the reported revenue, increased as a percent of revenue in the quarter compared to last year's fourth quarter, as fuel prices began to increase in the fall of 2002. As a result, the LTL trucking group's fourth quarter revenue before fuel surcharges increased approximately 9.8% compared to the 11.1% increase reported above, which includes fuel surcharges.
LTL shipments increased 9.3% over last year's fourth quarter and LTL tonnage increased 9.2%. LTL revenue per shipment increased 1.7% from $113.51 to $115.42, including fuel surcharges. LTL revenue per hundredweight also increased by 1.7%, from $10.27 to $10.45. Before fuel surcharges revenue per hundredweight increased by 0.6%. Average weight per LTL shipment was virtually flat at 1,105 pounds in each quarter.
Since each of our PremierPlus (long-haul) shipments is handled by two of our USF regional carriers, each carrier recognizes that shipment and its portion of the revenue billed to the customer. This method of measuring our statistics (shipment, tonnage and revenue) is consistent with our reporting in prior periods, and also with requirements we have in reporting to the United States Department of Transportation. Nevertheless, had the Company treated each PremierPlus shipment as one long-haul shipment, and not two regional shipments, the total LTL revenue per hundredweight would have increased 3.7% instead of the 1.7% as reported above.
USF Reddaway reported improved fourth quarter results, growing revenue by 11.4% and improving its operating ratio in the current quarter to 87.5 compared to last year's 90.1 as it improved operating efficiencies and labor costs. USF Bestway grew revenue by 14.4% and lowered its operating ratio to 93.0 in the quarter compared to 95.6 last year, primarily through their higher revenue and lower workers' compensation expenses. USF Holland's revenue increased by 11.6% and the company reported an operating ratio of 91.8 against last year's 91.7. Although USF Red Star increased revenue by 7.1%, its OR deteriorated to 103.1 from 101.7 in last year's fourth quarter due mainly to increases in health care and vehicle maintenance costs. USF Dugan's revenue grew 10.9% and they reported an OR of 101.1 compared to 100.0 in 2001.
Truckload
USF Glen Moore, the Company's truckload carrier, recorded a 19.6% revenue increase to $30.7 million in the current quarter over last year's $25.6 million. USF Glen Moore increased operating earnings by 64% to $1.3 million and had an OR of 95.7, compared to $0.8 million profit and an OR of 96.9 in last year's fourth quarter. This profit improvement comes from increases in volume levels and labor efficiencies, partially offset by rising fuel costs. Commented Skinner, "Mark Martin and his team are doing an exceptional job in our truckload segment, which continues to grow at levels well above plan."
Logistics
Revenue for the logistics group was $74.3 million, a 3.7% increase compared to last year's fourth quarter, while operating profits improved to $5.4 million from $1.7 million last year. Included in last year's fourth quarter results was a one-time charge for reorganizing the company. Before these charges the profit would have been $3.4 million. The improved profits resulted primarily from the consolidation of the logistics group's headquarters and slightly improved results at USF Processors.
Corporate and Other Expenses
Corporate and other expenses in the fourth quarter increased by $4.9 million over last year's quarter, driven mainly by continued investment in Information Technology. Skinner said, "The Company continues to invest significantly in Information Technology. Benefits will be realized by the LTL operating companies as we roll out a common Freight Management System later in 2003 and in 2004. Furthermore, we will continue to make significant enhancements to our Web-based services. A number of these enhancements were implemented in 2002 and have been enthusiastically accepted by our customers."
Capital Expenditures and Balance Sheet
Capital expenditures for the year 2002 amounted to approximately $142 million: $87 million for revenue equipment, $26 million for terminal facilities, $13 million for Information Technology and $16 million in other areas. Last year's capital expenditures were $94 million. Total expenditures for the fourth quarter totaled $52 million against $35 million for last year's quarter.
Capital expenditures for the year included $35 million for tractors made in advance of new EPA regulations which took effect on October 1st. "This should fulfill our replacement requirements through 2003," stated Skinner, "virtually eliminating the need to purchase any low NOX engines until 2004, at which time there should be well tested versions available."
Skinner commented, "We are beginning the new year with a strong financial position, having over $50 million in cash and a debt to capital ratio of 29.0%.
Summary
Skinner concluded, "2002 was a very challenging year for our economy and the transportation and logistics industry. I am proud of the performance of the USF family of companies in these difficult times. We expanded our customer base with new products and services, increased productivity, cut our costs significantly through the implementation of a corporate wide purchasing strategy for goods and services and deployed exciting new technology.
"It appears that 2003 will be an equally challenging year. The momentum we saw in the fourth quarter of 2002 has subsided somewhat in the first three weeks of 2003. The uncertainties of the economy and the world political situation continue to have an effect on our industry. Nevertheless, we will continue our hard work in 2003 in all of the areas I have mentioned.
"Until the negotiations between USF Holland and the IBT are over, it is premature to forecast earnings for the entire year. Traditionally the first quarter has seen the lowest economic activity in the year and I do not think this year will be different. We anticipate earnings for the first quarter to be between 22 and 30 cents per share. A ratio of approximately 1/2 of fourth quarter EPS has proven to be a reasonable benchmark in the past."
Conference Call
USFreightways Corporation will host a conference call at 11:00 a.m. CST on Tuesday, February 4th to discuss the Company's fourth quarter and full year results. A live broadcast of the call will be available through the Company's web site at www.usfc.com and also www.streetevents.com. To listen to the call, please go to one of the web sites at least fifteen minutes early to download and install any necessary software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call at both web sites. The conference call is the sole property of USFreightways and any rebroadcast or transcription of the event without prior written consent of the Company is prohibited.
Company Description
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.
Forward-Looking Statements
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 SEC including forms 8K, 10Q and 10K.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited (Dollars in thousands except per share amount)
Quarter Ended Year to Date Ended
Dec. 31 Dec. 31 Dec. 31 Dec. 31
2002 2001 2002 2001
Operating revenue:
LTL Trucking 478,183 430,485 1,866,892 1,816,204
TL Trucking 30,667 25,645 114,151 100,439
Logistics 74,309 71,656 278,161 277,393
Asia operations - 9,488 - 26,938
Intercompany
eliminations (2,470) - (8,678)
------------------------------------------------
Total operating
revenue 580,689 537,274 2,250,526 2,220,974
Operating income:
LTL Trucking 29,205 25,079 105,172 108,620
TL Trucking 1,319 802 5,311 2,887
Logistics 5,353 1,730 12,603 11,185
Asia operations - (1,029) - (2,811)
Freight forwarding
- Asia exit costs - - (12,760)(b) -
Corporate and other (9,077)(a) (4,219)(a) (29,472)(a) (16,545)(a)
------------------------------------------------
Total income from
operations 26,800 22,363 80,854 103,336
------------------------------------------------
Non-operating expenses
Interest expense (5,176) (5,134) (20,516) (20,964)
Interest income 937 1,574 2,708 2,278
Other, net (254) (221) (1,054) (499)
------------------------------------------------
Total non-operating
expenses (4,493) (3,781) (18,862) (19,185)
------------------------------------------------
Income from continuing
operations before
income taxes and
minority interest 22,307 18,582 61,992 84,151
Income tax expense (8,665) (7,571) (28,724) (33,074)
Minority interest (262) (1,100)
------------------------------------------------
Income from
continuing
operations 13,642 10,749 33,268 49,977
------------------------------------------------
Discontinued
operations
Loss from
operations of
discontinued (948)(c) (1,966)(c) (16,978)(c) (11,589)(c)
Freight
Forwarding
segment, net
of tax
Loss on disposal
of Freight
Forwarding
segment,
net of tax (13,239)(d) - (13,239) (d) -
------------------------------------------------
Loss on
discontinued
operations (14,187) (1,966) (30,217) (11,589)
------------------------------------------------
Income/(loss) before
cumulative effect of
accounting change (545) 8,783 3,051 38,388
Cumulative effect of
change in accounting
for goodwill - - (70,022) -
------------------------------------------------
Net income/(loss) (545) 8,783 (66,971) 38,388
================================================
Income per share from
continuing operations
- Basic 0.51 0.41 1.23 1.90
- Diluted 0.50 0.40 1.22 1.87
(Loss) per share from
discontinued
operations
- Basic (0.53) (0.08) (1.12) (0.44)
- Diluted (0.52) (0.07) (1.11) (0.44)
(Loss) per share
- cumulative effect
of change in
accounting for
goodwill
- Basic - - (2.60) -
- Diluted - - (2.56) -
Net income/(loss)
per share - Basic (0.02) 0.33 (2.49) 1.46
Net income/(loss)
per share - Diluted (0.02) 0.33 (2.45) 1.43
Average shares
outstanding
- Basic 26,968,569 26,429,422 26,900,311 26,309,107
Average shares
outstanding
- Diluted 27,236,110 26,926,090 27,331,890 26,765,861
(a) After deduction for amortization of intangibles of $302 and $1,432
in the fourth quarters of 2002 and 2001 respectively, and $1,235
and $5,447 in 2002 and 2001 respectively.
(b) Charges related to relinquishing our interest in Asia.
(c) Tax benefits in the fourth quarters of 2002 and 2001 amounted to
$534 and $1,105, respectively, and $6,907 and $6,518,
respectively, for 2002 and 2001.
(d) Tax benefits amounted to $29,060.
REVENUE and OPERATING RATIOS
Unaudited (Dollars in thousands)
Quarter Ended Year to Date Ended
Dec. 31, 2002 and Dec. 31, 2002 and
Dec. 31, 2001 Dec. 31, 2001
------------------- ------------------
Company Operating Operating
(Region) Revenue Ratio(a) Revenue Ratio(a)
----------------------------------------- ------------------
Holland
(Midwest) 02 $245,227 91.8% $960,392 92.5%
01 $219,740 91.7% $937,150 92.0%
Bestway
(Southwest) 02 39,915 93.0% 151,597 93.8%
01 34,889 95.6% 150,466 95.0%
Red Star
(Northeast) 02 65,671 103.1% 264,279 102.6%
01 61,313 101.7% 255,722 101.3%
Reddaway
(West Coast,
Northwest) 02 71,720 87.5% 274,368 89.2%
01 64,374 90.1% 266,206 90.7%
Dugan
(Plains,
South) 02 55,650 101.1% 216,256 99.4%
01 50,169 100.0% 206,660 97.8%
(a) Operating ratio is direct operating costs as a percentage of
revenue.
REVENUE and OPERATING RATIOS
Comparison 4th Quarter 2002 to 3rd Quarter 2002
Unaudited (Dollars in thousands)
-------------------------------------------------
Revenue Operating Ratio
-------------------------------------------------
Company 4th Qtr. 3rd Qtr. % Change 4th Qtr. 3rd Qtr.
-------------------------------------------------
Holland $245,227 $245,765 -0.2% 91.8% 92.3%
Bestway 39,915 39,600 0.8% 93.0% 92.9%
Red Star 65,671 68,877 -4.7% 103.1% 101.5%
Reddaway 71,720 72,065 -0.5% 87.5% 86.8%
Dugan 55,650 57,011 -2.4% 101.1% 99.2%
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Total LTL Trucking $478,183 $483,318 -1.1% 93.9% 93.7%
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