##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549
 Form 10-Q n
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
OCTOBER 2, 2004 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM

TO
 Commission File Number 0-19791 USF CORPORATION (Exact name of registrant as specified in its charter)
 Delaware
(State of Incorporation)
    
    36-3790696
(IRS Employer
Identification No.)
 8550 W. Bryn Mawr Avenue, Suite 700
Chicago, Illinois
(Address of principal executive offices)
    
    60631
(Zip Code)
 Registrants telephone number
including area code: (773) 824-1000 N/A
(Former name or former address, if changed since the last report) Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
n No Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date. As of October 28, 2004, 27,971,576 shares of common stock were outstanding. 1




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TABLE OF CONTENTS  PART I: FINANCIAL INFORMATIONItem 1.Condensed Consolidated Balance SheetsCondensed Consolidated Statements of OperationsCondensed Consolidated Statements of Cash FlowsCondensed Consolidated Statements of Changes in Stockholders EquityNotes to Condensed Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresPART II: OTHER INFORMATIONItem 1. Legal ProceedingsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSIGNATURESCertificationCertification    Table of Contents  
 PART I: FINANCIAL INFORMATION 
 Item 1. Financial Statements USF Corporation 
 
 As ofOctober 2,
    
    December 31,2004
    
    2003AssetsCurrent assets:Cash
    
    $
    134,321
    
    
    $
    121,659Accounts receivable, net
    
    
    307,394
    
    
    
    271,849Operating supplies and prepaid expenses
    
    
    32,544
    
    
    
    32,014Deferred income taxes
    
    
    32,080
    
    
    
    33,717Total current assets
    
    
    506,339
    
    
    
    459,239Property and equipment, net
    
    
    772,172
    
    
    
    753,902Goodwill
    
    
    100,813
    
    
    
    100,813Other assets
    
    
    44,658
    
    
    
    44,134Total Assets
    
    $
    1,423,982
    
    
    $
    1,358,088Liabilities and Stockholders EquityCurrent liabilities:Current debt
    
    $
    63
    
    
    $
    60Accounts payable
    
    
    62,057
    
    
    
    57,286Accrued salaries, wages and benefits
    
    
    98,005
    
    
    
    93,002Accrued claims and other
    
    
    126,322
    
    
    
    102,119Total current liabilities
    
    
    286,447
    
    
    
    252,467Long-term liabilitiesNotes payable and long-term debt
    
    
    250,039
    
    
    
    250,087Accrued claims and other
    
    
    108,033
    
    
    
    95,084Deferred income taxes
    
    
    90,800
    
    
    
    95,661Total Liabilities
    
    
    735,319
    
    
    
    693,299Commitments and contingencies (Note 8)Total stockholders equity
    
    
    688,663
    
    
    
    664,789Total Liabilities and Stockholders Equity
    
    $
    1,423,982
    
    
    $
    1,358,088
 See accompanying Notes to Condensed Consolidated Financial Statements. 2




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USF Corporation 
 
 Quarter Ended
    
    Year-to-DateOctober 2,
    
    October 4,
    
    October 2,
    
    October 4,2004
    
    2003
    
    2004
    
    2003Revenue:LTL Trucking
    
    $
    484,170
    
    
    $
    486,449
    
    
    $
    1,522,058
    
    
    $
    1,447,784TL Trucking
    
    
    33,637
    
    
    
    33,669
    
    
    
    100,390
    
    
    
    96,663Logistics
    
    
    67,017
    
    
    
    67,734
    
    
    
    197,989
    
    
    
    209,147Intercompany eliminations
    
    
    (2,745
    )
    
    
    (3,147
    )
    
    
    (9,731
    )
    
    
    (8,102
    )582,079
    
    
    
    584,705
    
    
    
    1,810,706
    
    
    
    1,745,492Operating expenses:LTL Trucking
    
    
    453,832
    
    
    
    456,136
    
    
    
    1,451,927
    
    
    
    1,375,359TL Trucking
    
    
    32,811
    
    
    
    31,893
    
    
    
    98,145
    
    
    
    93,402Logistics
    
    
    64,710
    
    
    
    64,807
    
    
    
    192,225
    
    
    
    203,882Corporate and Other
    
    
    7,733
    
    
    
    6,630
    
    
    
    33,096
    
    
    
    20,548Intercompany eliminations
    
    
    (2,745
    )
    
    
    (3,147
    )
    
    
    (9,731
    )
    
    
    (8,102
    )Total operating expenses
    
    
    556,341
    
    
    
    556,319
    
    
    
    1,765,662
    
    
    
    1,685,089Income from operations
    
    
    25,738
    
    
    
    28,386
    
    
    
    45,044
    
    
    
    60,403Non-operating income/(expense):Interest expense
    
    
    (5,241
    )
    
    
    (5,175
    )
    
    
    (15,667
    )
    
    
    (15,658
    )Interest income
    
    
    959
    
    
    
    221
    
    
    
    2,170
    
    
    
    639Other, net
    
    
    (412
    )
    
    
    (506
    )
    
    
    (1,365
    )
    
    
    (932
    )Net non-operating expense
    
    
    (4,694
    )
    
    
    (5,460
    )
    
    
    (14,862
    )
    
    
    (15,951
    )Income from continuing operations before income taxes and
cumulative effect of accounting change
    
    
    21,044
    
    
    
    22,926
    
    
    
    30,182
    
    
    
    44,452Income tax expense
    
    
    (8,976
    )
    
    
    (9,835
    )
    
    
    (13,015
    )
    
    
    (19,007
    )Income from continuing operations before cumulative effect
of accounting change
    
    
    12,068
    
    
    
    13,091
    
    
    
    17,167
    
    
    
    25,445Loss from discontinued
operations,
net of tax benefits of $96 and $130, respectively
    
    
    
    
    
    
    (130
    )
    
    
    
    
    
    
    (175
    )Income before cumulative effect of accounting change
    
    
    12,068
    
    
    
    12,961
    
    
    
    17,167
    
    
    
    25,270Cumulative effect of change in accounting for revenue
recognition, net of tax
benefits of $1,064
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,467
    )Net income
    
    $
    12,068
    
    
    $
    12,961
    
    
    $
    17,167
    
    
    $
    23,803Income per share from continuing operations:Basic
    
    $
    0.43
    
    
    $
    0.48
    
    
    $
    0.62
    
    
    $
    0.94Diluted
    
    
    0.43
    
    
    
    0.48
    
    
    
    0.62
    
    
    
    0.93Loss per share  discontinued operations:Basic
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    (0.01
    )Diluted
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    (0.01
    )Loss per share  cumulative effect of accounting change:Basic
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.05
    )Diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.05
    )Net income per share  basic
    
    
    0.43
    
    
    
    0.47
    
    
    
    0.62
    
    
    
    0.88Net income per share  diluted
    
    
    0.43
    
    
    
    0.47
    
    
    
    0.62
    
    
    
    0.87Average shares outstanding  basic
    
    
    27,862,646
    
    
    
    27,300,493
    
    
    
    27,721,038
    
    
    
    27,135,187Average shares outstanding  diluted
    
    
    28,059,373
    
    
    
    27,444,809
    
    
    
    27,904,170
    
    
    
    27,260,348
 See accompanying Notes to Condensed Consolidated Financial Statements. 3




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USF Corporation 
 
 Year-to-dateOctober 2,
    
    October 4,2004
    
    2003Cash flows from operating activities:Net income
    
    $
    17,167
    
    
    $
    23,803Net loss from discontinued operations
    
    
    
    
    
    
    175Income from continuing operations after cumulative effect of accounting change
    
    
    17,167
    
    
    
    23,978Adjustments to reconcile net income from continuing operations after accounting change
to net cash provided by operating activities:Depreciation of property and equipment
    
    
    77,913
    
    
    
    76,658Cumulative effect of accounting change net of tax
    
    
    
    
    
    
    1,467Amortization of intangible assets
    
    
    2,001
    
    
    
    1,568Deferred taxes
    
    
    (3,224
    )
    
    
    13,458Loss/(gains) on sale of property and equipment
    
    
    3,066
    
    
    
    (3,284
    )Increase in other items affecting cash from operating activities
    
    
    12,005
    
    
    
    14,365Net cash provided by operating activities
    
    
    108,928
    
    
    
    128,210Cash flows from investing activities:Acquisitions
    
    
    
    
    
    
    (4,883
    )Mexico loan
    
    
    (3,495
    )
    
    
    Capital expenditures
    
    
    (112,707
    )
    
    
    (98,929
    )Proceeds from sale of property and equipment
    
    
    13,458
    
    
    
    8,925Net cash used in investing activities
    
    
    (102,744
    )
    
    
    (94,887
    )Cash flows from financing activities:Dividends paid
    
    
    (7,735
    )
    
    
    (10,135
    )Employee and director stock transactions
    
    
    14,258
    
    
    
    11,503Repurchase of common stock
    
    
    
    
    
    
    (336
    )Net change in short-term bank debt
    
    
    3
    
    
    
    (1,911
    )Payments on long-term bank debt
    
    
    (48
    )
    
    
    (3,217
    )Net cash provided by/(used in) financing activities
    
    
    6,478
    
    
    
    (4,096
    )Net increase in cash
    
    
    12,662
    
    
    
    29,227Cash at beginning of period
    
    
    121,659
    
    
    
    54,158Cash at end of period
    
    $
    134,321
    
    
    $
    83,385Supplemental disclosure of cash flow information:Cash paid during the period for:Interest
    
    $
    9,756
    
    
    $
    9,940Income taxes
    
    
    5,025
    
    
    
    5,291Non-cash transactions: debt assumed in connection with acquisition
    
    
    
    
    
    
    2,794
 See accompanying Notes to Condensed Consolidated Financial Statements. 4




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USF Corporation 
 
 Year-to-DateOctober 2,
    
    October 4,2004
    
    2003Balance as of December 31, 2003 and 2002, respectively
    
    $
    664,789
    
    
    $
    619,131Net income
    
    
    17,167
    
    
    
    23,803Foreign currency translation adjustments
    
    
    231
    
    
    
    Comprehensive income
    
    
    17,398
    
    
    
    23,803Employee and director stock transactions
    
    
    14,258
    
    
    
    11,503Repurchase of common stock
    
    
    
    
    
    
    (336
    )Dividends declared
    
    
    (7,782
    )
    
    
    (7,616
    )Balance as of October 2, 2004 and October 4, 2003, respectively
    
    $
    688,663
    
    
    $
    646,485
 See accompanying Notes to Condensed Consolidated Financial Statements. 5




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Notes to Condensed Consolidated Financial Statements (Unaudited) (Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated)
 1. Summary of Significant Accounting Policies Basis of Presentation These interim financial statements of USF Corporation have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and the instructions to Quarterly Reports on
Form 10-Q and Rule 10-01 of Regulation S-X, and should be read in conjunction
with our Annual Report on Form 10-K for the year ended December 31, 2003.
Accordingly, significant accounting policies and other disclosures normally
provided have been omitted since such items are disclosed therein. In our opinion, the accompanying unaudited condensed consolidated financial
statements reflect all adjustments (including normal recurring adjustments)
necessary to fairly present our consolidated financial position as of October
2, 2004, the consolidated results of our operations for both the quarters and
year-to-date periods ended October 2, 2004 and October 4, 2003, and our
consolidated cash flows for the year-to-date periods ended October 2, 2004 and
October 4, 2003. Operating results for the year-to-date period ended October 2,
2004 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2004. We report on a calendar year basis. Our quarters consist of thirteen weeks that
end on a Saturday either before or after the end of March, June and September. Certain reclassifications have been made to prior year amounts to conform to
the current year presentation. 2. Restructuring and Impairment Charges In the 2004 second quarter we shut down USF Red Star, our former Northeast
carrier. Subsequent to the closure of USF Red Star, we announced plans to
expand USF Hollands operations into the Northeast. As a result of USF
Hollands expansion and following the guidance of SFAS No. 144, Accounting for
the Impairment of Long-Lived Assets, the results of USF Red Star are reported
in continuing operations in the LTL Trucking Revenue and Operating Expenses
lines in our financial statements. Our 2004 third quarter financial statements include operating losses and
shutdown costs for USF Red Star of $7,789 of which $5,478 represent operating
losses primarily for salaries and benefits for our employees assisting in the
wind-down of operations, legal fees, and other miscellaneous expenses. The
remaining $2,311 represent costs associated with exit and disposal activities
per Statement of Financial Accounting Standards (SFAS) No. 146, Accounting
for Costs Associated with Exit or Disposal Activities. Due to the shutdown
of USF Red Star, we are subject to withdrawal liability for up to 13
multi-employer pension plans. Of the $2,311, $2,155 relates to payments made
under the Multi-Employer Pension Plan Amendment Act of 1980 (MEPPA). While
we cannot estimate the ultimate liability, these payments were required to be
made under MEPPA. Although, we are entitled to review and contest liability
assessments provided by various funds as well as determine the mitigating
effect of USF Hollands expansion into certain of the geographic areas
previously covered by USF Red Star. Refer to Note 8 for more information. Our financial statements for the year-to-date period ended October 2, 2004
include operating losses and shutdown costs for USF Red Star of $31,382 of
which $12,360 represent costs associated with exit and disposal activities per
SFAS No. 146. Of the remaining $19,022, $2,961 represents operating losses
incurred prior to the shutdown and $16,061 represent operating losses
subsequent to the shutdown. Operating losses incurred subsequent to the
shutdown were primarily for salaries and benefits for our employees assisting
in the wind-down of operations, legal fees, and other miscellaneous expenses. 6




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Notes to Condensed Consolidated Financial Statements (Unaudited)(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) USF Red Star shutdown costs and operating losses are presented below: Quarter Ended
    
    
    
    
    
    Year-to-DateApril 3, 2004
    
    July 3, 2004
    
    October 2, 2004
    
    October 2, 2004Shutdown costs:Employee severance
    
    $
    
    
    
    $
    5,007
    
    
    $
    222
    
    
    $
    5,229Write-off of assets and increase /(decrease)
in allowance for uncollectible accounts
    
    
    
    
    
    
    3,694
    
    
    
    (66
    )
    
    
    3,628Operating leases and property taxes
    
    
    
    
    
    
    1,348
    
    
    
    
    
    
    
    1,348MEPPA payments
    
    
    
    
    
    
    
    
    
    
    2,155
    
    
    
    2,155
    
    
    
    10,049
    
    
    
    2,311
    
    
    
    12,360Operating losses:Prior to shutdown
    
    
    2,234
    
    
    
    727
    
    
    
    
    
    
    
    2,961After shutdown
    
    
    
    
    
    
    10,583
    
    
    
    5,478
    
    
    
    16,0612,234
    
    
    
    11,310
    
    
    
    5,478
    
    
    
    19,022Total shutdown costs and operating losses
    
    $
    2,234
    
    
    $
    21,359
    
    
    $
    7,789
    
    
    $
    31,382
 The following is a summary of the accruals recorded on the balance sheet for
lease obligations and severance costs related to the shutdown of USF Red Star: Lease Obligations
    
    Severance Costs
    
    TotalBalance at December 31, 2003
    
    $
    
    
    
    $
    
    
    
    $
    Charges
    
    
    1,348
    
    
    
    5,229
    
    
    
    6,577Payments
    
    
    (265
    )
    
    
    (3,857
    )
    
    
    (4,122
    )Balance at October 2, 2004
    
    $
    1,083
    
    
    $
    1,372
    
    
    $
    2,455
 During the 2004 second quarter, we abandoned an LTL information technology
project because of software stability and performance issues realized at the
conclusion of pilot tests in the 2004 second quarter. As a result, we recorded
an impairment charge of $5,980 in the Corporate and Other Operating Expenses
line in our financial statements to write the asset down to zero. 7




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Notes to Condensed Consolidated Financial Statements (Unaudited)(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) 3. Earnings Per Share Basic earnings per share are calculated on net income divided by the
weighted-average number of common shares outstanding during the period. Diluted
earnings per share are calculated by dividing net income by the
weighted-average number of common shares outstanding plus the shares that would
have been outstanding assuming the issuance of common shares for all dilutive
potential common shares for the period. Unexercised stock options are the only
reconciling items between our basic and diluted earnings per share. The following table presents information necessary to calculate basic and
diluted earnings per share: Quarter Ended
    
    Year-to-DateOctober 2,
    
    October 4,
    
    October 2,
    
    October 4,2004
    
    2003
    
    2004
    
    2003Weighted-average shares outstanding  basic
    
    
    27,862,646
    
    
    
    27,300,493
    
    
    
    27,721,038
    
    
    
    27,135,187Common stock equivalents
    
    
    196,727
    
    
    
    144,316
    
    
    
    183,132
    
    
    
    125,161Weighted-average shares and equivalents  diluted
    
    
    28,059,373
    
    
    
    27,444,809
    
    
    
    27,904,170
    
    
    
    27,260,348Anti-dilutive unexercised stock options excluded from calculations
    
    
    357,334
    
    
    
    1,424,800
    
    
    
    694,734
    
    
    
    1,424,800
 4. Debt Our debt includes $100,000 of unsecured guaranteed notes due May 1, 2009 and
$150,000 of unsecured guaranteed notes due April 15, 2010. Our guaranteed notes are fully and unconditionally guaranteed, on a joint and
several basis, and on an unsecured senior basis, by substantially all of our
direct and indirect domestic subsidiaries (the Subsidiary Guarantors). All of
the assets are owned by the Subsidiary Guarantors and substantially all of our
operations are conducted by the Subsidiary Guarantors. Accordingly, the
aggregate assets, liabilities, earnings and equity of the Subsidiary Guarantors
are substantially equivalent to the assets, liabilities, earnings and equity
shown in our consolidated financial statements. There are no material
restrictions on our ability to obtain funds from our subsidiaries by dividend
or loan. We, therefore, are not required to present separate financial
statements of our Subsidiary Guarantors, and other disclosures relating to
them. We have a $200,000 credit facility with a group of banks that will expire in
October 2005. This facility is for working capital, general corporate funding
needs, and up to $125,000 for letters of credit under our self-insurance
program. As of October 2, 2004 we had no borrowings drawn under the facility
and $108,798 in issued letters of credit. 8




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Notes to Condensed Consolidated Financial Statements (Unaudited)(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) 5. Goodwill and Other Intangible Assets The changes in carrying amounts of goodwill by segment for the year-to-date
period ended October 2, 2004 were as follows: LTL
    
    TL
    
    Logistics
    
    TotalBalance as of December 31, 2003
    
    $
    57,273
    
    
    $
    10,878
    
    
    $
    32,662
    
    
    $
    100,813Additions/(write-downs)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of October 2, 2004
    
    $
    57,273
    
    
    $
    10,878
    
    
    $
    32,662
    
    
    $
    100,813
 Intangible assets subject to amortization consist of the following: As of
    
    As ofOctober 2, 2004
    
    December 31, 2003Gross
    
    
    
    
    
    GrossAverage
    
    Carrying
    
    Accumulated
    
    Carrying
    
    AccumulatedLife (Yrs)
    
    Amount
    
    Amortization
    
    Amount
    
    AmortizationAmortized intangible assets:Customer lists
    
    
    5
    
    
    $
    270
    
    
    $
    (149
    )
    
    $
    9,444
    
    
    $
    (7,411
    )Non-competes
    
    
    5
    
    
    
    191
    
    
    
    (63
    )
    
    
    5,347
    
    
    
    (5,184
    )Total
    
    
    
    
    
    $
    461
    
    
    $
    (212
    )
    
    $
    14,791
    
    
    $
    (12,595
    )
 Due to the closure of USF Red Star, the gross carrying amount and accumulated
amortization of USF Red Star intangible assets, which net to zero, have been
removed from the 2004 financial statements. Aggregate amortization expense for the quarters ended October 2, 2004, and
October 4, 2003 was $32 and $673, respectively, and for the year-to-date
periods ended October 2, 2004 and October 4, 2003 was $2,001 and $1,568,
respectively. The 2004 second quarter included an $805 write-off of intangible
assets due to the closure of USF Red Star. Estimated amortization expense for each of the years ending December 31 is as
follows: Year2004
    
    $
    2,0332005
    
    
    1282006
    
    
    89Total
    
    $
    2,250
 The $2,033 amortization expense for 2004 includes an $805 write-off of
intangible assets due to the USF Red Star shutdown, as well as $1,098 in
amortization expense for USF Red Star intangible assets prior to the shutdown. 9




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Notes to Condensed Consolidated Financial Statements (Unaudited)(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) 6. Segment Reporting Quarter Ended
    
    Year-to-DateOctober 2,
    
    October 4,
    
    October 2,
    
    October 4,2004
    
    2003
    
    2004
    
    2003RevenueLTL Trucking
    
    $
    484,170
    
    
    $
    486,449
    
    
    $
    1,522,058
    
    
    $
    1,447,784TL Trucking
    
    
    33,637
    
    
    
    33,669
    
    
    
    100,390
    
    
    
    96,663Logistics
    
    
    67,017
    
    
    
    67,734
    
    
    
    197,989
    
    
    
    209,147Intercompany eliminations
    
    
    (2,745
    )
    
    
    (3,147
    )
    
    
    (9,731
    )
    
    
    (8,102
    )Total Revenue from Continuing Operations
    
    $
    582,079
    
    
    $
    584,705
    
    
    $
    1,810,706
    
    
    $
    1,745,492Income From OperationsLTL Trucking
    
    $
    30,338
    
    
    $
    30,313
    
    
    $
    70,131
    
    
    $
    72,425TL Trucking
    
    
    826
    
    
    
    1,776
    
    
    
    2,245
    
    
    
    3,261Logistics
    
    
    2,307
    
    
    
    2,927
    
    
    
    5,764
    
    
    
    5,265Corporate and Other
    
    
    (7,733
    )
    
    
    (6,630
    )
    
    
    (33,096
    )
    
    
    (20,548
    )Income from operations
    
    
    25,738
    
    
    
    28,386
    
    
    
    45,044
    
    
    
    60,403Net non-operating expense
    
    
    (4,694
    )
    
    
    (5,460
    )
    
    
    (14,862
    )
    
    
    (15,951
    )Income from continuing operations before income
taxes and cumulative effect of accounting change
    
    $
    21,044
    
    
    $
    22,926
    
    
    $
    30,182
    
    
    $
    44,452
 7. Stock Based Compensation SFAS No. 123, Accounting for Stock Based Compensation, establishes a fair
value based method of accounting for stock options. We have elected to continue
using the intrinsic value method prescribed under Accounting Principals Board
(APB) Opinion No. 25 as permitted by SFAS No. 123. For all stock options that
have been granted, the exercise prices of the stock options were equal to the
market prices of the underlying stock on the grant dates, therefore no
compensation expense was recognized. If we had elected to recognize
compensation expense based on the fair value of the options at grant date, as
prescribed by SFAS No. 123, our net income and earnings per share would have
been reduced to the pro forma amounts indicated in the table below: Quarter Ended
    
    Year-to-DateOctober 2,
    
    October 4,
    
    October 2,
    
    October 4,2004
    
    2003
    
    2004
    
    2003Net income  as reported
    
    $
    12,068
    
    
    $
    12,961
    
    
    $
    17,167
    
    
    $
    23,803Less: total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax effects
    
    
    (722
    )
    
    
    (1,351
    )
    
    
    (2,563
    )
    
    
    (3,771
    )Net income  pro forma
    
    
    11,346
    
    
    
    11,610
    
    
    
    14,604
    
    
    
    20,032Basic earnings per share  as reported
    
    
    0.43
    
    
    
    0.47
    
    
    
    0.62
    
    
    
    0.88Basic earnings per share  pro forma
    
    
    0.41
    
    
    
    0.43
    
    
    
    0.53
    
    
    
    0.74Diluted earnings per share  as reported
    
    
    0.43
    
    
    
    0.47
    
    
    
    0.62
    
    
    
    0.87Diluted earnings per share  pro forma
    
    
    0.41
    
    
    
    0.42
    
    
    
    0.52
    
    
    
    0.73
 10




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Notes to Condensed Consolidated Financial Statements (Unaudited)(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) 8. Contingencies We contribute to several union sponsored multi-employer pension plans. These
plans are not administered by us, and contributions are determined in
accordance with provisions of negotiated labor contracts. The Multi-Employer
Pension Plan Amendments Act of 1980 established a continuing liability to such
union sponsored plans for an allocated share of each plans unfunded vested
benefits upon substantial or total withdrawal by us or upon termination of the
pension plans. We believe any withdrawal liability could be material. No
withdrawal or termination has occurred or is contemplated other than the
potential liability for USF Red Star discussed below. Due to the shutdown of USF Red Star, it is probable that we will be subject to
withdrawal payments for up to 13 multi-employer pension plans. We continue to
gather information to determine the extent of such withdrawal liability from
each of the plans. Given the lack of current information, complexity of the
calculations and the expected mitigation relative to the USF Holland expansion,
the final withdrawal liability, which may be material to our financial
position, cannot currently be estimated, and therefore we have not accrued any
costs. We believe the process to determine withdrawal liability will likely
take at least several months, but it could extend to a year or more for the
following reasons: the time it will take to obtain information from the pension
plans and analyze such information, substantial negotiations with these pension
plans over withdrawal liability and any potential arbitration of the issues,
other legal proceedings, and the unknown mitigating effect of the USF Holland
expansion. In the 2004 third quarter $2,155 in payments were made under MEPPA.
While we cannot estimate the ultimate liability, these payments were required
to be made under MEPPA. Although, we are entitled to review and contest
liability assessments provided by various funds as well as determine the
mitigating effect of USF Hollands expansion into certain of the geographic
areas previously covered by USF Red Star. On December 23, 2003, Idealease Services, Inc. (Idealease) filed a complaint
against USF Logistics, in the Circuit Court of Cook County in Chicago,
Illinois. Idealease is asking the court to require USF Logistics to
specifically perform an alleged contractual obligation to buy back from
Idealease a fleet of vehicles it claims is valued at approximately $14,500 or
to pay Idealease that amount. Idealease also contends that USF Logistics is
liable for $557 in lease payments and that certain riders to a lease agreement
are invalid due to a lack of consideration. USF Logistics denies the material
allegations in the Idealease complaint and plans to vigorously contest the
lawsuit in court. USF Corporation and/or USF Red Star, Inc. are currently named in three class
action lawsuits; Anderson et. al. v. USF Corporation and USF Red Star Inc.,
(filed in the United States District Court for the Eastern District of
Pennsylvania on August 12, 2004); Taylor et. al. v. USF Corporation and USF Red
Star Inc.,(filed in United States District Court for the Eastern District of
Pennsylvania on August 19, 2004) and Shaun B. Cashman, Commissioner of the
State of Connecticut, Department of Labor v. USF Corporation,(filed in United
States District Court for the District of Connecticut on August 31, 2004). All
three lawsuits allege violations of the federal Worker Adjustment and
Retraining Notification Act (WARN). All plaintiffs are seeking sixty (60)
days of back pay and benefits with prejudgment interest to each affected
employee of USF Red Star Inc. We are involved in other litigation arising in the ordinary course of business,
primarily involving claims for bodily injury, property damage, and workers
compensation. We believe the ultimate recovery or liability, if any, resulting
from such litigation, individually or in total, would not materially adversely
affect our financial condition or results of operations. 11




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##### Table of Contents



Notes to Condensed Consolidated Financial Statements (Unaudited)(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) The following reflects the accruals estimated for the ultimate cost of
self-insured claims incurred, but not paid, for bodily injury, property damage,
cargo loss and damage, and workers compensation. As of
    
    As ofOctober 2, 2004
    
    December 31, 2003Current
    
    $
    61,680
    
    
    $
    52,772Long-term
    
    
    91,034
    
    
    
    80,707Total
    
    $
    152,714
    
    
    $
    133,479
 We believe the outcome of these matters is not expected to have any material
adverse effect on our consolidated financial position or results of our
operations, and have been adequately provided for in our financial statements. We use underground storage tanks at certain terminal facilities and maintain a
comprehensive policy of testing, upgrading, replacing or eliminating these
tanks to protect the environment and comply with various Federal and state
laws. We take prompt remedial action whenever any contamination is detected.
When we can reasonably estimate liabilities associated with environmental
matters, we record the necessary accrual. As of October 2, 2004 there were no
material liabilities recorded. 9. Acquisition In February 2003, we acquired the stock of System 81 Express, Inc. (System
81), a truckload carrier based in Tennessee that owned or operated
approximately 140 tractors and 260 trailers, for approximately $1,900 in cash
and $2,800 in assumed debt. In addition, contingent payments totaling $314 were
subsequently made to the former owners of System 81. Goodwill and other
intangible assets of $304 and $461, respectively, were recorded under the
acquisition. The acquisition of System 81 contributed approximately $900 more
to revenue in the year-to-date period ending October 2, 2004 than the
acquisition contributed to revenue in the year-to-date period ended October 4,
2003. 10. Subsequent Event On November 2, 2004, our board of directors reached an agreement with our
Chairman, President and Chief Executive Officer, Richard P. DiStasio, regarding
his employment with the Company. Both parties mutually agreed to terminate the
employment relationship between Mr. DiStasio and USF Corporation. This also
includes Mr. DiStasios resignation from the board of directors. The board
appointed Paul Liska as Executive Chairman and Thomas E. Bergmann, formerly
Executive Vice President, as interim Chief Executive Officer. Under the terms
of his termination agreement of November 2, 2004, Mr. DiStasio is entitled to certain
benefits that will result approximately in an $1,500 pre-tax charge in the 2004
fourth quarter. 12




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##### Table of Contents



(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations EXECUTIVE SUMMARY We reported income from continuing operations of $12,068, or $.43 per diluted
share, for the third quarter ended October 2, 2004. This compares to income
from continuing operations of $13,091, or $.48 diluted earnings per share, for
the prior year period. USF Red Star, whose closure was announced on May 23,
2004, incurred shutdown costs and operating losses during the 2004 third
quarter of $7,789, or ($.18) per diluted share. Revenue in the LTL Trucking segment for the 2004 third quarter was $484,170,
compared to $486,449 in the prior year period. USF Red Star revenue for the
2003 third quarter was $57,693. During the 2004 third quarter, we participated
in a continued strong freight environment, and the Northeast market was
re-established as part of our national LTL service area. USF Holland expanded
its brand into the Northeast by opening eight terminals in early September,
providing our customers with high-quality LTL service. Our TL Trucking segment revenue for the 2004 third quarter was $33,637 compared
to $33,669 in the prior year period, and income from operations was $826
compared to $1,776 in the prior year period. However both revenue and income
from operations were up sharply from the 2004 second quarter, as new management
continues to implement operational initiatives. Revenue in the Logistics segment for the 2004 third quarter was $67,017
compared to $67,734 in the prior year period, and income from operations was
$2,307 compared to $2,927 in the prior year. As with the TL Trucking segment,
operational initiatives are underway in the Logistics segment and we are encouraged by the
business development activities that management is taking. We continue to focus on improving our revenue growth and operating profit
through our Team One initiatives throughout the organization, and remain
committed to the roadmap established when we publicly communicated our
strategic plan on July 28, 2004. We are within the first year of our five year
plan and are confident that we are establishing the groundwork which will lead
to enhanced revenue and profitability in the future and an organization
increasingly focused on meeting or exceeding our customer needs. 13




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##### Table of Contents



(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) CONSOLIDATED RESULTS Our revenue and net income for the quarters and year-to-date periods ended
October 2, 2004 and October 4, 2003 were as follows: Quarter Ended
    
    Year-to-DateOctober 2,
    
    October 4,
    
    October 2,
    
    October 4,2004
    
    2003
    
    2004
    
    2003Revenue
    
    $
    582,079
    
    
    $
    584,705
    
    
    $
    1,810,706
    
    
    $
    1,745,492Net Income
    
    
    12,068
    
    
    
    12,961
    
    
    
    17,167
    
    
    
    23,803
 Our 2004 third quarter revenue decreased 0.4% from the 2003 third quarter
primarily due to the shutdown of USF Red Star in the 2004 second quarter. USF
Red Stars revenue for the 2003 third quarter was $57,693. The 2004 third
quarter contains 63 working days compared to 64 working days in 2003. Our 2004 third quarter resulted in net income of $12,068 and was negatively
impacted by the shutdown of USF Red Star. The net income for the 2004 third
quarter includes USF Red Star after-tax operating losses and shutdown costs of
$4,969, which included $1,375 in payments made under the Multi-Employer Pension
Plan Amendment Act of 1980 (MEPPA) . Our net income for the 2003 third
quarter included USF Red Star after-tax operating losses of $581 and after-tax
amortization expense of USF Red Star intangible assets of $369. Our net income for the year-to-date period ended October 2, 2004 included USF
Red Star after-tax operating losses and shutdown costs of $20,022, after-tax
write-off and amortization expense of USF Red Star intangible assets of $1,214
and the after-tax write-down of an information technology project of $3,815.
Our net income for the year-to-date period ended October 4, 2003 was also
negatively impacted by after-tax operating losses at USF Red Star of $4,803,
after-tax write-off and amortization expense of USF Red Star intangible assets
of $848, an $1,145 after-tax write-off of receivables in our Logistics segment,
$1,202 after-tax retirement costs for a former CEO, and an $1,467 after-tax
charge due to a change in the accounting for revenue and expense recognition.
Effective January 1, 2003, we recognize revenue for LTL and TL operations by
the allocation of revenue between reporting periods based on the relative
transit time in each reporting period with expenses recognized as incurred.
This change was made to recognize the increase in our average length of haul of
freight, which resulted from our implementation of new marketing strategies.
Excluding any potential MEPPA payments, we estimate an additional $2,000 to
$6,000 in USF Red Star operating losses and shutdown costs for wind-down team
salaries, severance, legal fees and other miscellaneous costs primarily in the
2004 fourth quarter. 14




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(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) In order to provide a better understanding of our ongoing financial
performance, the following table presents the significant items that impacted
our consolidated financial results for the periods shown: Quarter Ended October 2, 2004
    
    Quarter Ended October 4, 2003Diluted
    
    
    
    
    
    
    
    
    
    DilutedPre-tax
    
    After-tax
    
    EPS
    
    Pre-tax
    
    After-tax
    
    EPSSignificant items:USF Red Star operating losses
and shutdown costs
    
    $
    7,789
    
    
    $
    4,969
    
    
    $
    0.18
    
    
    $
    1,017
    
    
    $
    581
    
    
    $
    0.02Write-off/amortization expense
of USF Red Star intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    647
    
    
    
    369
    
    
    
    0.01
 Nine Months Ended October 2, 2004
    
    Nine Months Ended October 4, 2003Diluted
    
    
    
    
    
    
    
    
    
    DilutedPre-tax
    
    After-tax
    
    EPS
    
    Pre-tax
    
    After-tax
    
    EPSSignificant items:USF Red Star operating losses
and shutdown costs
    
    $
    31,382
    
    
    $
    20,022
    
    
    $
    0.71
    
    
    $
    8,390
    
    
    $
    4,803
    
    
    $
    0.18Write-off/amortization expense
of USF Red Star intangible assets
    
    
    1,903
    
    
    
    1,214
    
    
    
    0.04
    
    
    
    1,481
    
    
    
    848
    
    
    
    0.03Information technology write-down
    
    
    5,980
    
    
    
    3,815
    
    
    
    0.14
    
    
    
    
    
    
    
    
    
    
    
    Retirement costs for former CEO
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,100
    
    
    
    1,202
    
    
    
    0.04Receivables write-off related
to USF Logistics customer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    1,145
    
    
    
    0.04
 15




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(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) RESULTS OF OPERATIONS LTL Trucking Our revenue, income from operations, and operating ratios for our LTL segment
for the quarters and year-to-date periods ended October 2, 2004 and October 4,
2003 were as follows: Quarter Ended
    
    Year-to-DateOctober 2,
    
    October 4,
    
    October 2,
    
    October 4,2004
    
    2003
    
    2004
    
    2003Total revenue
    
    $
    484,170
    
    
    $
    486,449
    
    
    $
    1,522,058
    
    
    $
    1,447,784Income from operations
    
    
    30,338
    
    
    
    30,313
    
    
    
    70,131
    
    
    
    72,425Operating Ratio
    
    
    93.7
    %
    
    
    93.8
    %
    
    
    95.4
    %
    
    
    95.0
    %
 Our LTL segment includes our LTL operating companies, each of which generates
revenue from LTL and TL shipments. Revenue from LTL shipments represents over
90% of the revenue in the LTL segment. LTL statistics presented in the table
below exclude TL shipments. LTL StatisticsRevenue
    
    Revenue
    
    Weight per
    
    LengthRevenue
    
    Tons
    
    Shipments
    
    per
    
    per Hundred-
    
    Shipment
    
    of Haul(thousands)
    
    (thousands)
    
    (thousands)
    
    Shipment
    
    weight
    
    (pounds)
    
    (miles)Quarter EndedOctober 2, 2004
    
    $
    451,807
    
    
    
    1,978.4
    
    
    
    3,308.9
    
    
    $
    136.54
    
    
    $
    11.42
    
    
    
    1,196
    
    
    
    513October 4, 2003
    
    
    461,740
    
    
    
    2,022.2
    
    
    
    3,572.2
    
    
    
    129.26
    
    
    
    11.42
    
    
    
    1,132
    
    
    
    492Year-to-Date EndedOctober 2, 2004
    
    $
    1,424,293
    
    
    
    6,319.3
    
    
    
    10,703.1
    
    
    $
    133.07
    
    
    $
    11.27
    
    
    
    1,181
    
    
    
    506October 4, 2003
    
    
    1,376,501
    
    
    
    6,075.6
    
    
    
    10,732.7
    
    
    
    128.25
    
    
    
    11.33
    
    
    
    1,132
    
    
    
    491
 In the 2004 third quarter our LTL segments total revenue decreased from the
2003 third quarter by 0.5% and income from operations increased by 0.1%. The
shutdown of USF Red Star in the 2004 second quarter negatively impacted year
over year financial and statistical comparisons as there were 64 working days
of USF Red Star shipments in the 2003 third quarter and none in the 2004 third
quarter. The following provides an understanding of the factors that impacted
our operating results in the 2004 third quarter compared to the 2003 third
quarter:  
    
    USF Holland expanded its brand into the Northeast market in September 2004 by
opening eight terminals. USF Holland generated revenue of approximately $2,900
during September 2004 and incurred start-up losses of approximately $1,000 during
the 2004 third quarter related to the expansion.  
    
    The 2004 second quarter shutdown of our USF Red Star operations in the Northeast
resulted in $7,789 in pre-tax operating losses and shutdown costs in the 2004 third
quarter which were reported in the LTL segment. Of these costs, $2,311 was exit
and disposal activities per Statement of Financial Accounting Standards (SFAS)
No. 146, Accounting for Costs Associated with Exit or Disposal Activities
including $2,155 for withdrawal payments to multi-employer pension plans. In
addition there was $5,478 in operating losses for shutdown staffing, utilities,
depreciation, and other miscellaneous expenses. The closure of USF Red Star
negatively impacted the LTL segments statistics and operating results for 2004. 16




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##### Table of Contents



(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated)  
    
    LTL segment total revenue decreased 0.5% due to the shutdown of USF Red Star which
was largely mitigated by continued growth of USF PremierPlus® inter-regional
service in the remaining segment and generally favorable economic conditions for
LTL trucking. USF Red Star accounted for $57,693 or 11.9% of 2003 revenue.  
    
    Income from operations decreased 0.1% primarily due to the shutdown of USF Red
Star. Operating ratio improved from 93.8% to 93.7% despite the operating losses and
shutdown costs at USF Red Star. The operating losses and shutdown costs at USF Red
Star negatively impacted an otherwise strong performance from the remainder of our
LTL segment due to the revenue growth in the quarter and continued cost-savings
related to our Team One initiatives.  
    
    USF PremierPlus® revenue decreased 8.4% to $54,529 from $59,560 due to the
shutdown of USF Red Star, while the remaining segment experienced growth in
inter-regional service. USF Red Stars portion of USF PremierPlus® revenue was
approximately $12,000 in 2003.  
    
    LTL tonnage decreased 2.2% to 1.98 million tons from 2.02 million tons as the
absence of USF Red Star tonnage was partially offset by increased tonnage in the
remaining segment. USF Red Star accounted for approximately 10% of the segments
tonnage or 0.2 million tons in 2003.  
    
    Revenue per hundredweight remained flat while revenue per shipment increased 5.6%. Total revenue for our LTL segment increased 5.1% in the year-to-date period
ended October 2, 2004 compared to the year-to-date period ended October 4,
2003, despite 2004 containing 93 fewer working days of USF Red Star revenue.
Income from operations decreased 3.2%, in the year-to-date period ended October
2, 2004 compared to the year-to-date period ended October 4, 2003, as year-to
date USF Red Star shutdown costs and operating losses amounted to $31,382 in
2004 compared to operating losses of $8,390 in 2003. TL Trucking Quarter Ended
    
    Year-to-DateOctober 2,
    
    October 4,
    
    October 2,
    
    October 4,2004
    
    2003
    
    2004
    
    2003Revenue
    
    $
    33,637
    
    
    $
    33,669
    
    
    $
    100,390
    
    
    $
    96,663Income from operations
    
    
    826
    
    
    
    1,776
    
    
    
    2,245
    
    
    
    3,261Operating Ratio
    
    
    97.5
    %
    
    
    94.7
    %
    
    
    97.8
    %
    
    
    96.6
    %
 The following provides an understanding of the factors that impacted our
operating results in the 2004 third quarter compared to the 2003 third quarter:  
    
    Revenue was relatively flat as growth was limited by a shortage of drivers resulting in underutilized trucks. The empty truck
percentage in the 2004 third quarter was 8.4% compared to 7.8% the prior year. We improved our truck utilization during the 2004
third quarter from the 2004 second quarter as empty truck percentage improved from 12.9% in June 2004 to 6.8% in September 2004.  
    
    Revenue per loaded mile, excluding fuel surcharges, increased 7.7% as a result of the improving economy, and initiatives to
improve freight mix.  
    
    Income from operations were negatively affected by increased fuel and self-insurance costs as well as driver shortages. 17




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(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) Revenue for our TL segment increased $3,727 in the year-to-date period ended
October 2, 2004 compared to the year-to-date period ended October 4, 2003. The
acquisition of System 81 Express, Inc. in February 2003 accounted for $900 of
the increase in revenue in 2004. Logistics Quarter Ended
    
    Year-to-DateOctober 2,
    
    October 4,
    
    October 2,
    
    October 4,2004
    
    2003
    
    2004
    
    2003Revenue
    
    $
    67,017
    
    
    $
    67,734
    
    
    $
    197,989
    
    
    $
    209,147Income from operations
    
    
    2,307
    
    
    
    2,927
    
    
    
    5,764
    
    
    
    5,265Operating Ratio
    
    
    96.6
    %
    
    
    95.7
    %
    
    
    97.1
    %
    
    
    97.5
    %
 The following provides an understanding of the factors that impacted our
operating results in the 2004 third quarter compared to the 2003 third quarter:  
    
    Revenue decreased $717 or 1.1% as the Logistics segment continues to
rebuild its book of business after the bankruptcy of a major customer
in the 2003 first quarter. This revenue decrease is comprised of
decreases in cross dock and reverse logistics that were partially
offset through increased revenue with existing customers as well as
new customers in our transportation management, warehouse and Canadian
operations.  
    
    Income from operations decreased 21% to $2,307, primarily due to
start-up costs of our logistics operations in Mexico as well as
continued volume declines and lower profitability in the reverse
logistics grocery business. Revenue for our Logistics segment decreased 5.3% in the year-to-date period
ended October 2, 2004 compared to the year-to-date period ended October 4,
2003. The 2003 first quarter also included a receivables write-off of $2,000
related to a major customers bankruptcy. Corporate and Other Quarter Ended
    
    Year-to-DateOctober 2,
    
    October 4,
    
    October 2,
    
    October 4,2004
    
    2003
    
    2004
    
    2003Corporate & Other
    
    $
    (7,733
    )
    
    $
    (6,630
    )
    
    $
    (33,096
    )
    
    $
    (20,548
    )
 Corporate and Other expenses were $1,103 higher in the 2004 third quarter
compared to the 2003 third quarter primarily due to an increase in corporate
overhead. This increase was partially offset by a decrease in amortization
expense of intangible assets of $641 in the 2004 third quarter compared to the
2003 third quarter due to the write-off of USF Red Star intangible assets in
the 2004 second quarter. The year-to-date period ended October 2, 2004 for our Corporate and Other
segment included a $5,980 write-down for an LTL information technology project
that was abandoned as a result of software stability and performance issues.
Also included was $1,903 for the write-off and amortization expense of USF Red
Star intangible assets. The year-to-date period ended October 4, 2003 included
$1,481 in amortization expense for USF Red Star intangible assets and $2,100 in
retirement costs for a former CEO. Non-operating Income and Expense Interest expense principally includes interest on our guaranteed unsecured
notes of $250,000. We had cash invested in interest bearing instruments during
the third quarters of 2004 and 2003. At the end of the third quarters of 2004
and 2003, we had cash and cash equivalents of $134,321 and $83,385,
respectively. 18




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(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) Subsequent Event On November 2, 2004, our board of directors reached an agreement with our
Chairman, President and Chief Executive Officer, Richard P. DiStasio, regarding
his employment with the Company. Both parties mutually agreed to terminate the
employment relationship between Mr. DiStasio and USF Corporation. This also
includes Mr. DiStasios resignation from the board of directors. The board
appointed Paul Liska as Executive Chairman and Thomas E. Bergmann, formerly
Executive Vice President, as interim Chief Executive Officer. Under the terms
of his termination agreement of November 2, 2004, Mr. DiStasio is entitled to certain
benefits that will result approximately in an $1,500 pre-tax charge in the 2004
fourth quarter. Outlook  Unknown Trends or Uncertainties We expect improvement in our operating results in 2004 as a result of an
improved economy and our strategic initiatives. We believe our 2004
initiatives will provide increased revenue opportunities and generate cost
savings through operational efficiencies. We believe achieving improved
operating results are dependent on us executing our strategic initiatives, the
level of competition, and the extent of the improvement in the US economy. We
currently estimate that our full year earnings per share, excluding the effects
of USF Red Star, both current and ongoing and the information technology
write-down, will be in the $1.95 - $2.15 range. We have been subject to organization efforts by the International Brotherhood
of Teamsters. We understand there will be union issues over time. We will deal
with these organization efforts appropriately, but ultimately we cannot predict
the outcome of these activities. Statements in this report contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are not historical facts and are subject to a number
of risks and uncertainties and actual results may differ materially. These
risks and uncertainties are detailed from time to time in reports filed by the
Company with the SEC including forms 8-K, 10-Q and 10-K. 19




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(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) LIQUIDITY AND CAPITAL RESOURCES The following is a table of our contractual obligations and other commercial
commitments as of October 2, 2004: Payments & Commitments by PeriodThroughDecember, 31
    
    2-3
    
    4-5
    
    After 5Total
    
    2004
    
    Years
    
    Years
    
    YearsContractual ObligationsLong-Term Debt
    
    $
    250,117
    
    
    $
    62
    
    
    $
    55
    
    
    $
    
    
    
    $
    250,000Operating Leases
    
    
    55,780
    
    
    
    6,711
    
    
    
    33,410
    
    
    
    10,397
    
    
    
    5,262Total Contractual Obligations
    
    $
    305,897
    
    
    $
    6,773
    
    
    $
    33,465
    
    
    $
    10,397
    
    
    $
    255,262Other CommitmentsPurchase Commitments (1)
    
    $
    30,475
    
    
    $
    27,310
    
    
    $
    3,165
    
    
    
    
    
    
    
    
 (1) At October 2, 2004 our primary capital purchase commitments included $7,900
for land and improvements, $20,928 for revenue equipment and $544 for
information technology related projects. We believe that projected cash flows from operating activities, cash on hand
and funding from our committed credit facilities will be adequate to finance
our anticipated cash needs for 2004. Sources and Uses of Cash Cash increased by $12,622 in the year-to-date period ended October 2, 2004 to
$134,321 compared to an increase of $29,227 in the year-to-date period ended
October 4, 2003 to $83,385. Capital expenditures in the year-to-date period
ended October 2, 2004 were $13,778 higher than in the year-to-date period ended
October 4, 2003. Operations Our primary sources and uses of cash result from the realization of trade
accounts receivable and settlement of payroll, trade accounts payable, and
operating accruals including insurance and claims as part of our ongoing
operating activities. As a result of the shutdown of USF Red Star, we are
subject to withdrawal liability for up to 13 multi-employer pension plans.
Payments made under MEPPA and USF Red Star shutdown costs may reduce our cash
position. However, we do not believe the closure of USF Red Star materially
changes the underlying drivers of our operating cash flows. We believe that
cash generated from our core operations and cash on hand will be sufficient to
fund our operations and any potential liabilities resulting from the closure of
USF Red Star. Net cash provided by
operating activities decreased $19,282 in the year-to-date
period ended October 2, 2004 compared to the year-to-date period ended October
4, 2003. This was primarily due to a decrease in net income. 20




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(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) Investing We maintain an appropriate level of tractors and trailers to ensure the
effectiveness of our operations. Purchases of tractors and trailers have been,
and are expected to be, our most significant type of capital expenditure.
These purchases may be deferred or accelerated in order for us to respond to
changes in economic conditions and the market for these assets. Purchases of
tractors and trailers were $78,174 and $29,614, and total capital expenditures
were $112,707 and $98,929 during the year-to-date periods ended October 2, 2004
and October 4, 2003, respectively. Purchases of land and buildings in the
year-to-date period ended October 2, 2004 were $15,695 compared to $30,287 in
the year-to-date period ended October 4, 2003. In the 2004 third quarter, we increased our loan related to our Mexican joint
venture to $9,360. Financing We have a $200,000 committed credit facility that expires in October 2005. The
facility allows up to $125,000 for standby letters of credit to cover our
self-insurance programs and other miscellaneous letter of credit requirements.
In addition to our committed credit facility, we maintain an uncommitted line
of credit, which provides $10,000 of short-term funds. At October 2, 2004, we
had no borrowings under these facilities and had $108,798 of outstanding
standby letters of credit under our credit facility. Our external debt financing arrangements are discussed in Note 4 to the
Condensed Consolidated Financial Statements. Debt Instruments, Guarantees, and Related Covenants Our financing arrangements include covenants that require us to comply with
certain financial ratios including net worth and funded debt to adjusted cash
flows. We are in compliance with these covenants and do not believe these
covenants would restrict us from securing additional financing, if necessary. Dividends Our quarterly dividend rate is .0933 per share. During the 2004 third quarter,
we paid cash dividends totaling $2,591. 21




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(Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk We are exposed to the impact of interest rate changes. Our exposure to changes
in interest rates is limited to our short-term investments and borrowings under
a line of credit agreement, which has variable interest rates tied to LIBOR and
our credit ratings. There have been no borrowings under this agreement in the
current year-to-date period nor during 2003. In addition, we have $150,000 of
unsecured notes with an 8 1/2% fixed annual interest rate and $100,000 of
unsecured notes with a 6 1/2% fixed annual interest rate. We have no hedging
instruments. At October 2, 2004, we had approximately $124,000 in short-term
investments. We have a $200,000 credit facility with a group of banks that will expire in
October 2005. This facility is for working capital, general corporate funding
needs, and up to $125,000 for letters of credit issued under our self-insurance
program. As of October 2, 2004 we had no borrowings drawn under the facility
and $108,798 in issued letters of credit. The facility bears interest at LIBOR, plus a margin depending on our debt
rating. In addition, there are other fees associated with the facility and
certain financial covenants including minimum net worth and maximum funded debt
to adjusted cash flow. 
 Item 4. Controls and Procedures In order to ensure that information for disclosure in our filings of periodic
reports with the Securities and Exchange Commission is identified, recorded,
processed, summarized, and reported on a timely basis, we have adopted
disclosure controls and procedures. Our Interim Chief Executive Officer,
Thomas E. Bergmann, has reviewed and evaluated our disclosure controls and
procedures as of November 2, 2004, and has concluded that our disclosure
controls and procedures were adequate as of that date. There were no changes in our internal controls over financial reporting
identified in connection with the foregoing evaluation that occurred during our
current years third quarter that has materially affected, or is reasonably
likely to materially affect, our internal controls over financial reporting. 22




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PART II: OTHER INFORMATION (Dollars in Thousands, Except Share and Per Share Amounts, Unless Otherwise Indicated) 
 Item 1. Legal Proceedings. Our trucking subsidiaries are parties to a number of proceedings brought under
the Comprehensive Environmental Response, Compensation and Liability Act,
(CERCLA). They have been made parties to these proceedings as an alleged
generator of waste disposed of at hazardous waste disposal sites. In each case,
the Government alleges that the parties are jointly and severally liable for
the cleanup costs. Although joint and several liability is alleged, these
proceedings are frequently resolved on the basis of the quantity of waste
disposed of at the site by the generator. Our potential liability varies
greatly from site to site. For some sites the potential liability is de minimis
and for others the costs of cleanup have not yet been determined. It is not
feasible to predict or determine the outcome of these or similar proceedings
brought by state agencies or private litigants. We believe such liability, if
any, would not materially adversely affect our financial condition or results
of operations. 1. On December 23, 2003, Idealease Services, Inc. (Idealease) filed a
complaint against USF Logistics, in the Circuit Court of Cook County in
Chicago, Illinois. Idealease is asking the court to require USF Logistics to
specifically perform an alleged contractual obligation to buy back from
Idealease a fleet of vehicles it claims is valued at approximately $14,500 or
to pay Idealease that amount. Idealease also contends that USF Logistics is
liable for $557 in lease payments and that certain riders to a lease agreement
are invalid due to a lack of consideration. USF Logistics denies the material
allegations in the Idealease complaint and plans to vigorously contest the
lawsuit in court. 2. USF Corporation and/or USF Red Star, Inc. are currently named in three class
action lawsuits; Anderson et. al. v. USF Corporation and USF Red Star Inc.,
(filed in the United States District Court for the Eastern District of
Pennsylvania on August 12, 2004); Taylor et. al. v. USF Corporation and USF Red
Star Inc.,(filed in United States District Court for the Eastern District of
Pennsylvania on August 19, 2004) and Shaun B. Cashman, Commissioner of the
State of Connecticut, Department of Labor v. USF Corporation,(filed in United
States District Court for the District of Connecticut on August 31, 2004). All
three lawsuits allege violations of the federal Worker Adjustment and
Retraining Notification Act (WARN). All plaintiffs are seeking sixty (60)
days of back pay and benefits with prejudgment interest to each affected
employee of USF Red Star Inc. We are involved in other litigation arising in the ordinary course of business,
primarily involving claims for bodily injury, property damage, and workers
compensation. We believe the ultimate recovery or liability, if any, resulting
from such litigation, individually or in total, would not materially adversely
affect our financial condition or results of operations. 23




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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. N/A 
 Item 3. Defaults Upon Senior Securities. N/A 
 Item 4. Submission of Matters to a Vote of Security Holders. N/A 
 Item 5. Other Information. N/A 
 Item 6. Exhibits.  1.
    
    Exhibit 31.1-Section 302 Certification of
Principal Executive Officer
and Principal Financial Officer.2.
    
    Exhibit 32.1-Statement of Principal Executive
Officer
and Principal Financial Officer Pursuant to Section 1350(a)
of Title 18, United States Code (furnished not filed with
this Quarterly Report on Form 10-Q). 24




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized. Dated
November 8,
2004. USF CORPORATIONBy:
    /s/ Thomas E. BergmannThomas E. BergmannInterim Chief Executive Officer
(Principal Financial Officer) By:
    /s/ James T. CastroJames T. CastroVice President, Controller
(Principal Accounting Officer) 25