Exhibit 99.1
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Roadway Express, Inc. and Subsidiaries
Quarters ended June 15, 2002 and June 16, 2001
1
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 15, 2002 December 31, 2001
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(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 52,162 $ 46,087
Accounts receivable, including retained
interest in securitized receivables, net 162,054 165,465
Other current assets 32,172 24,412
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Total current assets 246,388 235,964
Carrier operating property, at cost 1,422,539 1,435,931
Less allowance for depreciation 1,010,343 1,011,280
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Net carrier operating property 412,196 424,651
Goodwill, net 15,006 14,722
Other assets 40,242 36,050
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Total assets $ 713,832 $ 711,387
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Liabilities and parent company investment
Current liabilities:
Accounts payable $ 157,342 $ 166,197
Salaries and wages 104,672 112,099
Other current liabilities 46,955 49,492
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Total current liabilities 308,969 327,788
Long-term liabilities:
Casualty claims and other 58,488 63,536
Accrued pension and retiree medical 125,365 119,145
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Total long-term liabilities 183,853 182,681
Parent company investment 221,010 200,918
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Total liabilities and parent company investment $ 713,832 $ 711,387
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Note: The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
2
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
Twelve Weeks Ended
(Second Quarter)
June 15, 2002 June 16, 2001
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(in thousands)
Revenue $ 606,409 $ 642,109
Operating expenses:
Salaries, wages and benefits 392,635 412,185
Operating supplies and expenses 103,488 115,925
Purchased transportation 57,317 63,707
Operating taxes and licenses 16,043 15,948
Insurance and claims expense 11,964 12,087
Provision for depreciation 15,416 15,678
Net loss on disposal of operating property 303 436
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Total operating expenses 597,166 635,966
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Operating income 9,243 6,143
Other (expense) income, net (914) 858
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Income before income taxes 8,329 7,001
Provision for income taxes 2,766 2,978
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Net income $ 5,563 $ 4,023
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Twenty-Four Weeks Ended
(Two Quarters)
June 15, 2002 June 16, 2001
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(in thousands)
Revenue $1,159,967 $1,292,594
Operating expenses:
Salaries, wages and benefits 758,970 824,311
Operating supplies and expenses 198,987 229,634
Purchased transportation 108,443 128,088
Operating taxes and licenses 30,231 33,487
Insurance and claims expense 22,352 25,267
Provision for depreciation 30,685 30,939
Net loss on disposal of operating property 649 622
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Total operating expenses 1,150,317 1,272,348
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Operating income 9,650 20,246
Other (expense), net (1,939) (4,571)
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Income before income taxes 7,711 15,675
Provision for income taxes 2,823 6,662
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Net income $ 4,888 $ 9,013
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See notes to condensed consolidated financial statements.
3
ROADWAY EXPRESS INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Twenty-four Weeks Ended
(Two Quarters)
June 15, 2002 June 16, 2001
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(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,888 $ 9,013
Depreciation 30,685 30,939
Other operating adjustments (10,527) 5,463
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Net cash provided by operating activities 25,046 45,415
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property (20,401) (33,358)
Sales of carrier operating property 1,521 440
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Net cash (used) by investing activities (18,880) (32,918)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid - (1,937)
Treasury stock activity, net - (337)
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Net cash (used) by financing activities - (2,274)
Effect of exchange rate on cash (91) 200
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Net increase in cash and cash equivalents 6,075 10,423
Cash and cash equivalents at beginning of period 46,087 64,939
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Cash and cash equivalents at end of period $ 52,162 $ 75,362
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See notes to condensed consolidated financial statements.
Roadway Express, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the twelve weeks ending June 15, 2002 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2002. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Roadway Corporation
Annual Report on Form 10-K for the year ended December 31, 2001.
4
Note 2--Accounting Period
Roadway Express, Inc. (Roadway, or Company) operates on 13 four-week accounting
periods with 12 weeks in each of the first three quarters and 16 weeks in the
fourth quarter.
Note 3--Segment information
The Company provides freight services in one business segment, long haul LTL
freight services in North America, and offers services to an additional 66
countries worldwide.
Note 4--Comprehensive Income
Comprehensive income differs from net income due to foreign currency translation
adjustments as shown below:
Twelve Weeks Ended Twenty-four Weeks Ended
(Second Quarter) (Two Quarters)
June 15, 2002 June 16, 2001 June 15, 2002 June 16 2001
------------------ ------------------ ----------------- ------------------
(in thousands)
Net income $ 5,563 $ 4,023 $ 4,888 $ 9,013
Foreign currency translation
adjustments 1,122 1,529 (56) 565
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Comprehensive (loss) income $ 6,685 $ 5,552 $ 4,832 $ 9,578
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Note 5--Contingent Matter
The Company's former parent is currently under examination by the Internal
Revenue Service for tax years 1994 and 1995, years prior to the spin-off of the
Company. The IRS has proposed substantial adjustments for these tax years for
multiemployer pension plan deductions. The IRS is challenging the timing, not
the validity of these deductions. The Company is unable to predict the ultimate
outcome of this matter, however, its former parent intends to vigorously contest
these proposed adjustments.
Under a tax sharing agreement entered into by the Company and its former parent
at the time of the spin-off, the Company is obligated to reimburse the former
parent for any additional taxes and interest which relate to the Company's
business prior to the spin-off. The amount and timing of such payments, if any,
is dependent on the ultimate resolution of the former parent's disputes with the
IRS and the determination of the nature and extent of the obligations under the
tax sharing agreement. The Company has established certain reserves with respect
to these proposed adjustments. There can be no assurance, however, that the
amount or timing of any liability of the Company to the former parent will not
have a material adverse effect on the Company's results of operations and
financial position.
5
Note 6--Guarantor and Non-Guarantor Subsidiaries
The credit facility borrowings and the senior notes issued by Roadway
Corporation in connection with its acquisition of Arnold Industries, Inc. are
secured by a first-priority-perfected lien on all of the capital stock of the
Company's direct subsidiaries. They are also supported by guarantees provided by
all of the Company's material subsidiaries, which are wholly owned. These
guarantees are full and unconditional, joint and several.
The following condensed consolidating financial statements set forth the
Company's balance sheets, statements of income, and statements of cash flows for
the same time periods as the financial statements presented in Item 1 above. In
the following schedules, "Guarantor Subsidiaries" refers to non-minor domestic
subsidiaries, and "Non-Guarantor subsidiaries" refers to foreign and minor
domestic subsidiaries and "Eliminations" represent the adjustments necessary to
(a) eliminate intercompany transactions and (b) eliminate the investments in the
Company's subsidiaries.
Condensed Consolidating Balance Sheets
June 15, 2002 Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
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(in millions)
Cash and cash equivalents $ 47 $ 5 $ - $ 52
Accounts receivable, including retained interest in
securitized receivables, net 140 15 - 155
Due from affiliates 46 - (39) 7
Prepaid expenses and supplies 21 - - 21
Deferred income taxes 11 - - 11
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Total current assets 265 20 (39) 246
Carrier operating property, at cost 1,396 27 - 1,423
Less allowance for depreciation 997 14 - 1,011
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Net carrier operating property 399 13 - 412
Goodwill, net - 15 - 15
Investment in subsidiaries (2) - 2 -
Long-term assets 6 - - 6
Deferred income taxes 34 - 1 35
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Total assets $ 702 $ 48 $ (36) $ 714
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Accounts payable $ 149 $ 8 $ - $ 157
Due to affiliates - 39 (39) -
Salaries and wages 103 2 - 105
Freight and casualty claims payable 46 1 - 47
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Total current liabilities 298 50 (39) 309
Casualty claims and other 58 - 1 59
Accrued pension and retiree medical 125 - - 125
Parent company investment 221 (2) 2 221
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Total liabilities and parent company investment $ 702 $ 48 $ (36) $ 714
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6
Note 6--Guarantor and Non-Guarantor Subsidiaries (continued)
Condensed Consolidating Balance Sheets
December 31, 2001 Guarantor Non-Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
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(in millions)
Cash and cash equivalents $ 45 $ 1 $ - $ 46
Accounts receivable, including retained interest in
securitized receivables, net 150 15 - 165
Due from affiliates 36 1 (37) -
Prepaid expenses and supplies 11 - - 11
Deferred income taxes 13 - - 13
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Total current assets 255 17 (37) 235
Carrier operating property, at cost 1,410 26 - 1,436
Less allowance for depreciation 998 13 - 1,011
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Net carrier operating property 412 13 - 425
Goodwill, net - 15 - 15
Investment in subsidiaries (4) - 4 -
Deferred income taxes 31 - - 31
Long-term assets 5 - - 5
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Total assets $ 699 $ 45 $ (33) $ 711
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Accounts payable $ 157 $ 9 $ - $ 166
Due to affiliates 1 36 (37) -
Salaries and wages 109 3 - 112
Freight and casualty claims payable 48 1 - 49
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Total current liabilities 315 49 (37) 327
Casualty claims and other 64 - - 64
Accrued pension and retiree medical 119 - - 119
Parent company investment 201 (4) 4 201
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Total liabilities and parent company investment $ 699 $ 45 $ (33) $ 711
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7
Note 6--Guarantor and Non-Guarantor Subsidiaries (continued)
Condensed Consolidating Statements of Income
Twelve weeks ended June 15, 2002 Guarantor Non-Guarantor
(Second Quarter) Subsidiaries Subsidiaries Eliminations Consolidated
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(in millions)
Revenue $ 578 $ 30 $ (1) $ 607
Operating expenses:
Salaries, wages and benefits 383 9 - 392
Operating supplies and expenses 98 7 (1) 104
Purchased transportation 48 9 - 57
Operating taxes and licenses 15 - - 15
Insurance and claims expenses 12 - - 12
Provision for depreciation 15 1 - 16
Net loss on disposal of operating property 1 - - 1
Results of affiliates (2) - 2 -
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Total operating expenses 570 26 1 597
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Operating income 8 4 (2) 10
Other (expense), net (1) - - (1)
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Income before income taxes 7 4 (2) 9
Provision for income taxes 1 2 - 3
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Net income $ 6 $ 2 $ (2) $ 6
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Twelve weeks ended June 16, 2001 Guarantor Non-Guarantor
(Second Quarter) Subsidiaries Subsidiaries Eliminations Consolidated
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(in millions)
Revenue $ 615 $ 28 $ - $ 643
Operating expenses:
Salaries, wages and benefits 403 9 - 412
Operating supplies and expenses 109 7 - 116
Purchased transportation 54 10 - 64
Operating taxes and licenses 16 - - 16
Insurance and claims expenses 12 - - 12
Provision for depreciation 15 1 - 16
Net loss on disposal of operating property 1 - - 1
Results of affiliates - - - -
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Total operating expenses 610 27 - 637
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Operating income 5 1 - 6
Other income, net 1 - - 1
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Income before income taxes 6 1 - 7
Provision for income taxes 2 1 - 3
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Net income $ 4 $ - $ - $ 4
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8
Note 6--Guarantor and Non-Guarantor Subsidiaries (continued)
Condensed Consolidating Statements of Income
Twenty-four weeks ended June 15, 2002 Guarantor Non-Guarantor
(Two Quarters) Subsidiaries Subsidiaries Eliminations Consolidated
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(in millions)
Revenue $ 1,107 $ 54 $ (1) $ 1,160
Operating expenses:
Salaries, wages and benefits 742 17 - 759
Operating supplies and expenses 187 13 (1) 199
Purchased transportation 91 17 - 108
Operating taxes and licenses 29 1 - 30
Insurance and claims expenses 22 - - 22
Provision for depreciation 29 2 - 31
Net loss on disposal of operating property 1 - - 1
Results of affiliates (2) - 2 -
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Total operating expenses 1,099 50 1 1,150
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Operating income 8 4 (2) 10
Other (expense), net (2) - - (2)
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Income before income taxes 6 4 (2) 8
Provision for income taxes 1 2 - 3
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Net income $ 5 $ 2 $ (2) $ 5
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Twenty-four weeks ended June 16, 2001 Guarantor Non-Guarantor
(Two Quarters) Subsidiaries Subsidiaries Eliminations Consolidated
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(in millions)
Revenue $ 1,240 $ 54 $ (1) $ 1,293
Operating expenses:
Salaries, wages and benefits 805 19 - 824
Operating supplies and expenses 216 14 - 230
Purchased transportation 110 19 (1) 128
Operating taxes and licenses 33 1 - 34
Insurance and claims expenses 25 - - 25
Provision for depreciation 29 2 - 31
Net loss on disposal of operating property 1 - - 1
Results of affiliates 3 - (3) -
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Total operating expenses 1,222 55 (4) 1,273
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Operating income (loss) 18 (1) 3 20
Other (expense), net (3) (1) - (4)
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Income (loss) before income taxes 15 (2) 3 16
Provision for income taxes 6 1 - 7
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Net income (loss) $ 9 $ (3) $ 3 $ 9
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9
Note 6--Guarantor and Non-Guarantor Subsidiaries (continued)
Condensed Consolidating Statement of Cash Flows
Twenty-four Weeks Ended June 15, 2002 Guarantor Non-Guarantor
(Two Quarters) Subsidiaries Subsidiaries Eliminations Consolidated
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(in millions)
Net cash provided by operating activities $ 20 $ 5 $ - $ 25
Cash flows from investing activities
Purchases of carrier operating property, net (18) (1) - (19)
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Net cash (used) in investing activities (18) (1) - (19)
Net cash (used) in financing activities - - - -
Net increase in cash and cash equivalents 2 4 - 6
Cash and cash equivalents at beginning of year 45 1 - 46
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Cash and cash equivalents at end of year $ 47 $ 5 $ - $ 52
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Twenty-four Weeks Ended June 16, 2001 Guarantor Non-Guarantor
(Two Quarters) Subsidiaries Subsidiaries Eliminations Consolidated
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(in millions)
Net cash provided by operating activities $ 42 $ 3 $ - $ 45
Cash flows from investing activities
Purchases of carrier operating property, net (31) (2) - (33)
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Net cash (used) in investing activities (31) (2) - (33)
Cash flows from financing activities
Dividends paid (2) - - (2)
Treasury stock activity - net - - - -
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Net cash (used) in financing activities (2) - - (2)
Net increase in cash and cash equivalents 9 1 - 10
Cash and cash equivalents at beginning of year 61 4 - 65
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Cash and cash equivalents at end of year $ 70 $ 5 $ - $ 75
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10