Exhibit 99.1
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Roadway Express, Inc. and Subsidiaries
Quarters ended September 13, 2003 and September 7, 2002
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ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 13, 2003 December 31, 2002
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(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 73,011 $ 82,016
Accounts receivable, including retained
interest in securitized receivables, net 220,580 212,834
Other current assets 41,111 31,662
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Total current assets 334,702 326,512
Carrier operating property, at cost 1,407,540 1,414,794
Less allowance for depreciation 1,000,628 996,224
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Net carrier operating property 406,912 418,570
Goodwill, net 16,781 14,816
Other assets 44,439 43,666
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Total assets $ 802,834 $ 803,564
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Liabilities and parent company investment
Current liabilities:
Accounts payable $ 222,612 $ 190,457
Salaries and wages 116,523 141,242
Other current liabilities 48,379 45,606
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Total current liabilities 387,514 377,305
Long-term liabilities:
Casualty claims and other 52,289 55,953
Accrued pension and retiree medical 144,582 133,072
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Total long-term liabilities 196,871 189,025
Parent company investment 218,449 237,234
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Total liabilities and parent company investment $ 802,834 $ 803,564
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Note: The balance sheet at December 31, 2002 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.
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ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
Twelve Weeks Ended
(Third Quarter)
September 13, 2003 September 7, 2002
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(in thousands)
Revenue $ 700,668 $ 631,158
Operating expenses:
Salaries, wages and benefits 441,446 402,918
Operating supplies and expenses 117,826 104,540
Purchased transportation 76,729 63,318
Operating taxes and licenses 17,024 16,511
Insurance and claims expense 14,530 15,489
Provision for depreciation 14,251 15,507
Net (gain) loss on disposal of operating property (5,069) 1,129
Compensation and other expense related to the
Yellow acquisition 23,374 --
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Total operating expenses 700,111 619,412
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Operating income 557 11,746
Other (expense), net (868) (702)
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(Loss) income before income taxes (311) 11,044
Provision for income taxes 2,327 4,709
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Net (loss) income $ (2,638) $ 6,335
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Thirty-six Weeks Ended
(Three Quarters)
September 13, 2003 September 7, 2002
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(in thousands)
Revenue $2,097,068 $1,791,125
Operating expenses:
Salaries, wages and benefits 1,313,985 1,161,888
Operating supplies and expenses 369,386 303,527
Purchased transportation 226,247 171,761
Operating taxes and licenses 52,586 46,742
Insurance and claims expense 42,024 37,841
Provision for depreciation 43,647 46,192
Net (gain) loss on disposal of operating property (4,288) 1,778
Compensation and other expense related to the
Yellow acquisition 23,374 --
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Total operating expenses 2,066,960 1,769,729
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Operating income 30,108 21,396
Other (expense), net (2,067) (2,641)
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Income before income taxes 28,040 18,755
Provision for income taxes 14,060 7,532
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Net income $ 13,981 $ 11,223
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See notes to condensed consolidated financial statements.
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ROADWAY EXPRESS INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Thirty-six Weeks Ended
(Three Quarters)
September 13, 2003 September 7, 2002
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(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 13,981 $ 11,223
Depreciation 43,647 46,192
Other operating adjustments 5,665 (20,770)
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Net cash provided by operating activities 63,293 36,645
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property (35,849) (40,026)
Sales of carrier operating property 8,997 2,203
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Net cash (used) by investing activities (26,852) (37,823)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (45,750)
Treasury stock activity, net - 1
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Net cash (used) by financing activities (45,750) 1
Effect of exchange rate on cash 305 (200)
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Net (decrease) increase in cash and cash equivalents (9,004) (1,377)
Cash and cash equivalents at beginning of period 82,016 46,807
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Cash and cash equivalents at end of period $ 73,012 $ 44,710
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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 and thirty-six weeks ending
September 13, 2003 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2003. 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,
2002.
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Note 2--Accounting Period
Roadway Express, Inc. (the registrant, 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 more than 100 countries
worldwide.
Note 4--Comprehensive Income
Comprehensive income differs from net income due to foreign currency translation
adjustments as shown below:
Twelve Weeks Ended Thirty-six Weeks Ended
(Third Quarter) (Three Quarters)
Sept. 13, 2003 Sept. 7, 2002 Sept. 13, 2003 Sept. 7, 2002
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(in thousands)
Net (loss) income $ (2,638) $ 6,335 $ 13,981 $ 11,223
Foreign currency translation
adjustments (707) (628) 5,069 (684)
Derivative fair value adjustments - 158 126 158
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Comprehensive (loss) income $ (3,345) $ 5,865 $ 19,176 $ 10,697
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Note 5--Contingent Matter
The Company's former parent (FedEx Corporation, successor in interest to Caliber
Systems, Inc., formerly known as Roadway Services, Inc.) 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 multi-employer 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
on January 2, 1996 (the date of the spin-off) the Company is obligated to
reimburse the former parent for any additional taxes and interest that relate to
the Company's business prior to the spin-off. The amount and timing of such
payments 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. On January 16, 2003, the Company made a
$14 million payment to its former parent under the tax sharing agreement for
taxes and interest related to certain of the proposed adjustments for tax years
1994 and 1995.
We estimate the possible range of the remaining payments that may be due to the
former parent to be approximately $0 to $16 million in additional taxes and $0
to $11 million in related interest, net of tax benefit. The Company has
established a $16 million deferred tax liability and 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.
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