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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the period ended March 26, 1994
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OR
( ) 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 0-10716
ROADWAY SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Ohio 34-1365496
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1077 Gorge Boulevard, P.O. Box 88, Akron, Ohio 44309-0088
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code is (216) 384-8184
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 X No
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The number of shares of common stock without par value outstanding as of April
15, 1994 was 39,022,565.
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INDEX
ROADWAY SERVICES, INC.
FORM 10-Q
PERIOD ENDED MARCH 26, 1994
PART I - FINANCIAL INFORMATION
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Item 1. Condensed Financial Statements (Unaudited)
Consolidated Balance Sheet--March 26, 1994 and December 31, 1993
Statement of Consolidated Income--Twelve weeks ended March 26,
1994 and March 27, 1993
Statement of Consolidated Cash Flows--Twelve weeks ended March
26, 1994 and March 27, 1993
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
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Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited)
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ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
March 26, December 31,
1994 1993
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(dollars in thousands)
ASSETS
Cash................................................. $ 40,058 $ 27,628
Marketable securities................................ 68,237 83,943
Accounts receivable.................................. 435,983 401,777
Prepaid expenses and supplies........................ 72,265 77,160
Deferred income taxes................................ 30,049 28,765
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TOTAL CURRENT ASSETS.............................. 646,592 619,273
Carrier operating property........................... 2,454,622 2,440,189
Less allowances for depreciation..................... 1,349,475 1,313,974
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TOTAL CARRIER OPERATING PROPERTY.................. 1,105,147 1,126,215
Cost in excess of net assets of businesses acquired.. 100,099 100,914
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$1,851,838 $1,846,402
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable..................................... $ 258,095 $ 268,103
Salaries and wages................................... 175,954 178,536
Other current liabilities............................ 146,208 131,850
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TOTAL CURRENT LIABILITIES......................... 580,257 578,489
Deferred income taxes................................ 49,736 57,620
Future equipment repairs............................. 24,009 23,148
Casualty claims payable after one year............... 92,754 86,546
Retiree medical...................................... 55,021 53,448
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TOTAL OTHER LIABILITIES........................... 221,520 220,762
Common stock - 40,896,414 shares issued.............. 39,898 39,898
Additional capital................................... 50,512 50,446
Earnings reinvested in the business.................. 1,015,774 1,013,519
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1,106,184 1,103,863
Less cost of common stock in treasury - 1,507,000
shares in 1994 and 1,527,000 shares in 1993......... 56,123 56,712
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TOTAL SHAREHOLDERS' EQUITY........................ 1,050,061 1,047,151
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$1,851,838 $1,846,402
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ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF CONSOLIDATED INCOME (UNAUDITED)
Twelve Weeks Ended
(First Quarter)
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March 26, March 27,
1994 1993
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(amounts in thousands,
except per share data)
REVENUE.......................................... $1,023,740 $856,052
OPERATING EXPENSES
Salaries, wages and benefits................... 550,355 464,346
Operating supplies and expenses................ 171,871 147,090
Purchased transportation....................... 169,870 127,114
Operating taxes and licenses................... 29,544 25,031
Insurance and claims........................... 25,088 20,409
Provision for depreciation..................... 47,833 41,257
Net (gain) on sale of property................. (9) (185)
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TOTAL OPERATING EXPENSES..................... 994,552 825,062
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OPERATING INCOME............................. 29,188 30,990
Other income - net............................... 26 3,578
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INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES............... 29,214 34,568
Provision for income taxes....................... 13,302 14,307
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INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES......................... 15,912 20,261
Cumulative effect of accounting changes...... - (18,131)
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NET INCOME................................. $ 15,912 $ 2,130
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EARNINGS PER SHARE:
Before cumulative effect of
accounting changes....................... $ .40 $ .51
Cumulative effect of accounting changes.... - (.46)
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NET INCOME................................. $ .40 $ .05
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DIVIDENDS DECLARED PER SHARE................. $ .35 $ .32 1/2
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AVERAGE SHARES OUTSTANDING................... 39,372 39,741
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ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF CONSOLIDATED
CASH FLOWS (UNAUDITED)
Twelve Weeks Ended
(First Quarter)
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March 26, March 27,
1994 1993
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(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income..................................... $ 15,912 $ 2,130
Adjustments.................................... 21,214 42,404
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NET CASH PROVIDED BY OPERATING ACTIVITIES.... 37,126 44,534
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property........ (28,095) (41,511)
Sales of carrier operating property............ 1,339 2,617
Purchases of marketable securities............. (1,477) (8,523)
Sales of marketable securities................. 17,183 4,963
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NET CASH USED IN INVESTING ACTIVITIES........ (11,050) (42,454)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid................................. (13,646) (12,803)
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NET CASH USED IN FINANCING ACTIVITIES........ (13,646) (12,803)
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NET INCREASE (DECREASE) IN CASH.............. 12,430 (10,723)
CASH AT BEGINNING OF YEAR.................... 27,628 41,036
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CASH AT END OF FIRST QUARTER................. $ 40,058 $ 30,313
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ROADWAY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
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The accompanying 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. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
statements are unaudited but, 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 ended
March 26, 1994 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1994. For further information, refer
to consolidated financial statements and footnotes thereto included in the
registrant's annual report on Form 10-K for the year ended December 31, 1993.
Note B - Accounting Period
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The registrant operates on a 13 four-week period calendar with 12 weeks in each
of the first three quarters and 16 weeks in the fourth quarter.
Note C - Accounting Changes
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Effective January 1, 1993, the registrant adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting for
Income Taxes." Together, the adoption of SFAS 106 and 109 as cumulative effect
adjustments resulted in a net charge to first quarter 1993 earnings of
$18,131,000 or $.46 per share.
Item 2. Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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Revenue for the first quarter ended March 26, 1994 increased $167,688,000 or
19.6% over first quarter 1993 levels. Accounting for $57,333,000 of the
increase was the inclusion of Central Freight Lines Inc. (Central) which was
acquired by the registrant on April 6, 1993. At Roadway Express, the
registrant's largest operating company, revenue was 4.1% higher than first
quarter 1993 levels principally due to a general rate increase implemented
effective January 1, 1994. Total first quarter tonnage at Roadway Express
declined 0.9% from comparable 1993 levels, including an increase of 0.5% in
less-than-truckload (LTL) tons.
Each of the registrant's operating companies experienced revenue gains that,
excluding Roadway Express and Central, totalled 26.1% over comparable first
quarter 1993 levels. The largest share of this growth was attributable to
Roadway Package System, Inc. (RPS), the registrant's small package carrier, due
to package volume growth and, to a lesser extent, an increase in average
revenue per package. Startup operations at Roadway Global Air, Inc. (RGA), a
worldwide heavy weight air cargo service, also contributed to the 1994 revenue
increase.
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First quarter 1994 operating expenses increased $169,490,000 or 20.5% over
comparable 1993 levels. Central accounted for $53,510,000 of the increase.
Inclusion of RGA in 1994 also contributed to the increase in operating
expenses. In addition to the impact on operating expenses of higher volume
levels, Roadway Express incurred higher compensation costs under the recently
expired industry labor contract which included wage and benefit increases of
3.4% effective April 1, 1993. Severe winter weather conditions and the
earthquake in southern California resulted in productivity declines and,
therefore, higher costs during the first quarter of 1994. Fuel prices, on a
per gallon basis, in the first quarter of 1994 averaged 7.8% lower than fourth
quarter 1993 levels, and 4.5% below first quarter 1993 levels. Purchased
transportation increased at all of the registrant's operating companies,
reflecting increased business levels at RPS and Roberts Express, Inc., and the
inclusion of RGA. Insurance and claims expense increased over 1993 due in part
to the inclusion of Central.
Operating income of $29,188,000 in the first quarter of 1994 represented an
operating margin of 2.9%, compared to 3.6% in the comparable prior year
quarter. At Roadway Express, the operating margin declined to 1.9% in 1994 from
2.2% in the first quarter of 1993. Startup losses at RGA offset performance
gains at the registrant's other operations. Other income-net declined in 1994
due to reduced levels of investments in marketable securities.
Since April 6, Teamsters at Roadway Express, the registrant's union subsidiary,
along with Teamsters at approximately 20 other carriers, have been on strike
after the industry labor contract expired without agreement on a new one. As a
result of the work stoppage, Roadway Express has cancelled revenue equipment
orders for $30 million and deferred expenditures totaling $40 million for
terminal construction and the purchase of data processing and other equipment.
Additional measures to control costs during the work stoppage are being
implemented. Neither the duration of the work stoppage nor its impacts on the
registrant can be reasonably predicted or quantified at this time, although
management expects them to be significant.
Rate competition is expected to remain intense in many of the registrant's
markets, and expenditures for expansion at operating companies other than
Roadway Express are expected to be substantial during the remainder of the
year. The startup losses at RGA will continue throughout 1994.
The registrant normally finances capital expenditures from internally generated
funds. The acquisition of Central, the startup of RGA and recent expansion has
reduced funds currently invested in marketable securities. It is anticipated
that cash, current investments in marketable securities and funds generated
from future operations should provide adequate levels of working capital and
funds for business expansion, projected capital expenditures, and other needs
of the business. The costs incurred as a result of a prolonged work stoppage
at Roadway Express could, however, require the registrant to borrow funds on a
short term basis to meet the needs of the business. Accordingly, the
registrant has arranged adequate external sources of short term financing.
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PART II - OTHER INFORMATION
Item 5. Other Information
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On March 28, RGA expanded to 26 new locations, increasing its network of air
logistics centers (ALCs) by more than 50%. Five of the new ALCs are outside
the U.S.: Manchester, U.K.; Munich, Germany; Milan, Italy; Melbourne,
Australia; and Bangkok, Thailand.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits--None
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(b) Reports on Form 8-K Filed During the First Quarter of 1994--None
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROADWAY SERVICES, INC.
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(Registrant)
Date: April 25, 1994 By /s/ D. A. Wilson
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D. A. Wilson, Senior Vice President-
Finance and Planning, Secretary and
Chief Financial Officer
Date: April 25, 1994 By /s/ Roy E. Griggs
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Roy E. Griggs,
Vice President and Controller
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