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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 25, 1995
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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
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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
21, 1995 was 39,071,192.
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INDEX
ROADWAY SERVICES, INC.
FORM 10-Q
PERIOD ENDED MARCH 25, 1995
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--March 25, 1995
and December 31, 1994
Condensed Statements of Consolidated Income--Twelve
weeks ended March 25, 1995 and March 26, 1994
Condensed Statements of Consolidated Cash Flows--Twelve
weeks ended March 25, 1995 and March 26, 1994
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 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART I - FINANCIAL INFORMATION
ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 25, December 31,
1995 1994
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(dollars in thousands)
ASSETS
Cash................................................. $ 39,476 $ 29,075
Marketable securities................................ 3,821 7,976
Accounts receivable.................................. 483,003 492,560
Prepaid expenses and supplies........................ 85,813 77,361
Deferred income taxes................................ 38,001 35,806
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TOTAL CURRENT ASSETS.............................. 650,114 642,778
Carrier operating property........................... 2,737,086 2,688,277
Less allowances for depreciation..................... 1,514,325 1,478,560
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TOTAL CARRIER OPERATING PROPERTY.................. 1,222,761 1,209,717
Cost in excess of net assets of businesses acquired.. 96,280 96,940
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$1,969,155 $1,949,435
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable..................................... $ 305,903 $ 339,859
Salaries and wages................................... 186,238 219,747
Short-term debt...................................... 85,800 -
Other current liabilities............................ 144,242 137,479
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TOTAL CURRENT LIABILITIES......................... 722,183 697,085
Casualty claims payable after one year............... 107,670 107,427
Future equipment repairs............................. 27,868 26,639
Retiree medical...................................... 60,713 59,243
Deferred income taxes................................ 41,942 43,647
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TOTAL LONG-TERM LIABILITIES....................... 238,193 236,956
Common stock - 40,896,414 shares issued.............. 39,898 39,898
Additional capital................................... 51,160 51,153
Earnings reinvested in the business.................. 970,635 978,459
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1,061,693 1,069,510
Less cost of common stock in treasury - 1,432,000
shares in 1995 and 1,477,000 shares in 1994......... 52,914 54,116
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TOTAL SHAREHOLDERS' EQUITY........................ 1,008,779 1,015,394
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$1,969,155 $1,949,435
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See notes to condensed consolidated financial statements.
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ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
Twelve Weeks Ended
(First Quarter)
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March 25, March 26,
1995 1994
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(amounts in thousands,
except per share data)
REVENUE.......................................... $1,087,007 $1,023,740
OPERATING EXPENSES
Salaries, wages and benefits................... 572,115 550,355
Purchased transportation....................... 209,511 169,870
Operating supplies and expenses................ 190,269 171,871
Operating taxes and licenses................... 29,373 29,544
Insurance and claims........................... 25,884 25,088
Provision for depreciation..................... 48,081 47,833
Net gain on sale of property................... (392) (9)
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TOTAL OPERATING EXPENSES..................... 1,074,841 994,552
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OPERATING INCOME............................. 12,166 29,188
Other income (expense) - net..................... (1,229) 26
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INCOME BEFORE INCOME TAXES 10,937 29,214
Provision for income taxes....................... 5,086 13,302
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NET INCOME................................. $ 5,851 $ 15,912
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NET INCOME PER SHARE....................... $ .15 $ .40
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DIVIDENDS DECLARED PER SHARE................. $ .35 $ .35
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AVERAGE SHARES OUTSTANDING................... 39,434 39,372
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See notes to condensed consolidated financial statements.
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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 25, March 26,
1995 1994
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(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income..................................... $ 5,851 $ 15,912
Adjustments.................................... (11,019) 21,214
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NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES.................... (5,168) 37,126
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property........ (64,070) (28,095)
Sales of carrier operating property............ 3,337 1,339
Purchases of marketable securities............. - (1,477)
Sales of marketable securities................. 4,155 17,183
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NET CASH USED IN INVESTING ACTIVITIES........ (56,578) (11,050)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid................................. (13,653) (13,646)
Increase in short-term debt.................... 85,800 -
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES...................... 72,147 (13,646)
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NET INCREASE IN CASH......................... 10,401 12,430
CASH AT BEGINNING OF YEAR.................... 29,075 27,628
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CASH AT END OF FIRST QUARTER................. $ 39,476 $ 40,058
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See notes to condensed consolidated financial statements.
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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 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
ended March 25, 1995 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1995. 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, 1994.
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 - Short-Term Debt
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At March 25, 1995, short-term debt included borrowings of $80 million under an
unsecured $300 million Credit Agreement with several banks, which expires in
March 1999. Interest on outstanding borrowings is based on various rates as
defined in the agreement. This agreement, which was entered into by the
registrant during the first quarter of 1995, contains restrictions on secured
borrowings and requires the registrant to maintain a minimum level of
consolidated net worth. Additional borrowings of $5.8 millon were outstanding
at March 25, 1995 under an unsecured $25 million revolving line of credit. The
weighted average interest rate on all borrowings during the first quarter was
6.5%. Due to the short-term nature of the debt, the outstanding balance
approximated fair value.
Item 2. Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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Consolidated revenue for the first quarter ended March 25, 1995 increased
$63,267,000 or 6.2% over revenue for the first quarter of 1994. At Roadway
Express, the registrant's largest operating company, revenue declined 2.6%
compared with the first quarter last year, primarily due to a reduction in
business volumes. Total first quarter tonnage declined 5.8%, with daily LTL
(less-than-truckload) tonnage declining 3.6%, based on 59 shipping days this
year versus 60 days last year. Business volumes continue below the levels
experienced by Roadway Express prior to the 24-day work stoppage in April 1994
by the International Brotherhood of Teamsters. The decline in revenue was also
attributable to a slowing economy and intense price competition from other
national carriers.
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The largest increase in consolidated revenue was attributable to Roadway
Package System, Inc. (RPS), the registrant's small package carrier. The
Roadway Regional Group (RRG), consisting of Viking Freight System, Central
Freight Lines, Spartan Express and Coles Express, also experienced an increase
in quarterly revenue. In addition, operations at Roadway Global Air (RGA), the
registrant's 18-month old worldwide air freight carrier, contributed to the
1995 revenue increase.
Operating expenses for the first quarter increased $80,289,000 or 8.1% over
comparable 1994 levels. The majority of the increases resulted from higher
business volumes at RPS, RRG, and RGA. Purchased transportation increased
23.3% in the first quarter of 1995, reflecting increased use of rail by Roadway
Express and increased business levels at RPS and RGA. Operating expenses,
which increased 16.6% at RRG, included investments in PRISM, a major
reengineering and information technology project launched during 1994 that will
continue for several years. At Roadway Express, operating expenses were .8%
below first quarter 1994 levels, due primarily to the reduction in volume. As
a result of reduced volume, fixed costs increased as a percent of revenue and
variable costs were adversely affected by reduced line-haul load averages.
Operating income in the first quarter amounted to $12,166,000 or 58.3% below
the first quarter of 1994. Other expense-net increased due to the reduction in
marketable securities and the addition of short-term debt.
Net income declined from $.40 per share in 1994 to $.15 per share in 1995.
Roadway Express lost $.01 per share in the quarter compared with a profit of
$.14 per share last year. Earnings from the registrant s other operating units
in the aggregate were also below last year but were close to plan. Earnings at
RPS increased 10% from last year and exceeded plan. The loss at RGA was $.02
more than planned at $.38 per share compared with a loss of $.25 per share last
year.
Roadway Express management will focus on regaining market share and
aggressively managing costs. Among steps being taken to improve the
competitive position of Roadway Express are its reengineered scheduled
operations system which is now producing faster transit times and excellent on
time performance and new metro to metro schedules which are competitive with
regional carriers. Aggressive cost management includes curtailment of salaried
staff positions to match current tonnage levels; refinements to the linehaul
operations system to improve load averages and equipment utilization; and a
reduction in capital expenditures.
RGA has entered into an agreement with American International Freight, Inc.
(AIF) of Ypsilanti, Michigan, a major cargo airline, which will result in
service and cost improvements for RGA. Under the arrangement, RGA will lease a
portion of its hub facility at Terre Haute, Indiana to AIF. Each company will
purchase space on the other s aircraft. The air fleet available to RGA will
increase from 13 to 23 all jet aircraft, increasing the extent of direct air
coverage. In conjunction with the recent opening of 29 additional air
logistics centers, RGA s overnight service will reach 75% of the U.S.
population, up from 62% last year.
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During the quarter, the registrant entered into two financing agreements to
provide available funds on an as needed basis. One agreement provides a $25
million overnight cash management line of credit. The other consists of a
$300 million Credit Agreement with several participating banks. Borrowings
under financing agreements amounted to $85.8 million at the end of the first
quarter. It is anticipated that borrowings will continue at least at this
level through the remainder of 1995. It is anticipated that funds generated
from future operating activities and financing sources currently in place will
finance projected 1995 capital expenditures and provide adequate levels of
working capital, funds for planned business expansion and other needs of the
business. Total capital expenditures in 1995 are currently projected at
approximately $385 million.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
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(I) Credit Agreement among Roadway Services, Inc., several lenders and
Chemical Bank, dated as of March 24, 1995.
(II) Financial Data Schedule
(b) Reports on Form 8-K Filed During the First Quarter of 1995
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A Form 8-K dated January 20, 1995 was filed under Item 5, Other
Materially Important Events, to report certain important business
information, and under Item 7, Financial Statements and Exhibits, to
file Exhibit 10-Material contracts.
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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 27, 1995 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 27, 1995 By /s/ Roy E. Griggs
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Roy E. Griggs,
Vice President and Controller
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