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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 June 17, 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 July
14, 1995 was 39,077,486.
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INDEX
ROADWAY SERVICES, INC.
FORM 10-Q
PERIOD ENDED JUNE 17, 1995
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--June 17, 1995 and
December 31, 1994
Condensed Statements of Consolidated Income--Twelve weeks
and twenty-four weeks ended June 17, 1995 and June 18, 1994
Condensed Statements of Consolidated Cash Flows--Twenty-four
weeks ended June 17, 1995 and June 18, 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 4. Results of Votes of Security Holders
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)
June 17, December 31,
1995 1994
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(dollars in thousands)
ASSETS
Cash........................................................ $20,296 $29,075
Marketable securities....................................... 4,070 7,976
Accounts receivable......................................... 487,296 492,560
Prepaid expenses and supplies............................... 86,759 77,361
Deferred income taxes....................................... 36,708 35,806
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TOTAL CURRENT ASSETS..................................... 635,129 642,778
Carrier operating property.................................. 2,829,643 2,688,277
Less allowances for depreciation............................ 1,555,713 1,478,560
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TOTAL CARRIER OPERATING PROPERTY......................... 1,273,930 1,209,717
Cost in excess of net assets of businesses acquired......... 95,634 96,940
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$2,004,693 $1,949,435
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable............................................ $311,282 $339,859
Salaries and wages.......................................... 193,775 219,747
Short-term debt............................................. 141,600 -
Other current liabilities................................... 125,098 137,479
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TOTAL CURRENT LIABILITIES................................ 771,755 697,085
Casualty claims payable after one year...................... 109,473 107,427
Future equipment repairs.................................... 28,916 26,639
Retiree medical............................................. 62,183 59,243
Deferred income taxes....................................... 38,942 43,647
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TOTAL LONG-TERM LIABILITIES.............................. 239,514 236,956
Common stock - 40,896,414 shares issued..................... 39,898 39,898
Additional capital.......................................... 51,310 51,153
Earnings reinvested in the business......................... 954,952 978,459
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1,046,160 1,069,510
Less cost of common stock in treasury - 1,426,000
shares in 1995 and 1,477,000 shares in 1994................ 52,736 54,116
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TOTAL SHAREHOLDERS' EQUITY............................... 993,424 1,015,394
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$2,004,693 $1,949,435
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<FN>
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 Twenty-Four Weeks Ended
(Second Quarter) (First Half)
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June 17, June 18, June 17, June 18,
1995 1994 1995 1994
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(amounts in thousands, except per share data)
REVENUE........................................ 1,097,387 $930,157 $2,184,394 $1,953,897
OPERATING EXPENSES
Salaries, wages and benefits................. 580,516 501,426 1,152,631 1,051,781
Purchased transportation..................... 210,729 190,310 420,240 36O,180
Operating supplies and expenses.............. 203,616 180,952 393,885 352,823
0perating taxes and licenses................. 3O,229 25,802 59,6O2 55,346
Insurance and claims......................... 25,897 24,282 51,781 49,370
Provision for depreciation................... 49,863 48,9O4 97,944 96,737
Net gain on sale of property................. (61) (353) (453) (362)
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TOTAL OPERATING EXPENSES................... 1,100,789 971,323 2,175,630 1,965,875
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OPERATING INCOME (LOSS).................... (3,402) (41,166) 8,764 (11,978)
Other income (expense)-net..................... 303 324 (926) 350
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INCOME (LOSS) BEFORE INCOME TAXES.......... (3,099) (40,842) 7,838 (11,628)
Provision (benefit) for income taxes........... (1,097) (19,116) 3,989 (5,814)
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NET INCOME (LOSS)........................ $(2,002) $(21,726) $3,849 $(5,814)
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NET INCOME (L0SS) PER SHARE.............. $(.05) $(.55) $.10 $(.15)
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DIVIDENDS DECLARED PER SHARE................. $.35 $.35 $.70 $.70
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AVERAGE SHARES OUTSTANDING................... 39,467 39,395 39,451 39,383
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<FN>
See notes to condensed consolidated financial statements.
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ROADWAY SERVICES INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED
CASH FLOWS (Unaudited)
Twenty-Four Weeks Ended
(First Half)
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June 17, June 18,
1995 1994
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(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)....................................... $ 3,849 $ (5,814)
Adjustments............................................. 30,901 104,988
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NET CASH PROVIDED BY
OPERATING ACTIVITIES...................... 34,750 99,174
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property................. (165,651) (92,105)
Sales of carrier operating property..................... 3,947 3,088
Purchases of marketable securities...................... - (11,330)
Sales of marketable securities.......................... 3,906 27,124
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NET CASH USED IN INVESTING ACTIVITIES............. (157,798) (73,223)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid.......................................... (27,331) (27,303)
Increase in short-term debt-net......................... 141,600 -
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES...................... 114,269 (27,303)
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NET DECREASE IN CASH.............................. (8,779) (1,352)
CASH AT BEGINNING OF YEAR......................... 29,075 27,628
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CASH AT END OF SECOND QUARTER..................... $ 20,296 $ 26,276
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<FN>
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 twenty-four
weeks ended June 17, 1995 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1995. For further information,
refer to the 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 June 17, 1995, short-term debt included borrowings of $140.0 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 $1.6 million were outstanding
at June 17, 1995 under an unsecured $25 million revolving line of credit. The
weighted average interest rate on all borrowings during the second quarter was
6.6%. 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 second quarter ended June 17, 1995 increased
$167.2 million or 18% over revenue for the same period in 1994. For the
twenty-four weeks constituting the registrant's first half, revenue increased
$230.5 million or 11.8% over 1994. Results for the second quarter a year ago
were impacted by the 24-day work stoppage against Roadway Express in April 1994
by the Teamsters Union. The Teamsters strike reduced revenue for the second
quarter of 1994 for Roadway Express by approximately $190 million. This
reduction was largely offset by increased business volumes at all of the
registrant's other operating companies, particularly the Roadway Regional Group
(RRG), Roadway Package System (RPS) and Roberts Express.
An intense pricing environment, especially in the national and regional less-
than-truckload (LTL) markets, and a slowing economy, which has contributed to
lower than anticipated volume levels, caused revenue to be below plan at all
the registrant's operating companies except Roadway Logistics Systems (ROLS).
At Roadway Express, the registrant's largest operating company, rate levels
continued to decline in the quarter, and are currently below those of a year
ago. Near the end of the quarter, LTL tonnage at Roadway was only 2.1% above
last year's depressed post-strike levels, and total tonnage was down 1.2% as
compared with the same period. Revenue at RPS was up 6.2% for the quarter over
the second quarter a year ago. The RRG, consisting of Viking Freight System,
Central Freight Lines, Spartan Express and Coles Express, posted revenues that
were approximately 8% below last year's second quarter. As a result of the
slowing
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economy, year over year revenue growth at the RRG is now estimated to be
somewhat less than originally anticipated. Roadway Global Air (RGA) and ROLS
continued to post strong revenue gains.
Second quarter 1995 operating expenses increased $129.5 million or 13.3% over
comparable 1994 levels, while first half operating expenses were up $209.8
million or 10.7% above 1994 levels. The increase in operating expenses for the
quarter was mostly attributable to Roadway Express, where meaningful comparison
to last year's quarter is significantly impacted by the Teamsters strike in
1994. RPS, RGA, and ROLS experienced increased operating expenses resulting from
higher business volumes. At Roadway Express, wages and benefits increased by
3.1% effective April 1, 1995, in accordance with the industry labor contract.
Purchased transportation has risen due to increased use of rail by Roadway
Express, and increased business volumes at RPS and RGA.
The net loss for the second quarter was $.05 per share compared to a $.55 per
share loss in 1994, while the first half's net income of $.10 per share
compared to a $.15 per share loss a year ago. A significant component of these
poor results was a $.22 per share loss at Roadway Express during the quarter.
Earnings from the registrant's other operating units in the aggregate were
below last year, but were only slightly behind plan. RGA lost $.40 per share
in the quarter compared with a $.38 per share loss in the first quarter and a
loss of $.36 per share in the second quarter last year. The full year loss for
RGA is still expected to be in the range of $1.30 to $1.50 per share, as
estimated in January.
Roadway Express has implemented cost reductions, including the streamlining of
its field management organization, which eliminated six of 25 geographic
districts and one of five divisions, effective July 1. Salaries have been
frozen, staff reductions have been made and discretionary expenses curtailed,
while sales efforts are being fully supported. The actions taken, both short
term and long term, to restore profitability at Roadway Express are the most
stringent in at least 30 years. Costs for the realignment at Roadway Express,
(along with the consolidation of Spartan Express' southern and central
divisions into a single headquarters staff), totaled $.03 per share and are
included in the second quarter results. Intense cost containment efforts will
continue at all of our operating companies for the remainder of 1995. For the
second half, unless freight rates continue to decline precipitously, Roadway
Express should be able to operate profitably, permitting the registrant to at
least earn $1.40 per share for 1995.
Borrowings under financing agreements amounted to $141.6 million at the end of
the second quarter. It is anticipated that borrowings will continue to increase
through the end of the third quarter, with some decline in the fourth quarter.
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.
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PART II - OTHER INFORMATION
Item 4. Results of Votes of Security Holders
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On May 10, 1995, the registrant held its Annual Meeting of Shareholders at
which the following directors were elected, receiving the number of votes set
forth beside their names.
George B. Beitzel 32,766,534 G. James Roush 32,758,716
Richard A. Chenoweth 32,759,122 Daniel J. Sullivan 32,750,732
Joseph M. Clapp 32,757,459 William Sword 32,749,056
Norman C. Harbert 32,762,795 H. Mitchell Watson, Jr. 32,749,483
Charles R. Longsworth 32,755,883 Sarah Roush Werner 32,760,556
Robert E. Mercer 32,761,494
With respect to a shareholder proposal in favor of confidential voting,
5,615,842 votes were cast in favor of the proposal; 18,998,665 votes were cast
against such proposal; 6,952,531 votes abstained; and there were 1,459,200
broker non-votes.
With respect to a shareholder proposal regarding executive compensation,
1,374,759 votes were cast in favor of the proposal; 23,121,209 votes were cast
against such proposal; 7,071,070 votes abstained; and there were 1,459,200
broker non-votes.
With respect to the ratification of Ernst & Young as independent auditors,
32,701,761 votes were cast in favor of the proposal; 235,053 votes were cast
against such proposal; and 89,424 votes abstained.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
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(10) Roadway Services, Inc. Directors' Deferred Fee Plan (as Amended and
Restated as of May 10, 1995)
(27) Financial Data Schedule
(b) Reports on Form 8-K Filed During the Second Quarter of 1995--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: July 19, 1995 By D. A. Wilson
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D. A. Wilson, Senior Vice
President- Finance and
Planning, Secretary and Chief
Financial Officer
Date: July 19, 1995 By R. E. Griggs
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Roy E. Griggs,
Vice President and Controller
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