1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[x] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (fee required)
For the fiscal year ended December 31, 1996
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OR
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
For the transition period from ________________ to _______________
Commission file number 0-10716
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CALIBER SYSTEM, 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)
3925 Embassy Parkway, P.O. Box 5459, Akron, Ohio 44334-0459
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (330) 665-5646
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
None on which registered
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock-without par value
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(Title of Class)
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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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 1997 was $630,986,000.
The number of shares of the issuer's common stock outstanding as of February
28,1997 was 38,916,795.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's proxy statement for the annual meeting of
shareholders to be held on May 14, 1997 are incorporated by reference into Part
III.
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PART I
Item 1. - Business.
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Caliber System, Inc., an Ohio corporation, is engaged through its
subsidiaries in a broad range of transportation, logistics, and related
information services. The Company's operations include a small-package carrier,
a superregional freight carrier, a surface expedited carrier and a contract
logistics provider. These operations provide services and solutions to meet
customer requirements based upon shipment size, distance, time in transit, and
distribution needs. The Company conducts these operations principally through
RPS, Inc. (RPS), Viking Freight, Inc. (Viking), Roberts Express, Inc. (Roberts)
and Caliber Logistics, Inc. (Logistics).
RPS, Caliber's largest operating unit, is the second-largest ground
small package carrier in the United States. RPS serves customers in the
small-package market in North America and between North America and Europe,
focusing primarily on the business-to-business delivery of packages weighing up
to 150 pounds. RPS provides ground service to 100% of the United States
population and overnight service to 45% of the United States population. Through
its subsidiary, RPS, Ltd., service is provided to 100% of the Canadian
population. Additionally, RPS provides service to Mexico through an arrangement
with another transportation provider. RPS service extends to 27 European
countries through an alliance with General Parcel Logistics, GmbH. RPS also
offers service offshore to Puerto Rico, Alaska and Hawaii via a ground/air
network operation in cooperation with other transportation providers. RPS
provides other specialized transportation services to meet specific customer
requirements in the small-package market. RPS conducts its operations primarily
with 8,300 owner-operated vehicles and, in addition, owns over 8,100 trailers.
Competition for high volume, profitable shipping business focuses largely on
providing economical pricing and dependable service.
In 1995, Caliber commenced the consolidation of its four regional
freight carriers into Viking Freight, Inc. to form a superregional freight
carrier. In March 1997, Caliber announced that it was restructuring Viking by
terminating operations at its former Coles Express unit in the Northeast and
Spartan Express in the Southeast and Midwest and seeking to sell its
former Central Freight Lines unit in the Southwest. The restructured Viking will
provide next- and second-day less-than-truckload service through 43 terminals
and more than 4,000 employees serving 12 western states. (See Item 7. --
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".)
Roberts is the largest surface expedited carrier in North America,
providing time definite shipping and transportation for emergency shipments.
Roberts also provides similar service in Europe. Utilizing over 2,200 vehicles,
Roberts delivers shipments within 15 minutes of the promised delivery time in
96% of all cases. Roberts also offers White Glove Services, requiring specially
equipped vehicles and highly trained teams to handle such items as electronics,
medical equipment, radioactive materials, pressurized gases, trade show exhibits
and works of art. Roberts transports freight by utilizing independent
owner-operators. Roberts competes principally with companies that specialize in
transporting time definite shipments. Competition is based primarily on meeting
exacting service requirements. Roberts competes by providing extremely reliable,
fast delivery of shipments at competitive prices.
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Caliber Logistics is a contract logistics provider with expertise across
the entire supply chain, from inbound materials management through distribution
to the final consumer. Services provided include transportation management,
dedicated transportation, warehouse operations and management, just-in-time
delivery programs (including light assembly and manufacturing), customer order
processing, returnable container management, freight bill payment and auditing
and other management services outsourced by its customers. Competition for the
provision of logistics services is vigorous.
The operations of the Company's subsidiaries in interstate commerce are
currently regulated by the Department of Transportation ("DOT") and Federal
Highway Administration, which retain limited oversight authority over motor
carriers. Federal legislation has been enacted that preempted regulation by the
states of rates and service in intrastate freight transportation.
The Company's subsidiaries, like other interstate motor carriers, are
subject to certain DOT safety requirements governing interstate operations. In
addition, vehicle weight and dimensions remain subject to both Federal and state
regulations.
The Company and its subsidiaries are subject to federal, state and local
environmental laws and regulations relating to, among other things, contingency
planning for spills of petroleum products and the disposal of waste oil.
Additionally, the Company and its subsidiaries are subject to significant
regulations dealing with underground fuel storage tanks and has environmental
management programs to conform with these regulations. The Company's
subsidiaries store fuel for trucks and tractors in approximately 151 underground
tanks located in 23 states.
The transportation and logistics industry is affected directly by the
state of the overall economy. Seasonal fluctuations affect tonnage, revenues,
and earnings. Normally, the fall of each year is the busiest shipping period for
each of the Company's operating subsidiaries; the months of December and January
of each year are the slowest. Shipment levels, operating costs and earnings can
also be adversely affected by inclement weather.
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Item 2. - Properties.
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Caliber System, Inc.
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Corporate offices of the registrant and its information systems
subsidiary, Caliber Technology, Inc. are located in Akron, Ohio in leased
facilities.
RPS, Inc.
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As of December 31, 1996, RPS operated 370 facilities, including 25 hubs.
Fifty-seven of the facilities, 23 of which are hubs, are owned; and 313
facilities are leased, generally for terms of three years or less. Twelve of the
facilities are operated by RPS, Ltd., RPS' subsidiary operating in Canada. The
25 hub facilities are strategically located to cover the geographic area served
by RPS. These facilities, averaging 85,411 square feet, range in size from
24,000 to 185,000 square feet.
RPS' corporate offices and information and data centers are located in
the Pittsburgh, Pennsylvania area in an approximately 350,000 square foot
building owned by a subsidiary of RPS.
Viking Freight, Inc.
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Subsequent to the restructuring announced in March 1997, Viking will
operate 43 terminals. The company's general offices are located in leased
facilities in San Jose, California.
Roberts Express, Inc.
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Roberts' general offices are located in Akron, Ohio in owned facilities.
Roberts does not use terminal facilities in its business.
Caliber Logistics, Inc.
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Caliber Logistics' general offices are located in Hudson, Ohio in
leased facilities.
Item 3. - Legal Proceedings.
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The registrant is involved in various lawsuits arising in the ordinary
course of its business. In the opinion of management, the outcome of these
matters will not have a material adverse effect on the financial condition or
results of operations of the registrant.
Item 4. - Submission of Matters to a Vote of Security Holders.
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None.
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Executive Officers of the Registrant.
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Name and Age Present Positions and Recent Business Experience
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Donald C. Brown Vice President-Human Resources since January 1996;
previously he served as Vice President-Corporate
Support Services during 1995; Assistant Controller
from January 1992 through 1994; and Assistant to
Vice President and Controller from December 1990
through 1991. Age 41.
John P. Chandler Vice President and Treasurer since January 1996;
previously he served as Vice
President-Administration and Treasurer from
January 1994 through 1995; Vice
President-Administration during 1993; and
President of RPS from July 1990 to December 1992.
Age 53.
Kathryn W. Dindo Vice President and Controller since January 1996;
previously she served as Assistant Controller from
August 1994 through 1995. Prior to employment with
the registrant, she was a partner with Ernst &
Young LLP since 1985. Age 47.
John E. Lynch, Jr. Vice President, General Counsel and Secretary
since July 1996. Prior to employment with the
registrant, he was a partner with Squire,
Sanders and Dempsey. Age 44.
Robert J. Quinn Vice President-Corporate Planning since April 1996.
Previously he served as Special Assistant to the
Chairman from July 1995 through April 1996 and was
on special assignment in Boston and Europe from
July 1993 to June 1995. Prior to employment with
the registrant, he was a principal at Mercer
Management Consulting. Age 42.
Daniel J. Sullivan Chairman since October 1995; President and Chief
Executive Officer since August 1995; President and
Chief Operating Officer from January 1994 to
August 1995; Senior Vice President and
President-National Carrier Group during 1993; Vice
President and President-National Carrier Group
during 1992; Vice President and Group Executive
from July 1990 through 1991 and President of RPS
through June 1990. Age 50.
Louis J. Valerio Senior Vice President-Finance and Chief
Financial Officer since October 1996. Prior to
employment with the registrant, he was the
Corporate Controller at Westinghouse Corporation
during 1995, and from
1988 to 1994 he was employed by
United Airlines in various officer
level positions. In his last
position at United, he served as
Senior Vice
President-Finance/Corporate Finance.
Age 47.
Officers are elected to serve on a calendar year basis except for the Chairman,
President, Treasurer and Secretary, who are elected for an annual term following
the annual meeting of shareholders. No family relationships exist between any of
the executive officers named above or between any executive officer and any
director of the registrant.
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PART II
Item 5. - Market for Registrant's Common Equity and Related Stockholder Matters.
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Caliber System, Inc. common stock began trading on the New York Stock Exchange
under the symbol "CBB" on November 29, 1995. The company is included in the Dow
Jones Transportation Average, a major barometer of the U.S. transportation
industry.
The number of holders of record of the company's common stock at December 31,
1996 was approximately 7,964. The high and low prices at which Caliber System,
Inc. common stock traded for each calendar quarter in 1996 and 1995 are shown
below.
Dividend Declared
Price Range Per Share
1996 High 1996 Low 1995 High 1995 Low 1996 1995
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March 31 $ 50 1/4 $ 35 7/16 $ 56 3/4 $ 47 3/4 $ 0.18 $ 0.35
June 30 43 7/8 33 3/4 49 1/2 42 0.18 0.35
September 30 34 1/4 15 5/8 56 1/2 45 1/2 0.18 0.35
December 31 21 1/8 15 7/8 53 1/2 42 11/16 0.18 0.35
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$ 0.72 $ 1.40
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The 1995 high and low stock prices have not been adjusted to reflect the
spin-off of Roadway Express.
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ITEM 6. - SELECTED FINANCIAL DATA.
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Amounts in thousands, except per share data
Years Ended December 31,
1996 1995 1994 1993 1992
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REVENUE $ 2,718,142 $ 2,448,172 $ 2,327,523 $ 1,822,490 $ 1,391,898
OPERATING EXPENSES
Salaries, wages and benefits 1,054,785 937,972 876,694 677,226 473,711
Purchased transportation 792,153 694,275 700,016 527,118 432,634
Operating supplies and expenses 574,653 428,980 362,219 288,089 217,626
Operating taxes and licenses 55,083 48,282 43,818 36,624 23,330
Insurance and claims 59,757 50,552 59,644 44,685 31,667
Provision for depreciation 148,715 132,383 120,029 97,565 74,599
Impairment charge(1) 225,036 -- -- -- --
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TOTAL OPERATING EXPENSES 2,910,182 2,292,444 2,162,420 1,671,307 1,253,567
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OPERATING INCOME (LOSS) (192,040) 155,728 165,103 151,183 138,331
Other income (expense), net (10,316) 6,407 6,377 10,486 11,886
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INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (202,356) 162,135 171,480 161,669 150,217
Income tax provision (benefit) (37,233) 69,726 72,943 70,064 63,722
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INCOME (LOSS) FROM CONTINUING OPERATIONS (165,123) 92,409 98,537 91,605 86,495
DISCONTINUED OPERATIONS(2)
Income (loss) from discontinued operations,
net of income taxes -- (69,950) (78,977) 27,730 60,912
Loss on discontinuance, net of income taxes -- (49,664) -- -- --
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INCOME (LOSS) FROM DISCONTINUED OPERATIONS -- (119,614) (78,977) 27,730 60,912
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES (165,123) (27,205) 19,560 119,335 147,407
CUMULATIVE EFFECT OF ACCOUNTING CHANGES(3)
Continuing operations -- -- -- (3,440) --
Discontinued operations -- -- -- (14,691) --
----------- ----------- ----------- ----------- -----------
-- -- -- (18,131) --
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NET INCOME (LOSS) $ (165,123) $ (27,205) $ 19,560 $ 101,204 $ 147,407
=========== =========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE(4)
Income (loss) from continuing operations $ (4.18) $ 2.34 $ 2.50 $ 2.32 $ 2.19
Discontinued operations:
Income (loss) from discontinued operations -- (1.77) (2.00) 0.70 1.54
Loss on discontinuance -- (1.26) -- -- --
----------- ----------- ----------- ----------- -----------
-- (3.03) (2.00) 0.70 1.54
Cumulative effect of accounting changes:
Continuing operations -- -- -- (0.09) --
Discontinued operations -- -- -- (0.37) --
----------- ----------- ----------- ----------- -----------
-- -- -- (0.46) --
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NET INCOME (LOSS) $ (4.18) $ (0.69) $ 0.50 $ 2.56 $ 3.73
=========== =========== =========== ----------- ===========
Cash dividends declared per share $ 0.72 $ 1.40 $ 1.40 $ 1.37 $ 1.27
Average number of shares of common stock outstanding 39,484 39,459 39,392 39,521 39,521
Total Assets $ 1,432,167 $ 1,389,270 $ 1,509,846 $ 1,466,509 $ 1,350,072
Long-Term Debt $ 200,000 $ -- $ -- $ -- $ --
Total Shareholders' Equity $ 538,647 $ 736,301 $ 1,015,394 $ 1,047,151 $ 1,021,360
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<FN>
Notes:
1) The company announced a major restructuring of the Viking operations on
March 27, 1997. Nonrecurring charges relating to the restructuring of
$225 million are included in 1996 operating expenses. See Note K to the
consolidated financial statements.
2) Includes spin-off of Roadway Express, Inc. and the exit from the air
freight business served by Roadway Global Air, Inc. as described in Note
I to the consolidated financial statements.
3) Changes in methods of accounting for income taxes and retiree medical
benefits in 1993.
4) Earnings per share are computed on the average number of shares of
common stock outstanding during each year.
ACQUISITIONS
- - June 1992 - Codes Express acquired
- - April 1993 - Central Freight Lines acquired
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Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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On December 14, 1995, the shareholders of Caliber System, Inc.
(formerly Roadway Services, Inc.) approved the spin-off to the company's
shareholders of approximately 95% of the stock of its wholly-owned subsidiary,
Roadway Express (REX), the company's national long haul, less-than-truckload
(LTL) motor freight carrier. In addition, during the last quarter of 1995, the
company exited the air freight business served by Roadway Global Air (RGA), a
wholly-owned subsidiary. Therefore, this discussion and analysis does not
include the operations of REX and RGA.
RESULTS OF OPERATIONS - 1996 VS. 1995
Consolidated revenue in 1996 amounted to $2.72 billion, an increase of
11% over 1995 revenue of $2.45 billion. All operating units experienced revenue
growth over 1995 levels.
Revenue for 1996 at RPS, the company's small package carrier, increased
to $1.34 billion or 4% over 1995 revenue of $1.29 billion. The increase was
primarily attributable to higher package volume from the growth of its Overnight
Ground(sm) product where capacity was added in several next day markets
increasing service during 1996 to 45% of the nation's population. A rate
increase implemented in February 1996 also marginally contributed to
the year over year revenue improvement as an intensely competitive pricing
environment resulted in significant rate erosion during the year. RPS revenue
for the fourth quarter grew 6.2% over 1995 levels, the highest quarterly year
over year growth in 1996. Increased volume in the fourth quarter was positively
affected by RPS' better than 95% on-time service. However, modest retail sales
in the non-durable goods sectors, which represent over 50% of RPS' volume,
continued to affect revenue growth.
Revenue at Viking Freight (Viking), the company's superregional
carrier, amounted to $965.8 million for 1996, an increase of 15.8% over 1995
revenues of $834.1 million. Revenues increased at Viking due to volume growth
but were negatively impacted by continued discounting within the industry.
Viking's revenue growth for the fourth quarter slowed to 13.6% over fourth
quarter 1995 levels reflecting the impact of Viking's revenue yield improvement
strategy to reduce unprofitable business.
Growth at Caliber Logistics (Logistics) contributed significantly to
the overall increase in revenue during 1996. 1996 net revenues at Logistics,
which are included in consolidated revenues, increased 48.7% over 1995 while
gross revenues were $506 million, an increase of 59% over 1995 levels. Roberts
Express (Roberts), the company's expedited carrier, experienced a 6% growth in
year over year revenues. Each of these units generated approximately $200
million of net revenue.
Consolidated operating expenses, excluding the impairment charge for
Viking discussed below, increased $392.7 million or 17.1% over 1995 levels. This
change was primarily due to increases at Viking of $228 million or 26.3% over
1995 levels, and higher fixed costs at RPS resulting from the unit's continuing
expansion and investment in technology and equipment. In addition, operating
expenses increased due to higher business levels at all units in 1996 over 1995.
During 1996, Viking experienced significant one-time costs and operating
inefficiencies associated with the consolidation of the company's regional
carriers. Tonnage growth beyond planned levels generated additional expenses
because of lower productivity, excessive overtime, hiring and training of new
employees, equipment rentals and purchased transportation. Operating expenses at
Viking were also negatively affected by higher than expected provisions for
uncollectible accounts receivable. Increased fuel prices also contributed to the
overall increase in operating expenses.
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A major restructuring of the Viking operations was announced on March
27, 1997. As a result of this restructuring, the company recorded a non-cash
$225 million asset impairment charge ($175 million net of tax or $4.43 per
share) related to the write-down of goodwill of $82 million and property and
equipment of $143 million which has been reflected in the 1996 operating
results. Additional restructuring charges, which include employee severance and
other restructuring costs, will be included in the company's operating results
for the first quarter of 1997.
The consolidated operating loss for 1996 was $192 million, including
the impairment charge for Viking; operating income was $33 million excluding
this charge. 1996 operating income, excluding the Viking impairment charge,
decreased $122.7 million from 1995 resulting in a 1996 operating margin of 1.2%
compared to 6.4% in 1995. Overall operating results were negatively affected by
the impairment charge at Viking, inefficiencies and costs related to Viking's
consolidation process, higher fixed costs at RPS, aggressive discounting and
overcapacity in the freight industry. Operating income at RPS amounted to $119
million for 1996, a decline of $42 million from 1995 levels. Viking's operating
loss for 1996 was $352.8 million including the impairment charge and $127.8
million excluding this charge. This compares to a loss of $31.5 million last
year at Viking. Roberts continues to maintain excellent margins. Logistics'
margins improved over 1995 levels. Operating results were positively impacted by
an overall reduction in pension expense of approximately $13 million primarily
due to a higher level of pension fund assets coupled with an increase in the
expected long-term rate of return on plan assets.
Increased interest expense of $10.6 million reflecting higher borrowing
levels and the loss of interest income from discontinued operations of $8.2
million were the principal factors impacting other income (expense), net in
1996.
The income tax benefit was 18.4% of loss before income taxes. This rate
differed from the U.S. federal statutory rate due primarily to the effects of
the write off of goodwill, state income taxes and non-deductible operating
costs.
The loss per share from continuing operations amounted to $4.18 in 1996
compared to income per share from continuing operations of $2.34 in 1995.
Excluding the Viking impairment charge, income per share from continuing
operations would have been $0.25 in 1996.
RESULTS OF OPERATIONS - 1995 VS. 1994
Consolidated revenue in 1995 amounted to a record $2.45 billion, an
increase of $120.6 million or 5.2% over 1994, when revenues were positively
impacted by the 24-day strike by the Teamsters against most unionized LTL
carriers. Revenue increased in 1995 at all operating units except Roberts. The
largest share of the revenue growth was attributable to RPS which reported
revenue of $1.29 billion, an increase of $77.2 million or 6.3% over 1994. This
increase was a result of growth in package volume and the effects of a rate
increase implemented in early 1995. Caliber Logistics contributed significantly
to the revenue increase due to on-going expansion of the business, reporting a
45.9% increase in revenue over 1994. Revenues at Viking Freight (formerly the
Roadway Regional Group) amounted to $834.1 million or an increase of 3.4% over
1994. This increase was experienced despite a decline in revenue at Central
Freight Lines (Central) of 8.6% due to the impact of intrastate deregulation in
Texas. Overall, revenue fell short of plan at Viking as a result of the slowing
economy and the aggressive discounting and overcapacity being experienced in the
industry. Roberts experienced a revenue decline of 13.2% due principally to the
sluggish economy.
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Operating expenses increased $130 million or 6% over 1994. This
increase resulted primarily from higher business volumes at all business units
except Roberts, with RPS and Viking reporting operating expense increases of
5.2% and 8.6%, respectively. Operating supplies and expenses at Viking were
impacted by costs of $6.6 million associated with the consolidation of the
company's regional carriers and the write-off of $3.1 million of goodwill for
Coles Express as a result of the adoption of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." As planned, Viking also incurred
additional costs related to PRISM, a major reengineering and information
technology project that was launched in 1994. Depreciation expense during 1995
at the company's information and technology unit was $6.7 million lower than
1994 due to certain information processing equipment becoming fully depreciated
in 1994. Insurance and claims related expenses declined $9.1 million in 1995
primarily as a result of on-going claims management and safety-related programs.
Higher than normal operating expenses were incurred in 1994 which included the
effect of a settlement with the IRS as described in Note J to the consolidated
financial statements. The net after-tax cost of the settlement amounted to $13.7
million or $.35 per share in 1994. Also included in 1994 was a charge to
operating expenses of $5.8 million related to federal legislation that required
the write-off of the remaining asset values of intrastate operating rights.
Operating income amounted to $155.7 million for 1995 compared to $165.1
million in 1994. Overall operating results were negatively impacted by the
aggressive discounting of freight rates and the effects of the sluggish economy.
The resulting lower-than-planned volumes and higher operating expenses
negatively impacted margins in 1995, which declined from 7.1% in 1994 to 6.4% in
1995. RPS was negatively impacted by the economy, particularly in the retail
industry, which affected its rate of growth. Despite stringent cost controls,
operating income was 2% below 1994 before the charge for the IRS settlement
mentioned above. Viking's margins were impacted by the consolidation costs and
the write-off of goodwill, previously mentioned, along with PRISM project costs,
resulting in an operating loss for Viking in 1995 of $31.5 million compared to
an operating profit in 1994 of $9.5 million. Caliber Logistics experienced
improved margins over the prior year. Effective cost controls at Roberts allowed
it to maintain its margins despite a decline in volume.
Other income, net, includes increased interest expense of $3.8 million
as a result of borrowings under new debt agreements put into place during 1995.
Also included is interest income on intercompany advances to discontinued
operations of $8.2 million in 1995 and $3.9 million in 1994 that will not
continue in future years.
Income taxes were 43% of income before income taxes. This rate exceeded
the U.S. federal statutory rate due primarily to state income taxes and
non-deductible operating costs.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow provided by operating activities of $102.3 million was $215.2
million less than net property additions of $282.7 million and dividends of
$34.8 million. The shortfall was funded by borrowings. In August 1996, the
company sold $200 million of 7.8% notes due August 1, 2006. The company is a
party to bank credit facilities providing for up to $300 million of term loans
and up to $25 million of borrowings under revolving credit. Both agreements are
unsecured and interest is based on variable rates. Outstanding bank borrowings
amounted to $230 million at year end with $95 million available for future
borrowings subject to the limitations of the loan covenants. The bank loan
agreements contain covenants requiring the company to maintain a minimum level
of consolidated net worth and limiting, among other things, the ratio of debt to
earnings, the incurrence of secured debt and sales of certain of the company's
assets.
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1997 capital expenditures are currently estimated to approximate $140
million of which 60% is expected to be for technology and highly automated
freight handling equipment, 30% for real estate and 10% for revenue and support
equipment. The company anticipates that through available borrowing capacity and
cash flows from operations it will be able to fund short-term cash requirements
from the Viking restructuring, capital expenditures during 1997 and provide
adequate levels of working capital and funds for payment of dividends and
interest. The sale of Central and elimination of Viking's unprofitable
divisions are expected to have a positive effect on earnings and cash flows.
Net proceeds from the sale of Viking's assets, as a result of the restructuring,
will be used to reduce outstanding debt. To further lower debt, in March 1997
the Board of Directors reduced the regular quarterly dividend from $0.18 per
share to $0.10 per share payable August 1, 1997. The future amount of cash
dividends is subject to the discretion of the Board. Future dividend decisions
will be affected by a number of factors, including the company's future
operating results, financial conditions and other factors.
CURRENT TRENDS AND OUTLOOK
The transportation, intermodal and logistics marketplace continues to
experience rapid change in response to demands for quality and time-based
management. Discounting and the effects of overcapacity in the industry are
anticipated to continue throughout 1997 in many of the markets served by the
company's operations, and it is expected that industry margins will remain under
pressure. During 1997, the company's operating units will focus on their core
business segments while seeking to control headcount and other costs. At RPS, it
is anticipated that net rate levels will improve as a result of a rate increase
effective on February 3, 1997, although discounting will continue. RPS plans to
continue the expansion of next-day delivery service in 1997, with the continuing
objective of serving 95% of the U.S. population with next-day delivery service
by the year 2001. The restructured Viking will provide next- and second-day
less-than-truckload service through 43 terminals and more than 4,000 employees
serving 12 western states. Viking will continue to work with Caliber's other
operating units to offer integrated, customized solutions for customers who need
a comprehensive transportation and logistics program.
CERTAIN FORWARD-LOOKING STATEMENTS
This Form 10-K, including information under the captions "Liquidity and
Capital Resources" and "Current Trends and Outlook" contains forward-looking
statements that are based on current expectations and are subject to a number of
risks and uncertainties. Actual results could differ materially from current
expectations due to a number of factors, including general economic conditions;
competitive initiatives and pricing pressures; availability and cost of capital;
shifts in market demand; weather conditions; the performance and needs of
industries serviced by the company's businesses; actual future costs and
employee wages and benefits; actual costs of continuing investments in
technology; the timing and amount of capital expenditures; and actual costs and
effects of the restructuring of the business served by Viking.
Item 8. - Financial Statements and Supplementary Data.
- ------------------------------------------------------
The response to this Item is submitted in a separate section of this report.
Item 9. - Changes in and Disagreements with Accountants on Accounting and
- ----------------------------------------------------------------------------
Financial Disclosure.
---------------------
None.
-11-
12
PART III
Item 10. - Directors and Executive Officers of the Registrant.
- --------- ----------------------------------------------------
In response to the information called for by Item 401 of Regulation S-K
with respect to directors of the registrant, the material set forth under the
heading "Information About Nominees for Directors" in the registrant's proxy
statement for the annual meeting of shareholders to be held on May 14, 1997,
which will be filed pursuant to Regulation 14A with the Securities and Exchange
Commission, is incorporated herein by reference.
In response to the information called for by Item 401 of Regulation S-K
with respect to executive officers of the registrant, the material set forth
under the heading "Executive Officers of the Registrant" in Part I of this Form
10-K Annual Report for the year ended December 31, 1996, is incorporated herein
by reference.
Item 11. - Executive Compensation.
- --------- ------------------------
In response to the information called for by this Item with respect to
directors of the registrant, the material set forth under the heading "Director
Compensation" in the registrant's proxy statement for the annual meeting of
shareholders to be held on May 14, 1997, which will be filed pursuant to
Regulation 14A with the Securities and Exchange Commission, is incorporated
herein by reference.
In response to the information called for by this Item with respect to
executive officers of the registrant, the material set forth under the heading
"Executive Compensation and Shareholdings by Executive Officers" in the
registrant's proxy statement for the annual meeting of shareholders to be held
on May 14, 1997, which will be filed pursuant to Regulation 14A with the
Securities and Exchange Commission, is incorporated herein by reference.
Item 12. - Security Ownership of Certain Beneficial Owners and Management.
- --------- ----------------------------------------------------------------
In response to the information called for by this Item, the material set
forth under the heading "Principal Holders of Company Common Stock on February
28, 1997," including the notes thereto; the material set forth under the heading
"Information About Nominees for Directors," including the notes thereto; the
material set forth under the heading "Ownership of Company Common Stock by
Management," including the notes thereto; and the material set forth under
"Section 16(a) Beneficial Ownership Reporting Compliance" in the registrant's
proxy statement for the annual meeting of shareholders to be held on May 14,
1997, which will be filed pursuant to Regulation 14A with the Securities and
Exchange Commission, is incorporated herein by reference.
-12-
13
Item 13. - Certain Relationships and Related Transactions.
- --------- ------------------------------------------------
None.
PART IV
Item 14. - Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) and (2) List of Financial Statements and Financial Statement
Schedules--The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) Exhibit Index--The response to this portion of Item 14 is
submitted as a separate section of this report.
(b) Reports on Form 8-K Filed in the Fourth Quarter of 1996:
- A report on Form 8-K as of September 23, 1996 was filed
under Item 5 announcing Third Quarter 1996 results.
- A report on Form 8-K as of October 14, 1996 was filed under
Item 5 announcing the election of Louis J. Valerio, Senior
Vice President-Finance and Chief Financial Officer.
- A report on Form 8-K as of November 13, 1996 was filed under
Item 5 announcing the declaration of dividend by the Board
of Directors and several management changes at the
registrant's subsidiary, Viking Freight, Inc.
- A report on Form 8-K as of December 19, 1996 was filed under
Item 5 announcing the election of Rodger G. Marticke as the
President and Chief Executive Officer of Viking Freight,
Inc. replacing Ronald G. Pelzel who will retire at year end;
the election of Thomas I. Escott as President of Caliber
Logistics, Inc. replacing Rodger G. Marticke; and
operational changes at Viking Freight, Inc. which would
result in the closing of 30 terminals and elimination of
1,500 positions.
(c) Exhibits--The response to this portion of Item 14 is
submitted as a separate section of this report.
(d) Financial Statement Schedules--The response to this portion
of Item 14 is submitted as a separate section of this
report.
-13-
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CALIBER SYSTEM, INC.
Date March 27, 1997 By Daniel J. Sullivan
--------------- ------------------------------------
Daniel J. Sullivan, Chairman,
President and Chief Executive Officer
Date March 27, 1997 By L.J. Valerio
--------------- --------------------------------------
L. J. Valerio, Senior Vice President-
Finance and Chief Financial Officer
Date March 27, 1997 By Kathryn W. Dindo
--------------- ---------------------------------------
Kathryn W. Dindo,
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
CALIBER SYSTEM, INC.
Date March 27, 1997 By G. B. Beitzel
--------------- ---------------------------------------
G. B. Beitzel, Director
Date March 27, 1997 By R. A. Chenoweth
--------------- ---------------------------------------
R. A. Chenoweth, Director
Date March 27, 1997 By Charles R. Longsworth
--------------- ---------------------------------------
Charles R. Longsworth, Director
Date March 27, 1997 By Daniel J. Sullivan
--------------- ---------------------------------------
Daniel J. Sullivan, Director
Date March 27, 1997 By H. Mitchell Watson, Jr.
--------------- ---------------------------------------
H. Mitchell Watson, Jr., Director
-14-
15
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a) (1) AND (2), AND 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1996
CALIBER SYSTEM, INC.
AKRON, OHIO
-15-
16
FORM 10-K--ITEM 14(a) (1) AND (2)
CALIBER SYSTEM, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements of Caliber System, Inc. and
subsidiaries are included in Item 8:
Report of Independent Auditors
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Income - Years ended December 31, 1996,
1995, and 1994
Consolidated Statements of Cash Flows - Years ended December 31, 1996,
1995, and 1994
Consolidated Statements of Shareholder's Equity - Years ended December
31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements - December 31, 1996
Summary of Quarterly Results of Operations - Years ended December 31,
1996 and 1995
The following consolidated financial statement schedule of Caliber System, Inc.
and subsidiaries is included in Item 14(d):
Schedule II-Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
-16-
17
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Caliber System, Inc.
We have audited the accompanying consolidated balance sheets of Caliber System,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the Index at Item 14 (a).
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Caliber System,
Inc. and subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
Akron, Ohio ERNST & YOUNG LLP
January 23, 1997,
except for Note K, as to which the date is
March 27, 1997
-17-
18
CONSOLIDATED BALANCE SHEETS
CALIBER SYSTEM, INC.
ASSETS DECEMBER 31
1996 1995
--------- --------
(dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 38,829 $ 34,908
Accounts receivable, net of allowances
of $32,000 in 1996 and $13,000 in 1995 365,033 273,124
Prepaid expenses and supplies 72,813 66,630
Deferred income taxes 47,801 27,562
---------- ----------
TOTAL CURRENT ASSETS 524,476 402,224
PROPERTY AND EQUIPMENT, NET 848,319 857,347
Cost in excess of net assets of businesses acquired, net of amortization 5,015 89,761
Other assets 54,357 39,938
---------- ----------
TOTAL ASSETS $1,432,167 $1,389,270
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
DECEMBER 31
1996 1995
--------- --------
(dollars in thousands)
CURRENT LIABILITIES
Short-term debt $230,000 $197,500
Accounts payable 262,313 219,406
Salaries and wages 80,259 74,790
Self-insurance accruals 50,439 49,992
Dividend payable 7,030 13,671
---------- ----------
TOTAL CURRENT LIABILITIES 630,041 555,359
LONG-TERM LIABILITIES
Long-term debt 200,000 --
Self-insurance accruals 40,809 39,832
Deferred income taxes 22,670 57,778
---------- ----------
TOTAL LONG-TERM LIABILITIES 263,479 97,610
SHAREHOLDERS' EQUITY
Serial preferred stock - without par value:
Authorized - 40,000,000 shares; Issued - none -- --
Common stock - without par value:
Authorized - 200,000,000 shares; Issued - 40,896,414,shares 39,898 39,898
Additional capital 50,735 51,322
Retained earnings 503,496 696,803
---------- ----------
594,129 788,023
Treasury stock, at cost
(1996 - 1,605,000 shares, 1995 - 1,394,000 shares) 55,482 51,722
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 538,647 736,301
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,432,167 $1,389,270
========== ==========
See notes to consolidated financial statements.
-18-
19
CONSOLIDATED STATEMENTS OF INCOME
CALIBER SYSTEM, INC.
YEARS ENDED DECEMBER 31
1996 1995 1994
----------- ----------- -----------
(dollars in thousands, except per share data)
REVENUE $ 2,718,142 $ 2,448,172 $ 2,327,523
OPERATING EXPENSES
Salaries, wages and benefits 1,054,785 937,972 876,694
Purchased transportation 792,153 694,275 700,016
Operating supplies and expenses 574,653 428,980 362,219
Operating taxes and licenses 55,083 48,282 43,818
Insurance and claims 59,757 50,552 59,644
Provision for depreciation 148,715 132,383 120,029
Impairment charge 225,036 -- --
----------- ----------- -----------
TOTAL OPERATING EXPENSES 2,910,182 2,292,444 2,162,420
----------- ----------- -----------
OPERATING INCOME (LOSS) (192,040) 155,728 165,103
Other income (expense), net (10,316) 6,407 6,377
----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (202,356) 162,135 171,480
Provision (benefit) for income taxes (37,233) 69,726 72,943
----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (165,123) 92,409 98,537
DISCONTINUED OPERATIONS
Loss from discontinued operations, net of income taxes -- (69,950) (78,977)
Loss on discontinuance, net of income taxes -- (49,664) --
----------- ----------- -----------
LOSS FROM DISCONTINUED OPERATIONS -- (119,614) (78,977)
----------- ----------- -----------
NET INCOME (LOSS) $ (165,123) $ (27,205) $ 19,560
=========== =========== ===========
EARNINGS (LOSS) PER SHARE
Income (loss) from continuing operations $ (4.18) $ 2.34 $ 2.50
Discontinued operations:
Loss from discontinued operations -- (1.77) (2.00)
Loss on discontinuance -- (1.26) --
----------- ----------- -----------
-- (3.03) (2.00)
----------- ----------- -----------
NET INCOME (LOSS) $ (4.18) $ (0.69) $ 0.50
=========== =========== ===========
See notes to consolidated financial statements.
-19-
20
CONSOLIDATED STATEMENTS OF CASH FLOWS
CALIBER SYSTEM, INC.
YEARS ENDED DECEMBER 31
1996 1995 1994
-------- -------- --------
(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from continuing operations $(165,123) $ 92,409 $ 98,537
Adjustments to reconcile income (loss) from continuing operations to net cash
provided by operating activities:
Depreciation and amortization 151,425 138,342 122,859
Deferred taxes (55,347) 7,866 (14,288)
Impairment charge 225,036 -- --
Changes in operating assets and liabilities:
Accounts receivable (91,909) (14,093) (56,850)
Accounts payable and accrued items 48,823 7,465 111,993
Other assets and liabilities (10,643) 7,607 20,146
-------- -------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 102,262 239,596 282,397
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (292,387) (288,134) (226,559)
Sales of property and equipment 9,700 4,472 4,185
Net advances to discontinued operations (2,527) (60,000) (57,000)
-------- -------- ---------
NET CASH USED IN INVESTING ACTIVITIES (285,214) (343,662) (279,374)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (34,825) (54,688) (54,613)
Dividends received from discontinued operations -- 7,500 12,000
Increase in short-term debt, net 32,500 197,500 --
Proceeds from issuance of long-term debt 200,000 -- --
-------- -------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 197,675 150,312 (42,613)
-------- -------- ---------
CASH FLOWS PROVIDED BY (USED IN) CONTINUING OPERATIONS 14,723 46,246 (39,590)
CASH FLOWS USED IN DISCONTINUED OPERATIONS (10,802) (26,118) (40,764)
-------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,921 20,128 (80,354)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 34,908 14,780 95,134
-------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 38,829 $ 34,908 $ 14,780
======== ======== =========
See notes to consolidated financial statements.
-20-
21
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
CALIBER SYSTEM, INC.
COMMON STOCK TREASURY STOCK TOTAL
---------------- ADDITIONAL RETAINED ----------------- SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT EQUITY
------ ------ ---------- -------- ------ ------ ------------
(amounts in thousands)
Balance at January 1, 1994 40,896 $39,898 $ 50,446 $ 1,013,519 1,527 $(56,712) $ 1,047,151
Net income -- -- -- 19,560 -- -- 19,560
Cash dividends declared ($1.40 per share) -- -- -- (54,620) -- -- (54,620)
Net shares issued in connection with
stock plans -- -- 707 -- (50) 2,596 3,303
------ ------- -------- ----------- ------ -------- ----------
Balance at December 31, 1994 40,896 39,898 51,153 978,459 1,477 (54,116) 1,015,394
Net loss -- -- -- (27,205) -- -- (27,205)
Cash dividends declared ($1.40 per share) -- -- -- (54,706) -- -- (54,706)
Distribution of Roadway Express -- -- -- (199,745) -- -- (199,745)
Net shares issued in connection with
stock plans -- -- 169 -- (83) 2,394 2,563
------ ------- -------- ----------- ------ -------- ----------
Balance at December 31, 1995 40,896 39,898 51,322 696,803 1,394 (51,722) 736,301
Net loss -- -- -- (165,123) -- -- (165,123)
Cash dividends declared ($.72 per share) -- -- -- (28,184) -- -- (28,184)
Net shares repurchased in connection with
stock plans -- -- (587) -- 211 (3,760) (4,347)
------ ------- -------- ----------- ------ -------- ----------
Balance at December 31, 1996 40,896 $39,898 $ 50,735 $ 503,496 1,605 $(55,482) $ 538,647
====== ======= ======== =========== ====== ======== ==========
See notes to consolidated financial statements.
-21-
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Caliber System, Inc.
December 31, 1996
Effective January 2, 1996, the company spun-off its wholly-owned subsidiary,
Roadway Express, Inc. (REX) to the company's shareholders. Also, during 1995 the
company announced plans to exit the air freight business served by Roadway
Global Air, Inc. (RGA). REX and RGA have been reflected as discontinued
operations in the accompanying financial statements. Accordingly, unless
otherwise stated, the accompanying notes for all years presented exclude these
businesses.
NOTE A - ACCOUNTING POLICIES
Operations and Principles of Consolidation
- ------------------------------------------
The company's operations are exclusively in the transportation industry.
Operations, listed in relative significance based on consolidated revenues,
include a small-package carrier, a superregional freight carrier, a contract
logistics provider and a surface expedited carrier . The company serves
customers in most industries, with a concentration in the retail and
manufacturing industries. The consolidated financial statements include the
accounts and operations of the company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
- -------------------------
The company considers all highly liquid investments with a maturity of three
months or less, when purchased, to be cash equivalents.
Property and Equipment
- ----------------------
Depreciation of property and equipment is computed by the straight line method
based on the useful lives of the assets. Interest costs for the construction of
certain long-term assets are capitalized and amortized over the useful life of
the related asset. The company capitalized interest costs of $6.3 million during
1996 and $5.4 million in 1995. See Note K.
Cost in Excess of Net Assets of Businesses Acquired
- ---------------------------------------------------
These costs ($7.5 million) are being amortized on the straight line method over
a 40-year period from the respective acquisition dates of the acquired
businesses. The carrying value of cost in excess of net assets of businesses
acquired ("goodwill") is reviewed to determine if an impairment is suggested. If
this review indicates that goodwill may not be recoverable, the company's
carrying value of the goodwill will be reduced. See Note K.
Self-Insurance Accruals
- -----------------------
The company is self-insured up to certain levels for health care, workers'
compensation, property damage, public liability and cargo claims. Accruals are
estimated each year based on historical claim costs and include estimated
amounts for incurred but not reported claims. Expenses resulting from workers'
compensation and health care claims are included in salaries, wages and benefits
in the consolidated statement of income.
Revenue
- -------
The company recognizes revenue on the date freight is delivered.
Income Taxes
- ------------
Deferred income taxes are provided for temporary differences between the basis
of the company's assets and liabilities for financial reporting and income tax
purposes.
-22-
23
NOTE A - ACCOUNTING POLICIES, CONTINUED
Earnings Per Share
- ------------------
Earnings per share is computed on the average number of shares of common stock
outstanding during each year: 39,484,000 in 1996, 39,459,000 in 1995 and
39,392,000 in 1994.
Use of Estimates in the Financial Statements
- --------------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts. Although actual results could differ from these
estimates, significant adjustments to these estimates historically have not been
required.
Change in Accounting Principles
- -------------------------------
Effective January 1, 1996, the company adopted Statement of Financial Accounting
Standards No. (SFAS) 123, "Accounting for Stock-Based Compensation." Under SFAS
123, companies may elect to adopt the fair value method of accounting for
stock-based compensation or continue to use Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) to measure expense
associated with stock-based compensation. The company has elected to continue
to follow APB 25 which results in net income (loss) and earnings(loss) per
share that are not materially different from amounts determined using the fair
value method of SFAS 123.
During 1995, the company adopted the provisions of SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
This statement requires impairment losses to be recognized for long-lived assets
used in continuing operations when indicators of impairment are present and the
assets' carrying value is not anticipated to be recovered through future
operations or sale. The application of SFAS 121 resulted in a charge to 1996
operating results of $225 million ($175 million net of tax or $4.43 per share).
See Note K.
Reclassifications
- -----------------
Certain amounts presented in prior years' financial statements have been
reclassified to conform with the 1996 presentation.
NOTE B - FINANCING ARRANGEMENTS
In July 1996, the company filed a shelf registration statement to issue up to
$400 million in unsecured debt securities. These securities may be offered as a
separate series in amounts, at prices and on terms to be determined by market
conditions at the time of sale. Net proceeds from the sale of the securities may
be used for working capital and general corporate purposes.
During the third quarter of 1996, the company issued $200 million of unsecured
notes under this registration statement which are included in long-term debt.
The notes mature on August 1, 2006 and bear interest at 7.80%. Net proceeds
received from the issuance of these notes were used to temporarily reduce
outstanding borrowings on the company's short-term bank loans.
The notes contain restrictive covenants limiting the ability of the company and
its subsidiaries to incur liens on assets and enter into certain leasing
transactions.
-23-
24
NOTE B - FINANCING ARRANGEMENTS, CONTINUED
Short-term debt consisted of borrowings of $230 million and $185 million at
December 31, 1996 and 1995, respectively, under an unsecured $300 million Credit
Agreement with several banks which expires in March 1999. Borrowings also
consisted of $12.5 million in 1995 under an unsecured $25 million revolving bank
line of credit which expires in April 1998. Interest on outstanding borrowings
is based on various rates as defined in the agreements. These agreements contain
covenants requiring the company to maintain a minimum level of consolidated net
worth and limiting, among other things, the ratio of debt to earnings, the
incurrence of secured debt and sales of certain of the company's assets. The
weighted average interest rate on all short-term borrowings during 1996 was
5.76% and 6.44% in 1995. Total interest payments amounted to $13.5 million and
$8.5 million during 1996 and 1995, respectively.
The outstanding balance of long-term and short-term debt approximates fair value
at December 31, 1996 and 1995.
NOTE C - OTHER FINANCIAL DATA
Property and equipment (at cost) consists of the following:
1996 1995
---------- ----------
(dollars in thousands)
Land $ 103,331 $ 111,453
Structures 413,584 377,002
Equipment 1,052,097 986,479
---------- ----------
1,569,012 1,474,934
Less allowance for depreciation 720,693 617,587
---------- ----------
Total Property and Equipment $ 848,319 $ 857,347
========== ==========
Accounts payable consists of the following:
1996 1995
---------- ----------
(dollars in thousands)
Trade and other payables $ 207,079 $ 177,015
Drafts outstanding 39,595 27,854
Taxes, other than income 15,639 14,537
---------- ----------
Total Accounts Payable $ 262,313 $ 219,406
========== ==========
-24-
25
NOTE C - OTHER FINANCIAL DATA, CONTINUED
Other income (expense), net consists of the following:
Year Ended December 31
----------------------
1996 1995 1994
-------- -------- -------
(dollars in thousands)
Interest income $ 830 $ 982 $2,357
Interest income from discontinued operations -- 8,227 3,899
Interest expense (14,391) (3,800) --
Other, net 3,245 998 121
-------- ------- ------
Other Income (Expense), net $(10,316) $ 6,407 $6,377
======== ======= ======
Interest income from discontinued operations represented intercompany interest
charged to REX and RGA for borrowings directly attributable to these entities.
NOTE D - EMPLOYEE BENEFIT PLANS
Retirement Plans
- ----------------
The company has defined benefit pension plans covering certain employees. The
benefits are based on, among other things, years of service and average
compensation during employment with the company. The company's funding policy is
to contribute amounts to the plans sufficient to meet the minimum funding
requirements, plus such additional amounts the company may determine to be
appropriate.
The following table reconciles the funded status of the company's pension plans
to prepaid pension cost which is reflected in other assets in the consolidated
balance sheet.
1996 1995
--------- ---------
(dollars in thousands)
Actuarial Present Value of Benefit Obligations
Accumulated benefit obligation, including vested benefits of $182,190
in 1996 and $177,369 in 1995 $ 206,240 $ 201,995
========= =========
Projected benefit obligation for service rendered to date $ 239,499 $ 231,774
Plan assets at fair value, primarily listed stocks, bonds and U.S. government
securities 339,387 305,378
--------- ---------
Plan assets greater than projected benefit obligation 99,888 73,604
Unrecognized net gain (57,217) (46,019)
Unrecognized prior service cost 18,398 20,102
Unrecognized net asset at transition (16,864) (18,269)
--------- ---------
Prepaid Pension Cost $ 44,205 $ 29,418
========= =========
-25-
26
NOTE D - EMPLOYEE BENEFIT PLANS, CONTINUED
Net pension cost consists of the following:
1996 1995 1994
-------- -------- --------
(dollars in thousands)
Service cost of benefits earned during the year $ 13,952 $ 12,685 $ 11,845
Interest cost on projected benefit obligation 15,616 8,495 7,450
Actual return on plan assets (39,571) (10,615) (5,517)
Net amortization and deferral 10,985 3,367 274
-------- -------- --------
Net Pension Cost $ 982 $ 13,932 $ 14,052
======== ======== ========
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation were 7% and 4% in 1996 and 1995, respectively. The expected long-term
rate of return on assets was 8.75% in 1996 and 7.75% in 1995 and 1994. The
change in the expected long-term rate of return decreased pension cost in 1996
by approximately $3 million.
The company contributed $16.6 million in 1996, $14.6 million in 1995 and $14
million in 1994 to various employee defined contribution plans which invest
primarily in company stock. Annual contributions are related primarily to
employees' salaries and wages.
Postretirement Health Care Benefits
- -----------------------------------
The company provides health care benefits to certain retirees who contribute to
the costs of these benefits. The following table sets forth the amounts
reflected in long-term self-insurance accruals in the consolidated balance
sheet:
1996 1995
-------- ---------
(dollars in thousands)
Accumulated Postretirement Benefit Obligation
Retirees $ (4,917) $ (4,590)
Fully eligible active plan participants (3,791) (4,131)
Other active plan participants (7,237) (9,910)
-------- --------
(15,945) (18,631)
Unrecognized net gain (5,202) (1,545)
-------- --------
Accrued Postretirement Benefit Cost $(21,147) $(20,176)
======== ========
-26-
27
NOTE D - EMPLOYEE BENEFIT PLANS, CONTINUED
Net periodic postretirement benefit cost consists of the following:
1996 1995 1994
------- ------- ------
(dollars in thousands)
Service cost of benefits earned during the year $ 878 $ 1,523 $1,263
Interest cost on accumulated postretirement benefit
obligation 1,071 1,302 1,202
Net amortization and deferral (252) (22) 10
------- ------- ------
Net Postretirement Benefit Cost $ 1,697 $ 2,803 $2,475
======= ======= ======
At December 31, 1996, the assumed health care cost trend rate was 9.1% for 1997
and is assumed to decrease gradually to 5.5% by 2004 and remain at that level
thereafter. Increasing the assumed health care cost trend rates by one
percentage point in each year would not have a material effect. The weighted
average discount rate used in determining the actuarial present value of the
accumulated postretirement benefit obligation was 7% at December 31, 1996 and
1995.
NOTE E - INCOME TAXES
Significant components of the company's deferred tax liabilities and assets
consist of the following:
1996 1995
-------- --------
(dollars in thousands)
Deferred Tax Liabilities
Property & Equipment $19,787 $ 57,465
Pensions 18,830 27,107
------- --------
Total Deferred Tax Liabilities 38,617 84,572
Deferred Tax Assets
Self-insurance accruals 34,241 37,592
Allowance for uncollectible accounts 11,597 3,801
Other employee benefits 10,877 12,006
State income taxes 4,760 475
Other 2,273 482
------- --------
Total Deferred Tax Assets 63,748 54,356
------- --------
Net Deferred Tax Asset (Liability) $25,131 $(30,216)
======= ========
The company has determined no valuation allowance is required on the above net
deferred tax asset based on the ability to recover taxes previously paid.
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NOTE E - INCOME TAXES, CONTINUED
The provision for income taxes consists of the following:
1996 1995 1994
-------- -------- --------
(dollars in thousands)
Taxes Currently Payable
Federal $ 8,597 $ 55,436 $ 75,871
State and local 9,517 6,424 11,360
-------- -------- --------
18,114 61,860 87,231
Deferred Taxes (Credits)
Federal (50,140) 7,059 (12,823)
State and local (5,207) 807 (1,465)
-------- -------- --------
(55,347) 7,866 (14,288)
-------- -------- --------
Provision (Benefit) for Income Taxes $(37,233) $ 69,726 $ 72,943
======== ======== ========
Income tax payments, including amounts for discontinued operations, totaled
$10.6 million in 1996, $41 million in 1995 and $60.2 million in 1994.
The company has net operating loss carryforwards of approximately $130 million
for state income tax purposes which are available to offset future taxable
income. These carryforwards expire from 2001 to 2111.
The effective tax rate differs from the federal statutory rate as set forth in
the following reconciliation:
1996 1995 1994
------ ------ -------
Federal statutory tax rate (35.0)% 35.0% 35.0%
State and local income taxes, net of federal tax benefit 1.4 2.9 3.8
Non-deductible operating costs 1.8 2.1 1.8
Goodwill impairment 14.2 .7 --
Other, net (.8) 2.3 1.9
---- ---- ----
Effective Tax Rate (18.4)% 43.0% 42.5%
==== ==== ====
NOTE F - SHAREHOLDERS' EQUITY
The Board of Directors is authorized to issue shares of serial preferred stock
in one or more series and to fix the terms and conditions of the preferred
shares, including: dividend rates and payment dates; liquidation prices;
redemption rights and prices; sinking fund requirements; conversion rights; and
restrictions on issuance. Voting rights would be on the same basis as
outstanding common shares.
On August 14, 1996, the Board of Directors approved the adoption of a
shareholder rights plan. Under the plan, the Board declared a dividend of one
right for each outstanding share of company common stock held of record as of
the close of business on August 26, 1996. Each right entitles the holder to
purchase from the company a defined number of common shares at 50% of the then
market price, subject to adjustment. The rights, which expire on August 28,
2006, unless redeemed, will not be exercisable, and no rights certificate will
be distributed, until 10 calendar days following a public announcement that a
person or group has acquired 20% of the company's common stock and as otherwise
set forth in the rights agreement. Subject to certain exceptions, the company
generally will be entitled to redeem the rights at $0.001 per right at any time.
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NOTE G - STOCK OPTIONS
During 1996, the company's shareholders approved the adoption of the 1996 Equity
Incentive Compensation Plan which authorized up to 1,900,000 shares of common
stock to be granted to key employees in the form of stock options and other
stock-based awards. In 1996, the company awarded approximately 828,000 stock
options exercisable primarily at $38.50 per share of which 754,000 were
outstanding at December 31, 1996. The options vest over a five year period and
expire in 2006. At December 31, 1996, none of the options was exercisable.
NOTE H - OPERATING LEASES
The company leases various facilities and equipment under noncancelable
operating leases requiring minimum future rentals aggregating $166.8 million
payable as follows: 1997-$40.7 million, 1998-$29.2 million, 1999-$18.9 million,
2000-$13.5 million, 2001-$10.7 million and thereafter $53.8 million. Rental
expense for operating leases was $56 million in 1996, $46 million in 1995 and
$36.4 million in 1994.
NOTE I - DISCONTINUED OPERATIONS
On January 2, 1996, the company distributed to shareholders 95% of the issued
and outstanding shares of common stock of REX, its wholly-owned subsidiary. This
distribution, which was tax-free for federal income tax purposes to the company
and its shareholders, was made to holders of record of the company's common
stock at the close of business on December 29, 1995. Shareholders received one
share of REX common stock for every two shares of company common stock held on
that date. The consolidated financial statements reflect the distribution as of
December 31, 1995, which resulted in a reduction of the company's shareholders'
equity of $199.7 million, representing the book value of the net assets
distributed. The company's remaining investment in REX amounted to $8.4 million
and $10.5 million at December 31, 1996 and 1995, respectively, and is included
in other assets.
On November 6, 1995, the company announced plans to exit the air freight
business served by its wholly-owned subsidiary, RGA. All domestic air freight
operations of RGA ceased November 20, 1995. All international operations ceased
prior to year end. The company recorded a pre-tax charge of $64.9 million
related to the discontinuance of this business.
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NOTE I - DISCONTINUED OPERATIONS, CONTINUED
Loss from discontinued operations for 1995 and 1994 consists of the following:
YEAR ENDED REX RGA TOTAL
- ---------- ----------- --------- -----------
(dollars in thousands)
December 31, 1995
- -----------------
Revenue $ 2,288,845 $ 99,425 $ 2,388,270
Operating expenses 2,299,615 180,557 2,480,172
----------- --------- -----------
Operating loss (10,770) (81,132) (91,902)
Other expense, net (3,103) (6,571) (9,674)
----------- --------- -----------
Loss before income taxes (13,873) (87,703) (101,576)
Income tax benefit (1,206) (30,420) (31,626)
----------- --------- -----------
Loss from Discontinued Operations $ (12,667) $ (57,283) $ (69,950)
=========== ========= ===========
December 31, 1994
- -----------------
Revenue $ 2,171,117 $ 73,364 $ 2,244,481
Operating expenses 2,200,055 157,792 2,357,847
----------- --------- -----------
Operating loss (28,938) (84,428) (113,366)
Other expense, net (1,775) (3,901) (5,676)
----------- --------- -----------
Loss before income taxes (30,713) (88,329) (119,042)
Income tax benefit (9,268) (30,797) (40,065)
----------- --------- -----------
Loss from Discontinued Operations $ (21,445) $ (57,532) $ (78,977)
=========== ========= ===========
The loss on discontinuance for 1995 consists of the following:
Loss on Discontinuance Before Income Taxes
Shut-down costs related to the discontinuance of
RGA's air freight business $ 64,925
Transaction costs for the spin-off of REX 7,518
-----------
72,443
Income tax benefit (22,779)
-----------
Loss on Discontinuance $ 49,664
===========
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NOTE J - COMMITMENTS AND CONTINGENCIES
During 1994, the company reached agreement with the Internal Revenue Service and
the Department of Justice related to the classification of certain drivers at
the company's small-package carrier for employment tax purposes. The net
after-tax cost of the settlement amounted to $13.7 million or $.35 per share and
is included in the 1994 consolidated statement of income.
Various legal proceedings arising from the normal conduct of business are
pending, but, in the opinion of management, the ultimate disposition of these
matters will have no material effect on the financial condition of the company.
NOTE K - SUBSEQUENT EVENTS
A major restructuring of the Viking operations was announced on March 27, 1997.
As a result of this restructuring, the company recorded a non-cash $225 million
asset impairment charge ($175 million net of tax or $4.43 per share) related to
the write-down of goodwill of $82 million and property and equipment of $143
million which has been reflected in the 1996 operating results. The impaired
assets were written down to fair value based on estimates of appraised values
for real estate and quoted prices for equipment. Additional restructuring
charges, which include employee severance and other restructuring costs, will be
included in the company's operating results for the first quarter of 1997.
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SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
CALIBER SYSTEM, INC.
Income
Income (Loss)From Loss From
Operating (Loss) From Loss From Continuing Discontinued Net Average
Income Continuing Discontinued Net Operations Operations Income (Loss) Shares
Quarter Ended Revenue (Loss) Operations Operations Income(Loss) Per Share Per Share Per Share Outstanding
- ------------- ------- --------- ----------- ------------ ------------ ---------- ------------ ------------ ------------
(dollars in thousands, except per share data)
1996
March 23 $ 582,074 $ 18,181 $ 9,621 $ - $ 9,621 $ 0.24 $ - $ 0.24 39,505,000
June 15 615,901 1,414 220 - 220 0.01 - 0.01 39,525,000
September 7 627,226 224 (1,970) - (1,970) (0.05) - (0.05) 39,505,000
December 31(a) 892,941 (211,859) (172,994) - (172,994) (4.38) - (4.38) 39,421,000
---------- --------- ----------- ------------ ------------ ---------- ------------ ------------
Total $2,718,142 $(192,040) $ (165,123) $ - $ (165,123) $ (4.18) $ - $ (4.18)
========== ========= =========== ============ ============ ========== ============ ============
1995
March 25 $ 543,469 $ 33,472 $ 21,530 $ (15,679) $ 5,851 $ 0.54 $ (0.39) $ 0.15 39,434,000
June 17 550,779 31,739 22,357 (24,359) (2,002) 0.57 (0.62) (0.05) 39,467,000
September 9 552,741 33,029 22,218 (19,890) 2,328 0.56 (0.50) 0.06 39,470,000
December 31 (b) 801,183 57,488 26,304 (59,686) (33,382) 0.67 (1.52) (0.85) 39,463,000
---------- --------- ----------- ------------ ------------ ---------- ------------ ------------
Total $2,448,172 $ 155,728 $ 92,409 $ (119,614) $ (27,205) $ 2.34 $ (3.03) $ (0.69)
========== ========= =========== ============ ============ ========== ============ ============
<FN>
Notes:
(a) The company announced a major restructuring of the Viking operations on
March 27, 1997. Nonrecurring charges relating to the restructuring of $225
million are included in 1996 operating expenses. See Note K to the
consolidated financial statements.
(b) Includes costs associated with the consolidation of the company's regional
carriers ($6.6 million) and adoption of SFAS 121 ($3.1 million) as
described in Management's Discussion and Analysis.
The company uses a 13 four-week period calendar with 12 weeks in each of the
first three quarters and 16 weeks in the fourth quarter.
Effective for 1997, the company has changed the methodology by which certain
corporate costs are allocated to operating units. As a result, 1996 operating
income (loss) for RPS and Viking will be restated as follows in millions: RPS -
First Quarter $27.7; Second Quarter $28.2; Third Quarter $29.5; and Fourth
Quarter $50.3. Viking - First Quarter $(14); Second Quarter $(33.3); Third
Quarter $(38.2); and Fourth Quarter $(276.3).
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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
CALIBER SYSTEM, INC.
Years Ended December 31, 1996, 1995 and 1994
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
COL.A COL.B COL.C COL.D COL.E
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE ----------------------------
DESCRIPTION AT BEGINNING (1) (2) DEDUCTIONS- BALANCE AT END
OF PERIOD CHARGED CHARGED TO DESCRIBE OF PERIOD
TO COST OTHER ACCOUNTS-
AND EXPENSES DESCRIBE
- ------------------------------------------------------------------------------------------------------------------------------------
1996
Reserve related to
discontinuance of RGA $49,934 $ -- $ -- $37,097 (A) $12,837
Allowance for uncollectible
accounts $12,586 $37,439 $ -- $18,070 (C) $31,955
1995
Reserve related to
discontinuance of RGA $ -- $64,925 $ -- $14,991 (A) $49,934
Allowance for uncollectible
accounts $ 9,639 $12,737 $ -- $ 9,790 (C) $12,586
1994
Allowance for uncollectable
accounts (B) $ 6,891 $ 9,274 $ -- $ 6,526 (C) $ 9,639
<FN>
(A) Charges against reserve.
(B) Restated to reflect the spin-off of Roadway Express, Inc. and exit from
the air freight business served by Roadway Global Air, Inc. (RGA).
(C) Uncollectible accounts written off, net of recoveries.
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EXHIBIT INDEX
3.1 Second Amended Articles of Incorporation of the Registrant effective
February 29, 1996 (filed as Exhibit 3.1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, and
incorporated herein by reference).
3.2 Restated Amended Code of Regulations of the Registrant effective May
10, 1989 (filed as Exhibit 3.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, and
incorporated herein by reference).
4.1 Caliber System, Inc. and Keybank National Association Rights Agreement
dated August 22, 1996 including Form of Rights Certificate (Exhibit A)
and Summary of Rights (Exhibit B) (filed as Exhibit 4.2 to the
Registrant's Current Report on Form 8-K dated August 22, 1996 and Form
8-K/A dated September 12, 1996, and incorporated herein by reference).
4.2 Indenture between Caliber System, Inc. and Chase Manhattan Bank
(formerly known as Chemical Bank) dated as of August 1, 1996 (a form
of which was filed as Exhibit 4 to the Registrant's Form S-3
Registration Statement No. 333-07473 dated July 12, 1996, and
incorporated herein by reference).
9 Amended Restated Voting Trust Agreement effective November 1, 1992
(filed as Exhibit 9 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, and incorporated herein by
reference).
10.1 Distribution Agreement between Roadway Services, Inc. and Roadway
Express, Inc. dated December 29, 1995 (filed as Exhibit 10.1 to the
Registrant's Current Report on Form 8-K dated January 18, 1996, and
incorporated herein by reference).
10.2(a) Credit Agreement among Roadway Services, Inc., Several Lenders and
Chase Manhattan Bank (formerly known as Chemical Bank) dated as of
March 24, 1995 (filed as Exhibit 10 to the Registrant's Quarterly
Report on Form 10-Q dated March 25, 1995, and incorporated herein by
reference).
10.2(b) Form of First Amendment and Waiver to Credit Agreement among Roadway
Services, Inc., Several Lenders and Chase Manhattan Bank (formerly
known as Chemical Bank) dated as of September 29, 1995 (filed as
Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated
January 18, 1996, and incorporated herein by reference).
10.2(c) Form of Second Amendment to Credit Agreement among Caliber System,
Inc., Several Lenders and Chase Manhattan Bank.
_______________________
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of this report.
35
10.3 Credit Agreement entered into between Caliber System, Inc. and Morgan
Guaranty Trust Company of New York on July 8, 1996 (filed as Exhibit
10.8 to the Registrant's Quarterly Report on Form 10-Q dated June 15,
1996, and incorporated herein by reference).
10.4* Caliber System, Inc. Directors' Deferred Compensation Plan effective
May 8, 1996 (filed as Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q dated June 15, 1996, and incorporated herein by
reference).
10.5* Caliber System, Inc. Nonemployee Directors' Stock Retainer Plan
effective May 8, 1996 (filed as Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q dated June 15, 1996, and incorporated
herein by reference).
10.6* Caliber System, Inc. Nonemployee Directors' Stock Plan (1989)
effective May 8, 1996 (filed as Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q dated June 15, 1996, and incorporated
herein by reference).
10.7* Caliber System, Inc. 1994 Nonemployee Directors' Stock Plan effective
May 8, 1996 (filed as Exhibit 10.4 to the Registrant's Quarterly
Report on Form 10-Q dated June 15, 1996, and incorporated herein by
reference).
10.8* Caliber System, Inc. Retirement Plan for Nonemployee Directors
effective May 8, 1996.
10.9* Caliber System, Inc. 1997 Officers' Incentive Compensation Plan dated
December 18, 1996.
10.10* Caliber System, Inc. Long-Term Stock Award Incentive Plan effective
January 2, 1996 (filed as Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q dated March 23, 1996, and incorporated herein by
reference).
10.11* Caliber System, Inc. 1996 Equity Incentive Compensation Plan effective
May 8, 1996 (filed as Exhibit 10.6 to the Registrant's Quarterly
Report on Form 10-Q dated June 15, 1996, and incorporated herein by
reference).
10.12(a)* Caliber System, Inc. Excess Plan effective January 2, 1996 (filed as
Exhibit 10.7(a) to the Registrant's Quarterly Report on Form 10-Q
dated June 15, 1996, and incorporated herein by reference).
10.12(b)* Caliber System, Inc. 401(a)(17) Benefit Plan effective January 2, 1996
(filed as Exhibit 10.7(b) to the Registrant's Quarterly Report on Form
10-Q dated June 15, 1996, and incorporated herein by reference).
10.12(c)* Caliber System, Inc. Administrative Document for Excess Plan and
401(a)(17) Benefit Plan effective January 2, 1996 (filed as Exhibit
10.7(c) to the Registrant's Quarterly Report on Form 10-Q dated June
15, 1996, and incorporated herein by reference).
10.13(a)* Form of Caliber System, Inc. Indemnification Agreement for Directors.
______________________
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of this report.
36
10.13(b)* Form of Caliber System, Inc. Indemnification Agreement for Officers.
10.14(a)* Form of Second Amended and Restated Management Retention Agreement
(Tier 1).
10.14(b)* Form of Second Amended and Restated Management Retention Agreement
(Tier 2).
10.14(c)* Form of Second Amended and Restated Management Retention Agreement
(Tier 2A).
10.14(d)* Form of Second Amended and Restated Management Retention Agreement
(Tier 3).
10.15(a)* Form of Employment Agreement (Form A).
10.15(b)* Form of Employment Agreement (Form B).
10.15(c)* Form of Agreement Regarding Change in Management and Termination of
Employment.
21 Significant Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
______________________
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of this report.