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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the Period ended March 29, 1997.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ______ to ______.
Commission file number 0-600
ROADWAY EXPRESS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 34-0492670
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No)
1077 Gorge Boulevard Akron, OH 44310
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (330) 384-1717
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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 ($.01 par value) outstanding as of April
17, 1997 was 20,528,251.
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 29, 1997 December 31, 1996
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(dollars in thousands)
Assets
Current assets:
Cash and cash equivalents $ 39,205 $ 36,243
Accounts receivable, net 262,949 260,789
Other current assets 16,388 16,847
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Total current assets 318,542 313,879
Carrier operating property at cost 1,379,772 1,392,048
Allowance for depreciation 1,010,215 1,013,954
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Net carrier operating property 369,557 378,094
Deferred income taxes 17,275 17,651
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Total assets $ 705,374 $ 709,624
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Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 131,584 $ 135,248
Salaries and wages payable 110,458 110,124
Other current liabilities 52,949 52,545
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Total current liabilities 294,991 297,917
Long-term liabilities
Casualty claims payable 63,586 66,674
Future equipment repairs 23,256 24,281
Accrued pension and retiree medical 98,631 96,156
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Total long-term liabilities 185,473 187,111
Shareholders' equity
Common Stock - $.01 par value
Authorized - 100,000,000 shares
Issued - 20,556,714 shares 206 206
Other shareholders' equity 224,704 224,390
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Total shareholders' equity 224,910 224,596
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Total liabilities and equity $ 705,374 $ 709,624
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Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
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ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
Twelve Weeks Ended
(First Quarter)
March 29, 1997 March 23, 1996
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(amounts in thousands, except per share data)
Revenue $ 590,675 $ 516,963
Operating expenses:
Salaries, wages and benefits 382,281 345,574
Operating supplies and expenses 101,947 87,082
Purchased transportation 48,218 39,358
Operating taxes and licenses 18,844 17,616
Insurance and claims expense 16,899 9,489
Provision for depreciation 12,628 15,536
Net (gain) on disposal of operating property (584) (2,634)
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Total operating expenses 580,233 512,021
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Operating income 10,442 4,942
Other (expense), net (221) (332)
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Income before income taxes 10,221 4,610
Provision for income taxes 4,699 1,987
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Net income $ 5,522 $ 2,623
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Net income per share $ 0.27 $ 0.13
Average shares outstanding 20,548 20,557
See notes to condensed consolidated financial statements.
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ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Twelve Weeks Ended
(First Quarter)
March 29, 1997 March 23, 1996
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(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,522 $ 2,623
Depreciation and amortization 12,646 15,543
Other operating adjustments (10,674) (14,309)
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Net cash provided by operating activities 7,494 3,857
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property (6,222) (7,319)
Sales of carrier operating property 2,716 3,976
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Net cash used by investing activities (3,506) (3,343)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (1,026) -
Net borrowings - -
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Net cash used by financing activities (1,026) -
Net increase in cash and cash equivalents 2,962 514
Cash and cash equivalents at beginning of period 36,243 23,341
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Cash and cash equivalents at end of period $ 39,205 $ 23,855
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See notes to condensed consolidated financial statements.
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Roadway Express, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note A--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the 12 weeks ended March 29, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. 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, 1996.
Note B--Accounting Period
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--Provision for Income Taxes
Taxes provided exceed the U.S. statutory rate primarily due to non-deductible
operating costs, and foreign and state taxes.
Twelve Weeks Ended
(First Quarter)
March 29, 1997 March 23, 1996
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(amounts in thousands)
U.S. Federal $ 3,216 $ 871
U.S. State 625 239
Foreign 858 877
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Total $ 4,699 $ 1,987
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Note D-Impact of Recently Issued Accounting Standards
The Company will adopt the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share", as of December 31, 1997. The
adoption of SFAS 128 is expected to have no impact on the Company's calculation
of earnings per share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company had net income of $5,522,000, or $0.27 per share, for the first
quarter ended March 29, 1997, compared to income of $2,623,000, or $0.13 per
share, in the first quarter of last year. This improvement in earnings is
primarily the result of revenue growth and cost controls relating to our nearly
completed network improvements. Revenues were $590,675,000 for the first quarter
of 1997, a 14.3% improvement over first quarter 1996 revenue of $516,963,000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Company's tonnage was up 8.7% in the first quarter compared to the prior
year quarter. This increase was partly attributable to the inclusion of three
extra working days in the first quarter this year. Less-than-truckload (LTL)
tons were up 9.3% and truckload tonnage was up 6.4% compared to first quarter
1996. Net revenue per ton has increased 5.1% above the first quarter 1996. This
increase reflects the impact of the January 1 price increase and the variable
fuel surcharge which was instituted at the end of the third quarter, 1996.
Operating expenses per ton (excluding gain on sale of operating property) were
up 3.8% compared to first quarter 1996. Fuel, purchased transportation, and
insurance costs increased faster than business levels this quarter. Purchased
transportation costs increased 22.5%, reflecting the Company's increasing use of
railroads in certain linehaul operations, and our expanding use of freight
containers for overseas operations. Higher fuel prices added $4.0 million to
operating expenses in the current quarter compared to first quarter 1996.
Salaries and wages were impacted by the tonnage growth and the 3.8% wage and
benefit increase on April 1, 1996, under the terms of the Teamster contract, as
well as by an increase in workers' compensation expenses. Freight, workers'
compensation, and casualty claims payable declined during 1996 primarily due to
new safety and risk management programs and an intensive review to settle
existing claims, which was essentially completed by the end of 1996. Despite the
new safety programs, insurance and claims expense increased by $7.4 million
during the first quarter of 1997 due to the reduced expense in 1996, and a
higher than expected settlement on a claim in 1997. Depreciation expense
continues to decline as more revenue equipment becomes fully depreciated and as
we reduce the number of terminal facilities. The Company's system count has been
reduced to 415 terminals, compared to 468 terminals at the end of the first
quarter 1996.
The tax expense attributable to the operating income for the first quarters of
1996 and 1995 differs from the Federal statutory rate due to the impact of state
taxes, taxes on profitable foreign operations, and non-deductible operating
expenses as described in Note C to the Condensed Consolidated Financial
Statements.
At the end of the quarter, there were no borrowings against the credit
facilities; cash flow from operations has been sufficient to meet working
capital needs. The Company entered into a second operating lease agreement to
replace an additional 3,250 (approximately 11%) of our linehaul trailers during
1997. Under these agreements, we have replaced approximately 4,300 aging
trailers with new leased units.
On February 7, 1997, Roadway announced that it had reached agreement for the
friendly acquisition of Reimer Express Lines, Ltd. of Winnipeg, Manitoba,
Canada, for $15 million in cash. The agreement also contains provisions for
additional payments of up to $10 million, subject to Reimer achieving defined
performance criteria over a five year period. The purchase is subject to
Canadian federal and provincial approvals, and is expected to be completed
during the second quarter of 1997. This acquisition will immediately and vastly
expand Roadway's Canadian coverage. The Company's current Canadian subsidiary
will be closed upon completion of the purchase of Reimer. The Company does not
expect to incur material expenses in relation to the shut-down of the existing
Canadian subsidiary.
The portions of narrative set forth in this discussion that are not historical
in nature are forward-looking statements. The Company's actual future
performance and operating and financial results may differ from those described
in the forward-looking statements as a result of a variety of factors that,
besides those mentioned, include the condition of the industry and the economy
and the success of the Company's operating plans.
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PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on March 26, 1997. Two
matters were voted upon at this meeting: (i) the election of seven members to
the Board of Directors and (ii) ratification of the appointment of Ernst & Young
LLP as the independent auditors. There were 18,358,612 shares voted and
2,176,691 shares not voted.
The following table shows the results of the vote.
PROPOSAL FOR AGAINST WITHHELD
Election of Directors
Frank P. Doyle 18,210,135 148,477
Phillip J. Meek 18,221,207 137,405
Robert E. Mercer 18,183,070 175,542
Carl W. Schafer 18,211,229 147,383
William Sword 18,209,855 148,756
Sarah Roush Werner 18,215,105 143,507
Michael W. Wickham 18,121,073 237,538
Appointment of Ernst &
Young LLP as auditors 18,161,618 114,036 82,958
ITEM 5. OTHER INFORMATION
On April 16, 1997, the Board of Directors announced a cash dividend of $0.05 per
share on the Company's common stock payable on June 2, 1997, to shareholders of
record on May 16, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No.
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10.20 Amendment to the $25,000,000 Credit Agreements between Roadway Express,
Inc., Morgan Guaranty Trust Company of New York, and Bank One of Akron,
N.A.
10.21 Schedule of documents not filed which are substantially identical in all
material respects to previously filed documents.
27 Financial Data Schedule.
List of the Current Reports on Form 8-K which were filed during the current
quarter:
Date of Form 8-K Items reported
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February 18, 1997 Announcement of the agreement between the Company and the
shareholders of Reimer for the friendly acquisition of
Reimer Express Lines, Ltd of Winnipeg, Manitoba, Canada.
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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.
ROADWAY EXPRESS, INC.
Date: May 1, 1997 By: /s/ J. Dawson Cunningham
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J. Dawson Cunningham, Vice President-
Finance and Administration, and
Treasurer (Principal Financial and
Accounting Officer)
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