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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the period ended June 18, 1994
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-10716
ROADWAY SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Ohio 34-1365496
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1077 Gorge Boulevard, P.O.Box 88, Akron, Ohio 44309-0088
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code is (216) 384-8184
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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The number of shares of common stock without par value outstanding as of July
15, 1994 was 39,034,368.
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INDEX
ROADWAY SERVICES, INC.
FORM 10-Q
PERIOD ENDED JUNE 18, 1994
PART I - FINANCIAL INFORMATION
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Item 1. Condensed Financial Statements (Unaudited)
Consolidated Balance Sheet--June 18, 1994 and
December 31, 1993
Statement of Consolidated Income--Twelve weeks
and twenty-four weeks ended June 18, 1994 and
June 19, 1993
Statement of Consolidated Cash Flows--Twenty-four
weeks ended June 18, 1994 and June 19, 1993
Notes to Condensed Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
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Item 4. Results of Votes of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited)
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ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
<CAPTION>
June 18, December 31,
1994 1993
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(dollars in thousands)
<S> <C> <C>
ASSETS
Cash................................................. $ 26,276 $ 27,628
Marketable securities................................ 68,149 83,943
Accounts receivable.................................. 444,588 401,777
Prepaid expenses and supplies........................ 69,215 77,160
Deferred income taxes................................ 32,132 28,765
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TOTAL CURRENT ASSETS.............................. 640,360 619,273
Carrier operating property........................... 2,511,124 2,440,189
Less allowances for depreciation..................... 1,392,267 1,313,974
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TOTAL CARRIER OPERATING PROPERTY.................. 1,118,857 1,126,215
Cost in excess of net assets of businesses acquired.. 99,412 100,914
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$1,858,629 $1,846,402
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable..................................... $ 298,983 $ 268,103
Salaries and wages................................... 187,540 178,536
Other current liabilities............................ 129,399 131,850
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TOTAL CURRENT LIABILITIES......................... 615,922 578,489
Deferred income taxes................................ 50,951 57,620
Future equipment repairs............................. 24,555 23,148
Casualty claims payable after one year............... 95,077 86,546
Retiree medical...................................... 56,603 53,448
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TOTAL OTHER LIABILITIES........................... 227,186 220,762
Common stock - 40,896,414 shares issued.............. 39,898 39,898
Additional capital................................... 51,006 50,446
Earnings reinvested in the business.................. 980,386 1,013,519
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1,071,290 1,103,863
Less cost of common stock in treasury - 1,495,000
shares in 1994 and 1,527,000 shares in 1993......... 55,769 56,712
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TOTAL SHAREHOLDERS' EQUITY........................ 1,015,521 1,047,151
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$1,858,629 $1,846,402
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</TABLE>
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<TABLE>
ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF CONSOLIDATED INCOME (UNAUDITED)
<CAPTION>
Twelve Weeks Ended Twenty-Four Weeks Ended
(Second Quarter) (First Half)
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June 18, June 19, June 18, June 19,
1994 1993 1994 1993
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(amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
REVENUE........................................ $930,157 $939,263 $1,953,897 $1,795,315
OPERATING EXPENSES
Salaries, wages and benefits................. 501,426 515,554 1,051,781 979,900
Operating supplies and expenses.............. 180,952 159,761 352,823 306,851
Purchased transportation..................... 190,310 131,079 360,180 258,193
Operating taxes and licenses................. 25,802 27,001 55,346 52,032
Insurance and claims......................... 24,282 19,587 49,370 39,996
Provision for depreciation................... 48,904 44,485 96,737 85,742
Net (gain) on sale of property............... (353) (206) (362) (391)
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TOTAL OPERATING EXPENSES................... 971,323 897,261 1,965,875 1,722,323
-------- -------- ---------- ----------
OPERATING INCOME (LOSS).................... (41,166) 42,002 (11,978) 72,992
Other income - net............................. 324 4,633 350 8,211
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INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES.. (40,842) 46,635 (11,628) 81,203
Provision (benefit) for income taxes........... (19,116) 19,312 (5,814) 33,619
-------- -------- ---------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES....................... (21,726) 27,323 (5,814) 47,584
Cumulative effect of accounting changes.... - - - (18,131)
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NET INCOME (LOSS)........................ $(21,726) $ 27,323 $ (5,814) $ 29,453
======== ======== ========== ==========
EARNINGS (LOSS) PER SHARE:
Before cumulative effect of
accounting changes..................... $ (.55) $ .69 $ (.15) $ 1.20
Cumulative effect of accounting changes.. - - - (.46)
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NET INCOME (LOSS)........................ $ (.55) $ .69 $ (.15) $ .74
======== ======== ========== ==========
DIVIDENDS DECLARED PER SHARE............... $ .35 $ .35 $ .70 $ .67 1/2
======== ======== ========== ==========
AVERAGE SHARES OUTSTANDING................. 39,395 39,697 39,383 39,719
======== ======== ========== ==========
</TABLE>
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<TABLE>
ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF CONSOLIDATED
CASH FLOWS (UNAUDITED)
<CAPTION>
Twenty-Four Weeks Ended
(First Half)
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June 18, June 19,
1994 1993
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(dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss).............................. $ (5,814) $ 29,453
Adjustments.................................... 104,988 72,115
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NET CASH PROVIDED BY OPERATING ACTIVITIES... 99,174 101,568
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property........ (92,105) (136,181)
Sales of carrier operating property............ 3,088 4,456
Purchases of marketable securities............. (11,330) (43,199)
Sales of marketable securities................. 27,124 227,824
Purchase of Central Freight Lines Inc.,
net of cash acquired......................... - (98,349)
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NET CASH USED IN INVESTING ACTIVITIES....... (73,223) (45,449)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid................................. (27,303) (25,621)
Purchases of common stock for treasury......... - (20,263)
Repayment of Central's borrowings.............. - (32,116)
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NET CASH USED IN FINANCING ACTIVITIES....... (27,303) (78,000)
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NET (DECREASE) IN CASH...................... (1,352) (21,881)
CASH AT BEGINNING OF YEAR................... 27,628 41,036
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CASH AT END OF SECOND QUARTER............... $ 26,276 $ 19,155
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</TABLE>
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ROADWAY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
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The accompanying condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
statements are unaudited but, in the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the twenty-four weeks
ended June 18, 1994 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1994. For further information, refer
to consolidated financial statements and footnotes thereto included in the
registrant's annual report on Form 10-K for the year ended December 31, 1993.
Note B - Accounting Period
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The registrant operates on a 13 four-week period calendar with 12 weeks in each
of the first three quarters and 16 weeks in the fourth quarter.
Note C - Accounting Changes
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Effective January 1, 1993, the registrant adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting for
Income Taxes." Together, the adoption of SFAS 106 and 109 as cumulative effect
adjustments resulted in a net charge to 1993 earnings of $18,131,000 or $.46
per share.
Note D - Acquisition
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On April 6, 1993, the registrant acquired Central Freight Lines Inc. (Central),
Texas' largest regional carrier, following a vote of approval by Central's
shareholders. The registrant used internally generated funds to acquire the
common stock of Central at a total cost of $102,142,000. The acquisition was
accounted for as a purchase and the cost in excess of net assets acquired was
$16,432,000.
Item 2. Management's Discussion and Analysis of Financial Condition
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and Results of Operations
-------------------------
The results of operations for 1994 were adversely impacted by a 24-day
Teamsters strike in April against Roadway Express, the registrant's largest
operating company. The Teamsters returned to work on April 30 and ratified a
four year labor agreement on June 5, 1994. Under the new labor agreement,
Teamster wages and benefits increase 1.2% in the first year. The contract
allows expanded use of rail transportation and casual dock labor which should
provide an operating cost benefit to Roadway Express. The effects of the
strike on second quarter operating results at Roadway Express included a
reduction in revenue of 31.8% from second quarter 1993 levels and a decline of
33.3% in tonnage. Roadway Express incurred an operating loss in the second
quarter of 1994 of $68,353,000, compared to operating income of $16,097,000 in
the second quarter of 1993. The second quarter operating loss at Roadway
Express includes a charge of $.13 per share after taxes for anticipated cash
expenditures for terminal closings and
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relocating certain personnel to realign linehaul operations for greater
efficiency, including better balancing of road and rail operations.
Consolidated revenue for the second quarter ended June 18, 1994 decreased
$9,106,000 or 1% from second quarter 1993 levels. For the twenty-four weeks
constituting the registrant's first half, revenue increased $158,582,000 or
8.8% over 1993. The Teamsters strike reduced second quarter revenue for
Roadway Express by approximately $190,000,000. This reduction was largely
offset by increased business volumes at all of the registrant's other operating
companies, particularly the regional group, Roadway Package System (RPS), and
Roberts Express (Roberts). Central, a member of the regional group, was
acquired on April 6, 1993, and accounted for $75,710,000 of the first half
increase. Startup operations of Roadway Global Air (RGA), a worldwide heavy
weight air cargo service, are also included in the 1994 results. Revenue at
RGA continued to grow at a significant rate but less than plan because of a
traffic mix which included larger than expected shipments and more deferred
service freight, resulting in lower revenue per pound.
At Roadway Express, first half revenue was 14.2% lower than in the first half
1993, and tonnage was 17.3% lower. Due to a general rate increase implemented
effective January 1, 1994, revenue per ton was 4.2% higher in the second
quarter, and 4.7% higher for the first half, as compared to 1993. RPS
implemented a rate increase on February 7, 1994, and the registrant's other
carriers have also obtained rate increases on portions of their traffic.
Second quarter 1994 operating expenses increased $74,062,000 or 8.3% over
comparable 1993 levels, while first half operating expenses were up
$243,552,000 or 14.1% above 1993 levels. The majority of the increases
resulted from higher business volumes at all of the registrant's operations
other than Roadway Express. At Roadway Express, operating expenses were
$85,590,000 or 16.5% below second quarter 1993 levels, and $63,332,000 or 6.2%
below first half 1993 results. Central accounted for $66,762,000 of the first
half increase. Inclusion of RGA in 1994 also contributed to the increase in
operating expenses. Fuel prices in the second quarter of 1994 averaged 6.1%
lower than second quarter 1993 levels. Purchased transportation increases
reflect increased business levels at RPS and Roberts, and the inclusion of RGA.
The operating loss for the second quarter and for the first half of 1994 is
primarily attributable to the Teamsters strike at Roadway Express. The strike
resulted in a second quarter 1994 operating loss of $68,353,000 at Roadway
Express, compared to operating income of $16,097,000 in 1993. For the first
half of 1994, Roadway Express reported an operating loss of $57,978,000,
compared to operating income of $27,521,000 for 1993. Startup losses in the
second quarter and first half at RGA offset operational gains achieved by the
registrant's other operating companies, particularly RPS, Viking Freight
System, Central and Roberts. Other income-net declined in 1994 principally due
to reduced levels of investments in marketable securities. The effective
income tax rate for 1994 increased over 1993 due to the impact of nondeductible
expenses, and due to startup losses in state and foreign tax jurisdictions for
which no current tax benefit is available.
The net loss for the second quarter of 1994 was $.55 per share, a deterioration
of $1.24 from 1993. For the first half of 1994, the net loss was $.15 per
share, down $1.35 from first half 1993 income before the cumulative effect of
accounting changes. At Roadway Express the net loss for the quarter and first
half of 1994 was $.96 per share and $.82 per share, respectively. Improvements
in 1994 at RPS, the regional group, Roberts and Roadway Logistics Systems, Inc.
(ROLS) only
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partially offset the startup losses at RGA. The net loss for RGA for the
second quarter was $.13 per share greater than plan. It is not unreasonable to
expect that third and fourth quarter losses for RGA could exceed original
estimates by similar amounts.
For the remainder of 1994, management will continue to focus on the recovery of
Roadway Express. A performance recovery management incentive compensation plan
has been instituted at Roadway Express for the second half of 1994. Operating
improvements made possible under the new Teamsters contract, particularly to
balance road and rail operations for better service and costs, are planned for
implementation in the fall. Management will also concentrate on improving the
revenue yield at RGA while continuing to bring a new level of quality to the
heavy air freight business. Rate competition is expected to remain intense in
many of the registrant's markets, and expenditures for expansion at operating
companies other than Roadway Express are expected to be substantial during the
remainder of the year.
The registrant normally finances capital expenditures from internally generated
funds. The Teamsters strike, the startup of RGA, the acquisition of Central
and recent expansion have reduced funds currently invested in marketable
securities. It is anticipated that cash, current investments in marketable
securities, funds generated from future operations and, if required, short term
financing currently available to the registrant will provide adequate levels of
working capital and funds for business expansion, projected capital
expenditures, and other needs of the business. Capital expenditures in 1994
are currently projected at approximately $330 million.
PART II - OTHER INFORMATION
Item 4. Results of Votes of Security Holders
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On May 11, 1994, the registrant held its Annual Meeting of Shareholders at
which the following directors were elected receiving the number of votes set
forth beside their names.
George B. Beitzel 34,833,192
Richard A. Chenoweth 34,827,390
Joseph M. Clapp 34,830,204
Norman C. Harbert 34,839,006
Charles R. Longsworth 34,829,241
Robert E. Mercer 34,818,986
G. James Roush 34,845,908
Daniel J. Sullivan 34,826,368
William Sword 34,829,712
Sarah Roush Werner 34,842,924
With respect to the approval of the adoption of the 1994 Roadway Services, Inc.
Nonemployee Directors' Stock Plan, 33,013,791 votes were cast in favor of the
proposal to approve adoption; 1,547,691 votes were cast against such approval;
131,014 votes abstained; and there were 214,150 broker non-votes. With respect
to a shareholder proposal in favor of confidential voting, 9,513,195 votes were
cast in favor of the proposal; 24,096,582 votes were cast against such
proposal; 133,295 votes abstained; and there were 1,163,574 broker non-votes.
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Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits--None
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(b) Reports on Form 8-K Filed During the Second Quarter of 1994--None
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROADWAY SERVICES, INC.
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(Registrant)
Date: July 26, 1994 By D. A. Wilson
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D. A. Wilson, Senior Vice President-
Finance and Planning, Secretary and
Chief Financial Officer
Date: July 26, 1994 By Roy E. Griggs
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Roy E. Griggs,
Vice President and Controller
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