<PAGE> 1
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, 1993
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
ROADWAY SERVICES, INC.
______________________________________________________________________
(Exact name of registrant as specified in its charter)
Ohio 34-1365496
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1077 Gorge Boulevard, P.O. Box 88, Akron, Ohio 44309-0088
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 384-8184
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None
------------------- ---------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock-without par value
----------------------------------------------------------------
(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___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 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, 1994 was $1,480,991,000.
The number of shares of the issuer's common stock outstanding as of
February 28, 1994 was 39,023,120.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's Annual Report to Shareholders for
the year ended December 31, 1993 are incorporated by reference into Parts I
and II.
Certain portions of the registrant's proxy statement for the annual
meeting of shareholders to be held on May 11, 1994 are incorporated by
reference into Part III.
<PAGE> 2
PART I
ITEM 1. - BUSINESS.
Roadway Services, Inc. (registrant), a corporation organized in 1982
under the laws of the State of Ohio, is a holding company engaged through its
operating companies in the transportation and logistics businesses. Its
operating companies are Roadway Express, Inc., Roadway Package System, Inc.
(RPS), Roadway Global Air, Inc. (RGA), a heavy weight air freight company which
began operations on September 13, 1993, Roberts Express, Inc., Roadway
Logistics Systems, Inc. (ROLS), and a regional carrier group which includes
Viking Freight System, Inc., Spartan Express, Inc., Coles Express, Inc. and
Central Freight Lines Inc., which was acquired on April 6, 1993. Additional
information concerning the acquisition of Central is contained in Note B to the
consolidated financial statements set forth on page 34 of the registrant's
Annual Report to Shareholders for the year ended December 31, 1993, and is
incorporated herein by reference.
The registrant's largest operating group consists of Roadway Express,
Inc. (Akron, Ohio), its subsidiary Roadway Express (Canada), Inc. (Calgary,
Alberta, Canada), and joint venture TNL-Roadway (Mexico City, D.F., Mexico).
Collectively, this group is one of the industry's major carriers of long haul,
less-than-truckload (LTL) general freight. Roadway Express, providing common
carrier interstate transportation since 1930, serves all 50 states, Canada,
Guam, Mexico, Latin America, the Eastern Caribbean, Europe, the Middle East and
the Pacific Rim through 573 terminal facilities. The Roadway Express system
primarily handles long haul, interstate shipments of LTL freight. No single
carrier, or small number of carriers, is dominant in the portion of the
industry in which Roadway Express operates. Additional information concerning
this operating group is set forth in the first nine and eleventh paragraphs of
the discussion contained on pages 4 through 6 of the Annual Report to
Shareholders for the year ended December 31, 1993, and is incorporated herein
by reference.
The registrant's other motor carrier subsidiaries provide service to
various portions of the motor carrier transportation market, none of which is
dominated by a single carrier or small number of carriers with one exception.
The surface small package shipping market area, in which RPS competes, is
dominated by United Parcel Service. Additional information concerning the
registrant's other motor carrier subsidiaries is set forth in the first ten
paragraphs of the discussion contained on pages 8 through 10; the first two and
sixth paragraphs of the discussion contained on pages 14 and 15; the first
three and fifth paragraphs of the discussion contained on pages 16 and 17; the
first four paragraphs of the discussion contained on pages 18 and 19; the first
three paragraphs of the discussion contained on page 20; and the discussion
contained on pages 22 and 23 of the registrant's Annual Report to Shareholders
for the year ended December 31, 1993, and is incorporated herein by reference.
- 2 -
<PAGE> 3
RGA provides heavy weight air cargo service to customers worldwide
through 51 air logistics centers in North America, Europe, Asia and Australia,
including a hub facility in Terre Haute, Indiana. Additional information
concerning RGA is set forth in the discussion contained on pages 12 and 13 of
the registrant's Annual Report to Shareholders for the year ended December 31,
1993, and is incorporated herein by reference.
ROLS provides contract logistics services. Additional information
concerning ROLS is set forth in the first four and sixth paragraphs of the
discussion contained on pages 24 and 25 of the registrant's Annual Report to
Shareholders for the year ended December 31, 1993, and is incorporated herein
by reference.
All domestic motor carrier subsidiaries are subject to regulation by the
Interstate Commerce Commission and the Department of Transportation. At the
end of 1993 the registrant and its affiliates employed approximately 46,600
persons and utilized the services of approximately 6,700 independent
contractors.
Item 2. - Properties.
Roadway Services, Inc.
Corporate offices of the registrant and its information systems
subsidiary are located in Akron, Ohio in facilities leased from one of the
registrant's subsidiaries. Limited additional corporate office space is
located in nearby leased facilities.
Roadway Express, Inc.
As of December 31, 1993, the Roadway Express operating group owned or
leased 573 terminal facilities, of which 29 were major consolidation and
distribution facilities referred to as "breakbulk terminals." Of the total
facilities, 372 were owned and 201 were leased, generally for terms of three
years or less. The number of loading spaces, a measure of freight handling
capacity, totaled 15,258 at year end 1993, of which 13,007 were at owned
facilities and 2,251 were at leased facilities. All significant leased and
owned facilities were being utilized at year end 1993, and are adequate to meet
current needs.
The 29 major breakbulk terminals, all of which are owned by Roadway
Express, are located in strategic locations throughout the continental United
States. These facilities, averaging 87,000 square feet, range in size from
31,000 to 220,000 square feet.
The general offices are located in the company-owned headquarters building
in Akron, Ohio. Limited additional general office space is located in nearby
leased facilities. Divisional offices are located throughout the United
States, generally in office space at company-owned terminal facilities.
The investment by Roadway Express in its revenue vehicle fleet
represents 58% of the investment in revenue vehicles by the registrant and its
subsidiaries. At the end of 1993, the average age of the Roadway Express
intercity tractors was 5.3 years and that of the intercity trailers was 6.4
years. There is sufficient capacity to meet normal requirements. Leased
equipment may be utilized to meet peak demands.
- 3 -
<PAGE> 4
Additional information concerning Roadway Express is set forth in the
first paragraph of the discussion on page 6 of the registrant's Annual Report
to Shareholders for the year ended December 31, 1993, and is incorporated
herein by reference.
Roadway Package System, Inc.
As of December 31, 1993, Roadway Package System operated 271 terminals,
including 21 hub facilities. Forty-three of the terminals, 17 of which are hub
facilities, are owned and 228 terminals, including the other four hub
facilities, are leased, generally for terms of three years or less. Twelve of
the terminals, including three hub facilities, are operated by Roadway Package
System, Ltd. in Canada. The 21 hub facilities are strategically located to
cover the geographic area served by RPS. These facilities, averaging 73,000
square feet, range in size from 18,000 to 140,000 square feet.
The general offices and information systems center are located in leased
facilities in the Pittsburgh, Pennsylvania area.
Additional information concerning Roadway Package System is set forth in
the third, fourth and thirteenth paragraphs of the discussion contained on
pages 8 through 11 of the Annual Report to Shareholders for the year ended
December 31, 1993, and is incorporated herein by reference.
Roadway Global Air, Inc.
As of December 31, 1993, Roadway Global Air, Inc. operated 51 leased air
logistic centers located in North America, Europe, Asia and Australia, and a
leased hub facility in Terre Haute, Indiana. These facilities, averaging 9,400
square feet, range in size from 1,600 to 36,000 square feet. The company's
general offices are located in leased facilities in Indianapolis, Indiana.
Viking Freight, Inc.
Viking Freight, Inc. is the parent of regional carriers Viking Freight
System, Inc., Central Freight Lines Inc., Spartan Express, Inc. and Coles
Express, Inc.
As of December 31, 1993, Viking Freight System, Inc. operated 45
terminals located in eight western states. Twenty-seven of the terminals, with
1,209 loading spaces, are owned and the remaining 18 terminals, with 451
loading spaces, are leased. The largest terminal facility, located in
Whittier, California, has 130 loading spaces and is owned by Viking Freight,
Inc. The company's general offices are located in leased facilities in San
Jose, California.
As of December 31, 1993, Central Freight Lines Inc. operated 75
terminals located in six southwestern states. Fifty-six of the terminals, with
2,724 loading spaces, are owned and the remaining 19, with 204 loading spaces,
are leased. The largest terminal, located in Dallas, Texas, has 525 loading
spaces and is owned by Central Freight Lines Inc. The company's general
offices are located in Waco, Texas in owned facilities.
- 4 -
<PAGE> 5
As of December 31, 1993, Spartan Express, Inc. operated 64 terminals
located in 16 central and southern states through two divisions: Spartan
Central and Spartan South. Twelve of the terminals, with 356 loading spaces,
are owned and the remaining 52, with 868 loading spaces, are leased. The
largest terminal, located in leased facilities in the Atlanta, Georgia area,
has 102 loading spaces. The general offices of Spartan South are located in
Greer, South Carolina in facilities owned by Spartan Express. Spartan
Central's general offices are located in leased facilities in Worthington,
Ohio.
As of December 31, 1993, Coles Express, Inc. operated 15 terminals
located in 10 northeastern states. Five of the terminals, with 127 loading
spaces, are owned and the remaining 10, with 241 loading spaces, are leased.
The largest terminal, located in Elizabeth, New Jersey, has 40 loading spaces
and is leased by Coles Express. The company's general offices are located in
Bangor, Maine in owned facilities.
Roberts Transportation Services, Inc.
The company's general offices are located in Akron, Ohio in facilities
owned by its principal operating subsidiary, Roberts Express, Inc. Terminal
facilities are not required, due to the exclusive use service provided.
Roadway Logistics Systems, Inc.
The company's general offices are located in Akron, Ohio in leased
facilities.
Item 3. - Legal Proceedings.
During 1989, the Internal Revenue Service (IRS) completed an examination
of the registrant's employment tax returns for the years 1985 and 1986
proposing changes in classification of certain drivers at Roadway Package
System, Inc. and subjecting the registrant to payment of approximately $5
million of certain employment taxes for those years. The registrant paid the
amounts claimed although it disagreed with the IRS position both as to
liability for and amounts of taxes claimed. Suit was filed in the United
States Court of Claims to recover the amounts paid. In 1992, the IRS completed
its examination of the registrant's 1987 through 1989 employment tax returns
and proposed additional employment taxes of approximately $27 million. Were
the IRS to propose adjustments for the years 1990 through 1993 on the same
basis as adjustments proposed for prior years, its proposed adjustments could
approximate an additional $87 million of employment taxes. Until the present
suit is resolved, the registrant cannot reasonably determine whether it has any
liability for years after 1986.
Various other 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 registrant.
Item 4. - Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter of 1993.
- 5 -
<PAGE> 6
Executive Officers of the Registrant.
<TABLE>
<S> <C>
Name and Age Present Positions and Recent Business Experience
- ------------ ------------------------------------------------
John P. Chandler, 50 Vice President-Administration and Treasurer since January 1994; previously he
served as Vice President-Administration during 1993; President of Roadway Package System
Inc. from July 1990 to December 1992 and Vice President-Finance and Administration of
Roadway Package System, Inc. through June 1990.
Joseph M. Clapp, 57 Director since 1982, and Chairman and Chief Executive Officer since January 1994;
previously he served as Chairman and President from 1987 through December 1993.
John M. Glenn, 62 Vice President and General Counsel since 1987.
Roy E. Griggs, 57 Vice President and Controller since August 1990; previously he served as Assistant
Controller.
William F. Klug, 54 Vice President-Properties and Materials Management since 1988.
Jonathan T. Pavloff, 44 Vice President-Corporate Planning since February 1991; previously he served as
President of Summit Information Systems, Inc., a company owned management information
subsidiary, from 1989 to February 1991.
A. C. Snelson, 61 Vice President-Corporate Support Services since 1985.
Daniel J. Sullivan, 47 Director since August 1990 and President and Chief Operating Officer since January 1994;
previously he served as 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 Roadway
Package System, Inc. through June 1990.
D. A. Wilson, 49 Senior Vice President-Finance and Planning, Secretary and Chief Financial Officer since
January 1994; previously he served as Senior Vice President-Finance and Planning and
Secretary since January 1993 and as Vice President-Finance and Secretary from 1989
through 1992.
</TABLE>
- 6 -
<PAGE> 7
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.
PART II
Item 5. - Market for Registrant's Common Equity and Related Stockholder
Matters.
In response to the information called for by this Item, the material set
forth under the heading "Common Stock and Dividends" on page 42 of the
registrant's Annual Report to Shareholders for the year ended December 31,
1993, is incorporated herein by reference.
Item 6. - Selected Financial Data.
In response to the information called for by this Item, the historical
data set forth for the years 1993, 1992, 1991, 1990 and 1989, and Notes (1) and
(2) on pages 40 and 41 of the registrant's Annual Report to Shareholders for
the year ended December 31, 1993, are incorporated herein by reference.
Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
In response to the information called for by this Item, the material set
forth on pages 27 through 29 of the registrant's Annual Report to Shareholders
for the year ended December 31, 1993 is incorporated herein by reference.
Item 8. - Financial Statements and Supplementary Data.
The consolidated financial statements of the registrant and its
subsidiaries set forth on pages 30 through 38 and the Report of Independent
Auditors on page 39 of the registrant's Annual Report to Shareholders for the
year ended December 31, 1993 are incorporated herein by reference.
The Report of Independent Auditors on the Financial Statement Schedules
listed in Item 14(a) is included as Exhibit 99 of this report.
The material set forth under the heading "Summary of Quarterly Results
of Operations" on page 42 of the registrant's Annual Report to Shareholders for
the year ended December 31, 1993, is incorporated herein by reference.
Item 9. - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
- 7 -
<PAGE> 8
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 11, 1994,
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, 1993, is incorporated herein
by reference.
In response to the information called for by Item 405 of Regulation S-K,
the information set forth in the last sentence of footnote (a) to the table
under the heading "Principal Holders of Common Stock on February 28, 1994", and
the last paragraph set forth under the heading "Ownership of Company Common
Stock by Management", in the registrant's proxy statement for the annual
meeting of shareholders to be held on May 11, 1994, which will be filed
pursuant to Regulation 14A with the Securities and Exchange Commission, 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 11, 1994, 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 11, 1994, 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, 1994," including the notes thereto, the material set forth under the
heading "Information About Nominees for Directors," including the notes thereto
and the material set forth under the heading "Ownership of Company Common Stock
by Management," including the notes thereto, in the registrant's proxy
statement for the annual meeting of shareholders to be held on May 11, 1994,
which will be filed pursuant to Regulation 14A with the Securities and Exchange
Commission, is incorporated herein by reference.
Item 13. - Certain Relationships and Related Transactions.
None.
- 8 -
<PAGE> 9
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 1993--A
report on Form 8-K dated November 12, 1993 was filed under
Item 5, Other Materially Important Events, to announce
certain management changes and the authorization by the
registrant's board of directors to purchase up to $30
million of the registrant's common stock during 1994 for
corporate requirements.
(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.
- 9 -
<PAGE> 10
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 SERVICES, INC.
<TABLE>
<S> <C>
Date March 9, 1994 By JOSEPH M. CLAPP
-------------- ------------------------------------
Joseph M. Clapp, Chairman and
Chief Executive Officer
Date March 9, 1994 By D. A. WILSON
-------------- ------------------------------------
D. A. Wilson, Senior Vice President-
Finance and Planning, Secretary and
Chief Financial Officer
Date March 9, 1994 By ROY E. GRIGGS
-------------- ------------------------------------
Roy E. Griggs,
Vice President and Controller
</TABLE>
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.
ROADWAY SERVICES, INC.
<TABLE>
<S> <C>
Date March 9, 1994 By G. B. BEITZEL
-------------- ------------------------------------
G. B. Beitzel, Director
Date March 9, 1994 By R. A. CHENOWETH
-------------- ------------------------------------
R. A. Chenoweth, Director
Date March 9, 1994 By JOSEPH M. CLAPP
-------------- ------------------------------------
Joseph M. Clapp, Director
Date March 9, 1994 By CHARLES R. LONGSWORTH
-------------- ------------------------------------
Charles R. Longsworth, Director
Date March 9, 1994 By ROBERT E. MERCER
-------------- ------------------------------------
Robert E. Mercer, Director
Date March 9, 1994 By DANIEL J. SULLIVAN
-------------- ------------------------------------
Daniel J. Sullivan, Director
</TABLE>
- 10 -
<PAGE> 11
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) (1) AND (2), AND 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1993
ROADWAY SERVICES, INC.
AKRON, OHIO
- 11 -
<PAGE> 12
FORM 10-K--ITEM 14(a) (1) AND (2)
ROADWAY SERVICES, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements, included in the registrant's
Annual Report to Shareholders for the year ended December 31, 1993, are
incorporated by reference in Item 8:
Consolidated Balance Sheet--December 31, 1993 and 1992--pages 30 and 31
Statement of Consolidated Income--Years ended December 31, 1993,
1992 and 1991--page 32
Statement of Consolidated Earnings Reinvested in the Business--
Years ended December 31, 1993, 1992 and 1991--page 32
Statement of Consolidated Cash Flows--Years ended December 31, 1993,
1992 and 1991--page 33
Notes to Consolidated Financial Statements--December 31, 1993--
pages 34 through 38
The following consolidated financial statement schedules of Roadway Services,
Inc. and subsidiaries are included in Item 14(d):
Schedule I-Marketable Securities-Other Investments
Schedule V-Property, Plant and Equipment
Schedule VI-Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
Schedule VIII-Valuation and Qualifying Accounts
Schedule X-Supplementary Income Statement Information
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.
- 12 -
<PAGE> 13
SCHEDULE I-MARKETABLE SECURITIES-OTHER INVESTMENTS
ROADWAY SERVICES, INC. AND SUBSIDIARIES
December 31, 1993
(dollars in thousands)
<TABLE>
<S> <C> <C> <C> <C>
COL.A COL.B COL.C COL.D COL.E
Number of Market Amount at which Each
Shares or Value of Portfolio of Equity
NAME OF ISSUER AND TITLE OF EACH ISSUE Units-Principal Cost of Each Issue Security Issues and
Amount of Each Issue at Balance Each Other Security
Bonds and Notes Sheet Date Issue Carried in the
Balance Sheet
MARKETABLE SECURITIES
U.S. government obligations $83,859 $83,943 $83,967 $83,943
</TABLE>
<PAGE> 14
SCHEDULE V-PROPERTY, PLANT AND EQUIPMENT
ROADWAY SERVICES, INC. AND SUBSIDIARIES
Years Ended December 31, 1993, 1992 and 1991
(dollars in thousands)
<TABLE>
<CAPTION>
COL.A COL.B COL.C COL.D COL.E COL.F
Balance at Beginning Additions at Other Changes-Add Balance at End
CLASSIFICATION of Period Cost Retirements (Deduct)-Describe of Period
<S> <C> <C> <C> <C> <C>
1993
Land $ 130,605 $ 15,268 $ 1,746 $ 351 (A)
28,216 (B) $ 172,694
Structures 476,102 60,949 2,732 2,349 (A)
59,305 (B) 595,973
Revenue equipment 971,621 114,573 11,448 (674)(A)
31,928 (B) 1,106,000
Other operating equipment 466,123 118,770 23,861 (2,026)(A)
6,516 (B) 565,522
---------- -------- ------- -------- ----------
$2,044,451 $309,560 $39,787 $125,965 $2,440,189
========== ======== ======= ======== ==========
1992
Land $ 120,280 $ 9,186 $ 3,008 $ 4,147 (B) $ 130,605
Structures 430,862 70,645 1,418 (27,940)(A)
3,953 (B) 476,102
Revenue equipment 901,110 75,921 8,527 (528)(A)
3,645 (B) 971,621
Other operating equipment 398,159 55,321 16,845 28,468 (A)
1,020 (B) 466,123
---------- -------- ------- -------- ----------
$1,850,411 $211,073 $29,798 $ 12,765 $2,044,451
========== ======== ======= ======== ==========
1991
Land $ 108,777 $ 11,274 $ 559 $ 788 (A) $ 120,280
Structures 397,140 70,767 3,797 (33,248)(A) 430,862
Revenue equipment 855,221 56,491 10,544 (58)(A) 901,110
Other operating equipment 317,114 64,437 15,910 32,518 (A) 398,159
---------- -------- ------- -------- ----------
$1,678,252 $202,969 $30,810 $ -0- $1,850,411
========== ======== ======= ======== ==========
</TABLE>
(A) Reclassifications.
(B) Assets from business acquisitions.
<PAGE> 15
SCHEDULE VI-ACCUMULATED DEPRECIATION,
DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
ROADWAY SERVICES, INC. AND SUBSIDIARIES
Years Ended December 31, 1993, 1992 and 1991
(dollars in thousands)
<TABLE>
<CAPTION>
COL.A COL.B COL.C COL.D COL.E COL.F
Balance at Additions Charged Other Changes-Add Balance at End
DESCRIPTION Beginning To Costs and Retirements (Deduct)-Describe of Period
of Period Expenses
<S> <C> <C> <C> <C> <C>
(A)
1993
Structures $ 190,358 $ 30,716 $ 991 $ 337 $ 220,420
Revenue equipment 690,402 83,369 8,771 (241) 764,759
Other operating equipment 268,031 83,147 22,287 (96) 328,795
---------- -------- --------- ------- ---------
$1,148,791 $197,232 $32,049 $ -0- $1,313,974
========== ======== ========= ======= ==========
1992
Structures $ 165,860 $ 24,745 $ 251 $ 4 $ 190,358
Revenue equipment 621,664 75,782 6,541 (503) 690,402
Other operating equipment 210,693 69,760 12,921 499 268,031
---------- -------- ------- ----- ----------
$ 998,217 $170,287 $19,713 $ -0- $1,148,791
========== ======== ======= ===== ==========
1991
Structures $ 145,803 $ 23,082 $ 3,029 $ 4 $ 165,860
Revenue equipment 553,614 74,548 6,300 (198) 621,664
Other operating equipment 168,285 57,039 14,825 194 210,693
---------- -------- ------- ----- ----------
$ 867,702 $154,669 $24,154 $ -0- $ 998,217
========== ======== ======= ===== ==========
</TABLE>
(A) Reclassifications.
<PAGE> 16
SCHEDULE VIII-VALUATION AND QUALIFYING ACCOUNTS
ROADWAY SERVICES, INC. AND SUBSIDIARIES
Years Ended December 31, 1993, 1992 and 1991
(dollars in thousands)
<TABLE>
<CAPTION>
COL.A COL.B COL.C COL.D COL.E
ADDITIONS
DESCRIPTION Balance at Beginning (1) (2) Deductions-Describe Balance at End
of Period Charged to Cost Charged to Other of Period
and Expenses Accounts-Describe
<S> <C> <C> <C> <C> <C>
(A)
1993
Allowance for uncollectible
accounts $10,200 $12,576 $ 486 (B) $11,757 $11,505
1992
Allowance for uncollectible
accounts $ 7,457 $11,848 $ 145 (B) $ 9,250 $10,200
1991
Allowance for uncollectible
accounts $ 6,868 $13,064 $ -0- $12,475 $ 7,457
</TABLE>
(A) Uncollectible accounts written off, net of recoveries.
(B) Additions from business acquisitions.
<PAGE> 17
SCHEDULE X-SUPPLEMENTARY INCOME STATEMENT INFORMATION
ROADWAY SERVICES, INC. AND SUBSIDIARIES
Years Ended December 31, 1993, 1992 and 1991
(dollars in thousands)
<TABLE>
<CAPTION>
COL.A COL.B
ITEM CHARGED TO COSTS AND EXPENSES
<S> <C> <C> <C>
1993 1992 1991
---- ---- ----
Maintenance and repairs $165,162 $151,297 $139,696
Amortization of intangible assets NOTE A NOTE A NOTE A
Taxes other than payroll and
income taxes:
Fuel $ 59,036 $ 50,596 $ 47,017
Vehicle license 18,759 16,103 14,921
Property and other 38,147 29,567 26,521
-------- -------- --------
$115,942 $ 96,266 $ 88,459
Royalties NONE NONE NONE
Advertising costs NOTE A NOTE A NOTE A
</TABLE>
Note A - Not presented as such amounts are less than 1% of total revenues.
- 17 -
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<S> <C>
3.1 Restated Amended Articles of Incorporation of the Registrant
(filed as Exhibit 4(a) to Post-Effective Amendment No. 1 to Registration
Statement No. 33-44502 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).
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 Roadway Services, Inc. Long-Term Stock Award Incentive Plan (as Amended and Restated
December 1992) (filed as Exhibit 10.1 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992, and incorporated herein by reference).
*10.2 Restricted Book Value Shares Plan for Roadway Services, Inc. and Certain Operating
Companies (as Amended and Restated as of January 13, 1994) (filed as Exhibit 4(c) to
Post-Effective Amendment No. 3 to Registration Statement No. 33-44502 and
incorporated herein by reference).
*10.3 Roadway Services, Inc. Directors' Deferred Fee Plan (filed as Exhibit 10.5 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1990,
and incorporated herein by reference).
*10.4 Roadway Services, Inc. Nonemployee Directors' Stock Plan (filed as Exhibit 4(c) to
Registration Statement No. 33-44757 and incorporated herein by reference).
*10.5 Roadway Services, Inc. Retirement Plan for Nonemployee Directors (as Amended as of
February 10, 1993) (filed as Exhibit 10.5 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1992, and incorporated herein by
reference).
*10.6 Written description of Officers' Incentive Compensation Plan.
*10.7(a) Roadway Services, Inc. Excess Plan effective January 1, 1993.
*10.7(b) Roadway Services, Inc. 401(a)(17) Benefit Plan effective January 1, 1993.
*10.7(c) Roadway Services, Inc. Administrative Document for Excess Plan and 401(a)(17) Benefit
Plan effective January 1, 1993.
</TABLE>
________________________________
* Management contract or compensatory plan or arrangement required to
be filed as an exhibit pursuant to Item 14(c) of this report.
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<S> <C>
13 Annual Report to Shareholders for the year ended December 31,
1993.
21 Significant Subsidiaries of the Registrant.
23 Consent of Ernst & Young.
99 Report of Independent Auditors on Financial Statement Schedules.
</TABLE>
<PAGE> 1
Exhibit 10.6
DESCRIPTION OF OFFICERS' INCENTIVE COMPENSATION
Officers are assigned earnings allocation factors related to their
responsibility. The amount of incentive compensation depends on the Company's
attainment of applicable standards. Performance above or below the standards
affects incentive compensation accordingly. An officer shall receive 100% of
his allocation in cash unless he elects to take a portion in the form of
Restricted Book Value Shares pursuant to an election procedure established by
the Company.
Subject to the conditions set forth below, approximately 75% of the cash
portion of the officer's allocation shall be estimated and paid as soon as
possible after January 1 of the year following the year for which the incentive
compensation was calculated (the Plan Year); and the balance of the cash and
any Restricted Book Value Shares shall be distributed at the Company's
convenience after RSI's independent auditors certify the total amount of
incentive compensation payable, but in no case later than March 16 of the year
after the Plan Year. In November 1993, the Company's Board of Directors
amended the 1993 Officers' Incentive Compensation Plan to provide that
approximately 75% of the officer's allocation be paid in cash on December 27,
1993, notwithstanding the provisions in effect that would otherwise create
conditions precedent to payment.
Notwithstanding the provision requiring completion of service in the Company's
employ for the full Plan Year, if the officer is not in the Company's employ on
December 31 of the Plan Year, the officer shall be allocated a portion (based
upon full weeks of service during the Plan Year) of the amount of his officer's
allocation that would otherwise have been earned for a full year performance if
any of the events of termination of employment described in Items (a), (b), (c)
and (d) below (including any conditions applicable to such events) have
occurred during the Plan Year; but the officer shall be allocated his entire
officer's allocation if his employment has been terminated pursuant to the
event described in Item (e) below. Any amounts shall then be paid in the
manner described above. The events of termination referred to above in this
paragraph are as follows:
(a) Death;
(b) Disability requiring retirement from gainful employment, provided
that the terms of Items (d)(ii) and (iii) below are complied with,
unless waived by the Company's Board of Directors;
(c) Retirement at or after the officer's normal retirement date provided
the terms of Items (d)(i), (ii) and (iii) below are complied with,
unless waived by the Company's Board of Directors;
(d) Termination of employment for reasons other than as set forth in the
preceding Items (a), (b), (c) or Item (e) below, provided that, in
each such case, such termination shall have occurred under such
circumstances that the Board of Directors shall determine that the
officers acted at all times in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of
the Company; and upon condition that he execute an agreement
obligating him:
(i) not to accept employment with or render service in any
manner to a competitor of the Company for the period ending
with the distribution in full of 100% of the cash portion
of the officer's allocation;
<PAGE> 2
(ii) not to disclose to anyone confidential and secret
information that is a competitive asset of the Company,
including, without limitation, (1) customer information
such as names, addresses, sales histories, purchasing
habits, credit status and pricing levels, (2) prospective
customer information and lists, (3) product and system
specifications, schematics, designs and concepts developed
by the Company, (4) personnel data, (5) Company policy and
procedural manuals and memoranda, and (6) other
confidential information used by the Company to conduct its
business; and
(iii) to deliver to the Company at the time of his termination of
employment all originals and copies of documents of every
kind and nature received by him in the course of his
employment with the Company which are in his care, custody
and control, except only such documents as are necessary to
evidence rights and obligations after the date of
termination.
(e) Termination of employment initiated by the Company for reasons other
than as set forth in Item (a), (b) or (c) above, provided that, in
each case, such termination shall have occurred under such
circumstances that the Board of Directors shall determine that the
officer acted at all times in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of
the Company and upon condition that he execute an agreement
obligating him to comply with at least the provisions of Items
(d)(ii) and (iii) above.
In the event the officer's employment terminates prior to December 31 of the
Plan Year and his termination does not fall within any of the events (including
any of the conditions applicable to such events, set forth in Items (a), (b),
(c), (d) or (e) above) then the officer shall not receive any part of his
officer's allocation of incentive compensation for the Plan Year in question.
<PAGE> 1
Exhibit 10.7(a)
ROADWAY SERVICES, INC.
EXCESS PLAN
-----------
Roadway Services, Inc. (the "Company") hereby establishes the Roadway
Services, Inc. Excess Plan. The purpose of this Excess Plan is to provide to
certain of the employees of the Company and of certain other Employers benefits
they would receive under the terms of certain defined benefit pension plans of
the Controlled Group but for the limit on the benefits payable under such
Pension Plans due to the application of Section 415 of the Code. This Excess
Plan includes the Roadway Services, Inc. Administrative Document for Excess
Plan and 401(a)(17) Benefit Plan (the "Administrative Document"), which is
incorporated herein by reference.
ARTICLE I
DEFINITIONS
-----------
1.1. Generally
---------
The following words and phrases shall have the same meanings as specified in
the applicable Pension Plan, as it may be amended from time to time, unless the
context clearly requires otherwise:
"Actuarial (or Actuarially) Equivalent"
"Actuary"
"Code"
"Employee"
"Pension Commencement Date"
"Plan Year"
<PAGE> 2
2
The following words and phrases shall have the same meaning as specified in
the Administrative Document, as it may be amended from time to time, unless the
context clearly requires otherwise:
"Board"
"Committee"
"Controlled Group" or "Controlled Group Members"
"Effective Date"
"Excess Plan"
"401(a)(17) Benefit Plan"
"Plans"
In addition, for purposes of this Excess Plan, the following words and
phrases shall have the meanings hereinafter indicated unless the context
clearly indicates otherwise:
1.2. Account
-------
"Account" means the record maintained in accordance with Article III by the
Company for each Participant.
1.3. Accrued Benefit
---------------
"Accrued Benefit" of a Participant as of any date, hereinafter called an
"accrual date," equals the amount of Excess Retirement Benefit to which the
Participant would be entitled under Section 2.1 if he terminated his employment
with the Controlled Group on the accrual date.
1.4. Employer
--------
"Employer" means the Company and any other Controlled Group Member that
adopts this Excess Plan in accordance with Section 7.7 of the Administrative
Document.
<PAGE> 3
3
1.5. Excess Retirement Benefit
-------------------------
"Excess Retirement Benefit" means the monthly benefit payable to or with
respect to a Participant and/or his Spouse under Article II.
1.6. Participant
-----------
"Participant" means an Employee who (i) is participating
in one or more Pension Plans whose benefits thereunder are limited by
Section 415 of the Code and (ii) who retires from an Employer on or after
the Effective Date.
1.7. Pension Plan
------------
"Pension Plan" means, with respect to any Participant, the defined benefit
pension plan(s) specified on Exhibit A hereto (which is incorporated herein by
reference) in which he participates.
1.8. Spouse
------
Spouse shall mean the deceased Participant's surviving spouse if such person
married such Participant at least one (1) year prior to his death.
1.9. Valuation Date
--------------
"Valuation Date" shall mean the last day of each calendar year or such other
dates as may be established by the Company.
<PAGE> 4
4
ARTICLE II
EXCESS RETIREMENT BENEFITS
--------------------------
2.1. Amount of Benefit
-----------------
(a) Participants in a Single Pension Plan. The Excess Retirement Benefit
-------------------------------------
payable to or with respect to a Participant for any month of any Plan Year
shall be an amount equal to the excess, if any, of (i) the amount of the
monthly benefit, expressed as a single life annuity commencing as of the
Participant's Pension Commencement Date, or, if the Participant is married on
his Pension Commencement Date, expressed as a 100% joint and survivor annuity
in an Actuarially Equivalent amount commencing as of the Participant's Pension
Commencement Date, that would be payable to or with respect to the Participant
under the Pension Plan if the Pension Plan did not contain limitations pursuant
to Section 415 of the Code, over (ii) the amount of the monthly benefit payable
on the same basis to or with respect to the Participant under such Pension Plan
for such month. Such Excess Retirement Benefit (1) shall be reduced to reflect
any post-retirement increases in monthly benefits payable to the Participant
under such Pension Plan by reason of increases in the limits under Section 415
of the Code, and (2) shall reflect any adjustments under such Pension Plan
because of the Participant's determination not to elect to waive any qualified
pre-retirement survivor annuity.
(b) Participants in Multiple Pension Plans. If a person has been a
--------------------------------------
Participant in more than one Pension Plan, his
<PAGE> 5
5
Excess Retirement Benefit for any month of any Plan Year shall be an amount
equal to the excess, if any, of (i) the largest amount of monthly benefits to
which he or his Beneficiary would be entitled under any of the Pension Plans
for such Plan Year if the Pension Plans did not contain limitations pursuant to
Section 415 of the Code, over (ii) the amount of monthly benefits in fact
payable to the Participant or his Beneficiary under all of the Pension Plans
for such month, and computed and adjusted as provided in Section 2.1(a).
(c) Pre-retirement Survivor Annuity. If a married Participant dies before
-------------------------------
his Pension Commencement Date, and has a Spouse entitled to a qualified
pre-retirement survivor annuity under any Pension Plan, such Spouse shall
receive a pre-retirement survivor annuity based on the Excess Retirement
Benefit computed and adjusted as provided in Section 2.1(a) and (b) to which
the Participant would be entitled. Such pre-retirement and survivor annuity
will be payable at the same time and in the same manner as the qualified
pre-retirement survivor annuity.
2.2. Manner and Time of Payment
--------------------------
(a) Manner of Payment. The Excess Retirement Benefit in the amount
-----------------
determined from time to time under Section 2.1 shall be payable monthly to a
Participant for the life of the Participant, commencing as of the Participant's
Pension Commencement Date; provided, however, for a married Participant, the
Excess Retirement Benefit, in an Actuarially Equivalent
<PAGE> 6
6
amount, shall be payable monthly to the Participant as an annuity for the life
of the Participant, with a survivor annuity for the life of the Spouse, which
is one hundred percent (100%) of the amount of the annuity payable during the
joint lives of the Participant and the Spouse.
(b) Time of Payment.
---------------
(i) The first monthly payment of an Excess Retirement Benefit to a retired
Participant entitled to such benefit shall be payable as of the first day of
the first calendar month after such Participant shall have become entitled
thereto pursuant to the provisions of the Pension Plan and this Excess Plan,
and each subsequent monthly payment of such benefit shall be payable as of the
first day of each calendar month thereafter during his lifetime, ceasing with
the payment made as of the first day of the calendar month in which the death
of such Participant occurs. Any survivorship benefit shall be paid in the same
manner, beginning the month following the month during which the death of such
retired Participant occurs and continuing until such Spouse dies.
(ii) The Excess Retirement Benefit of any retired Participant receiving a
retirement benefit shall terminate as of the date of his re-employment if such
retired Participant is re-employed by an Employer and, upon his subsequent
retirement pursuant to the provisions of the Pension Plan after any period of
such re-employment, such Participant shall thereupon be eligible for the Excess
Retirement Benefit then in effect,
<PAGE> 7
7
pursuant to the provisions of this Excess Plan, with such adjustments in the
amount of such benefit as may be necessary to reflect actuarially the value of
any Excess Retirement Benefit previously paid such Participant under this
Excess Plan.
2.3. Liability for Payment
---------------------
The Company shall pay the Excess Retirement Benefit to the Participant
and/or his Beneficiary.
2.4. Eligibility for Benefit
-----------------------
Each Participant shall be eligible for an Excess Retirement Benefit.
2.5. Payment to Guardian
-------------------
If a benefit payable hereunder is payable to a minor, to a person declared
incompetent or to a person incapable of handling the disposition of his
property, the Company may direct payment of such benefit to the guardian, legal
representative or person having the care and custody of such minor, incompetent
or person. The Company may require such proof of incompetency, minority,
incapacity or guardianship as it may deem appropriate prior to distribution of
the benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit.
2.6. Effect on other Benefits
------------------------
Benefits payable to or with respect to a Participant under the Pension
Plans, the 401(a)(17) Benefit Plan or any other Company-sponsored (qualified or
nonqualified) plan, if any, are in addition to those provided under this Excess
Plan.
<PAGE> 8
8
2.7. Effect of Termination of Excess Plan
------------------------------------
Notwithstanding anything in this Excess Plan to the contrary, in the event
of a termination of the Excess Plan, the Company, in its sole and absolute
discretion, shall have the right to change the time and/or manner of
distribution of Participants' Excess Retirement Benefits, including, without
limitation, by providing for the satisfaction of the Company's obligation to
pay Excess Retirement Benefits by payment of a single lump sum payment to each
Participant or Spouse then entitled to an Excess Retirement Benefit in an
amount equal to the Actuarially Equivalent present value of such Excess
Retirement Benefit, provided that the Company may not diminish the value of the
Excess Retirement Benefit payable to any Participant or Spouse hereunder.
ARTICLE III
PARTICIPANT'S ACCOUNT
---------------------
3.1. Generally
---------
The Company, through its accounting records, shall establish an Account for
each Participant to reflect the value of the Participant's Excess Retirement
Benefit under this Excess Plan. The Accounts established hereunder shall be
segregated from other accounts on the books and records of the Company as a
contingent liability of the Company to Participants. As of each Valuation
Date, the Company shall credit each Participant's Account with the increase in
the Actuarially Equivalent present value of the Participant's Accrued Benefit
since the preceding
<PAGE> 9
9
Valuation Date and shall debit from the Participant's Account any decrease in
such Actuarially Equivalent present value and the amount of any payments of an
Excess Retirement Benefit since the preceding Valuation Date. The amount of
such credits and/or debits shall be determined by the Company.
3.2. Limitation on Rights of Participants and Spouses
------------------------------------------------
The establishment of each Participant's Account hereunder is solely for the
Company's convenience in administering the Excess Plan. Amounts "credited" to
the Account shall continue for all purposes to be part of the general funds of
the Company. Each Participant's Account is merely a record of the value of the
Company's unsecured contractual obligation to the Participant and his Spouse
under the Excess Plan.
ARTICLE IV
VESTING
-------
Anything herein to the contrary notwithstanding, except as otherwise
provided in Section 5.3(b) of the Administrative Document or Article VI of the
Administrative Document, Excess Retirement Benefits of Participants who are
vested under the Pension Plan shall at all times be fully vested.
ARTICLE V
METHOD OF FUNDING
-----------------
The obligation of the Company hereunder shall be a general unfunded and
unsecured obligation of the Company only. It is not intended hereby to
establish a fund to provide for the payment of Excess Retirement Benefits or to
create a trust or
<PAGE> 10
10
lien (equitable or otherwise) for the benefit of any Participant, Spouse or any
other person.
IN WITNESS WHEREOF, the Roadway Services, Inc. Excess Plan is executed on
behalf of the Company by its authorized officer this 21st day of February,
1994, effective as of the Effective Date.
ROADWAY SERVICES, INC.
By: D. A. WILSON
----------------------
Senior Vice President-
Finance and Planning
<PAGE> 11
EXHIBIT A
---------
1. ROADWAY SERVICES, INC.
PENSION PLAN AND TRUST (AMENDED AND RESTATED)
<PAGE> 1
Exhibit 10.7(b)
ROADWAY SERVICES, INC.
401(a)(17) BENEFIT PLAN
-----------------------
Roadway Services, Inc. (the "Company") hereby establishes the
Roadway Services, Inc. 401(a)(17) Benefit Plan. The purpose of this 401(a)(17)
Benefit Plan is to provide to certain of the highly compensated employees of
the Company and of certain other Employers benefits they would receive under
the terms of certain defined benefit pension plans of the Controlled Group but
for the limit on the amount of compensation that may be taken into account
under such Pension Plans due to the application of Section 401(a)(17) of the
Code. This 401(a)(17) Benefit Plan includes the Roadway Services, Inc.
Administrative Document for Excess Plan and 401(a)(17) Benefit Plan (the
"Administrative Document"), which is incorporated herein by reference.
ARTICLE I
DEFINITIONS
-----------
1.1. Generally
---------
The following words and phrases shall have the same meanings
as specified in the applicable Pension Plan, as it may be amended from time to
time, unless the context clearly requires otherwise:
"Actuarial (or Actuarially) Equivalent"
"Actuary"
"Code"
<PAGE> 2
2
"Employee"
"Pension Commencement Date"
"Plan Year"
The following words and phrases shall have the same meaning as
specified in the Administrative Document, as it may be amended from time to
time, unless the context clearly requires otherwise:
"Board"
"Committee"
"Controlled Group" or "Controlled Group Members"
"Effective Date"
"Excess Plan"
"401(a)(17) Benefit Plan"
"Plans"
In addition, for purposes of this 401(a)(17) Benefit Plan, the
following words and phrases shall have the meanings hereinafter indicated
unless the context clearly indicates otherwise:
1.2. Account
-------
"Account" means the record maintained in accordance with
Article III by the Company for each Participant.
1.3. Accrued Benefit
---------------
"Accrued Benefit" of a Participant as of any date, hereinafter
called an "accrual date," equals the amount of 401(a)(17) Benefit to which the
Participant would be entitled under Section 2.1 if he terminated his employment
with the Controlled Group on the accrual date.
1.4. Employer
--------
"Employer" means the Company and any other Controlled
Group Member that adopts this 401(a)(17) Benefit Plan in accordance with
Section 7.7 of the Administrative Document.
<PAGE> 3
3
1.5. 401(a)(17) Benefit
------------------
"401(a)(17) Benefit" means the monthly benefit payable to or
with respect to a Participant and/or his Spouse under Article II.
1.6. Participant
-----------
"Participant" means an Employee who (i) is participating in
one or more Pension Plans whose benefits thereunder are limited by Section
401(a)(17) of the Code, (ii) is selected by the Company for participation in
this 401(a)(17) Benefit Plan, and (iii) retires from an Employer on or after
the Effective Date.
1.7. Pension Plan
------------
"Pension Plan" means, with respect to any Participant, the
defined benefit pension plan(s) specified on Exhibit A hereto (which is
incorporated herein by reference) in which he participates.
1.8. Spouse
------
"Spouse" shall mean the deceased Participant's surviving
spouse if such person married such Participant at least one (1) year prior to
his death.
1.9. Valuation Date
--------------
"Valuation Date" shall mean the last day of each calendar year
or such other dates as may be established by the Company.
<PAGE> 4
4
ARTICLE II
401(a)(17) BENEFITS
-------------------
2.1. Amount of Benefit
-----------------
(a) Participants in a Single Pension Plan. The 401(a)(17)
-------------------------------------
Benefit payable to or with respect to a Participant for any month of any Plan
Year shall be an amount equal to the excess, if any, of (i) the amount of the
monthly benefit, expressed as a single life annuity commencing as of the
Participant's Pension Commencement Date, or, if the Participant is married on
his Pension Commencement Date, expressed as a 100% joint and survivor annuity
in an Actuarially Equivalent amount commencing on the Participant's Pension
Commencement Date, that would be payable to or with respect to the Participant
under the Pension Plan if the Pension Plan did not contain limitations pursuant
to Sections 415 and 401(a)(17) of the Code, over (ii) the sum of (A) the amount
of the monthly benefit payable on the same basis to or with respect to the
Participant under such Pension Plan for such month and (B) the amount payable
to or with respect to the Participant under the Excess Plan for such month.
Such 401(a)(17) Benefit shall reflect any adjustments under such Pension Plan
because of the Participant's determination not to elect to waive any qualified
pre-retirement survivor annuity.
(b) Participants in Multiple Pension Plans. If a person has
--------------------------------------
been a Participant in more than one Pension Plan, his 401(a)(17) Benefit for
any month of any Plan Year shall be an amount equal to the excess, if any, of
(i) the largest amount of monthly benefits to which he or his Beneficiary would
be entitled
<PAGE> 5
5
under any of the Pension Plans for such Plan Year if the Pension Plans did not
contain limitations pursuant to Sections 401(a)(17) and 415 of the Code, over
(ii) the amount of benefits in fact payable to the Participant or his
Beneficiary under all of the Pension Plans and the Excess Plan for such month,
and computed and adjusted as provided in Section 2.1(a).
(c) Pre-retirement Survivor Annuity. If a married
-------------------------------
participant dies before his Pension Commencement Date, and has a Spouse
entitled to a qualified pre-retirement survivor annuity under any Pension Plan,
such Spouse shall receive a pre-retirement survivor annuity based on the
401(a)(17) Benefit computed and adjusted as provided in Section 2.1(a) and (b)
to which the Participant would be entitled. Such pre-retirement survivor
annuity shall be payable at the same time and in the same manner as the
qualified pre-retirement survivor annuity.
2.2. Manner and Time of Payment
--------------------------
(a) Manner of Payment. The 401(a)(17) Benefit in the amount
-----------------
determined from time to time under Section 2.1 shall be payable monthly to a
Participant for the life of the Participant, commencing as of the Participant's
Pension Commencement Date; provided, however, for a married Participant, the
401(a)(17) Benefit, in an Actuarially Equivalent amount, shall be payable
monthly to the Participant as an annuity for the life of the Participant, with
a survivor annuity for the life of the Spouse, which is one hundred percent
(100%) of the amount of the annuity payable during the joint lives of the
Participant and the Spouse.
<PAGE> 6
6
(b) Time of Payment.
---------------
(i) The first monthly payment of a 401(a)(17) Benefit to
a retired Participant entitled to such benefit shall be payable as of the first
day of the first calendar month after such Participant shall have become
entitled thereto pursuant to the provisions of the Pension Plan and this
401(a)(17) Benefit Plan, and each subsequent monthly payment of such benefit
shall be payable as of the first day of each calendar month thereafter during
his lifetime, ceasing with the payment made as of the first day of the calendar
month in which the death of such Participant occurs. Any survivorship benefit
shall be paid in the same manner, beginning the month following the month
during which the death of such retired Participant occurs and continuing until
such Spouse dies.
(ii) The 401(a)(17) Benefit of any retired Participant receiving a
retirement benefit shall terminate as of the date of his re-employment if such
retired Participant is re-employed by an Employer and, upon his subsequent
retirement pursuant to the provisions of the Pension Plan after any period of
such re-employment, such Participant shall thereupon be eligible for the
401(a)(17) Benefit then in effect, pursuant to the provisions of this
401(a)(17) Benefit Plan, with such adjustments in the amount of such benefit as
may be necessary to reflect actuarially the value of any 401(a)(17) Benefit
previously paid such Participant under this 401(a)(17) Benefit Plan.
<PAGE> 7
7
2.3. Liability for Payment
---------------------
The Company shall pay the 401(a)(17) Benefit to the
Participant and/or his Beneficiary.
2.4. Eligibility for Benefit
-----------------------
Each Participant shall be eligible for a 401(a)(17) Benefit.
2.5. Payment to Guardian
-------------------
If a benefit payable hereunder is payable to a minor, to a
person declared incompetent or to a person incapable of handling the
disposition of his property, the Company may direct payment of such benefit to
the guardian, legal representative or person having the care and custody of
such minor, incompetent or person. The Company may require such proof of
incompetency, minority, incapacity or guardianship as it may deem appropriate
prior to distribution of the benefit. Such distribution shall completely
discharge the Company from all liability with respect to such benefit.
2.6. Effect on other Benefits
------------------------
Benefits payable to or with respect to a Participant under the
Pension Plans, the Excess Plan or any other Company-sponsored (qualified or
nonqualified) plan, if any, are in addition to those provided under this
401(a)(17) Benefit Plan.
2.7. Effect of Termination of 401(a)(17) Benefit Plan
------------------------------------------------
Notwithstanding anything in this 401(a)(17) Benefit Plan to
the contrary, in the event of a termination of the 401(a)(17) Benefit Plan, the
Company, in its sole and absolute discretion, shall have the right to change
the time and/or manner
<PAGE> 8
8
of distribution of Participants' 401(a)(17) Benefits, including, without
limitation, by providing for the satisfaction of the Company's obligation to
pay 401(a)(17) Benefits by payment of a single lump sum payment to each
Participant or Spouse then entitled to a 401(a)(17) Benefit in an amount equal
to the Actuarially Equivalent present value of such 401(a)(17) Benefit,
provided that the Company may not diminish the value of the 401(a)(17) Benefit
payable to any Participant or Spouse hereunder.
ARTICLE III
PARTICIPANT'S ACCOUNT
---------------------
3.1. Generally
---------
The Company, through its accounting records, shall establish
an Account for each Participant to reflect the value of the Participant's
401(a)(17) Benefit under this 401(a)(17) Benefit Plan. The Accounts
established hereunder shall be segregated from other accounts on the books and
records of the Company as a contingent liability of the Company to
Participants. As of each Valuation Date, the Company shall credit each
Participant's Account with the increase in the Actuarially Equivalent present
value of the Participant's Accrued Benefit since the preceding Valuation Date
and shall debit from the Participant's Account any decrease in such Actuarially
Equivalent present value and the amount of any payments of a 401(a)(17) Benefit
since the preceding Valuation Date. The amount of such credits and/or debits
shall be determined by the Company.
<PAGE> 9
9
3.2. Limitation on Rights of Participants and Spouses
------------------------------------------------
The establishment of each Participant's Account hereunder is
solely for the Company's convenience in administering the 401(a)(17) Benefit
Plan. Amounts "credited" to the Account shall continue for all purposes to be
part of the general funds of the Company. Each Participant's Account is merely
a record of the value of the Company's unsecured contractual obligation to the
Participant and his Spouse under the 401(a)(17) Benefit Plan.
ARTICLE IV
VESTING
-------
Anything herein to the contrary notwithstanding, except as
otherwise provided in Section 5.3(b) of the Administrative Document or Article
VI of the Administrative Document, 401(a)(17) Benefits of Participants who are
vested under the Pension Plan shall at all times be fully vested.
ARTICLE V
METHOD OF FUNDING
-----------------
The obligation of the Company hereunder shall be a general
unfunded and unsecured obligation of the Company only. It is not intended
hereby to establish a fund to provide for the payment of 401(a)(17) Benefits or
to create a trust or lien (equitable or otherwise) for the benefit of any
Participant, Spouse or any other person.
<PAGE> 10
10
IN WITNESS WHEREOF, the Roadway Services, Inc. 401(a)(17)
Benefit Plan is executed on behalf of the Company by its authorized officer
this 21st day of February, 1994, effective as of the Effective Date.
ROADWAY SERVICES, INC.
By: D. A. WILSON
---------------------
Senior Vice President-
Finance and Planning
<PAGE> 11
11
EXHIBIT A
---------
1. ROADWAY SERVICES, INC.
PENSION PLAN AND TRUST (AMENDED AND RESTATED)
<PAGE> 1
Exhibit 10.7(c)
ROADWAY SERVICES, INC.
ADMINISTRATIVE DOCUMENT FOR EXCESS PLAN
AND 401(a)(17) BENEFIT PLAN
Effective January 1, 1993
-------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
ARTICLE I DISCRETIONARY POWERS 1
ARTICLE II DEFINITIONS 2
2.1 Generally.................................. 2
2.2 Accrued Benefit............................ 2
2.3 Board...................................... 2
2.4 Controlled Group or Controlled
Group Members............................ 3
2.5 Committee.................................. 3
2.6 Effective Date............................. 3
2.7 Employers.................................. 3
2.8 Excess Plan................................ 3
2.9 Excess Retirement Benefit.................. 3
2.10 401(a)(17) Benefit......................... 3
2.11 401(a)(17) Benefit Plan.................... 4
2.12 Participant................................ 4
2.13 Pension Plan............................... 4
2.14 Plans...................................... 4
2.15 Terminated Participant..................... 4
ARTICLE III ADMINISTRATION OF THE PLANS 4
3.1 Authority and Responsibility............... 4
3.2 Reliance on Tables, Etc.................... 5
3.3 Indemnification............................ 6
3.4 Expenses................................... 6
3.5 Limitation of Actions...................... 6
ARTICLE IV CLAIMS RESPONSIBILITY AND PROCEDURES
UNDER THE PLANS 6
4.1 Committee - Organization................... 6
4.2 Administration of Claims................... 7
4.3 Claims Procedure........................... 7
4.4 Review Procedure........................... 8
ARTICLE V AMENDMENT AND TERMINATION 9
5.1 Amendment.................................. 9
5.2 Termination................................ 10
5.3 Procedure for Amendment or Termination..... 10
5.4 Withdrawal by Participating Employers...... 11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Page
ARTICLE VI INALIENABILITY 11
ARTICLE VII MISCELLANEOUS 12
7.1 Correction of Errors....................... 12
7.2 Interpretation............................. 13
7.3 Integration................................ 13
7.4 No Fiduciary Relationship Created.......... 13
7.5 No Guarantee of Employment................. 13
7.6 Severability............................... 14
7.7 Adoption by Other Employers................ 14
</TABLE>
<PAGE> 4
1
ROADWAY SERVICES, INC.
ADMINISTRATIVE DOCUMENT FOR EXCESS PLAN
AND 401(a)(17) BENEFIT PLAN
---------------------------
Roadway Services, Inc. (the "Company") hereby establishes this
Administrative Document (the "Administrative Document") to provide for the
administration of the Roadway Services, Inc. Excess Plan and the Roadway
Services, Inc. 401(a)(17) Benefit Plan. The Plans provide to certain of the
employees of the Company and of certain other Employers benefits they would not
otherwise receive under the terms of certain defined benefit pension plans of
the Controlled Group (as identified in the Excess Plan and the 401(a)(17)
Benefit Plan). The 401(a)(17) Benefit Plan and the Excess Plan provide
participants with benefits equal to the difference between the benefit amounts
calculated under the Pension Plans without regard to the limits imposed by
Sections 401(a)(17) and 415 of the Code, respectively, and the actual benefit
amounts that the Code permits to be paid under the Pension Plans. This
Administrative Document is a part of each of the Excess Plan and the 401(a)(17)
Benefit Plan.
ARTICLE I
DISCRETIONARY POWERS
--------------------
All discretionary powers granted hereunder and under the Plans shall
be exercised in a uniform nondiscriminatory manner.
<PAGE> 5
2
ARTICLE II
DEFINITIONS
-----------
2.1. Generally
---------
Unless the context or intent of the Plans (including this
Administrative Document) requires otherwise, the singular includes the plural,
the plural includes the singular, and the masculine gender includes the
feminine.
The following words and phrases shall have the same meanings as
specified in the applicable Pension Plan, as it may be amended from time to
time, unless the context clearly requires otherwise:
"Code"
"Employee"
For purposes of the Plans (including this Administrative Document),
the following words and phrases shall have the meanings hereinafter indicated
unless either the context clearly requires otherwise or a Plan provides
differently with respect to its own provisions:
2.2. Accrued Benefit
---------------
"Accrued Benefit" shall have the meanings specified in Section 1.3 of
the Excess Plan and Section 1.3 of the 401(a)(17) Benefit Plan, as applicable.
2.3. Board
-----
"Board" means the board of directors of the Company, or as
appropriate in the context of a provision of either of the Plans (including
this Administrative Document), such other body as designated by the Board.
<PAGE> 6
3
2.4. Controlled Group or Controlled Group Members
--------------------------------------------
"Controlled Group" or "Controlled Group Members" means the Company
and any and all other corporations, trades and/or businesses the employees of
which, together with the employees of the Company, are required by any of the
subsections of Section 414 of the Code to be treated as though they were
employed by a single employer.
2.5. Committee
---------
"Committee" means the committee appointed by the Company in
accordance with Article IV.
2.6. Effective Date
--------------
"Effective Date" means January 1, 1993.
2.7. Employers
---------
"Employers" means the Company and any other Controlled Group Member
that adopts or has adopted one or more of the Plans (including this
Administrative Document) in accordance with Section 7.7.
2.8. Excess Plan
-----------
"Excess Plan" means the Roadway Services, Inc. Excess Plan, of which
this Administrative Document is a part.
2.9. Excess Retirement Benefit
-------------------------
"Excess Retirement Benefit" shall have the meaning specified in
Section 1.5 of the Excess Plan.
2.10. 401(a)(17) Benefit
------------------
"401(a)(17) Benefit" shall have the meaning specified in Section 1.5
of the 401(a)(17) Benefit Plan.
<PAGE> 7
4
2.11. 401(a)(17) Benefit Plan
-----------------------
"401(a)(17) Benefit Plan" means the Roadway Services, Inc. 401(a)(17)
Benefit Plan, of which this Administrative Document is a part.
2.12. Participant
-----------
"Participant" means an Employee who is participating in one or both
of the Plans and whose participation therein has not been terminated.
2.13. Pension Plan
------------
"Pension Plan" means, with respect to any Participant, the defined
benefit pension plan(s) specified in a Plan in which he participates.
2.14. Plans
-----
"Plan" or "Plans" means either or both of the 401(a)(17) Benefit Plan
and the Excess Plan, as the context requires.
2.15. Terminated Participant
----------------------
"Terminated Participant" shall have the meaning described in
Article VI.
ARTICLE III
ADMINISTRATION OF THE PLANS
---------------------------
3.1. Authority and Responsibility
----------------------------
To the extent not otherwise provided in Article IV or the Plans, the
administration of the Plans shall be under the supervision of the Company.
Except as provided in Article IV, the Company shall have the sole and absolute
authority and responsibility for construing and interpreting the provisions of
the Plans unless otherwise specifically provided in a Plan and subject to any
applicable requirements of law.
<PAGE> 8
5
For this purpose, except as provided in Article IV or a Plan, the
Company's powers will include, but will not be limited to, the following
authority in addition to any and all other powers provided in a Plan:
(a) To establish such rules and regulations, if any, as the
Company deems necessary or proper for the efficient administration of a Plan
and for the payment of benefits under a Plan.
(b) To interpret a Plan, decide all questions concerning the
eligibility of persons to participate in a Plan, and construe any ambiguous
provision of a Plan, correct any defect, supply any omission, or reconcile any
inconsistency, in such manner and to such extent as the Company in its
discretion may determine; and any such action of the Company will be binding
and conclusive upon all Participants and Spouses.
(c) To appoint such agents, counsel, accountants, consultants and
other persons as may be required to assist in administering the Plans,
including, without limitation, employees of an Employer.
(d) To allocate and delegate its responsibilities under the Plans
and to designate committees, entities or persons, including, without
limitation, a third party administrator, to carry out any of its
responsibilities under a Plan. Any such allocation, delegation or designation
will be in writing, will be reviewed periodically by the Company, and will be
terminable upon such notice as the Company in its discretion deems reasonable
and proper under the circumstances.
3.2. Reliance on Tables, Etc.
-----------------------
In administering a Plan, the Company may, in its discretion, adopt
such actuarial tables, factors and valuation methods as it
<PAGE> 9
6
deems necessary and may rely conclusively on all tables, valuations,
certificates, opinions and reports that are furnished by accountants, counsel
or other experts employed or engaged by the Company. In addition, the Company
may rely upon information furnished to it by any other Employer.
3.3. Indemnification
---------------
The Company shall indemnify and defend to the fullest extent
permitted by law any individual acting on behalf of the Company pursuant to
this Article against all liabilities, damages, costs and expenses (including
attorneys' fees and amounts paid in settlement of any claims, in each case
approved by the Company) occasioned by any act or omission to act in connection
with a Plan, if such act or omission is in good faith.
3.4. Expenses
--------
The Company shall pay all expenses of administering the Plans,
including, without limitation, the expenses of the Committee properly incurred
in the performance of its duties under the Plans.
3.5. Limitation of Actions
---------------------
No individual acting on behalf of the Company pursuant to this
Article shall have any right to vote upon or decide any matters relating solely
to his own rights under a Plan.
ARTICLE IV
CLAIMS RESPONSIBILITY AND PROCEDURES UNDER THE PLANS
----------------------------------------------------
4.1. Committee - Organization
------------------------
The Company shall appoint a Committee to perform the duties set forth
in this Article. The Committee shall consist of two (2) or more individuals
who have accepted appointment thereto. The members of the Committee shall
serve at the discretion of the
<PAGE> 10
7
Company and may resign by delivering a written resignation to the Company.
Vacancies in the Committee arising for any reason shall be filled by the
Company, provided that any vacancy unfilled for thirty (30) days may be filled
by a majority vote of the remaining members of the Committee. The members of
the Committee shall serve without compensation.
4.2. Administration of Claims
------------------------
Notwithstanding the provisions of Article III, the resolution of
claims (including reviews of claim determinations) under the Plans shall be the
sole responsibility of the Committee and shall be resolved in accordance with
the procedures set forth in this Article. With respect to the claims and
review procedures provided in this Article, the Committee is hereby delegated
the same authority and responsibility given to the Company pursuant to Section
3.1. In addition, in determining claims under the Plans, the Committee shall
be entitled to rely on documents furnished to them to the same extent given to
the Company in Section 3.2, and shall be indemnified for actions taken in
performing the review procedures to the same extent individuals are indemnified
in Section 3.3; and the individual members of the Committee shall be limited in
their actions when deciding their rights under the Plans to the same extent
individuals are limited under Section 3.5.
4.3. Claims Procedure
----------------
(a) Any Participant or Beneficiary who believes that he is entitled
to receive a benefit under a Plan may file a written claim with the Committee
(or its delegate) on appropriate forms furnished by the Committee (or its
delegate) stating those benefits to which the Participant or Spouse believes he
is entitled.
<PAGE> 11
8
(b) Within ninety (90) days after such claim was filed (plus an
additional period of ninety (90) days if required for processing, provided that
notice of the extension of time is given to the claimant within the first
90-day period), the Committee (or its delegate) shall furnish or cause to be
furnished to the claimant either an approval or a detailed written denial of
his claim. If a claim is denied, such written denial shall be written in a
manner calculated to be understood by the claimant and will contain:
(1) The specific reason(s) for the denial of the claim;
(2) Specific reference to the provisions of the Plan on which the
denial of the claim is based;
(3) A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary;
and
(4) An explanation of the review procedure specified in Section
4.4.
(c) If a claimant does not receive any such notice of denial
within such 90-day or 180-day period, as the case may be, after the date of
filing the claim, the claim shall be deemed to have been denied in full.
4.4. Review Procedure
----------------
(a) Within sixty (60) days of the denial, either in whole or in
part, the claimant (or his duly authorized representative) may appeal such
denial by filing a written request to review his claim with the Committee on
appropriate forms furnished by the Committee. If such an appeal is so filed
within such 60-day period, the
<PAGE> 12
9
Committee will conduct a full and fair review of such claim and will mail or
deliver to the claimant a written decision of the matter based on the facts and
the pertinent provisions of the Plan within sixty (60) days after the receipt
of the request for review (unless special circumstances require an additional
sixty (60) days, in which case written notice of such extension will be given
to the claimant prior to the commencement of such extension). Such decision
will be written in a manner calculated to be understood by the claimant, will
state the specific reason(s) for the decision and the specific provisions of
the Plan on which the decision was based and will, to the extent permitted by
law, be final and binding on all interested persons. During such review the
claimant (or his authorized agent) will be given the opportunity to review the
Plan under which he is claiming benefits and any other documents pertinent
thereto and to submit issues and comments in writing.
(b) If a decision on the review is not furnished within such
60-day or 120-day period, as the case may be, the claim shall be deemed to have
been denied on review.
ARTICLE V
AMENDMENT AND TERMINATION
-------------------------
5.1 Amendment
---------
Except as limited herein, the Board has reserved, and does hereby
reserve, the right to amend any or all of the provisions of either or both of
the Plans (including this Administrative Document) at any time, either
prospectively or retroactively, without the consent of any other Employer or of
any Participant,
<PAGE> 13
10
Spouse or other person. Notwithstanding the foregoing, amendments to a Pension
Plan that affect the benefits provided under the Plans will automatically amend
either or both of the Plans (including this Administrative Document), to the
extent applicable.
5.2 Termination
-----------
The Board has reserved, and does hereby reserve, the right to
terminate either or both of the Plans (including this Administrative Document)
at any time without the consent of any other Employer or of any Participant,
Spouse or other person.
5.3. Procedure for Amendment or Termination
--------------------------------------
(a) Any such amendment or termination shall be expressed in an
instrument executed in the name of the Company by any two officers thereof upon
the order of its Board and shall become effective as of the date designated in
such instrument or, if no such date is specified, on the date of its execution.
Written notice of any amendment shall be given to the Participants as soon as
practicable after its execution. In the event of termination of either Plan,
each Participant's Accrued Benefit in such terminated Plan as of the date of
the termination shall be 100% vested as of the date of termination.
(b) Notwithstanding the foregoing provisions, no amendment or
termination of either or both of the Plans shall, without written consent of
the Participant (or, if the Participant has died, the Spouse), adversely affect
the vested rights of any Participant (or, if the Participant has died, the
Spouse) then eligible for a vested benefit under either or both of the Plans,
nor shall any amendment increase the obligations under the Plans (including
this Administrative Document), without its consent, of any corporation
<PAGE> 14
11
or other business organization that is or at any time has been an Employer
under the Plans (including this Administrative Document).
5.4. Withdrawal by Participating Employers
-------------------------------------
Any Employer (other than the Company) that adopts either or both of
the Plans may elect to withdraw separately from either or both of the Plans,
and such withdrawal shall constitute a termination of either or both of the
Plans, as the case may be, as to the withdrawing Employer; provided, however,
that such terminating Employer shall continue to be an Employer for the
purposes of the Plans (including this Administrative Document) as to
Participants or Spouses to whom such Employer owes obligations under the Plans
(including this Administrative Document). Such withdrawal and termination
shall be expressed in an instrument executed by the terminating Employer on
authority of its board of directors and shall become effective as of the date
designated in such instrument or, if no such date is specified, on the date of
its execution.
ARTICLE VI
INALIENABILITY
--------------
No right or interest of any Participant or Spouse under the Plans
shall, without the written consent of the Company, be assignable or
transferable in any manner or be subject to alienation, anticipation, sale,
pledge, encumbrance or other legal process or in any manner be liable for or
subject to the debts or liabilities of such Participant or Spouse. If the
Participant or Spouse shall attempt to or shall transfer, assign, alienate,
anticipate, sell, pledge or otherwise encumber his benefits hereunder or any
part thereof, or if by reason of his bankruptcy or
<PAGE> 15
12
other event happening at any time such benefits would devolve upon anyone else
or would not be enjoyed by him, then the Company, in its discretion, may
terminate his interest in any such benefit to the extent the Company considers
necessary or advisable to prevent or limit the effects of such occurrence.
Termination shall be effected by filing a "termination declaration" with the
Company and making reasonable efforts to deliver a copy to the Participant or
Spouse (the "Terminated Participant") whose interest is adversely affected.
As long as the Terminated Participant is alive, any benefits affected
by the termination shall be retained by the Company and, in the Company's sole
and absolute judgment, may be paid to or expended for the benefit of the
Terminated Participant, his spouse, his children or any other person or persons
in fact dependent upon him in such a manner as the Company shall deem proper.
Upon the death of the Terminated Participant, all benefits withheld from him
and not paid to others in accordance with the preceding sentence shall be paid
to the Terminated Participant's surviving spouse or, if none, to the Terminated
Participant's then living descendants, including adopted children, per stirpes.
-----------
ARTICLE VII
MISCELLANEOUS
-------------
7.1. Correction of Errors
--------------------
Any mistake in any direction, certificate, notice or other document
furnished or issued by an Employer or the Company in connection herewith may be
corrected when the mistake becomes known, and an Employer or the Company may
direct any adjustment or
<PAGE> 16
13
action that it deems practicable under the circumstances to remedy the mistake.
7.2. Interpretation
--------------
(a) The Plans (including this Administrative Document) shall be
construed and enforced according to the laws of the State of Ohio, and all
provisions hereof shall be administered according to those laws, except to the
extent pre-empted by applicable federal law.
(b) Paragraph headings have been inserted in the Plans (including
this Administrative Document) for purposes of convenience only and shall not be
used as an aid to interpretation.
7.3. Integration
-----------
The Plans (including this Administrative Document) constitute the
entire agreement of the parties, and no change, amendment or modification
hereof shall be valid and binding unless made in writing in accordance with the
provisions hereinabove set forth.
7.4. No Fiduciary Relationship Created
---------------------------------
Nothing in the Plans (including this Administrative Document) shall
constitute the creation of a trust or other fiduciary relationship between an
Employer and any Participant, Spouse or other person.
7.5. No Guarantee of Employment
--------------------------
Nothing contained in the Plans (including this Administrative
Document) shall be construed as guaranteeing future employment to Participants.
A Participant continues to be an employee of the Company, an Employer or a
Controlled Group Member solely at the will of the Company, the Employer or the
Controlled Group Member and is subject to discharge at any time, with or
without cause.
<PAGE> 17
14
7.6. Severability
------------
If any provision of the Plans (including this Administrative
Document) or the application thereof to any circumstance(s) or person(s) is
held to be invalid by a court of competent jurisdiction, the remainder of the
Plans (including this Administrative Document) and the application of such
provision to any other circumstance(s) or person(s) shall not be affected
thereby.
7.7. Adoption by Other Employers
---------------------------
Any Controlled Group Member may adopt either or both of the Plans
(including this Administrative Document) with the consent of the Board, if the
Controlled Group Member adopts or has adopted a Pension Plan and executes an
instrument evidencing its adoption of either or both of the Plans on order of
its board of directors and files a copy thereof with the Company. Such
instrument of adoption may be subject to such terms and conditions as the
Company's Board requires or approves.
IN WITNESS WHEREOF, this Administrative Document is executed on
behalf of the Company by its authorized officer this 21st day of February,
1994, effective as of the Effective Date.
ROADWAY SERVICES, INC.
By: D. A. WILSON
---------------------
Senior Vice President-
Finance and Planning
<PAGE> 1
Exhibit 13
ROADWAY SERVICES, INC.
ANNUAL REPORT 1993
<PAGE> 2
MISSION
Roadway Services, Inc., through its operating companies, is in the business of
satisfying customers by meeting their requirements for value added
transportation and logistics services, thereby creating value for our
shareholders.
bullet We will be quality driven and customer focused in pursuit of this
mission. We will be the best there is at the art and science of
satisfying the customer.
bullet We will be efficient in the use of human and other resources.
bullet We will provide our people with a challenging and satisfying work
experience.
bullet We will conduct our affairs with integrity as a responsible corporate
citizen.
<TABLE>
TABLE OF CONTENTS
<S> <C>
Financial Highlights . . . . . . . . . . . . . . 1
To Our Shareholders . . . . . . . . . . . . . . 2
Review of Operations . . . . . . . . . . . . . . 4
Glossary . . . . . . . . . . . . . . . . . . . . 26
Management's Discussion. . . . . . . . . . . . . 27
Consolidated Financial Statements. . . . . . . . 30
Notes to Consolidated Financial Statements . . . 34
Report of Independent Auditors . . . . . . . . . 39
Historical Data. . . . . . . . . . . . . . . . . 40
Summary of Quarterly Results of Operations . . . 42
Common Stock and Dividends . . . . . . . . . . . 42
Directors and Officers . . . . . . . . . . . . . 43
Corporate Information. . . . . . . . . . . . . . 44
</TABLE>
PAPER FORMAT DOCUMENT INSIDE FRONT COVER
<PAGE> 3
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
1993 1992
------------ ----------
(dollars in thousands,
except per share data)
<S> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . $ 4,155,940 $ 3,577,601
Income Before Income Taxes and
Cumulative Effect of Accounting Changes . . . . . $ 214,405 $ 250,466
Income Before Cumulative Effect of Accounting
Changes . . . . . . . . . . . . . . . . . . . . . $ 119,335 $ 147,407
Net Income. . . . . . . . . . . . . . . . . . . . $ 101,204 $ 147,407
Earnings per Share:
Before Cumulative Effect of Accounting
Changes . . . . . . . . . . . . . . . . . . . . $ 3.02 $ 3.73
Net Income . . . . . . . . . . . . . . . . . . $ 2.56 $ 3.73
Cash Dividends Paid per Share . . . . . . . . . . $ 1.35 $ 1.25
Purchases of Carrier Operating Property . . . . . $ 309,560 $ 211,073
Long-Term Debt. . . . . . . . . . . . . . . . . . $ -0- $ -0-
Total Shareholders' Equity . . . . . . . . . . . $ 1,047,151 $ 1,021,360
</TABLE>
BAR GRAPH NO. 1
BAR GRAPH NO. 2
PHOTO NO. 1
PAPER FORMAT DOCUMENT PAGE 1
<PAGE> 4
TO OUR SHAREHOLDERS
February 17, 1994
Dear Shareholder:
Revenue in 1993 was $4,155,940,000 compared with $3,577,601,000 in 1992.
Income for the year, before the cumulative effect of accounting changes, was
$119,335,000 or $3.02 per share compared with $147,407,000 or $3.73 per share
in 1992. Net income for the year was $101,204,000 or $2.56 per share compared
with $147,407,000 or $3.73 per share in 1992. The company adopted new
accounting rules in the first quarter regarding the recognition of the costs of
providing health care benefits to certain retirees and accounting for deferred
income taxes, resulting in a net reduction in after-tax earnings of $.46 per
share.
Results for the year include the revenue and earnings of Coles Express,
purchased by the company in June 1992, and Central Freight Lines of Waco,
Texas, purchased in April 1993. Revenue and startup losses for Roadway Global
Air (RGA), which began operations on September 13, 1993, are also included in
this year's results.
Roadway Express, our largest carrier, contributed $2.3 billion in revenue,
a 6.3% increase over 1992. Roadway Express' share of the company's earnings
before accounting changes, however, declined from $61.7 million or $1.56 per
share in 1992 to $46.8 million or $1.18 per share in 1993.
Revenue for the year, from all other sources, was $1.8 billion, an increase
of 31.6% over 1992, reflecting the acquisitions and startup noted above as well
as good growth at existing operations. Earnings for these companies, before
accounting changes, were $72.5 million or $1.84 per share in 1993 versus $85.7
million or $2.17 per share in 1992.
While continuing our historic trend of annual revenue increases, these
results reflect a departure from the previous five consecutive years of
earnings growth. This decline was principally caused by cost increases
associated with the implementation of accelerated service schedules on nearly
40% of Roadway Express' traffic lanes, development costs for information
technology, and initial operating losses from the startup of RGA. While these
were to be expected and the RGA losses were slightly favorable to its plan, we
must be disappointed that the operational challenge of the service acceleration
at Roadway was not better met. As well, competitive pressures on pricing
significantly limited yield improvement at Roadway, with adverse consequences
on earnings. Both of these areas are being addressed with intensity, with
improvement noted in the fourth quarter.
In 1994, Roadway, as well as other carriers, will negotiate a new industry
labor contract. The outcome of these negotiations is critical to the future of
the unionized portion of the LTL freight industry, including Roadway. A "win
win" result, one that helps to assure the long term security of our employees
and their company, is possible but will require hard and good faith bargaining
on all sides.
Roadway Services grew and evolved in significant ways in 1993, even though
it was not a painless process. We added important capabilities both regionally
and globally.
Extending our service offerings is an essential component of our plan for
growing shareholder value. Our customers are increasingly faced in their
business with time based competition and expanding geographic markets. We must
have capabilities to align with those customer requirements, whether in North
America or other continents. It is also important that we bring these new
services and products to market without any compromise of our core business
competency. Our plan for expansion depends on doing even better what we do well
- - in our core businesses - while leveraging these established strengths to
develop new services which are necessary to complement them.
The first component of this growth model involves the extension of current
business offerings to new geographic markets. The initial thrust is to expand
our core business opportunities throughout North America. Even with its
extensive terminal network, Roadway Express is, nonetheless, expanding by
emphasizing service lanes between major metropolitan markets. Roadway Package
System (RPS) is continuing its plan to provide service to 100% of the United
States population by 1996. RPS opened 40 terminals during 1993 to extend its
services to 92% of the U.S. population. In 1994, 47 new facilities are
scheduled to open.
With the addition of Coles in the northeast and Central in the southwest to
Viking in the west and Spartan in the south and central states, we now have in
place the most comprehensive regional LTL coverage in the United States.
Central and Viking are leaders in their markets; Coles and Spartan have
substantial growth opportunities. The focus of each of these companies is to
deliver overnight and second day service with superior on-time reliability
within their respective geographic regions.
New service initiatives in Canada and Mexico will be facilitated by the
North American Free Trade Agreement. Roadway Express has formed an important
joint venture with Mexico's Transportes de Nuevo Laredo (TNL) that not only
allows for increased transborder business but has opened up the intra-Mexico
LTL market as well. RPS, Ltd., RPS' Canadian subsidiary, is growing its
coverage significantly in that market, now serving 88% of the Canadian
population.
The second component of geographic expansion is to meet requirements our
customers may have for service between their North American base and
international destinations. Roadway Express has
PAPER FORMAT DOCUMENT PAGE 2
<PAGE> 5
expanded its NVO offerings, now providing service to Europe, Asia, the
Middle East, the Caribbean and South America. A principal reason for the
startup of RGA was to extend the reach of our service to major trade centers
worldwide, recognizing the increasing needs of our North American customer base
for access to foreign markets.
It has always been the case that the value we produce for our customers is
that of time and space utility. Geographic expansion addresses one of these
elements; the second component of our growth model addresses the other - time.
We will extend the elements of our current services which are defined by
transit schedules, through new or existing businesses. Customers in North
America and Europe already know that when time is critical, it's time to call
Roberts Express for same day or sunrise delivery service. The positioning of
our regional group allows us to routinely and dependably deliver shipments the
next day. Roadway Express has accelerated service standards by one to two days
on several major metropolitan traffic lanes. RGA's service has removed the
distance variable from the service equation by providing overnight service
throughout the U.S. and to virtually any point in the world in two or three
business days.
A third component has been added to the value of that time and space
utility: that of information. The transmission of timely and accurate
information through the logistics pipeline has transformed the practice of
inventory management. Our Summit Information Systems unit, in conjunction with
the information systems groups at our operating companies, are leading
"suppliers" of timely and valuable information concerning product flow for our
customers. Company investment in information systems and technology was
substantial in 1993 and will continue as we strive to meet the expanding needs
of our customers in these important areas.
Logistics is sometimes referred to as the "last frontier" in American
business. Many firms do see the logistics function as a source of competitive
advantage. As logistics is often not a core competency in many industries,
there is a growing tendency towards outsourcing the function to specialists
such as our Roadway Logistics Systems (ROLS) unit. ROLS has enjoyed another
year of strong growth and continues to develop its resources, while providing a
valuable source of insight to the customer's perspective - the point of view
which is critical to the long term creation of shareholder value.
Our intense focus on the customer is quality driven and assisted by
technology, but dependent primarily on our most important resource - our
people. The delivery of customer satisfaction was manifested in 1993 in a
number of ways that have made us proud. Virtually all of our companies gained
market share in 1993, perhaps the most important "award." Additionally, 45
individual customer quality awards were given to our operating companies while
Viking and Roadway were again recognized as the regional and national "carriers
of the year," respectively, by the National Small Shipment Traffic Conference.
Driver employees and contractors from our operating companies won four safe
driving championships. As well, three outstanding professionals were selected
as driver of the year in their respective states and four of our people were
named to the prestigious "America's Road Team," the elite group of drivers who
are selected by the American Trucking Associations as "ambassadors" to the
public. For the first time, your company was named one of America's 25 most
admired corporations in the latest FORTUNE magazine survey. These honors as
well as the financial results reflected in the pages which follow were produced
by a team of people focused on satisfying customers while improving operating
efficiencies and with whom we are honored to be associated.
We hope that it is apparent that significant steps were taken during 1993
to prepare your company to meet the emerging needs of a regional, continental,
and global transportation and logistics marketplace. While competitive
challenges abound, so do our opportunities for growth.
Sincerely,
/s/ Joseph M. Clapp /s/ Daniel J. Sullivan
Joseph M. Clapp Daniel J. Sullivan
Chairman & CEO President & COO
MANAGEMENT CHANGES
Daniel J. Sullivan was elected president and chief operating officer, effective
January 1, 1994. Sullivan previously served as senior vice president of the
company and was responsible for the national carrier group which includes
Roadway Express, Roadway Package System and Roadway Global Air. He is also a
director.
Concurrently, Joseph M. Clapp, formerly chairman and president, was named
chairman and chief executive officer. Douglas A. Wilson, senior vice
president-finance and planning, was designated chief financial officer. John
P. Chandler was elected treasurer in addition to his position of vice
president-administration. Michael Newton retired as treasurer.
PAPER FORMAT DOCUMENT PAGE 3
<PAGE> 6
ROADWAY
PHOTO NO. 2
Revenue for Roadway Express grew 6.3% to $2.3 billion in 1993, on a 5.4%
tonnage increase. Operating income declined to $82.6 million from $99.7 million
in 1992, as operating costs rose 7.4%.
Productivity was adversely affected by the implementation during the first
quarter of accelerated transit schedules on nearly 40% of the company's traffic
lanes. Persistent yield pressures also impacted the company's financial results
for the year. Productivity and meaningful revenue yield improvements continue
to receive primary management attention.
In addition to accelerating service schedules to many destinations, Roadway
expanded its international service offerings, brought new service "products" to
market, deployed new technology and continued its quality journey.
In 1993, Roadway and a Mexican motor carrier, Transportes de Nuevo Laredo
(TNL), formed a joint venture, TNL-Roadway, to provide expanded LTL coverage and
enhanced customer service for U.S., Canadian and Mexican shippers. The company
operates out of terminals in Nuevo Laredo, Mexico City, Monterrey and
Guadalajara, Mexico. Expansion to additional interior points is planned for
1994. TNL-Roadway assumed the operations of Roadway Bodegas y Consolidacion, a
subsidiary formed by Roadway in 1990 to provide international LTL freight
services between the U.S., Mexico and Canada.
The distribution of freight in Canada is handled by Roadway Express
(Canada), Inc., which provides a single-system freight service between the U.S.
and seven provinces.
Roadway expanded its capabilities to meet its North American-based
customers' needs for service to international destinations. In 1993, the
company began offering direct, weekly, less-than-containerload (LCL)
door-to-port service to seven Middle Eastern countries, including Bahrain,
Iran, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Roadway
also began export services to Latin America and the Eastern Caribbean during
1993. These international services are in addition to export services to
PHOTO NO. 3
PAPER FORMAT DOCUMENT PAGE 4
<PAGE> 7
PHOTO NO. 4
NORTH AMERICAN LTL NETWORK OPERATIONS
21 countries in Europe and Western Europe and 12 countries in the Pacific Rim,
including Australia and New Zealand.
Technology enhancements were deployed in 1993. In February, Roadway
announced improvements to QUIKTRAK, its automated shipment tracing system.
These changes make Roadway's offering, the most complete shipment status
information in the industry, available to customers via telephone or personal
computer. QUIKTRAK now provides more current and detailed delivery status
information, including tender date and appointment information. Also in
February, Roadway introduced E(Bullet)Z RATE Plus, a personal computer-based
shipment rating system especially designed for customers who require more than
freight rates. E(Bullet)Z RATE Plus allows shippers and consignees to audit
shipments and generate rate tables with very few keystrokes, stores multiple
sets of discounts and other pricing information, and provides rates to Canada
with currency conversion. The new system also provides Roadway's transit times
between points and indicates whether points are served by Roadway Express
directly or through a connecting carrier.
Also in 1993, Roadway established Core Restore, a new service designed for
the motor vehicle industry, which provides a fully integrated system for
managing the return of warranty, defective, rebuildable or remanufacturable
motor vehicle parts. Core Restore facilities in Columbus, Ohio and Salt Lake
City, Utah inspect and warehouse these products for shipment to customer
locations.
ROADWAY
PAPER FORMAT DOCUMENT PAGE 5
<PAGE> 8
ROADWAY
PHOTO NO. 5
Roadway began operations in December of a new state-of-the-art
consolidation facility at its Winston-Salem, North Carolina breakbulk. The
facility employs the most innovative materials handling systems and technology
ever used in the LTL industry. Freight moves through the
consolidation/distribution center more quickly, speeding transit, while less
manual handling of freight reduces the risk of damage. Accurate, customized
sortation maintains shipment integrity.
Roadway strives to differentiate its service from competing motor carriers
by achieving unparalleled customer satisfaction. To that end, the company
employs the principles of total quality management (TQM). Roadway continued to
invest in quality training for more than 25,000 employees. TQM has become the
framework for managing the business and underlies the way Roadway employees
deal with each other and customers.
As a part of its continuous improvement process, Roadway realigned its
sales structure in October 1993. This change optimizes the use of full-time,
dedicated sales and telemarketing representatives to provide more consistent
and professional sales representation. The removal of day-to-day sales
management and account development responsibilities from terminal managers
allows them to fully concentrate their efforts on building better operational
services and efficiencies for Roadway customers.
Roadway's quality achievement efforts were again recognized in 1993 as the
company became the first five-time winner of the national "Carrier of the Year"
award from the National Small Shipment Traffic Conference, the only such
industrywide award given. Roadway also received 18 customer quality awards.
Safety is a primary focus of Roadway Express. During 1993, Roadway Express
drivers performed with an intercity accident frequency of 599,290 miles per
accident, a decline of 2.6% from the prior year's performance. For the tenth
consecutive year, Roadway pickup and delivery drivers won first place honors at
the American Trucking Associations (ATA) National Truck & Industry Safety
Contest. In June 1993, Mark Johnson, director of safety and hazardous materials
services for Roadway, was elected chairman of the board of directors of the
Hazardous Materials Advisory Council in Washington, D.C. The Council is an
international organization devoted to promoting safety in
PHOTO NO. 6
PAPER FORMAT DOCUMENT PAGE 6
<PAGE> 9
PHOTO NO. 7
NORTH AMERICAN LTL NETWORK OPERATIONS
the domestic and international transportation and handling of hazardous
materials.
Roadway was accepted as a Responsible Care registered trademark Partner by
the Chemical Manufacturers Association. The Roadway-CMA partnership commits
Roadway to a series of rigorous processes designed to assure the safe
transport of chemical products.
For the second consecutive year, Roadway is represented by two drivers on
1994's "America's Road Team." Anthony J. Gemma, a pickup and delivery driver in
Philadelphia, and Clifford Williams, an intercity driver from Rossville,
Georgia, were selected by the ATA to serve on the prestigious Road Team. The
team consists of outstanding drivers from across the country who represent the
industry and promote safe driving nationwide. In 1993, Roadway formed the
"Corporate Road Team" comprised of former "America's Road Team" members from
the company. In addition, six "District Road Teams" were formed. The mission of
these teams is to create public awareness of ways to safely share the road and
to help inform the public about Roadway and the motor carrier industry.
In 1993, Roadway continued to support the Senior PGA (Professional Golf
Association) in an effort to provide dental care to needy children by
transporting a trailer which has been converted to a mobile dental clinic to 21
tournament site cities during 1994.
Roadway's theme for 1994 is "Foundation for the Future." The foundations of
the plan are improving yield, achieving operational excellence and improving
cost structure. The concrete for the foundation is an obsessive commitment to
satisfy customers - both internal and external. In 1994, Roadway will reinforce
its total commitment to customer and employee satisfaction.
ROADWAY
PAPER FORMAT DOCUMENT PAGE 7
<PAGE> 10
ROADWAY PACKAGE SYSTEM
PHOTO NO. 8
Roadway Package System (RPS), which began operations in 1985, enjoyed another
year of significant growth in 1993, exceeding $1 billion in annual revenue and
again improving profits. The company continued to penetrate its traditional
ground market while expanding its second day air, "multiweight" and Canadian
small package markets.
RPS serves the small package market, offering shippers efficient,
responsive second through fifth day service for packages weighing up to 150
pounds, focusing primarily on the business to business segment. RPS also offers
second day air service systemwide and deferred air service to Alaska, Hawaii,
Mexico and Puerto Rico. In addition, the company provides overnight ground
service in selected markets.
During 1993, RPS opened 40 terminals, increasing the company's network to
271 facilities in North America. The operation is supported by 21 hubs - 18 in
the U.S. and three in Canada. This expansion brought RPS' service to 92% of
the U.S. and 88% of the Canadian population, respectively. In 1994, RPS plans
to open 47 additional facilities, extending geographic coverage in accordance
with its commitment to serve 100% of the U.S. by 1996.
During 1993, RPS also opened two new automated hubs, in Charlotte, North
Carolina and Atlanta, Georgia, utilizing state-of-the-art material handling
systems. The new hubs now scan barcode labels on the top, sides, and front of
each package, improving the quality of the sortation process. These systems
have improved sortation efficiency and accuracy, while minimizing the potential
for damage to packages.
RPS understands that its business is as much information delivery as
package delivery. Accordingly, the company continued to utilize technology to
improve and expedite the transfer of information to the customer. Proofs of
Delivery (P.O.D.s) transmitted by fax to customers from the RPS central imaging
PHOTO NO. 9
PAPER FORMAT DOCUMENT PAGE 8
<PAGE> 11
PHOTO NO. 10
SMALL PACKAGE SHIPMENTS
system rose to over 65% of all requests during the last year. Additionally, the
company introduced Auto P.O.D. in 1993, a premium service designed for
customers who require a proof of delivery on every package, such as
pharmaceutical and specialty goods suppliers.
RPS customers may now receive "real time" confirmation of delivery status
by means of on-van communications introduced in 1993. The new system,
integrated with the STAR SYSTEM registered trademark portable scanner and
on-board micro computer, is connected via a nationwide cellular network to the
RPS package tracing system. This latest RPS innovation allows small package
shippers to access information on every ground and air shipment at no
additional charge. Also available is a new version of RPS ACCESS service mark,
the company's pc-based EDI product, which is designed to operate both on
local area networks and stand-alone personal computers. Both products
give RPS customers quicker access to better information.
RPS also introduced RPS MULTISHIP service mark in 1993, a multi-carrier,
pc-based parcel processing system. Developed to RPS' specifications,
MULTISHIP service mark enables RPS customers to save time on package
preparation, simplify data management, stay up-to-date on shipping charges
and provide answers to their customers' questions. MULTISHIP service mark
performs a variety of functions,
ROADWAY PACKAGE SYSTEM
PAPER FORMAT DOCUMENT PAGE 9
<PAGE> 12
ROADWAY PACKAGE SYSTEM
PHOTO NO. 11
including weighing and rating packages electronically, generating shipment
information and reports, printing combination address and barcode labels on
demand, retrieving package information and supporting an EDI link to RPS. The
system is designed to grow with a customer's business.
RPSAIR, the company's satisfaction guaranteed second-day air product,
experienced substantial growth in 1993. RPS now utilizes Roadway Services'
newest operating company, Roadway Global Air (RGA), to provide lift in a number
of RPSAIR service lanes. RPS also launched interisland air service in Hawaii
during 1993.
In 1993, RPS introduced a new service to Mexico, offering both expedited
and deferred air options. This new service is available from all RPS U.S.
domestic points to the Guadalajara, Mexico City and Monterrey metropolitan
areas and is delivered by TNL-Roadway, Roadway Express' Mexican joint venture.
RPS, Ltd., the company's Canadian subsidiary, completed its first year of
operation in August 1993. The company serves Canada through 12 terminals,
including three hubs. Volume from both the domestic and northbound cross-border
markets increased substantially from 1992.
RPS was the recipient of several awards in 1993, among them the
Westinghouse Gold Carrier Quality Award and Dunlop Tire Corp.'s Best Premium
Service Carrier Award. In 1993, the American Trucking Associations (ATA) again
recognized RPS as the nation's safest fleet in its linehaul mileage class for
the 1992 frequency of 735,294 miles per accident.
PHOTO NO. 12
PAPER FORMAT DOCUMENT PAGE 10
<PAGE> 13
PHOTO NO. 13
SMALL PACKAGE SHIPMENTS
In 1993, RPS P&D contractors achieved a new company safety record, operating
4,690 hours between accidents. In addition, Fred Case, an RPS contractor, was
selected for the prestigious ATA "America's Road Team."
RPS continues to integrate the Quality Process into all levels of the
organization. In 1993, all employees and contractors received additional
Quality Awareness Training. Numerous quality teams were active, both at
headquarters and in the field. The company also participated in intercompany
quality initiatives with a number of suppliers and customers, including
Hallmark, 3M and Oshkosh B'Gosh.
Ground was broken for the company's new corporate headquarters and data
center in August. The 300,000 square foot facility will be located in suburban
Pittsburgh. RPS will begin to occupy the new facility in early 1995, with full
occupancy expected by the end of that year.
ROADWAY PACKAGE SYSTEM
PAPER FORMAT DOCUMENT PAGE 11
<PAGE> 14
ROADWAY GLOBAL AIR
PHOTO NO. 14
Roadway Global Air (RGA) commenced service on September 13, 1993 as the newest
Roadway Services operating company. RGA's market entrance satisfies another
dimension of the time and distance matrix for our customers and meets their
growing requirements for time sensitive transportation.
RGA, headquartered in Indianapolis, Indiana, is an integrated air carrier
specializing in heavy weight air cargo, defined as shipments weighing 25 pounds
or more. The company is dedicated to providing leadership in the air cargo
business through the use of technology and talented professionals. The company
has built an efficient air transportation network, served by a dedicated fleet
of Boeing 727s, McDonnell-Douglas DC-9s and Convair 600s operated under
contract to RGA and supported by an extensive ground transportation system.
This network is complemented by a state-of-the-art information system platform,
encompassing real time door-to-door tracking; proactive shipment tracking and
exception notification; immediate proof of delivery services; and global
electronic data interchange (EDI) non-proprietary systems.
RGA offers a full range of time-definite services, including overnight,
next morning and next afternoon, second day and third day. Global schedules
provided include premium and standard services.
RGA opened with 51 air logistics centers (ALCs) operating in North America,
Europe and the Pacific region. At the heart of the worldwide network is a
dedicated air hub located in Terre Haute, Indiana. In response to the growing
demand for RGA's services, 26 ALCs will open in the second quarter of 1994.
This expansion represents a growth of 50% in worldwide locations and will allow
RGA to provide an increased number of next morning and international priority
service points.
Ground operations for RGA are handled by contractors and agents.
Contractors are based in all ALC locations, while agents are utilized in
smaller cities and to service remote delivery areas. Contractors and agents
throughout the world perform dock handling, traditional pickup and delivery
functions, and airport drop and recovery.
PHOTO NO. 15
PAPER FORMAT DOCUMENT PAGE 12
<PAGE> 15
PHOTO NO. 16
WORLDWIDE AIR CARGO
RGA has brought to the market unmatched value-added features and customer
information systems capabilities. Advanced technology provides customers with
"real time" shipment information concerning their critical shipments, while
supporting significant operating efficiencies. The heart of the system is the
DDA service mark, or driver's digital assistant, a handheld computer used to
transmit "real time" shipment information across a wireless data network for
use in customer service and field operations. Detailed shipment data is
captured by the driver through the DDA service mark barcode scanning and data
entry functions. In addition, pickup requests and routing changes are
transmitted to and from RGA's central operations to ensure accurate
information and prompt service.
RGA has developed another advanced use of technology with its RGA
ACCESS service mark electronic data interchange software. This user-friendly
EDI program meets a wide variety of needs for shipment information. The
system can be linked directly through the customer's personal computer. No
proprietary hardware or extensive training is necessary. In addition to
traditional EDI capabilities, RGA ACCESS service mark offers "real time"
shipment tracing, on-screen proof of delivery and shipment exception
notification.
In 1994, RGA will continue its new product development. Expanded RGA
ACCESS service mark capabilities will include international documentation
reference, service availability, and pricing, billing and claims resources.
An automated shipment processing system has been developed and will be
implemented in early 1994, allowing customers to prepare shipping
documentation, print barcodes and labels, and transmit pickup requests
automatically. An automated voice response unit will be activated for
enhanced 24-hour customer service information. Additionally, RGA will
enhance customer satisfaction by developing specialized products such as
charter service to meet unique shipping needs.
ROADWAY GLOBAL AIR
PAPER FORMAT DOCUMENT PAGE 13
<PAGE> 16
VIKING FREIGHT SYSTEM, INC.
PHOTO NO. 17
Viking Freight System is the leading regional carrier in the 11-state region of
the western United States. While the economic recovery that much of the country
began to experience in 1993 eluded most of the west, Viking's home state of
California remained particularly hard hit. Nonetheless, through a combination
of outstanding service and capitalizing on market opportunities, Viking
recorded impressive results. Revenue increased nearly 7%, fueled by substantial
growth in the second half of the year, and operating income rose over 22%.
Contributing to the results were a successful yield improvement program and
improved productivity.
In terms of customer service, Viking had a record year with over 2.6
million shipments carried, on-time performance of 99.1% and a claims expense
ratio of 0.72% of revenue.
Viking's customers acknowledged this performance by recognizing Viking with
a number of awards, among them the fifth consecutive on-time service award from
Target Stores; the third consecutive LTL "Carrier of the Year" award from both
Merck and Glaxo; recognition as a 1993 "Quality Carrier" in DISTRIBUTION
MAGAZINE's annual survey; and Regional LTL "Carrier of the Year" by the
National Small Shipment Traffic Conference for the second consecutive year.
Viking's EZTDBW (easy to do business with) philosophy, IQ (individual
quality process) and VPEP (performance earnings program) all support these
recognized achievements in customer and personnel satisfaction. At the center
of these philosophies is Viking's real strength: its regard for the employee
supported by face-to-face communication, involvement, recognition, reward and
appreciation, the factors which have earned Viking recognition as one of
America's best places to work.
Another example of Viking's commitment to the training and development of
its people is Viking University. The in-house program, which is available to
all levels of Viking's employees, consists of workshops and courses designed to
strengthen and develop personal and professional skills needed to continually
exceed customer needs and expectations.
PHOTO NO. 18
PAPER FORMAT DOCUMENT PAGE 14
<PAGE> 17
PHOTO NO. 19
REGIONAL OPERATIONS
Viking continued to be a leader in technological innovations. The driver
handheld micro computers introduced in 1992 were implemented systemwide in
1993, providing more timely and accurate shipment data for Viking's customers
and operations. Additionally, an image processing system came on-line, making
document requests much easier and timely for those who require them. Fax
Manifest, which provides current information on shipments en-route, continued
as the company's most popular product with customers.
In 1994, Viking will face the challenges of sustaining its growth in a
sluggish California economy while facing competitor expansion to the northern
and eastern boundaries of its existing territory.
VIKING FREIGHT SYSTEM, INC.
PAPER FORMAT DOCUMENT PAGE 15
<PAGE> 18
CENTRAL FREIGHT LINES, INC.
PHOTO NO. 20
In 1993, Roadway Services once again staked a major presence in the regional
LTL market, this time in the southwest and in Texas through the acquisition of
Central Freight Lines Inc. Central joined the Roadway family of carriers in
April after a vote by the company's employee shareholders. Despite increased
competition from liberalization of regulation in Central's home state of Texas,
the company enjoyed record revenue in 1993 and one of its best earnings
performances in recent years.
Central is one of the nation's largest regional LTL carriers and is the
largest intrastate carrier in Texas. Established in 1925, the company provides
next day LTL interstate freight transportation to more than 4,000 cities and
towns in Arkansas, Louisiana, New Mexico, Oklahoma, Tennessee and Texas.
Service to Mexico is available through TNL-Roadway, Roadway Express' joint
venture. The 75 terminals in the Central system handle more than 3.5 million
shipments per year. More terminals will open in 1994.
The company's Dallas hub, which has 525 doors, is the world's largest
freight terminal owned and operated by a single motor carrier. The hub handles
an average of 6.4 million pounds of freight each day.
At the heart of Central's success is its people. To support the company's
continued growth, in 1993 Central introduced two development programs: "Central
2000: Our Business Is People," which encourages employees at all levels of the
company to embrace new ideas and philosophies for the development of effective
leaders; and "Team 2000: Team Based Continuous Improvement," relying on teams
of people at Central that are involved in all aspects of the company's business
to bring about continuous improvements that are vital during any period of
growth.
Central prides itself on customer service supported by information and
transportation technology applications, which has distinguished Central, the
regional carrier group and Roadway Services. In 1994, Central drivers will be
equipped with handheld computers to further enhance customer
PHOTO NO. 21
PAPER FORMAT DOCUMENT PAGE 16
<PAGE> 19
PHOTO NO. 22
REGIONAL OPERATIONS
information services and operating efficiencies.
Central's pickup and delivery drivers are essential to customer service.
Customers recognize Central drivers who provide them with exceptional service
throughout the year and participate in the Customer-Selected Driver/Salesman of
the Month program. Central's commitment to safety is reflected in the
company's safety record of 478,512 miles between accidents and in the
accomplishments of intercity drivers such as Durwood Moon of Holland, Texas.
Moon was named Texas Driver of the Year, having driven more than four million
miles without an accident or lost-time injury in his 35 years of service. In
addition, Larry Springer, a driver also from the Holland, Texas terminal, with
20 years and two million safe miles of experience, was appointed to the 1994
"America's Road Team."
Central Freight Lines has a proud past, but its focus is on the future.
Central is committed to embracing continued growth, innovation, change and
diversity throughout 1994, while delivering superior satisfaction to its
customers.
CENTRAL FREIGHT LINES, INC.
PAPER FORMAT PAGE 17
<PAGE> 20
SPARTAN EXPRESS, INC.
PHOTO NO. 23
Covering the southeast and central portions of the United States is
Spartan Express, a regional carrier offering service throughout 18 states
through its two divisions - Spartan South and Spartan Central.
Spartan South, headquartered in Greer, South Carolina, offers 24- to
48-hour service to its customers through 42 terminals in 10 states. This
division opened eight new facilities in 1993 in Alabama, Florida, Maryland and
North Carolina. The new facilities in Baltimore and Hagerstown, Maryland allow
Spartan to serve 100% of that state and the new terminal added in Kinston,
North Carolina provides more complete coverage in the eastern part of that
state. In September, weekly, door-to-door, LTL service was initiated to Puerto
Rico through the Port of Jacksonville.
Spartan Central provides 24- to 48-hour intrastate and interstate services
to eight states in the Midwest region, utilizing 22 terminals. In 1993, the
division opened a new terminal in Mansfield, Ohio and will open terminals in
Dayton, Ohio and Minneapolis/St. Paul, Minnesota in April 1994. Spartan
Central's three largest terminals, Chicago, Cincinnati and Cleveland, have been
using the Automated Dispatch Management System, a computerized information
system that aids in the dispatch process and allows Spartan to gather customer
information more efficiently. Three more terminals are expected to be using the
system in 1994.
In 1993, both Spartan divisions benefited from the addition of Spartan
Image Management System (SIMS), an image processing system that works in
conjunction with the company's electronic data interchange (EDI) technology.
SIMS is a document storage and retrieval system which allows for immediate
access to shipping documents, including proof of delivery and bills of lading,
by reading barcode
PHOTO NO. 24
PAPER FORMAT DOCUMENT PAGE 18
<PAGE> 21
PHOTO NO. 25
REGIONAL OPERATIONS
information from original documents. This system addresses a significant demand
for shipment documentation integration in supply chain transaction processing.
Tom Dobb, who previously managed Roadway Express' Greenville, South
Carolina and Toledo, Ohio districts, was appointed president of Spartan South
during 1993.
SPARTAN EXPRESS, INC. CENTRAL
PAPER FORMAT DOCUMENT PAGE 19
<PAGE> 22
COLES EXPRESS INC.
PHOTO NO. 26
As New England's oldest carrier, Coles Express is also becoming
one of the fastest growing companies in the region. Coles, founded in 1917,
began 1993 with seven terminals in the New England states. By the end of the
year, the company opened eight additional terminals throughout New England and
in the Mid-Atlantic states.
Coles provides 24- to 48-hour delivery services to customers in
Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New
York, Pennsylvania, Rhode Island and Vermont through 15 terminals. In 1993,
Coles expanded to Albany and Long Island, New York; Elizabeth, New Jersey;
Philadelphia, Pennsylvania; and Baltimore, Maryland. This growth, made possible
by Coles' established reputation for superior service, more than doubled the
number of shipments handled in 1993.
In August, Coles implemented new information systems which provide
customers several new services, including computer-generated Fax Manifest by
8:00 a.m. and "Easy Access," a full range of EDI products. The new systems
place Coles in the forefront of meeting the vital information needs of
customers throughout the northeastern region of the United States. An automated
rating system implemented during the year has enhanced accuracy and efficiency
and provided improved billing services to customers.
New graphics were introduced on Coles' vehicles in 1993 as the company's
traditional orange and white colors were transformed into a "family
resemblance" with other members of the regional carrier group. The
PHOTO NO. 27
PAPER FORMAT DOCUMENT PAGE 20
<PAGE> 23
PHOTO NO. 28
REGIONAL OPERATIONS
design is consistent with the group's common standard of excellence. In
addition, the company nearly doubled its tractor fleet during 1993, with
substantial equipment purchases being made in 1994 as well to support Coles'
continued growth.
Coles' 1994 plans include the opening of 12 new terminals in New York and
Pennsylvania to complete its Middle Atlantic coverage.
COLES EXPRESS INC.
PAPER FORMAT DOCUMENT PAGE 21
<PAGE> 24
ROBERTS EXPRESS
PHOTO NO. 29
Roberts Express concluded another successful year with record revenue and
profit growth. The world's largest surface expedited carrier specializes in the
transportation of critical and emergency shipments or those which are fragile,
valuable, require security provisions, special handling, customized equipment
or full-range temperature control. Roberts also provides CharterAir service,
with arrangements for both air charter service and ground transportation to and
from an airport, in the event a customer's needs cannot be met with surface
transportation.
Roberts' ability to respond quickly to a customer's needs is attributable,
in part, to its two-way satellite communications system. "Customer Link" allows
the company to complete its dispatch process within a 10-minute window during
which time a shipment is matched to one of five truck sizes, an available
driver is selected from across 146 express centers and an immediate pickup is
scheduled.
Roberts has the distinction of being the first carrier to use satellite
communications in both North America and Europe. Roberts Express Europe has
equipment in Belgium, France, Germany, Luxembourg and The Netherlands and was
recently granted authority in France and Northern Italy. In 1993, the European
subsidiary was awarded the International Standards Organization (ISO) 9002
certification. The standards measure company policies and procedures, assuring
that they match quality norms and the company's stated claims. Certification is
required by many customers who seek to do international business in the
European common market.
The White Glove Services division of Roberts was established as an
alternative to van lines or other specialized carriers for several markets
which require special care and handling. "Temp-Assure," a full range
temperature-controlled service specializing in the transportation of products
which require protection from heat and cold, experienced rapid growth in 1993.
PHOTO NO. 30
PAPER FORMAT DOCUMENT PAGE 22
<PAGE> 25
PHOTO NO. 31
CRITICAL SHIPMENTS
In 1993, self directed work teams - known at Roberts as Customer Assistance
Teams - were fully implemented. The teams, which have accomplished impressive
productivity improvements, are responsible for the entire process of serving
the customer, including meeting requests for service, dispatch, highway control
and safety. Team members are linked by networked computers, allowing them to
communicate easily with customers and track the progress of each shipment.
In 1993, Roberts completed the expansion of its Akron headquarters. The
addition was necessary to accommodate present and future business growth.
ROBERTS EXPRESS
PAPER FORMAT DOCUMENT PAGE 23
<PAGE> 26
ROADWAY LOGISTICS SYSTEMS
PHOTO NO. 32
Roadway Logistics Systems, better known as ROLS, continued to grow its customer
base, resulting in revenue which significantly increased from 1992 and exceeded
goals.
ROLS provides a range of contract logistics services that enhance its
customers' competitive positions. The company designs, implements and manages
integrated logistics systems, utilizing its expertise in information
technology, operations management, transportation management and support
services. The company provides personnel on-site to manage a customer's
logistics operations, blending facility management, transportation management
and information management to produce superior logistics results.
ROLS serves a diverse customer base, including manufacturers and
distributors of automotive, high technology, industrial and consumer products.
The company provides a variety of value-added services, including: just-in-time
logistics programs; integrated transportation management programs; contract
warehouse services; production subassembly and sequencing support; finished
goods distribution; ROLS Rite Routing System; returnable container management;
and business process reengineering.
In 1993, ROLS implemented a new computer platform and devoted substantial
resources to enhancing its customer/carrier information integration
capabilities. These systems, which are under continuing development, have
potential for utilization by other Roadway Services operating companies as
well.
In 1993, ROLS received the fifth annual "Excellence in Logistics" Award
from its customer, Libbey-Owens-Ford (LOF). ROLS has been providing logistics
services for LOF since 1991. ROLS' service advantage is its Rite Routing
System, a technology-based single source logistics system dedicated to managing
all of LOF's transportation needs. The system manages seven modes of
transportation for LOF, including longhaul, regional and
PHOTO NO. 33
PAPER FORMAT DOCUMENT PAGE 24
<PAGE> 27
PHOTO NO. 34
CONTRACT LOGISTICS
intrastate LTL, small parcel, expedited service, express air freight and heavy
weight air freight from ROLS' Akron Rite Routing Center.
The contract services division of ROLS includes ROLS Dedicated
Transportation (RDT) and Pivot Systems, which provide carriage and related
logistical support to the automotive industry; Warehouse Services, a provider
of consolidation and warehousing services, all in conjunction with related
transportation services; and MediQuik Express, a supplier of specialty services
targeted to the unique needs of the pharmaceutical and health care industries.
MediQuik provides high security, time-definite, temperature-controlled services
to its customers utilizing specialized personnel and equipment. MediQuik also
became a supplier of refrigerated LTL route services to the blood plasma
industry after purchasing the assets of Bio-Med-Hu, Inc. in late 1992.
Five years ago, in 1989, ROLS was the first logistics service company
established by a major LTL transportation company. It continues to evolve as a
"hands on," quality-driven provider of superior logistics support to firms
seeking to outsource non-core business functions.
ROADWAY LOGISTICS SYSTEMS
PAPER FORMAT DOCUMENT PAGE 25
<PAGE> 28
GLOSSARY
ACCESS service mark: An EDI system that links a customer computer with the
RPS computer system for call tags, P.O.D.s and tracing.
AIR LOGISTICS CENTERS (ALCS): A facility in the Roadway Global Air system which
consolidates, sorts and processes inbound and outbound air cargo.
AUTO P.O.D.: An RPS barcode label system that automatically sends proof of
deliveries (P.O.D.s) to the customer after the package is delivered.
BREAKBULK: Consolidation and distribution center; a facility in the Roadway
system which unloads and consolidates shipments received from its satellites as
well as from other breakbulks.
CUSTOMER LINK: A two-way satellite communications system which enhances Roberts
Express' ability to respond quickly and accurately to customer demands. The
satellite equipment allows Roberts to complete its dispatch process within a
10-minute window during which time a shipment is matched to one of five truck
sizes, an available driver is selected, and an immediate pickup is scheduled.
EASY ACCESS: A software product developed and designed to assist customers in
all areas of traffic management.
ELECTRONIC DATA INTERCHANGE (EDI): The exchange of information between one
computer and another in a format or language that is understood by both the
sender and receiver.
EbulletZ RATE registered trademark PLUS: A pc-based rating system that
provides Roadway customers with shipment charges, rate tables and discounts,
pricing and other rate information in a format chosen by the customer.
FAX MANIFEST: An intransit shipment report which is faxed to customers on a
daily basis. It is a daily manifest showing all open shipments, freight
location, and shipment status for each customer.
GENERAL FREIGHT: All commodities except household goods, refrigerated goods,
bulk commodities or commodities requiring specialized equipment (i.e., heavy
machinery trailers or armored trucks).
JUST-IN-TIME: A distribution and materials handling system which
keeps inventory levels to a minimum by ordering and delivering supplies only as
needed.
LESS-THAN-TRUCKLOAD (LTL): Shipments weighing less than 10,000 pounds each.
Many LTL shipments weigh less than 500 pounds; most are below 1,000 pounds.
LOGISTICS: The integrated system of managing, planning, allocating and
controlling financial, physical and human resources committed to physical
distribution, manufacturing support and purchasing operations.
LONG HAUL: The movement of freight requiring three or more days.
OUTSOURCING: Contracting a function or operation that was previously performed
internally to a company that specializes in the desired service.
QUALITY: "Meeting the requirements." To have quality, three things must
happen. First, the customer must understand and accurately define the
requirements. Second, the customer must clearly communicate the requirements
to the suppliers. Third, the supplier must understand and be able to meet
the requirements.
QUIKTRAK registered trademark: An automated shipment tracking system which
advises the exact location and current status of a shipment within the
Roadway system via telephone or personal computer.
REGIONAL CARRIER: A carrier serving customers within a specific geographic
region of the country, usually within a distance which can be served overnight
or in two days.
SELF DIRECTED WORK TEAMS: The process of empowering team members at all levels
of the organization. The purpose of the program is to allow employees to
participate in shared decision making in areas where supervisors or managers
previously made the decisions.
SHIPMENT INTEGRITY: When all parts of a multi-piece shipment are tracked
and presented together for delivery.
SHORT HAUL: The movement of freight requiring two days or less.
STAR SYSTEM registered trademark: A handheld unit used to scan all RPS package
barcodes upon delivery and to record the consignee's name.
TEMP-ASSURE: A full range temperature-controlled service provided by Roberts
specializing in the transport of chemicals, industrial and medical products and
electronic equipment.
TIME-DEFINITE/CRITICAL SHIPMENTS: Shipments usually of an expedited nature and
for which a commitment has been made for delivery at a specific time.
TRUCKLOAD: Shipments weighing 10,000 pounds or more.
PHOTO NO. 35
PAPER FORMAT DOCUMENT AGE 26
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS - 1993 VS. 1992
Consolidated revenue for 1993 increased $578,339,000 or 16.2% over 1992
levels. Accounting for $177,216,000 of the increase was the inclusion of
Central Freight Lines (Central) which was acquired by the company on April 6,
1993. At Roadway Express, the company's largest operating company, revenue
increased by 6.3% over prior year levels. Tonnage at Roadway Express increased
5.4%, including an increase of 5.9% in less-than-truckload (LTL) tons. Due to
continued competitive pressures, freight rates at Roadway Express increased
only slightly in 1993 resulting in revenue per ton only 0.9% above 1992 levels.
LTL revenue per ton at Roadway Express increased only 0.5%. Excluding Central
and Roadway Express, 1993 revenue from the company's other operations increased
over 1992 levels by 18.9%. The largest share of this growth was attributable to
Roadway Package System (RPS), the company's small package carrier, due to
package volume growth and, to a lesser extent, an increase in the average
revenue per package.
Operating expenses in 1993 increased $610,710,000 or 18.3% over 1992
levels. Central accounted for $163,822,000 of the increase. In addition to the
impact on operating expenses of higher volume levels, Roadway Express incurred
higher compensation costs under the current industry labor contract which
included wage and benefit increases of 3.4% effective April 1, 1993.
Productivity decreased at Roadway Express during the first quarter due to the
implementation of faster transit schedules on many traffic lanes. Increasing
productivity remains a primary focus along with other measures to reduce
operating expenses and realize meaningful revenue yield improvements. Fuel
prices in 1993, on a per gallon basis, averaged 2.1% above 1992 levels. Fuel
prices increased in the second half of 1993 in response to federally mandated
reductions in diesel fuel sulfur levels and federal fuel tax increases of $.043
per gallon effective October 1. Also affecting 1993 operating expenses were
increases of $18.7 million in pension plan expenses for employees not subject
to labor contracts and $7.0 million in retiree medical expenses. As discussed
in Note E to the consolidated financial statements, the increase in pension
expense resulted from plan amendments to increase benefits and from changes in
actuarial assumptions. Actuarial assumption changes are anticipated to increase
pension expense again in 1994 by approximately $3 million. Retiree medical
expenses increased due to the accounting change discussed below, and to a
lesser degree from the inclusion of Central's operations since its acquisition.
Purchased transportation increased 24.7% in 1993 reflecting increased business
levels at RPS and Roberts Express (Roberts), the company's expedited shipment
carrier. Purchased transportation in 1993 also increased at Roadway Express
where shipments to foreign markets increased, and due to the September 13
startup of Roadway Global Air (RGA) which utilizes independent contractors and
commercial carriers for its air and ground transportation services. Greater
than normal expenditures for technology and systems development also occurred
in 1993 in order to meet emerging needs of shippers.
The company's operating income as a percentage of revenue, the operating
margin, was 4.9% in 1993, a substantial drop from 6.6% in 1992. As a result,
operating income declined by $32,371,000, primarily due to the performance at
Roadway Express, our long haul LTL carrier that operates in a fiercely
competitive and mature market, and the expected startup losses at RGA, our new
air cargo carrier. The company's other operations provided a net gain in
operating income, led by RPS, even with its startup losses at RPS, Ltd. in
Canada, along with Roberts and regional carrier Viking Freight, and the
inclusion of Central since its acquisition.
Other income-net declined in 1993 as compared to 1992 levels. The decline
was attributable to lower investment levels due to the purchase of Central in
early April, increased purchases of carrier operating property, lower cash
generated from operations and lower interest rates as compared to 1992.
The increase in the effective income tax rate from 41.1% in 1992 to 44.3%
in 1993 resulted primarily from the increase, effective January 1, 1993, in the
statutory federal rate to 35%, and increases in state taxes. Contributing to
the increase to a smaller degree are startup losses at RGA and RPS, Ltd. in
state or foreign tax jurisdictions for which no current tax benefit is
available. The effective rate is expected to rise in 1994 due to these and
other factors.
As discussed in Notes D and E to the consolidated financial statements, the
company recorded the cumulative effect of two accounting changes in the first
quarter of 1993 which resulted in a net charge to first quarter 1993 earnings
of $18,131,000, or $0.46 per share. By adopting Financial Accounting
PAPER FORMAT DOCUMENT PAGE 27
<PAGE> 30
Standards Board (FASB) Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," the company recognized the entire
December 31, 1992 accumulated postretirement benefit obligation of $38,496,000
($23,867,000 after tax) as a charge to earnings and, as discussed above, also
increased the 1993 provision for retiree medical costs to recognize anticipated
costs of benefits during eligible service with the company. Also adopted by the
company in 1993 was FASB Statement No. 109, "Accounting For Income Taxes,"
which resulted in an increase in first quarter earnings of $5,736,000. Under
FASB Statement No. 109, the company now recognizes deferred tax liabilities and
assets on the liability method whereby such amounts are adjusted and earnings
are affected in the periods when changes in tax rates are legislated.
Previously, the company recorded deferred taxes at the rates in effect when
timing differences arose and no adjustments were recorded for subsequent tax
rate changes.
Income before the cumulative effect of accounting changes dropped $0.71 per
share from 1992 levels. Increases at Roberts Express, RPS and Viking, together
with the positive contribution from newly acquired Central, only partially
offset the decline.
RESULTS OF OPERATIONS - 1992 VS. 1991
Revenue for 1992 was up 12.6% over 1991 levels, including an increase of
6.0% at Roadway Express. Tonnage at Roadway Express increased 3.1%, including
an increase in LTL tons of 4.2%. In addition to tonnage increases, revenue
growth at Roadway Express also resulted from improved revenue per ton which
averaged 2.2% higher in 1992 than in 1991. At the company's other operations,
1992 revenue exceeded 1991 levels by 24.9%, with the largest increase being at
RPS. Freight rate discounting precluded meaningful sustained freight rate
increases at these operations in 1992; therefore, the growth in revenue
resulted primarily from significant volume increases.
Operating expenses in 1992 increased 12.5% over 1991 levels, due
principally to increased business levels. In addition to the impact of
increased volume levels, Roadway Express' operating expenses reflect wage and
benefit increases of 3.5% effective April 1, 1992 under the industry labor
contract. Fuel prices averaged 2.2% less in 1992 than in 1991. Higher purchased
transportation in 1992 reflected increased business levels at RPS. Increases in
insurance and claims expenses in 1992 over 1991 levels were primarily the
result of the favorable loss experience at the majority of the company's
operations in 1991. Depreciation expense increased only 10.1% over 1991 levels,
while maintenance expenditures were higher, reflecting the increase in the
average age of the revenue equipment at Roadway Express.
The company's operating margin was 6.6% in 1992, up slightly from 6.5% in
1991. The operating margin declined by four tenths of a percentage point at
Roadway Express, resulting in slightly lower operating income in 1992 as
compared to 1991. At the other operating companies, the operating margin
improved by six tenths of a percentage point, accounting for the entire
increase in consolidated operating income for the year. This increase was
attributable principally to the increased operating income at RPS.
Income from investments increased despite lower interest rates, reflecting
larger investments in marketable securities throughout 1992 as compared to
1991.
LIQUIDITY AND CAPITAL RESOURCES
The company normally finances capital expenditures from internally
generated funds. It is anticipated that cash and current investments in
marketable securities, primarily U.S. government securities maturing over the
next two years, funds generated from future operations, and, if required,
financing sources readily available to the company will finance projected 1994
capital expenditures and provide adequate levels of working capital and funds
for business expansion including funds required by RGA. Capital expenditures
in 1994 are projected at $360 million. Additionally, the Board has authorized
the purchase of up to $30 million of the company's common stock in 1994. The
funds for that purchase would be available from the sources discussed above.
IMPACT OF INFLATION AND
CURRENT TRENDS
Roadway Express implemented a general freight rate increase effective
January 1, 1994. A similar rate increase implemented a year earlier did not
provide meaningful revenue yield improvements due to intense price competition.
RPS also announced a rate increase effective February 7, 1994, and the regional
carriers have achieved recent success in obtaining rate increases on portions
of their traffic. Price competition is anticipated to continue in 1994 in many
of the markets served
PAPER FORMAT DOCUMENT PAGE 28
<PAGE> 31
by the company's operations, and it is expected that industry margins will
remain under pressure. Cost controls and productivity gains will therefore
continue to be a primary management focus in order to maintain and improve
margins at the various operating companies.
The transportation and logistics marketplace continues to experience rapid
change in response to demand for quality and time based management. The
company's capabilities must also expand to meet emerging customer requirements,
even at the expense of short term profits. Management expects that 1994
spending for expansion, in particular by increasing the global markets served,
and for systems development, will continue to be substantial. Also, management
is exploring implementation of common systems, as deemed appropriate to meet
customer needs and eliminate duplications of operating costs, at the company's
U.S. regional carrier group. The regional carrier group includes Viking
Freight in the west, Central in the southwest, Spartan Express in the south and
midwest, and Coles Express in the northeast. In addition to pressures on
margins from price competition and these additional planned expenses,
uncertainties exist regarding future costs of necessary operating expenses such
as fuel and related taxes, and employee wages and benefits, including medical
costs. Roadway Express is involved in industry labor negotiations with the
International Brotherhood of Teamsters to replace the current three-year
industry labor contract that expires on March 31, 1994. First quarter 1994
operating results will be adversely impacted by severe weather and the
earthquake in southern California. All of these factors, including anticipated
continuing startup losses at RGA, affect the outlook for 1994.
As discussed in Note G to the consolidated financial statements, the company
has filed suit to recover approximately $5 million of employment taxes paid as
a result of proposed changes in classification of certain contractors at RPS by
the Internal Revenue Service (IRS) during its examination of the company's 1985
and 1986 federal employment tax returns. Subsequently, the IRS proposed an
adjustment for additional employment taxes of approximately $27 million for the
years 1987 through 1989. Management anticipates that an IRS proposal for the
years 1990 through 1993 on the same basis as adjustments proposed for prior
years could approximate an additional $87 million. The company continues to
engage in discussions with the government in order to resolve the issue for all
years. Should a resolution not be achieved on favorable terms, the company
intends to pursue the litigation. Effective January 1, 1994, with the advice of
its outside counsel, RPS effected certain revisions of its contractual
arrangements with its pickup and delivery owner-operators in ways that should
serve to fortify its treatment of them as independent contractors. Accordingly,
the company believes that the long-established relationship between it and
those contractors will continue as it has been for the foreseeable future.
The impact of inflation on operating expenses has been moderate in recent
years. Most of the company's operating expenses reflect current costs.
Depreciation expense is reflected in the financial statements based on
historical cost of the assets and, therefore, has less impact on the results of
operations than if such expenses were based on current replacement costs. As
assets are replaced, the cost of the new assets will generally be higher,
resulting in increased depreciation charges. However, technological
improvements may result in operating cost savings. The majority of the
company's carrier operating property is revenue equipment having relatively
short service lives of four to six years. Therefore, annual depreciation
expense more closely reflects current costs than for companies in industries
with substantial investments in property with longer useful lives.
PAPER FORMAT DOCUMENT PAGE 29
<PAGE> 32
<TABLE>
CONSOLIDATED BALANCE SHEET
ROADWAY SERVICES, INC. AND SUBSIDIARIES
ASSETS
<CAPTION>
DECEMBER 31
1993 1992
---------- ----------
(dollars in thousands)
<S> <C> <C>
CURRENT ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,628 $ 41,036
Marketable securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,943 274,898
Accounts receivable, net of allowance for uncollectible accounts . . . . . . . . . . . . . . . . 401,777 304,645
Prepaid expenses and supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,160 55,954
Deferred income taxes -- Note D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,765 21,562
---------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619,273 698,095
CARRIER OPERATING PROPERTY -- at cost
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,694 130,605
Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595,973 476,102
Revenue equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,106,000 971,621
Other operating equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 565,522 466,123
---------- ----------
2,440,189 2,044,451
Less allowances for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,313,974 1,148,791
---------- ----------
TOTAL CARRIER OPERATING PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,126,215 895,660
COST IN EXCESS OF NET ASSETS OF
BUSINESSES ACQUIRED -- net of amortization -- Note B . . . . . . . . . . . . . . . . . . . . . . 100,914 87,330
---------- ----------
$1,846,402 $1,681,085
========== ==========
</TABLE>
PAPER FORMAT DOCUMENT PAGE 30
<PAGE> 33
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
DECEMBER 31
1993 1992
---------- ----------
(dollars in thousands)
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable -- Note C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 268,103 $ 225,361
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,536 149,501
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,864 21,988
Freight and casualty claims paybale within one year . . . . . . . . . . . . . . . . . . . . 99,340 81,395
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,646 12,803
---------- ----------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578,489 491,048
OTHER LIABILITIES
Deferred income taxes -- Note D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,620 66,462
Future equipment repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,148 21,321
Casualty claims payable after one year . . . . . . . . . . . . . . . . . . . . . . . . . . 86,546 80,894
Retiree medical -- Note E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,448 --
---------- ----------
TOTAL OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220,762 168,677
SHAREHOLDERS' EQUITY -- Note F
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,446 50,392
Earnings reinvested in the business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,013,519 966,061
---------- ----------
1,103,863 1,056,351
Less cost of common stock in treasury
(1993 -- 1,527,000 shares, 1992 -- 1,163,000 shares) . . . . . . . . . . . . . . . . . . 56,712 34,991
---------- ----------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,047,151 1,021,360
---------- ----------
$1,846,402 $1,681,085
========== ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
PAPER FORMAT DOCUMENT PAGE 31
<PAGE> 34
<TABLE>
STATEMENT OF CONSOLIDATED INCOME
ROADWAY SERVICES, INC. AND SUBSIDIARIES
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
------------ ------------ -----------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
REVENUE . . . . . . . . . . . . . . . . . . . . . . $ 4,155,940 $ 3,577,601 $ 3,176,956
OPERATING EXPENSES
Salaries, wages and benefits . . . . . . . . . . 2,242,628 1,908,425 1,734,782
Operating supplies and expenses. . . . . . . . . 678,872 591,438 514,760
Purchased transportation . . . . . . . . . . . . 623,358 500,001 419,590
Operating taxes and licenses . . . . . . . . . . 115,942 96,266 88,459
Insurance and claims . . . . . . . . . . . . . . 95,136 74,380 61,844
Provision for depreciation . . . . . . . . . . . 197,232 170,287 154,669
Net (gain) loss on sale of carrier
operating property. . . . . . . . . . . . . (1,638) 23 (3,554)
------------ ------------ -----------
TOTAL OPERATING EXPENSES . . . . . . . 3,951,530 3,340,820 2,970,550
------------ ------------ -----------
OPERATING INCOME. . . . . . . . . . . . 204,410 236,781 206,406
Other income -- net, including interest of
$10,305 in 1993, $15,850 in 1992 and
$10,626 in 1991 . . . . . . . . . . . . . . . . . 9,995 13,685 7,200
------------ ------------ -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES . . . . . 214,405 250,466 213,606
Provision for income taxes -- Note D. . . . . . . . 95,070 103,059 86,283
------------ ------------ -----------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES . . . . . . . . . . 119,335 147,407 127,323
Cumulative effect of accounting changes
-- Notes D and E. . . . . . . . . . . . . . . . . (18,131) -- --
------------ ------------ -----------
NET INCOME. . . . . . . . . . . . . . . $ 101,204 $ 147,407 $ 127,323
============ ============ ===========
EARNINGS PER SHARE
Before cumulative effect of accounting changes. . $ 3.02 $ 3.73 $ 3.27
Cumulative effect of accounting changes:
Income taxes, liability method -- Note D . . . .15 -- --
Retiree medical, net of tax benefit -- Note E . (.61) -- --
------------ ------------ -----------
(.46) -- --
------------ ------------ -----------
NET INCOME . . . . . . . . . . . . . . . $ 2.56 $ 3.73 $ 3.27
============ ============ ===========
</TABLE>
<TABLE>
STATEMENT OF CONSOLIDATED EARNINGS REINVESTED IN THE BUSINESS
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
------------ ------------ -----------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
Balance at beginning of year . . . . . . . . . . . $ 966,061 $ 868,777 $ 786,939
Add net income for the year . . . . . . . . . . . . 101,204 147,407 127,323
------------ ------------ -----------
1,067,265 1,016,184 914,262
Less dividends declared . . . . . . . . . . . . . . 53,746 50,123 45,485
------------ ------------ -----------
BALANCE AT END OF YEAR . . . . . . . . . . . $ 1,013,519 $ 966,061 $ 868,777
============ ============ ===========
Dividends declared per share . . . . . . . . . . . $ 1.375 $ 1.275 $ 1.175
<FN>
See notes to consolidated financial statements.
</TABLE>
PAPER FORMAT DOCUMENT PAGE 32
<PAGE> 35
<TABLE>
STATEMENT OF CONSOLIDATED CASH FLOWS
ROADWAY SERVICES, INC. AND SUBSIDIARIES
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
--------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income . . . . . . . . . . . . . . . . . . . . . . $ 101,204 $ 147,407 $ 127,323
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting changes . . . . . 18,131 -- --
Depreciation and amortization . . . . . . . . . . 200,080 172,695 157,077
(Gain) loss on sale of carrier operating property. (1,638) 23 (3,554)
Issuance of treasury shares for stock plans . . . 2,564 18,507 30,623
Changes in assets and liabilities, net of effects
from business acquisitions:
Increase in accounts receivable . . . . . . . (76,823) (39,999) (18,537)
Increase in other current assets . . . . . . . (12,901) (13,637) (7,447)
Increase in accounts payable and accrued items 60,499 34,269 39,413
Decrease in current income taxes payable . . . (3,901) (782) (5,856)
Increase in other liabilities . . . . . . . . 16,205 20,382 458
--------- --------- ---------
Total adjustments . . . . . . . . . . . . . . . . 202,216 191,458 192,177
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES. . . 303,420 338,865 319,500
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property . . . . . . . (309,560) (211,073) (202,969)
Sales of carrier operating property . . . . . . . . . 9,376 10,062 10,210
Purchases of marketable securities . . . . . . . . . . (100,151) (197,263) (262,637)
Sales of marketable securities . . . . . . . . . . . . 291,106 124,787 183,694
Business acquisitions, net of cash acquired . . . . . (98,349) (866) --
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES. . . . . (207,578) (274,353) (271,702)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid . . . . . . . . . . . . . . . . . . . . (52,903) (48,984) (44,375)
Purchases of common stock for treasury . . . . . . . . (24,231) -- --
Repayment of borrowings of acquired business . . . . . (32,116) -- --
Proceeds from exercise of stock options . . . . . . . -- 186 --
--------- --------- ---------
NET CASH USED IN FINANCING ACTIVITIES (109,250) (48,798) (44,375)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH . . . . . . . (13,408) 15,714 3,423
CASH AT BEGINNING OF YEAR . . . . . . . . . . 41,036 25,322 21,899
--------- --------- ---------
CASH AT END OF YEAR . . . . . . . . . . . . . $ 27,628 $ 41,036 $ 25,322
========= ========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
PAPER FORMAT DOCUMENT PAGE 33
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ROADWAY SERVICES, INC. AND SUBSIDIARIES
DECEMBER 31, 1993
NOTE A -- ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements include
the accounts of the company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Operations are exclusively
within the transportation industry.
Cash and Marketable Securities -- For purposes of reporting cash flows, cash
includes cash on hand and cash held by banks which is subject to immediate
withdrawal. Marketable securities, principally U.S. government securities, are
stated at cost which approximates market.
Depreciation -- Depreciation of carrier operating property is computed by
the straight line method based on useful lives of assets -- structures, 15 to
45 years; and equipment, 3 to 10 years.
Cost in Excess of Net Assets of Businesses Acquired -- These costs
($115,360,000) are being amortized on the straight line method over a 40 year
period from the respective acquisition dates of the acquired businesses.
Casualty Claims Payable -- These accruals include claims for property damage
and public liability, and workers' compensation. Expenses resulting from
workers' compensation claims are included in salaries, wages and benefits in
the accompanying statement of consolidated income.
Future Equipment Repairs -- This accrual represents the estimated costs of
anticipated major future repairs on intercity tractors.
Revenue -- The company recognizes revenue as earned on the date of freight
delivery to consignee.
Net Income Per Share -- Net income per share is computed on the average
number of shares of common stock outstanding during each year: 39,521,000 in
1993 and 1992, and 38,906,000 in 1991.
Reclassifications -- Certain amounts for 1992 and 1991 have been
reclassified to conform to 1993 classifications.
NOTE B -- ACQUISITIONS
On April 6, 1993, the company acquired Central Freight Lines Inc., Texas'
largest regional carrier, following a vote of approval by Central's
shareholders. The company used internally generated funds to acquire the common
stock of Central at a total cost of $102,142,000.
On June 24, 1992, the company acquired Cole Enterprises, Inc., the parent
company of Coles Express, Inc., a New England regional motor common carrier
based in Bangor, Maine, for $4,617,000 in cash and 235,892 shares of the
company's common stock valued at $15,127,000.
The acquisitions of Central and Coles were accounted for as purchases and
the cost in excess of next assets acquired was $16,432,000 and $3,441,000,
respectively. The earnings of Central and Coles are included in the
accompanying statement of consolidated income since their respective
acquisition dates, and are not material in relation to consolidated operations.
NOTE C -- ACCOUNTS PAYABLE
<TABLE>
<CAPTION>
Items classified as accounts payable consist of the following: 1993 1992
--------- ---------
(dollars in thousands)
<S> <C> <C>
Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . $ 191,073 $ 149,999
Drafts outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,468 45,301
Taxes, other than income . . . . . . . . . . . . . . . . . . . . . . . . 35,562 30,061
--------- ---------
Total accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $ 268,103 $ 225,361
========= =========
</TABLE>
PAPER FORMAT DOCUMENT PAGE 34
<PAGE> 37
22NOTE D -- INCOME TAXES
Effective January 1, 1993, the company adopted the provisions of Statement
of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes." The cumulative effect of adopting SFAS 109 resulted in an increase in
1993 earnings of $5,736,000 or $.15 per share.
Under SFAS 109, deferred taxes are recorded using tax rates scheduled to be
in effect at the time the items giving rise to the deferred taxes reverse.
Prior to 1993, deferred taxes were recorded using tax rates in effect in the
year in which the timing differences arose and were not adjusted for subsequent
tax rate changes.
Significant components of the company's deferred tax liabilities and assets
as of December 31, 1993 are as follows:
<TABLE>
<CAPTION>
1993
-----------
(dollars in
thousands)
-----------
<S> <C>
Deferred tax liabilities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 121,321
Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,723
---------
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 142,044
Deferred tax assets:
Freight and casualty claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,116
Retiree medical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,891
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,182
---------
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,189
---------
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,855
=========
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(dollars in thousands)
<S> <C> <C> <C>
Taxes currently payable:
Federal . . . . . . . . . . . . . . . . . . . . . . $ 80,268 $102,853 $ 78,418
State . . . . . . . . . . . . . . . . . . . . . . . 19,391 20,430 16,456
--------- -------- --------
99,659 123,283 94,874
Deferred taxes (credits):
Federal . . . . . . . . . . . . . . . . . . . . . . (3,923) (17,214) (7,208)
State . . . . . . . . . . . . . . . . . . . . . . . (666) (3,010) (1,383)
--------- -------- --------
(4,589) (20,224) (8,591)
--------- -------- --------
Provision for income taxes . . . . . . . . . . . . $ 95,070 $103,059 $ 86,283
========= ======== ========
</TABLE>
Deferred income taxes (credits) include the following:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ---------
(dollars in thousands)
<S> <C> <C> <C>
Depreciation . . . . . . . . . . . . . . . . . . . . $ 2,389 $ (7,296) $ 1,510
Freight and casualty claims . . . . . . . . . . . . . (11,202) (3,338) (2,985)
Accrued vacations . . . . . . . . . . . . . . . . . . -- -- (5,451)
Other, net . . . . . . . . . . . . . . . . . . . . . 4,224 (9,590) (1,665)
---------- --------- ---------
$ (4,589) $ (20,224) $ (8,591)
========== ========= =========
</TABLE>
PAPER FORMAT DOCUMENT PAGE 35
<PAGE> 38
The effective tax rate differs from the federal statutory rate as set forth
in the following reconciliation:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate . . . . . . . . . . . . . 35.0% 34.0% 34.0%
State income taxes, net of federal tax benefit . . . 5.7 4.6 4.7
Other, net . . . . . . . . . . . . . . . . . . . . . 3.6 2.5 1.7
----- ----- -----
Effective tax rate . . . . . . . . . . . . . . . 44.3% 41.1% 40.4%
===== ===== =====
</TABLE>
Income tax payments amounted to $101,217,000 in 1993, $99,362,000 in 1992 and
$101,417,000 in 1991.
NOTE E -- RETIREMENT PLANS
The company charged to operations $97,682,000 in 1993, $90,229,000 in 1992
and $82,985,000 in 1991 for contributions to multiemployer pension plans for
Roadway Express, Inc. employees subject to labor contracts. The company also
charged to operations $114,167,000 in 1993, $102,127,000 in 1992 and
$91,846,000 in 1991 for contributions to multiemployer plans that provide
health and welfare benefits to employees and retirees of Roadway Express, Inc.
who are or were subject to labor contracts. These amounts were determined in
accordance with provisions of industry labor contracts.
The company has defined benefit pension plans covering employees not subject
to labor contracts. 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 sets forth the company plans' funded status and amounts
recognized in the balance sheet:
<TABLE>
<CAPTION>
1993 1992
--------- ---------
(dollars in thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
$264,908 in 1993 and $219,876 in 1992 . . . . . . . . . . . . . . . . . . . $ 302,638 $ 251,062
========= =========
Projected benefit obligation for service rendered to date . . . . . . . . . . . $ 380,034 $ 317,142
Plan assets at fair value, primarily listed stocks and U.S. government securities 364,792 307,639
--------- ---------
Projected benefit obligation in excess of plan assets . . . . . . . . . . . . . . (15,242) (9,503)
Unrecognized net gain from past experience different from
that assumed and effects of changes in assumptions . . . . . . . . . . . . . . (25,812) (49,624)
Prior service cost not yet recognized in net pension cost . . . . . . . . . . . . 81,216 86,566
Unrecognized net asset from date of adoption of SFAS 87 . . . . . . . . . . . . . (42,009) (44,810)
--------- ---------
Accrued pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,847) $ (17,371)
========= =========
</TABLE>
Net pension cost of company plans includes the following components:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Service cost of benefits earned during the year . . . . . . . . . . . . . . . . . $ 21,633 $ 13,474 $ 11,803
Interest cost on projected benefit obligation . . . . . . . . . . . . . . . . . . 22,915 15,769 12,537
Actual return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,986) (20,888) (56,973)
Deferral of experience gain (loss) and amortization of net assets . . . . . . . . (65) (2,532) 36,853
-------- -------- --------
Net pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,497 $ 5,823 $ 4,220
======== ======== ========
</TABLE>
PAPER FORMAT DOCUMENT PAGE 36
<PAGE> 39
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 6.5% and 4% in 1993, and 6.75% and 4% in
1992. The expected long-term rate of return on assets was 7.75%. The projected
benefit obligation increased in 1993 by approximately $21 million due to the
lower assumed discount rate. Net pension cost increased in 1993 by
approximately $8 million for amendments to increase benefits to participants
effective January 1, 1993, and approximately $5 million due to the lower
assumed discount rate.
The company provides health care benefits to certain retirees who were not
subject to labor contracts. During 1993, eligible new retirees began
contributing to the cost of these benefits. Prior to 1993 the cost of these
benefits was recognized when incurred. Effective January 1, 1993, the company
adopted the provisions of SFAS 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." Under SFAS 106, the cost of these benefits is
recognized during eligible employment. The company recorded the entire
transition obligation of $38,496,000 ($23,867,000 after tax or $.61 per share)
as a one time charge against 1993 earnings.
The following table sets forth the amounts recognized in the balance sheet:
<TABLE>
<CAPTION>
1993 1992
---------- ---------
(dollars in thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7,497) $ (3,417)
Fully eligible active plan participants . . . . . . . . . . . . . . . . . . . . (8,501) (4,887)
Other active plan participants . . . . . . . . . . . . . . . . . . . . . . . . . (45,299) (30,192)
---------- --------
(61,297) (38,496)
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,849 --
Unrecognized transition obligation . . . . . . . . . . . . . . . . . . . . . . . -- 38,496
---------- ---------
Accrued postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . . $ (53,448) $ --
========== =========
</TABLE>
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1993 1992 1991
-------- ------- -------
(dollars in thousands)
<S> <C> <C> <C>
Service cost of benefits earned during the year . . . . . . . . . . . . . . . . . $ 4,000
Interest cost on accumulated postretirement benefit obligation . . . . . . . . . 3,737
Net amortization and deferral . . . . . . . . . . . . . . . . . . . . . . . . . . 75
--------
Net postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,812 $ 852 $ 759
======== ======= =======
</TABLE>
At December 31, 1993, the assumed health care cost trend rate is 12.75% for
1994 and is assumed to decrease gradually to 6.25% by 2006 and remain at that
level thereafter. At December 31, 1992, the assumed rate was 13.5% for 1993 and
12.75% for 1994, decreasing gradually to 6.5% by 2005. The health care cost
trend rate assumption has a significant effect on the amounts reported. For
example, increasing the assumed health care trend rates by one percentage point
in each year would increase the accumulated postretirement benefit obligation
as of December 31, 1993 and 1992 by $9 million and $7 million, respectively,
and the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for 1993 by $1 million.
The weighted average discount rate used in determining the actuarial present
value of the accumulated postretirement benefit obligation was 6.5% and 6.75%
at December 31, 1993 and 1992, respectively.
The company contributed $28,207,000 in 1993, $27,665,000 in 1992 and
$20,533,000 in 1991 to various employee defined contribution plans which invest
primarily in company stock. These plans generally cover employees not subject
to labor contracts. Annual contributions are related to company profitability
and employees' salaries and wages.
PAPER FORMAT DOCUMENT PAGE 37
<PAGE> 40
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.
The company issued from treasury 86,624 shares of its common stock in 1993,
301,221 shares in 1992 and 587,000 shares in 1991 in connection with employee
stock plans. The company purchased 448,533 shares of its common stock in 1993.
Under a plan for nonemployee directors, in 1990 the company awarded 1,111
shares of its common stock and options to purchase 4,444 shares at $36 per
share, and in 1989 awarded 9,331 shares and options to purchase 37,324 shares
at $30 per share. During 1993, 1992 and 1991, 2,091 shares, 2,313 shares, and
3,731 shares, respectively, were forfeited under plan provisions and certain of
the options became exercisable. Under plan provisions, the remaining shares
awarded in 1990 and 1989 may be forfeited in the future and related options
may become exercisable. Nonemployee directors exercised options to purchase
6,200 shares at $30 per share during 1992. The number of shares that may be
issued under this plan is limited to 60,000.
The fair market value of treasury shares issued in connection with stock
plans and the 1992 acquisition of Cole Enterprises, Inc. discussed in Note B
exceeded cost by $54,000 in 1993, $19,121,000 in 1992 and $15,146,000 in 1991.
The excess has been recorded as additional capital.
NOTE G -- CONTINGENCIES
During 1989, the Internal Revenue Service (IRS) completed an examination of
the company's employment tax returns for the years 1985 and 1986 proposing
changes in classification of certain drivers at Roadway Package System, Inc.
and subjecting the company to payment of approximately $5 million of certain
employment taxes for those years. The company paid the amounts claimed although
it disagreed with the IRS position both as to liability for and amounts of
taxes claimed. The company then filed suit in the United States Court of Claims
to recover the amounts paid. In 1992, the IRS completed its examination of the
company's 1987 through 1989 employment tax returns and proposed additional
employment taxes of approximately $27 million. Were the IRS to propose
adjustments for the years 1990 through 1993 on the same basis as adjustments
proposed for prior years, its proposed adjustments could approximate an
additional $87 million of employment taxes. Until the present suit is resolved,
the company cannot reasonably determine whether it has any liability for years
after 1986.
Various other 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.
PAPER FORMAT DOCUMENT PAGE 38
<PAGE> 41
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
To the Board of Directors
Roadway Services, Inc.
We have audited the accompanying consolidated balance sheets of Roadway
Services, Inc. and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of income, earnings reinvested in the business
and cash flows for each of the three years in the period ended December 31,
1993. 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 audits 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 Roadway
Services, Inc. and subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young
------------------------
Akron, Ohio
January 25, 1994
PAPER FORMAT DOCUMENT PAGE 39
<PAGE> 42
<TABLE>
HISTORICAL DATA
<CAPTION>
1993 1992 1991 1990
----------- ----------- ---------- -----------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . . $ 4,155,940 $ 3,577,601 $ 3,176,956 $ 2,971,235
Operating Expenses
Salaries, wages and benefits. . . . . . . . . . . . 2,242,628 1,908,425 1,734,782 1,620,498
Operating supplies and expenses. . . . . . . . . 678,872 591,438 514,760 485,998
Purchased transportation . . . . . . . . . . . . 623,358 500,001 419,590 374,597
Operating taxes and licenses . . . . . . . . . . 115,942 96,266 88,459 79,649
Insurance and claims . . . . . . . . . . . . . . 95,136 74,380 61,844 72,841
Provision for depreciation . . . . . . . . . . . 197,232 170,287 154,669 149,259
Net (gain) loss on sale of carrier
operating property . . . . . . . . . . . . . . (1,638) 23 (3,554) (191)
----------- ----------- ----------- -----------
Total Operating Expenses . . . . . . . . . . . . . . 3,951,530 3,340,820 2,970,550 2,782,651
----------- ----------- ----------- -----------
Operating Income . . . . . . . . . . . . . . . . . . 204,410 236,781 206,406 188,584
Other income -- net . . . . . . . . . . . . . . . . 9,995 13,685 7,200 5,954
----------- ----------- ----------- -----------
Income before income taxes and cumulative
effect of accounting changes . . . . . . . . . . . 214,405 250,466 213,606 194,538
Provision for income taxes . . . . . . . . . . . . 95,070 103,059 86,283 75,458
----------- ----------- ----------- -----------
Income before cumulative effect of
accounting changes . . . . . . . . . . . . . . . . 119,335 147,407 127,323 119,080
Cumulative effect of accounting changes(1) . . . . . (18,131) -- -- --
----------- ----------- ----------- -----------
Net Income . . . . . . . . . . . . . . . . . . . . . $ 101,204 $ 147,407 $ 127,323 $ 119,080
=========== =========== =========== ===========
Earnings per share(2):
Before cumulative effect of accounting changes . . $ 3.02 $ 3.73 $ 3.27 $ 3.05
Cumulative effect of accounting changes . . . . . . (.46) -- -- --
----------- ----------- ----------- -----------
Net Income . . . . . . . . . . . . . . . . . . . . $ 2.56 $ 3.73 $ 3.27 $ 3.05
=========== =========== =========== ===========
Cash dividends declared per share(3) . . . . . . . $ 1.37 1/2 $ 1.27 1/2 $ 1.17 1/2 $ 1.10
Average number of shares of
common stock outstanding (3) . . . . . . . . . . . 39,521 39,521 38,906 39,023
Total Shareholders' Equity . . . . . . . . . . . . $ 1,047,151 $ 1,021,360 $ 890,256 $ 777,795
Total Assets . . . . . . . . . . . . . . . . . . . . $ 1,846,402 $ 1,681,085 $ 1,488,632 $ 1,341,046
____________________________________________________________________________________________________________________________
Tons of freight -- LTL . . . . . . . . . . . . . . 11,014 9,219 8,388 7,967
TL . . . . . . . . . . . . . . . 3,772 2,796 2,740 2,532
----------- ----------- ----------- -----------
Total . . . . . . . . . . . . . 14,786 12,015 11,128 10,499
Intercity miles. . . . . . . . . . . . . . . . . . . 1,056,177 932,866 862,865 811,729
Ton miles. . . . . . . . . . . . . . . . . . . . . . 13,342,600 11,788,035 10,944,225 10,492,865
____________________________________________________________________________________________________________________________
<FN>
Notes: (1) Changes in methods of accounting for income taxes and retiree medical
benefits in 1993.
(2) Earnings per share are computed on the average number of shares of
common stock outstanding during each year.
(3) Adjusted to reflect a 2 for 1 stock split effective May 30, 1984.
</TABLE>
PAPER FORMAT DOCUMENT PAGE 40
<PAGE> 43
<TABLE>
HISTORICAL DATA
<CAPTION>
1989 1988 1987 1986
--------- ---------- ---------- ----------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . . $2,660,910 $2,184,531 $1,908,747 $1,717,491
Operating Expenses
Salaries, wages and benefits. . . . . . . . . . . . 1,490,454 1,241,070 1,094,415 993,997
Operating supplies and expenses . . . . . . . . . 436,831 348,146 333,414 283,788
Purchased transportation. . . . . . . . . . . . . 313,163 257,217 205,407 144,239
Operating taxes and licenses. . . . . . . . . . . 72,817 60,380 57,018 53,205
Insurance and claims. . . . . . . . . . . . . . . 65,118 54,427 45,974 37,042
Provision for depreciation. . . . . . . . . . . . 138,170 122,827 115,158 100,421
Net (gain) loss on sale of carrier
operating property. . . . . . . . . . . . . . . (75) (1,238) (755) (987)
---------- ---------- ---------- ----------
Total Operating Expenses . . . . . . . . . . . . . . 2,516,478 2,082,829 1,850,631 1,611,705
---------- ---------- ---------- ----------
Operating Income . . . . . . . . . . . . . . . . . . 144,432 101,702 58,116 105,786
Other income -- net. . . . . . . . . . . . . . . . . 5,745 18,997 20,221 24,332
---------- ---------- ---------- ----------
Income before income taxes and cumulative
effect of accounting changes . . . . . . . . . . . 150,177 120,699 78,337 130,118
Provision for income taxes . . . . . . . . . . . . . 54,656 40,460 27,829 53,652
---------- ---------- ---------- ----------
Income before cumulative effect of
accounting changes . . . . . . . . . . . . . . . . 95,521 80,239 50,508 76,466
Cumulative effect of accounting changes(1) . . . . . -- -- -- --
---------- ---------- ---------- ----------
Net Income . . . . . . . . . . . . . . . . . . . . . $ 95,521 $ 80,239 $ 50,508 $ 76,466
========== ========== ========== ==========
Earnings per share(2):
Before cumulative effect of accounting changes. . . $ 2.44 $ 2.00 $ 1.26 $ 1.91
Cumulative effect of accounting changes . . . . . . -- -- -- --
---------- ---------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . . . . . . $ 2.44 $ 2.00 $ 1.26 $ 1.91
========== ========== ========== ==========
Cash dividends declared per share(3) . . . . . . . . $ 1.10 $ 1.10 $ 1.10 $ 1.10
Average number of shares of
common stock outstanding (3) . . . . . . . . . . . 39,154 40,120 40,217 40,114
Total Shareholders' Equity . . . . . . . . . . . . . $ 718,292 $ 670,389 $ 661,661 $ 654,235
Total Assets . . . . . . . . . . . . . . . . . . . . $1,273,120 $1,182,235 $1,105,473 $1,070,659
____________________________________________________________________________________________________________________________
Tons of freight -- LTL. . . . . . . . . . . . . . . 7,447 6,210 5,799 4,932
TL . . . . . . . . . . . . . . . 2,688 2,412 2,180 2,212
---------- ---------- ---------- ----------
Total. . . . . . . . . . . . . . 10,135 8,622 7,979 7,144
Intercity miles. . . . . . . . . . . . . . . . . . . 777,799 675,079 641,157 544,755
Ton miles. . . . . . . . . . . . . . . . . . . . . . 10,200,525 8,931,450 8,556,682 7,556,624
____________________________________________________________________________________________________________________________
<FN>
Notes: (1) Changes in methods of accounting for income taxes and retiree medical
benefits in 1993.
(2) Earnings per share are computed on the average number of shares of
common stock outstanding during each year.
(3) Adjusted to reflect a 2 for 1 stock split effective May 30, 1984.
</TABLE>
PAPER FORMAT DOCUMENT PAGE 41
<TABLE>
HISTORICAL DATA
<CAPTION>
1985 1984 1983
---------- ---------- ----------
(Amounts in thousands, except per share data)
<S> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . . $1,579,825 $1,461,510 $1,252,980
Operating Expenses
Salaries, wages and benefits. . . . . . . . . . . . 930,837 891,899 792,997
Operating supplies and expenses . . . . . . . . . 275,983 253,018 213,606
Purchased transportation. . . . . . . . . . . . . 109,944 58,424 27,015
Operating taxes and licenses. . . . . . . . . . . 50,861 45,051 32,964
Insurance and claims. . . . . . . . . . . . . . . 34,885 28,765 24,712
Provision for depreciation. . . . . . . . . . . . 81,280 51,992 35,962
Net (gain) loss on sale of carrier
operating property. . . . . . . . . . . . . . . (2,336) (379) (500)
---------- ---------- ----------
Total Operating Expenses . . . . . . . . . . . . . . 1,481,454 1,328,770 1,126,756
---------- ---------- ----------
Operating Income . . . . . . . . . . . . . . . . . . 98,371 132,740 126,224
Other income -- net. . . . . . . . . . . . . . . . . 33,508 45,388 51,446
---------- ---------- ----------
Income before income taxes and cumulative
effect of accounting changes . . . . . . . . . . . 131,879 178,128 177,670
Provision for income taxes . . . . . . . . . . . . . 55,968 78,113 78,465
---------- ---------- ----------
Income before cumulative effect of
accounting changes . . . . . . . . . . . . . . . . 75,911 100,015 99,205
Cumulative effect of accounting changes(1) . . . . . -- -- --
---------- ---------- ----------
Net Income . . . . . . . . . . . . . . . . . . . . . $ 75,911 $ 100,015 $ 99,205
========== ========== ==========
Earnings per share(2):
Before cumulative effect of accounting changes. . . $ 1.90 $ 2.49 $ 2.47
Cumulative effect of accounting changes . . . . . . -- -- --
---------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . . . . . . $ 1.90 $ 2.49 $ 2.47
========== ========== ==========
Cash dividends declared per share(3) . . . . . . . . $ 1.02 1/2 $ 1.00 $ .85
Average number of shares of
common stock outstanding (3) . . . . . . . . . . . 39,931 40,105 40,185
Total Shareholders' Equity . . . . . . . . . . . . . $ 613,836 $ 577,950 $ 528,815
Total Assets . . . . . . . . . . . . . . . . . . . . $ 999,861 $ 912,965 $ 812,373
_______________________________________________________________________________________________________
Tons of freight -- LTL. . . . . . . . . . . . . . . 4,444 4,143 3,423
TL . . . . . . . . . . . . . . . 2,572 2,528 1,614
---------- ---------- ----------
Total. . . . . . . . . . . . . . 7,016 6,671 5,037
Intercity miles. . . . . . . . . . . . . . . . . . . 529,153 498,362 396,495
Ton miles. . . . . . . . . . . . . . . . . . . . . . 7,254,521 6,922,814 5,621,280
_______________________________________________________________________________________________________
<FN>
Notes: (1) Changes in methods of accounting for income taxes and retiree medical
benefits in 1993.
(2) Earnings per share are computed on the average number of shares of
common stock outstanding during each year.
(3) Adjusted to reflect a 2 for 1 stock split effective May 30, 1984.
</TABLE>
PAPER FORMAT DOCUMENT PAGE 41
<PAGE> 44
<TABLE>
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
<CAPTION>
Operating Net Earnings Per Net Income Average Shares
Quarter Ended Revenue Income Income (a) Income Share (a) Per Share Outstanding
------------- ------- --------- ---------- ------ ----------- ---------- --------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
1993
March 27 $ 856,052 $ 30,990 $ 20,261 $ 2,130 $ 0.51 $ 0.05 39,741,000
June 19 939,263 42,002 27,323 27,323 0.69 0.69 39,697,000
September 11 983,872 53,752 29,039 29,039 0.74 0.74 39,322,000
December 31 1,376,753 77,666 42,712 42,712 1.08 1.08 39,369,000
1992
March 28 $ 802,666 $ 48,764 $ 30,723 $ 30,723 $ 0.78 $ 0.78 39,263,000
June 20 803,501 50,447 32,363 32,363 0.82 0.82 39,397,000
September 12 836,701 51,880 32,836 32,836 0.83 0.83 39,683,000
December 31 1,134,733 85,690 51,485 51,485 1.30 1.30 39,697,000
</TABLE>
(a) Before cumulative effect of accounting changes.
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.
COMMON STOCK AND DIVIDENDS
Roadway Services, Inc. common stock is traded in the over-the-counter
NASDAQ National Market (symbol: ROAD). Roadway Services is included in the Dow
Jones Transportation Average, a major barometer for the U.S. transportation
industry. Roadway is the only over-the-counter stock to be included in a Dow
Jones average.
Cash dividends declared per share totaled $1.37 1/2 in 1993 and $1.27 1/2
in 1992. The number of holders of record of the company's common stock at
December 31, 1993 was approximately 7,200. The high and low prices at which
Roadway Services common stock traded for each quarter in 1993 and 1992, as
reported by the National Association of Securities Dealers, Inc., are shown
below.
<TABLE>
<CAPTION>
Price Range
----------------------------------------- Dividends Declared
1993 1992 Per Share
------------------- ------------------ ----------------------
Quarter Ended High Low High Low 1993 1992
------------- ------- ------- ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
March 31 . . . . . . . . . . . . . $72 1/2 $59 3/4 $77 1/4 $59 3/4 $ .32 1/2 $ .30
June 30 . . . . . . . . . . . . . 65 1/2 51 3/4 77 3/4 61 1/4 .35 .32 1/2
September 30 . . . . . . . . . . . 63 1/4 55 3/4 67 1/2 55 1/4 .35 .32 1/2
December 31 . . . . . . . . . . . 69 57 1/2 76 1/4 58 1/4 .35 .32 1/2
--------- ---------
$1.37 1/2 $1.27 1/2
========= =========
</TABLE>
The company offers a dividend reinvestment plan through its stock transfer
agent, Society National Bank. The plan provides an opportunity for registered
shareholders of the company to automatically purchase additional shares of
Roadway Services common stock with dividends. Further information regarding the
plan is on page 44 of this report.
An information booklet which provides answers to questions regarding the
ownership and transfer of stock is also available to shareholders of the
company. Copies may be obtained by contacting the company at the address or
telephone number listed on page 44 of this report.
PAPER FORMAT DOCUMENT PAGE 42
<PAGE> 45
DIRECTORS AND OFFICERS
ROADWAY SERVICES, INC.
BOARD OF DIRECTORS
GEORGE B. BEITZEL, Retired Senior Vice President
and Director, International Business Machines Corp.,
Armonk, New York
R. A. CHENOWETH, Principal of Buckingham, Doolittle
& Burroughs, a Legal Professional Association,
Akron, Ohio
JOSEPH M. CLAPP, Chairman and Chief Executive Officer
of the company
NORMAN C. HARBERT, Chairman and CEO, The Hawk
Group, Cleveland, Ohio
CHARLES R. LONGSWORTH, Chairman, The Colonial
Williamsburg Foundation, Williamsburg, Virginia
ROBERT E. MERCER, Retired Chairman and CEO,
The Goodyear Tire & Rubber Company, Akron, Ohio
G. JAMES ROUSH, Private Investor, Seattle, Washington
DANIEL J. SULLIVAN, President and Chief Operating
Officer of the company
WILLIAM SWORD, Chairman of the Board, Wm. Sword
& Co. Incorporated, Princeton, New Jersey
SARAH ROUSH WERNER, Private Investor,
Marysville, Washington
OFFICERS
DONALD C. BROWN, Assistant Controller
JOHN P. CHANDLER, Vice President-Administration and Treasurer
JOSEPH M. CLAPP, Chairman and Chief Executive Officer
JOHN M. GLENN, Vice President and General Counsel
ROY E. GRIGGS, Vice President and Controller
WILLIAM F. KLUG, Vice President-Properties and
Materials Management
JONATHAN T. PAVLOFF, Vice President-Corporate
Planning
A. C. SNELSON, Vice President-Corporate Support Services
DANIEL J. SULLIVAN, President and Chief Operating Officer
D. A. WILSON, Senior Vice President-Finance and Planning,
Secretary and Chief Financial Officer
OPERATING COMPANY OFFICERS
ROADWAY EXPRESS, INC.
JOHN D. BRONNECK, Vice President-Northeastern Division
FRANK W. CAHILL, Vice President-Central Division
HELENE CSVANY, Vice President-Information Systems
J. DAWSON CUNNINGHAM, Vice President-Finance
and Administration, Secretary and Treasurer
BRIAN M. CURRAN, Vice President-Southern Division
LAWRENCE L. DEMASTUS, Vice President-Maintenance
DOUGLAS G. DUNCAN, Vice President-Sales
LOUIS J. ESPOSITO, Vice President-Midwestern Division
RONALD J. GORDON, Vice President-Western Division
JOE D. LAWRENCE, Vice President-Quality
MICHAEL J. MURPHY, Vice President-Corporate Sales
ROBERT W. OBEE, Vice President-Operations Planning
and Engineering
K. OLSEN, Vice President-Marketing
ANTHONY R. POAT, Vice President-Pricing
J. A. SALERNO, Vice President-Administration
J. D. STALEY, Vice President-Operations
MICHAEL W. WICKHAM, President
ROADWAY PACKAGE SYSTEM, INC.
GORDON N. BLOOM, Vice President-Management
Information Systems
PAUL S. CALLAHAN, Vice President-Central Division
MARY K. COULTER, Vice President-Customer Service
ERIC W. DAMON, Vice President-Finance and Administration
EDWARD S. DiSALVO, Vice President-Sales
DAVID L. GERSCHULTZ, Vice President-Southern Division
IVAN T. HOFMANN, President
LEE E. HOLLY, Vice President-Human Resources
BRAM B. JOHNSON, Vice President-Marketing
RONALD E. JOSEPH, Vice President-Transportation,
Safety and Maintenance
JOSEPH P. LOUGHRAN, Vice President-Operations
Planning and Engineering
TERRENCE F. SRSEN, President, Roadway Package
System, Ltd.
J. ALLAN TEPPER, Vice President-Western Division
THOMAS R. WARREN, Vice President-Field Operations
ROBERT T. YOUNG, Vice President-Eastern Division
ROADWAY GLOBAL AIR, INC.
DONALD G. BERGER, President
REGIONAL CARRIER GROUP
RANDOLPH C. BANGHAM, President
VIKING FREIGHT SYSTEM, INC.
RONALD G. PELZEL, President
CENTRAL FREIGHT LINES INC.
C. TOM CLOWE, JR., President
SPARTAN EXPRESS, INC.
THOMAS L. DOBB, President-Spartan South
LAWRENCE K. LeGRAND, President-Spartan Central
COLES EXPRESS, INC.
ROBERT T. DRAKE, President
ROBERTS EXPRESS, INC.
R. BRUCE SIMPSON, President
ROADWAY LOGISTICS SYSTEMS, INC.
ROBERT D. LAKE, President
SUMMIT INFORMATION SYSTEMS, INC.
GERALD A. LONG, President
PAPER FORMAT DOCUMENT PAGE 43
<PAGE> 46
CORPORATE INFORMATION
ROADWAY SERVICES, INC. is a holding company engaged through its operating
companies in the transportation and logistics businesses. Its operating
companies are:
ROADWAY EXPRESS, INC., the company's largest operating company, primarily
handles long haul, less-than-truckload (LTL) general freight, serving all 50
states, Canada, Guam, Mexico, Latin America, the Eastern Caribbean, Europe, the
Middle East and the Pacific Rim through 573 terminals.
1077 Gorge Boulevard, P.O. Box 471
Akron, Ohio 44309
(216) 384-1717
ROADWAY PACKAGE SYSTEM, INC. serves shippers in the small package market. RPS
presently serves 47 states through 259 terminals. ROADWAY PACKAGE SYSTEM, LTD.
(Toronto, Ontario) provides service throughout Canada with 12 terminals.
P.O. Box 108
Pittsburgh, Pennsylvania 15230
(412) 269-1000
ROADWAY GLOBAL AIR, INC. provides heavy weight air cargo service to customers
worldwide through 51 air logistics centers in North America, Europe, Asia and
Australia, including a hub facility in Terre Haute, Indiana.
9200 Keystone Crossing, Suite 500
Indianapolis, Indiana 46240
(317) 580-7070
VIKING FREIGHT, INC. is the parent of regional carriers VIKING FREIGHT SYSTEM,
INC., SPARTAN EXPRESS, INC., COLES EXPRESS, INC., and CENTRAL FREIGHT LINES INC.
Viking provides LTL service in nine western states through 45 terminals, and
service to Alaska, Hawaii and Mexico. Spartan provides LTL service in 18
central and southern states through 64 terminals. Coles provides LTL service
to 10 northeastern states through 15 terminals. Central provides LTL service
to six southwestern states and Mexico through 75 terminals.
(Viking): 411 East Plumeria Drive
San Jose, California 95134
(408) 922-7200
(Spartan South): P.O. Box 1089
Greer, South Carolina 29652
(803) 879-4211
(Spartan Central): 125 Dillmont Drive
Worthington, Ohio 43235
(614) 841-1220
(Coles): 444 Perry Road
Bangor, Maine 04401
(207) 942-7311
(Central): 5601 W. Waco Drive
Waco, Texas 76702
(817) 772-2120
ROBERTS TRANSPORTATION SERVICES, INC., through its subsidiaries, provides
expedited delivery for critical and time-sensitive shipments.
2088 South Arlington Street, P.O. Box 7162
Akron, Ohio 44306
(216) 773-3381
ROADWAY LOGISTICS SYSTEMS, INC. provides contract logistics services.
131 North Canton Road
Akron, Ohio 44305
(216) 784-1600
CORPORATE HEADQUARTERS
- ----------------------
1077 Gorge Boulevard
P.O. Box 88
Akron, Ohio 44309
Telephone: (216) 384-8184
ANNUAL MEETING
- --------------
The annual meeting of shareholders of Roadway Services, Inc. will be held on
Wednesday, May 11, 1994 at 9:00 a.m. Eastern Daylight Time at the Sheraton
Hotel, 1989 Front St., Cuyahoga Falls, Ohio. Formal notice and proxy
statement, with proxy, will be mailed on or about April 11, 1994, to each
shareholder of record on March 25, 1994. Shareholders are requested to execute
and return proxies.
TRANSFER AGENT AND REGISTRAR
- ----------------------------
Society National Bank
Corporate Trust Division
P.O. Box 6477
Cleveland, Ohio 44101-1477
DIVIDEND REINVESTMENT PLAN
- --------------------------
Registered shareholders of Roadway Services, Inc. are eligible to participate
in a dividend reinvestment plan through Society National Bank, the company's
stock transfer agent. For information regarding the plan, contact the
company's transfer agent.
PAPER FORMAT DOCUMENT PAGE 44
<PAGE> 47
APPENDIX TO ANNUAL REPORT TO SHAREHOLDERS
<TABLE>
<CAPTION>
Paper Format
Graphs Document Page
- ------ -------------
<S> <C>
Bar Graph No. 1 1
Depicts a comparison of Roadway Express to
Other Companies Totally
</TABLE>
Revenue (in billions)
<TABLE>
<CAPTION>
Roadway Express Total
<S> <C> <C>
1989 $1.84 $2.66
1990 $1.98 $2.97
1991 $2.06 $3.18
1992 $2.19 $3.58
1993 $2.32 $4.16
</TABLE>
<TABLE>
<S> <C>
Bar Graph No. 2 1
</TABLE>
Net Income (in millions)(a)
<TABLE>
<S> <C>
1989 $ 95.5
1990 $119.1
1991 $127.3
1992 $147.4
1993 $119.3
</TABLE>
(a) Excludes $18.1 million charge for the cumulative
effect of accounting changes in 1993.
<TABLE>
<CAPTION>
Paper Format
Photo No. Description Document Page
- --------- ----------- -------------
<S> <C> <C>
1 Small photo of sky 1
2 Individual looking at computer equipment 4
3 Roadway truck 4
4 Roadway doubles truck 5
5 Individuals looking at computer screens 6
6 Roadway doubles truck 6
7 Sortation equipment 7
8 Sortation equipment 8
9 RPS Air truck and RGA airplane 8
10 RPS van 9
11 RPS van 10
12 Individual looking at computer equipment 10
13 Sortation equipment 11
14 Air cargo container 12
15 RGA airplane 12
16 RGA airplane 13
17 Individual with handheld micro computer 14
18 Viking doubles truck 14
19 Viking doubles truck 15
20 Central mechanic 16
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
Paper Format
Photo No. Description Document Page
- --------- ----------- -------------
<S> <C> <C>
21 Central truck 16
22 Central truck 17
23 Individual looking at computer equipment 18
24 Line of Spartan trucks 18
25 Spartan truck 19
26 Individual fueling Coles truck 20
27 Coles doubles truck 20
28 Coles doubles truck 21
29 Computer equipment 22
30 Individuals at work stations 22
31 Roberts truck 23
32 ROLS truck 24
33 Inside of a warehouse 24
34 Automotive parts in a warehouse 25
35 Small photo of the sky 26
</TABLE>
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
State or Jurisdiction
Subsidiary of Incorporation
---------- ---------------------
Roadway Express, Inc. Delaware
Roadway Express International, Inc. Delaware
TNL-Roadway SA de CV Mexico
Roadway Express, B.V. Netherlands
Roadway Express (Canada), Inc. Alberta
Roadway Managed Return Services, Inc. Ohio
Roadway Package System, Inc. Delaware
Roadway Package System, Ltd. Canada
Roadway Package System S.A. de C.V. Mexico
Roadway Telemarketing, Inc. Delaware
Roadway Global Air, Inc. Delaware
Roadway Global Air International, Inc. Delaware
Roadway Global Air, S.N.C. France
Roadway Global Air, Ltd. Hong Kong
Viking Freight, Inc. California
Viking Freight System, Inc. California
Spartan Express, Inc. South Carolina
Coles Express, Inc. Delaware
Central Freight Lines Inc. Texas
Roadway Logistics Systems, Inc. Ohio
ROLS Dedicated Transportation, Inc. Delaware
MediQuik Express, Inc. Ohio
Pivot Systems, Inc. Delaware
Pronto Express, Inc. Ohio
ROLS Marketing Services, Inc. Delaware
Warehouse Services, Inc. Delaware
Roadway Logistics Systems (Canada), Ltd Ontario
Roberts Transportation Services, Inc. Ohio
Roberts Express, Inc. Ohio
Roberts Express, B.V. Netherlands
Roberts Express SARL France
Roberts Express GmbH Germany
North Coast Express, Inc. Ohio
Summit Information System, Inc. Ohio
Carrier Supplies, Inc. Ohio
Roadway Tire Company Ohio
Services Development Corporation Delaware
Circle Investment Co. Delaware
Triangle Investment Co. Delaware
Transport Financial Corporation Delaware
Roadway Services (Canada), (1991) Ltd. Canada
The Roadway Company (Europe), Inc. Delaware
<PAGE> 2
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Roadway Services, Inc. of our report dated January 25, 1994, included in
the 1993 Annual Report to Shareholders of Roadway Services, Inc.
We also consent to the incorporation by reference of our report dated January
25, 1994 with respect to the consolidated financial statements incorporated
herein by reference, and our report with respect to the financial statement
schedules included in this Annual Report (Form 10-K) of Roadway Services, Inc.,
in the following Registration Statements and related Prospectuses:
<TABLE>
<CAPTION>
REGISTRATION
NUMBER DESCRIPTION OF REGISTRATION STATEMENT FILING DATE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Merrill Lynch, Pierce, Fenner & Smith February 26, 1988
Incorporated Special Prototype Profit Sharing
Plan and Trust for Independent Contractors --
33-18955 Form S-3
33-26135 Roadway Services, Inc. Stock Savings and December 14,
Retirement Income Plan and Trust -- Form S-8 1988
33-28546 Viking Freight, Inc. Viking Financial Security May 5, 1989
Plan -- Form S-8
33-44502 Restricted Book Value Shares Plan for Roadway December 12,
Services, Inc. and Certain Operating 1991
Companies -- Form S-8
33-44757 Roadway Services, Inc. Nonemployee Directors' December 31,
Stock Plan -- Form S-8 1991
</TABLE>
ERNST & YOUNG
March 8, 1994
<PAGE> 1
Exhibit 99
Report of Independent Auditors
On Financial Statement Schedules
To the Board of Directors
Roadway Services, Inc.
We have audited the consolidated balance sheets of Roadway Services, Inc. and
subsidiaries as of December 31, 1993 and 1992 and the related consolidated
statements of income, earnings reinvested in the business and cash flows for
each of the three years in the period ended December 31, 1993. Our audits also
included the financial statement schedules listed in the Index in Item 14(a).
In our opinion, such financial statement schedules referred to above, when
considered in relation to the financial statements taken as a whole, present
fairly in all material respects the information set forth therein.
ERNST & YOUNG
January 25, 1994
