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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the period ended September 10, 1994
-----------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from_____________________to____________________
Commission file number 0-10716
ROADWAY SERVICES, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Ohio 34-1365496
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1077 Gorge Boulevard, P.O.Box 88, Akron, Ohio 44309-0088
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code is (216) 384-8184
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No_____
The number of shares of common stock without par value outstanding as of
October 7, 1994 was 39,032,452.
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INDEX
ROADWAY SERVICES, INC.
FORM 10-Q
PERIOD ENDED SEPTEMBER 10, 1994
PART I - FINANCIAL INFORMATION
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Item 1. Condensed Financial Statements (Unaudited)
Consolidated Balance Sheet--September 10, 1994 and
December 31, 1993
Statement of Consolidated Income--Twelve weeks and
thirty-six weeks ended September 10, 1994 and
September 11, 1993
Statement of Consolidated Cash Flows--Thirty-six weeks
ended September 10, 1994 and September 11, 1993
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
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Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited)
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ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
<CAPTION>
September 10, December 31,
1994 1993
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(dollars in thousands)
<S> <C> <C>
ASSETS
Cash................................................... $ 44,337 $ 27,628
Marketable securities.................................. 45,722 83,943
Accounts receivable.................................... 483,698 401,777
Prepaid expenses and supplies.......................... 58,738 77,160
Deferred income taxes.................................. 34,897 28,765
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TOTAL CURRENT ASSETS................................ 667,392 619,273
Carrier operating property............................. 2,567,450 2,440,189
Less allowances for depreciation....................... 1,429,418 1,313,974
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TOTAL CARRIER OPERATING PROPERTY.................... 1,138,032 1,126,215
Cost in excess of net assets of businesses acquired.... 98,788 100,914
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$1,904,212 $1,846,402
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable....................................... $ 317,716 $ 268,103
Salaries and wages..................................... 199,532 178,536
Other current liabilities.............................. 140,462 131,850
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TOTAL CURRENT LIABILITIES........................... 657,710 578,489
Deferred income taxes.................................. 46,358 57,620
Future equipment repairs............................... 25,525 23,148
Casualty claims payable after one year................. 102,746 86,546
Retiree medical........................................ 58,207 53,448
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TOTAL OTHER LIABILITIES............................. 232,836 220,762
Common stock - 40,896,414 shares issued................ 39,898 39,898
Additional capital..................................... 51,151 50,446
Earnings reinvested in the business.................... 978,371 1,013,519
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1,069,420 1,103,863
Less cost of common stock in treasury - 1,496,000
shares in 1994 and 1,527,000 shares in 1993........... 55,754 56,712
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TOTAL SHAREHOLDERS' EQUITY.......................... 1,013,666 1,047,151
---------- ----------
$1,904,212 $1,846,402
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</TABLE>
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<TABLE>
ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF CONSOLIDATED INCOME (Unaudited)
<CAPTION>
Twelve Weeks Ended Thirty-Six Weeks Ended
(Third Quarter) (Three Quarters)
-------------------- -----------------------
Sept. 10, Sept. 11, Sept. 10, Sept. 11,
1994 1993 1994 1993
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(amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
REVENUE........................................ $1,091,507 $983,872 $3,045,404 $2,779,187
OPERATING EXPENSES
Salaries, wages and benefits................. 587,216 535,949 1,638,997 1,515,849
Operating supplies and expenses.............. 181,242 155,238 534,065 462,089
Purchased transportation..................... 199,699 142,629 559,879 400,822
Operating taxes and licenses................. 28,970 26,742 84,316 78,774
Insurance and claims......................... 23,111 23,404 72,481 63,400
Provision for depreciation................... 47,523 46,324 144,260 132,066
Net (gain) on sale of property............... (299) (166) (661) (557)
---------- -------- ---------- ----------
TOTAL OPERATING EXPENSES................... 1,067,462 930,120 3,033,337 2,652,443
---------- -------- ---------- ----------
OPERATING INCOME........................... 24,045 53,752 12,067 126,744
Other income - net............................. 1,123 1,123 1,473 9,334
---------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES.. 25,168 54,875 13,540 136,078
Provision for income taxes..................... 13,519 25,836 7,705 59,455
---------- -------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES....................... 11,649 29,039 5,835 76,623
Cumulative effect of accounting changes.... - - - (18,131)
---------- -------- ---------- ----------
NET INCOME............................... $ 11,649 $ 29,039 $ 5,835 $ 58,492
========== ======== ========== ==========
EARNINGS PER SHARE:
Before cumulative effect of
accounting changes..................... $ .30 $ .74 $ .15 $ 1.94
Cumulative effect of accounting changes.. - - - (.46)
---------- -------- ---------- ----------
NET INCOME............................... $ .30 $ .74 $ .15 $ 1.48
========== ======== ========== ==========
DIVIDENDS DECLARED PER SHARE............... $ .35 $ .35 $ 1.05 $ 1.02 1/2
========== ======== ========== ==========
AVERAGE SHARES OUTSTANDING................. 39,402 39,322 39,389 39,588
========== ======== ========== ==========
</TABLE>
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<TABLE>
ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF CONSOLIDATED
CASH FLOWS (Unaudited)
<CAPTION>
Thirty-Six Weeks Ended
(Three Quarters)
----------------------------
September 10, September 11,
1994 1993
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(dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income......................................... $ 5,835 $ 58,492
Adjustments........................................ 169,035 162,256
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NET CASH PROVIDED BY OPERATING ACTIVITIES....... 174,870 220,748
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property............ (160,338) (238,586)
Sales of carrier operating property................ 4,922 6,383
Purchases of marketable securities................. (2,894) (74,118)
Sales of marketable securities..................... 41,115 278,155
Purchase of Central Freight Lines Inc.,
net of cash acquired............................. - (98,349)
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NET CASH USED IN INVESTING ACTIVITIES........... (117,195) (126,515)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid..................................... (40,966) (39,267)
Purchases of common stock for treasury ............ - (24,232)
Repayment of Central's borrowings.................. - (32,117)
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NET CASH USED IN FINANCING ACTIVITIES........... (40,966) (95,616)
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NET INCREASE (DECREASE) IN CASH................. 16,709 (1,383)
CASH AT BEGINNING OF YEAR....................... 27,628 41,036
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CASH AT END OF THIRD QUARTER.................... $ 44,337 $ 39,653
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ROADWAY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
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The accompanying condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
statements are unaudited but, in the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the thirty-six weeks
ended September 10, 1994 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1994. For further information,
refer to consolidated financial statements and footnotes thereto included in
the registrant's annual report on Form 10-K for the year ended December 31,
1993.
Note B - Accounting Period
- --------------------------
The registrant operates on a 13 four-week period calendar with 12 weeks in each
of the first three quarters and 16 weeks in the fourth quarter.
Note C - Accounting Changes
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Effective January 1, 1993, the registrant adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting for
Income Taxes." Together, the adoption of SFAS 106 and 109 as cumulative effect
adjustments resulted in a net charge to 1993 earnings of $18,131,000 or $.46
per share.
Note D - Acquisition
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On April 6, 1993, the registrant acquired Central Freight Lines Inc. (Central),
Texas' largest regional carrier, following a vote of approval by Central's
shareholders. The registrant used internally generated funds to acquire the
common stock of Central at a total cost of $102,142,000. The acquisition was
accounted for as a purchase and the cost in excess of net assets acquired was
$16,432,000.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Consolidated revenue for the third quarter ended September 10, 1994 increased
$107,635,000 or 10.9% over revenue for the same period in 1993. For the
thirty-six weeks ended September 10, 1994 revenue increased $266,217,000 or
9.6% over 1993 levels.
Revenue gains, as a result of increased business volumes, were experienced
during the third quarter by all of the registrant's operating companies except
Roadway Express. Excluding Roadway Express, these gains amounted to a 25.2%
increase over 1993 third quarter net revenues. A significant portion of this
gain was attributable to Roadway Package System (RPS), which experienced a
16.6% revenue increase due primarily to
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package volume growth and, to a lesser extent, an increase in average revenue
per package. The regional carrier group also contributed to the strong revenue
gains. Year to date revenue includes an increase of $81,700,000 at Central
Freight Lines, a member of the regional carrier group, which was acquired on
April 6, 1993. Startup operations of Roadway Global Air (RGA), a worldwide air
cargo service, also contributed to the third quarter and year to date 1994
revenue increases.
At Roadway Express, the registrant's largest operating company, 1994 revenues
were down 0.5% from 1993 third quarter levels and were 9.5% below the first
thirty-six weeks of 1993. Year to date revenues were reduced by $190,000,000
as a result of a 24-day Teamsters' strike in April, 1994 against Roadway
Express. Third quarter tonnage for Roadway Express was down 4.9%, with
less-than-truckload tons down 5.5% and truckload tonnage declining 2.6%
compared with the third quarter a year ago. While Roadway Express' revenue was
down 0.5%, the operating margin deteriorated from 3.5% to 1.8% compared with
the third quarter last year, which is solely attributable to costs accrued
under the special Performance Recovery Plan for Roadway Express supervisory
personnel and most clerical employees which was implemented for the second half
of 1994.
Third quarter 1994 operating expenses increased $137,342,000 or 14.8% over
comparable 1993 levels, while operating expenses for the first thirty-six weeks
were up $380,894,000 or 14.4% above 1993 levels. Increased operating expenses
resulted from higher business volumes at all of the registrant's operating
companies except Roadway Express. At Roadway Express operating expenses were
$6,600,000 or 1.3% higher than 1993 third quarter levels and were up
$56,731,000 or 3.7% for the first thirty-six weeks of 1994 compared to 1993.
Increased purchased transportation was experienced, primarily by RPS and
Roberts due to volume increases, and by the inclusion of RGA. Central Freight
Lines accounted for $71,566,000 of the increase in operating expenses for the
first three quarters of 1994.
As a result of recently enacted Federal legislation which effectively preempts
state regulation of motor carrier rates, routes and services, the remaining
asset values of intrastate operating rights were charged to operating expenses
in the third quarter. This charge reduced net earnings by $.06 per share.
Operating income for the third quarter of 1994 decreased $29,707,000 or 55.3%
compared to 1993 results with year to date operating income decreasing
$114,677,000 from 1993. The quarter was impacted most by operating losses at
RGA, which concluded its initial year of service on September 13. Operating
income for the quarter was also affected by the Performance Recovery Plan
previously mentioned for Roadway Express whose quarterly earnings were reduced
from $.28 per share to $.14 per share. Third quarter results were below plan
for the Roadway Regional Group (RRG). The strong performances by regional
carriers Viking Freight System and Central Freight Lines were offset by
increased losses at Spartan Express and Coles Express, both of which were
affected by expansion costs. Operating income for RPS was approximately even
with the strong third quarter of a year ago, which was impacted by a threatened
work stoppage at United Parcel Service. Roberts Express had excellent results
for the quarter.
The 1994 year to date operating income was significantly impacted by the
$68,353,000 operating loss during the second quarter at Roadway Express, which
was attributable to the Teamsters' strike. The effective tax rate for 1994
increased over 1993 due to
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the impact of nondeductible expenses, and losses in state and foreign tax
jurisdictions for which a current tax benefit is not available. For the first
thirty-six weeks of 1994, net income was $.15 per share compared to $1.48 per
share after the cumulative effect of accounting changes a year ago. Third
quarter net income fell from $.74 in 1993 to $.30 in 1994.
For the remainder of 1994, management will continue to focus on securing a
greater proportion of overnight traffic at RGA to improve revenue yields.
Although volume levels and operating costs were near plan, lower than planned
yields relating to traffic mix resulted in a net loss at RGA for the quarter
approximately equal to its second quarter loss. These lower than planned
yields at RGA are expected to result in fourth quarter losses slightly larger
than the third quarter loss for that company, solely attributable to the
additional four weeks in the fourth quarter. The registrant operates on a 13
four-week period calendar with 12 weeks in each of the first three quarters and
16 weeks in the fourth quarter. Roadway Express is currently implementing a
major change to its linehaul system, made possible by the new labor agreement,
to include through service by dual driver "sleeper" teams as well as more use
of rail to achieve greater efficiencies and better service. These changes
should provide a modest benefit to fourth quarter results.
The registrant continues to finance capital expenditures from internally
generated funds. The Teamsters strike, the startup of RGA, recent expansion
and the acquisition of Central have reduced funds currently invested in
marketable securities. It is anticipated that cash, current investments in
marketable securities, funds generated from future operations and, if required,
financing currently available to the registrant will provide adequate levels of
working capital and funds for business expansion, projected capital
expenditures, and other needs of the business. Total capital expenditures in
1994 are currently projected at approximately $290 million.
PART II - OTHER INFORMATION
Item 5. Other Information
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On August 10, 1994, the registrant announced the election of Rodger G. Marticke
as vice president and group executive, effective August 14; Donald C. Brown as
vice president-corporate support services, effective January 1, 1995; and
Kathryn W. Dindo as assistant controller, effective August 14.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits--Financial Data Schedule
---------------------------------
(b) Reports on Form 8-K Filed During the Third Quarter of 1994--None
----------------------------------------------------------------
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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<S> <C>
ROADWAY SERVICES, INC.
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(Registrant)
Date: October 20, 1994 By D. A. WILSON
------------------ ------------------------------------
D. A. Wilson, Senior Vice President-
Finance and Planning, Secretary and
Chief Financial Officer
Date: October 20, 1994 By ROY E. GRIGGS
------------------ ------------------------------------
Roy E. Griggs,
Vice President and Controller
</TABLE>
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Exhibit Index
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Exhibit
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JUN-19-1994
<PERIOD-END> SEP-10-1994
<EXCHANGE-RATE> 1
<CASH> 44,337
<SECURITIES> 45,722
<RECEIVABLES> 483,698
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 667,392
<PP&E> 2,567,450
<DEPRECIATION> 1,429,418
<TOTAL-ASSETS> 1,904,212
<CURRENT-LIABILITIES> 657,710
<BONDS> 0
<COMMON> 39,898
0
0
<OTHER-SE> 973,768
<TOTAL-LIABILITY-AND-EQUITY> 1,904,212
<SALES> 0
<TOTAL-REVENUES> 1,091,507
<CGS> 0
<TOTAL-COSTS> 1,067,462
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 25,168
<INCOME-TAX> 13,519
<INCOME-CONTINUING> 11,649
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,649
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
