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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 9, 1995
------------------------------------------
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)
Ohio 34-1365496
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1077 Gorge Boulevard, P.O. Box 88, Akron, Ohio 44309-0088
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code is (216) 384-8184
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
--- ---
The number of shares of common stock without par value outstanding as of
October 6, 1995 was 39,069,269.
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INDEX
ROADWAY SERVICES, INC.
FORM 10-Q
PERIOD ENDED SEPTEMBER 9, 1995
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--September 9, 1995 and
December 31, 1994
Condensed Statements of Consolidated Income--Twelve weeks
and thirty-six weeks ended September 9, 1995 and September
10, 1994
Condensed Statements of Consolidated Cash Flows--Thirty-six
weeks ended September 9, 1995 and September 10, 1994
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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<TABLE>
PART I - FINANCIAL INFORMATION
ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
September 9, December 31,
1995 1994
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(dollars in thousands)
ASSETS
<S> <C> <C>
Cash................................................. $ 35,310 $ 29,075
Marketable securities................................ 1,906 7,976
Accounts receivable.................................. 513,051 492,560
Prepaid expenses and supplies........................ 87,668 77,361
Deferred income taxes................................ 37,093 35,806
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TOTAL CURRENT ASSETS.............................. 675,028 642,778
Carrier operating property........................... 2,890,528 2,688,277
Less allowances for depreciation..................... 1,596,465 1,478,560
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TOTAL CARRIER OPERATING PROPERTY.................. 1,294,063 1,209,717
Cost in excess of net assets of businesses acquired.. 95,042 96,940
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$2,064,133 $1,949,435
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable..................................... $ 326,786 $ 339,859
Salaries and wages................................... 191,408 219,747
Short-term debt...................................... 195,000 --
Other current liabilities............................ 128,926 137,479
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TOTAL CURRENT LIABILITIES......................... 842,120 697,085
Casualty claims payable after one year............... 110,025 107,427
Future equipment repairs............................. 29,971 26,639
Retiree medical...................................... 63,653 59,243
Deferred income taxes................................ 36,460 43,647
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TOTAL LONG-TERM LIABILITIES....................... 240,109 236,956
Common stock - 40,896,414 shares issued.............. 39,898 39,898
Additional capital................................... 51,310 51,153
Earnings reinvested in the business.................. 943,604 978,459
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1,034,812 1,069,510
Less cost of common stock in treasury - 1,433,000
shares in 1995 and 1,477,000 shares in 1994......... 52,908 54,116
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TOTAL SHAREHOLDERS' EQUITY........................ 981,904 1,015,394
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$2,064,133 $1,949,435
========== ==========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
<CAPTION>
Twelve Weeks Ended Thirty-Six Weeks Ended
(Third Quarter) (Three Quarters)
---------------------- --------------------------
Sept. 9, Sept. 10, Sept. 9, Sept. 10,
1995 1994 1995 1994
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(amounts in thousands, except per share data)
<S> <C>
REVENUE........................................ $1,108,425 $1,091,507 $3,292,819 $3,045,404
OPERATING EXPENSES
Salaries, wages and benefits................. 587,870 587,216 1,740,501 1,638,997
Purchased transportation..................... 218,941 199,699 639,181 559,879
Operating supplies and expenses.............. 190,406 181,242 584,291 534,065
Operating taxes and licenses................. 29,387 28,970 88,989 84,316
Insurance and claims......................... 24,446 23,111 76,227 72,481
Provision for depreciation................... 50,606 47,523 148,550 144,260
Net gain on sale of property................. (1,077) (299) (1,530) (661)
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES................... 1,100,579 1,067,462 3,276,209 3,033,337
--------- --------- --------- ---------
OPERATING INCOME........................... 7,846 24,045 16,610 12,067
Other income (expense)-net..................... (710) 1,123 (1,636) 1,473
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES ................ 7,136 25,168 14,974 13,540
Provision for income taxes..................... 4,808 13,519 8,797 7,705
--------- --------- --------- --------
NET INCOME................................. $ 2,328 $ 11,649 $ 6,177 $ 5,835
========== ========== ========== ==========
NET INCOME PER SHARE....................... $ .06 $ .30 $ .16 $ .15
========== ========== ========== ==========
DIVIDENDS DECLARED PER SHARE............... $ .35 $ .35 $ 1.05 $ 1.05
========== ========== ========== ==========
AVERAGE SHARES OUTSTANDING................. 39,470 39,402 39,457 39,389
========== ========== ========== ==========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
ROADWAY SERVICES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED
CASH FLOWS (UNAUDITED)
<CAPTION>
Thirty-Six Weeks Ended
(Three Quarters)
---------------------------------
Sept. 9, Sept. 10,
1995 1994
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(dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................... $ 6,177 $ 5,835
Adjustments.................................... 71,362 169,035
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NET CASH PROVIDED BY
OPERATING ACTIVITIES................... 77,539 174,870
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property........ (238,134) (160,338)
Sales of carrier operating property............ 6,768 4,922
Purchases of marketable securities............. -- (2,894)
Sales of marketable securities................. 6,070 41,115
-------- ---------
NET CASH USED IN INVESTING ACTIVITIES....... (225,296) (117,195)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid................................. (41,008) (40,966)
Increase in short-term debt-net................ 195,000 --
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES................... 153,992 (40,966)
-------- --------
NET INCREASE IN CASH........................ 6,235 16,709
CASH AT BEGINNING OF YEAR................... 29,075 27,628
-------- ---------
CASH AT END OF THIRD QUARTER................ $ 35,310 $ 44,337
======== =========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
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ROADWAY SERVICES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
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The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the thirty-six
weeks ended September 9, 1995 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1995. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the registrant's annual report on Form 10-K for the year
ended December 31, 1994.
Note B - Accounting Period
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The registrant operates on a 13 four-week period calendar with 12 weeks in each
of the first three quarters and 16 weeks in the fourth quarter.
Note C - Short-Term Debt
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At September 9, 1995, short-term debt included borrowings of $195.0 million
under an unsecured $300 million Credit Agreement with several banks, which
expires in March 1999. Interest on outstanding borrowings is based on various
rates as defined in the agreement. This agreement, which was entered into by
the registrant during the first quarter of 1995, contains restrictions on
secured borrowings and requires the registrant to maintain a minimum level of
consolidated net worth. No borrowings were outstanding at September 9, 1995
under an unsecured $25 million revolving line of credit. The weighted average
interest rate on all borrowings during the third quarter was 6.5%. Due to the
short-term nature of the debt, the outstanding balance approximated fair
value.
Item 2. Management's Discussion and Analysis of Financial Condition
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and Results of Operations
-------------------------
On August 23, 1995, the Board of Directors of Roadway Services, Inc. (RSI)
announced a plan to spin off Roadway Express, Inc., its largest subsidiary, to
create two separate, publicly traded companies. The plan is subject to
approval of RSI shareholders, a favorable determination from the Internal
Revenue Service as to the tax-free nature of the transaction or, at the option
of the RSI Board, to receipt of an opinion from independent tax counsel to the
same effect. The company expects the spin-off to be completed in early 1996.
The financial statements of RSI and subsidiaries reflected in this Form 10-Q
include the financial statements of Roadway Express for all periods presented.
Consolidated revenue for the third quarter ended September 9, 1995 increased
$16.9 million or 1.5% over revenue for the same period in 1994. For the
thirty-six weeks ended September 9, 1995 revenue increased $247.4 million or
8.1% over 1994 levels. The 1994 thirty-six week period included the adverse
impact of the 24-day Teamsters strike in the second quarter against Roadway
Express, when revenue was reduced by approximately $190 million.
Revenue growth continues to be behind plan at all operating companies, except
ROLS, because of the sluggish economy and an intense pricing environment,
especially in the national and regional less-than-truckload (LTL) markets. For
the quarter, revenue at Roadway Express was $526.6 million compared with
revenue of $542.7 million during the third quarter last year, a decline of
3.0%. Year-to-date revenue for 1995 was $1,570 million compared to $1,443
million for 1994. This year-to-date increase is primarily the result of
depressed volume during
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1994 due to the Teamsters strike previously mentioned. Third quarter tonnage
for Roadway Express was down 0.1%, with less-than-truckload (LTL) tons up 1.8%
and truckload tonnage down 7.6% compared with the third quarter a year ago.
Excluding Roadway Express, revenue for the quarter was up $33.0 million or 6.0%
over last year's third quarter levels. Revenue at Roadway Package System (RPS)
was up 4.5% for the quarter over last year's third quarter. RPS was also the
largest contributor to the year-to-date increase in revenue which resulted from
package volume growth and the effects of the rate increase implemented in early
1995. The Roadway Regional Group (RRG), consisting of Viking Freight System,
Central Freight Lines, Spartan Express and Coles Express, posted revenues that
were 5.4% above last year's third quarter, with Central Freight Lines'
(Central) revenue down 9.5% due in part to the impact of intrastate
deregulation in Texas. Revenue for Roberts Express (Roberts) for the quarter
was 16.0% below last year's third quarter. Roadway Global Air (RGA) and
Roadway Logistics Systems (ROLS) continued to post strong revenue gains due to
ongoing growth of their business. At RGA revenue was up 64.4% over last year's
third quarter, but continues below plan primarily due to the shortfall in next
day AM shipments.
Third quarter 1995 operating expenses increased $33.1 million or 3.1% over
comparable 1994 levels, while year-to-date operating expenses were $242.9
million or 8.0% above 1994 levels. At Roadway Express, operating expenses for
the quarter of $529.3 million, which includes the impact of a 3.1% increase in
labor and benefits effective April 1, 1995 in accordance with the industry
labor contract, were $3.6 million or 0.7% lower than last year's levels, which
included the costs of the post-strike Performance Recovery Plan for Roadway
Express supervisory personnel and most clerical employees which was implemented
for the second half of 1994. Excluding Roadway Express, operating expenses
increased $36.7 million or 6.9% due to higher business volumes at all operating
companies except Central and Roberts during the quarter. The increase in
operating expenses occurred despite higher than normal operating expenses
having been incurred in 1994. As a result of Federal legislation enacted
during 1994, the remaining asset values of intrastate operating rights of $5.8
million were charged to operating expenses and were included in the results for
the thirty-six weeks ended September 10, 1994. Operating expenses in 1995 were
also impacted by expenses related to an ongoing information technology project
undertaken by RRG called PRISM. Purchased transportation continues to rise due
to increased use of the rail by Roadway Express and increased business volumes
at RPS and RGA.
Operating income for the third quarter of 1995 amounted to $7.8 million
compared to $24 million in 1994. Roadway Express accounted for $12.5 million of
the reduction in third quarter operating income. Operating income at RPS
increased 4.7% for the quarter compared to 1994. Year-to- date operating
income for 1995 was $16.6 million compared to $12.1 million for the comparable
period in 1994.
Net income for the third quarter was $.06 per share compared to $.30 per share
in 1994, while year-to-date net income of $.16 per share compared to $.15 per
share a year ago. Significant components of the reduced earnings for the
quarter were a $.10 per share loss at Roadway Express compared to net income of
$.14 per share last year and a $.40 per share loss at RGA compared with a loss
of .36 per share in 1994. Operating results at the RRG, primarily Central,
also declined during the quarter. Year-to-date earnings at all RSI operating
units, other than RPS and ROLS, declined in 1995. Net income at RPS increased
10.6% during the first thirty-six weeks of 1995. RGA's net loss increased
despite growth in revenue because of increased costs for expanding RGA's
infrastructure and transportation network and lower-than-expected demand for
its next-day A.M. product. The year-to-date loss at RGA amounted to $1.18 per
share compared to $.98 per share in 1994, with the full year loss at RGA
expected to exceed the range of $1.30 to $1.50 per share anticipated at the
beginning of the year. RRG realized a net loss for the thirty-six weeks in 1995
which represented a decline of $20.9 million in net income from the comparable
period in 1994. RRG's net loss resulted primarily from costs incurred in
connection with its PRISM project as well as intense discounting of rates in
certain geographic areas.
During the balance of 1995, RSI expects freight volume to increase from the
third quarter as a result of the normal seasonal nature of its businesses.
Competitive
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discounting is expected to continue in the national and regional LTL markets
with limited opportunity to improve rate levels. It is anticipated that the
previously announced earnings estimate of $1.40 per share will not be achieved.
Borrowings under financing agreements amounted to $195.0 million at the end of
the third quarter with total borrowings expected to decline in the fourth
quarter. It is anticipated that funds generated from future operations and
financing sources currently in place will finance projected 1995 capital
expenditures and provide adequate levels of working capital, funds for planned
business expansion and other needs of the business in the near future. Total
capital expenditures in 1995 are currently projected at approximately $360
million.
PART II - OTHER INFORMATION
Item 5. Other Information
- -------------------------
On October 4, 1995 the Board of Directors of the registrant elected Daniel J.
Sullivan, 49, the current President and Chief Executive Officer, to the
additional position of Chairman, replacing Joseph M. Clapp who announced his
retirement as Chairman and a Director, effective immediately. Mr. Clapp will
serve the registrant as Chairman Emeritus during 1996.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
--------
(27) Financial Data Schedule
(b) Reports on Form 8-K Filed During the Third Quarter of 1995
----------------------------------------------------------
A Form 8-K dated August 23, 1995 was filed under Item 5, Other
Materially Important Events, to report the anticipated spin-off of
Roadway Express, Inc. and the election of Daniel J. Sullivan as Chief
Executive Officer.
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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.
ROADWAY SERVICES, INC.
-----------------------------
(Registrant)
Date: October 18, 1995 By D. A. Wilson
------------------- ------------------------------------
D. A. Wilson, Senior Vice President-
Finance and Planning, Secretary and
Chief Financial Officer
Date: October 18, 1995 By Roy E. Griggs
------------------- ------------------------------------
Roy E. Griggs,
Vice President and Controller
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUN-18-1995
<PERIOD-END> SEP-09-1995
<CASH> 35,310
<SECURITIES> 1,906
<RECEIVABLES> 513,051
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 675,028
<PP&E> 2,890,528
<DEPRECIATION> 1,596,465
<TOTAL-ASSETS> 2,064,133
<CURRENT-LIABILITIES> 842,120
<BONDS> 0
<COMMON> 39,898
0
0
<OTHER-SE> 942,006
<TOTAL-LIABILITY-AND-EQUITY> 2,064,133
<SALES> 0
<TOTAL-REVENUES> 1,108,425
<CGS> 0
<TOTAL-COSTS> 1,100,579
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,136
<INCOME-TAX> 4,808
<INCOME-CONTINUING> 2,328
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,328
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
