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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 March 23, 1996
---------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-10716
CALIBER SYSTEM, INC.
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(Exact name of company as specified in its charter)
Ohio 34-1365496
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3560 West Market Street, P.O. Box 5459, Akron, Ohio 44334-0459
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(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code is (330) 665-5646
Indicate by check mark whether the company (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 company 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 April
19, 1996 was 39,188,517.
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INDEX
CALIBER SYSTEM, INC.
FORM 10-Q
PERIOD ENDED MARCH 23, 1996
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--March 23, 1996 and
December 31, 1995
Condensed Statements of Consolidated Income--Twelve weeks ended
March 23, 1996 and March 25, 1995
Condensed Statements of Consolidated Cash Flows--Twelve weeks
ended March 23, 1996 and March 25, 1995
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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2
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PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
CALIBER SYSTEM, INC.
<TABLE>
<CAPTION>
March 23, December 31,
1996 1995
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(dollars in thousands)
ASSETS
<S> <C> <C>
Cash and cash equivalents............................ $ 14,313 $ 34,908
Accounts receivable.................................. 292,369 273,124
Prepaid expenses and supplies........................ 78,112 66,630
Deferred income taxes................................ 36,986 27,562
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TOTAL CURRENT ASSETS.............................. 421,780 402,224
Property and equipment............................... 1,495,568 1,474,934
Less allowances for depreciation..................... 636,376 617,587
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TOTAL PROPERTY AND EQUIPMENT...................... 859,192 857,347
Cost in excess of net assets of businesses acquired.. 89,162 89,761
Other assets......................................... 38,156 39,938
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TOTAL OTHER ASSETS................................ 127,318 129,699
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TOTAL ASSETS...................................... $1,408,290 $1,389,270
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable..................................... $ 213,931 $ 219,406
Salaries and wages................................... 67,075 74,790
Short-term debt...................................... 235,400 197,500
Other current liabilities............................ 54,735 63,663
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TOTAL CURRENT LIABILITIES......................... 571,141 555,359
Self-insurance accruals.............................. 39,370 39,832
Deferred income taxes................................ 58,587 57,778
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TOTAL LONG-TERM LIABILITIES....................... 97,957 97,610
Common stock - 40,896,414 shares issued.............. 39,898 39,898
Additional capital................................... 50,404 51,322
Earnings reinvested in the business.................. 699,385 696,803
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789,687 788,023
Less cost of common stock in treasury - 1,353,000
shares in 1996 and 1,394,000 shares in 1995......... 50,495 51,722
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TOTAL SHAREHOLDERS' EQUITY........................ 739,192 736,301
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $1,408,290 $1,389,270
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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CONDENSED STATEMENTS OF CONSOLIDATED INCOME (Unaudited)
CALIBER SYSTEM, INC.
<TABLE>
<CAPTION>
Twelve Weeks Ended
(First Quarter)
---------------------------------
March 23, March 25,
1996 1995
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(amounts in thousands,
except per share data)
<S> <C> <C>
REVENUE.......................................... $ 582,074 $ 543,469
OPERATING EXPENSES
Salaries, wages and benefits................... 230,023 210,952
Purchased transportation....................... 166,491 155,020
Operating supplies and expenses................ 110,795 92,509
Operating taxes and licenses................... 12,043 11,183
Insurance and claims........................... 11,194 12,049
Provision for depreciation..................... 33,347 28,284
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TOTAL OPERATING EXPENSES..................... 563,893 509,997
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OPERATING INCOME............................. 18,181 33,472
Other (expense) income, net...................... (1,232) 1,709
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INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES.......................... 16,949 35,181
Provision for income taxes....................... 7,328 13,651
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INCOME FROM CONTINUING OPERATIONS............ 9,621 21,530
LOSS FROM DISCONTINUED OPERATIONS, NET OF
INCOME TAXES............................... - (15,679)
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NET INCOME................................... $ 9,621 $ 5,851
========== ===========
EARNINGS (LOSS) PER SHARE
Income from continuing operations............ $ 0.24 $ 0.54
Loss from discontinued operations............ - (0.39)
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NET INCOME................................... $ 0.24 $ 0.15
========== ===========
DIVIDENDS DECLARED PER SHARE..................... $ 0.18 $ 0.35
========== ===========
AVERAGE SHARES OUTSTANDING....................... 39,505 39,434
========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
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CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited)
CALIBER SYSTEM, INC.
<TABLE>
<CAPTION>
Twelve Weeks Ended
(First Quarter)
------------------------------
March 23, March 25,
1996 1995
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(dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Income from continuing operations.............. $ 9,621 $ 21,530
Adjustments.................................... (6,601) 1,478
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NET CASH PROVIDED BY
OPERATING ACTIVITIES.................... 3,020 23,008
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment............ (37,830) (52,630)
Sales of property and equipment................ 3,331 781
Net advances to discontinued operations........ (14,277) (59,600)
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NET CASH USED IN INVESTING ACTIVITIES........ (48,776) (111,449)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid................................. (13,671) (13,653)
Dividends received from discontinued operations - 7,500
Increase in short-term debt, net............... 37,900 85,800
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NET CASH PROVIDED BY
FINANCING ACTIVITIES...................... 24,229 79,647
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CASH FLOWS USED IN
CONTINUING OPERATIONS..................... (21,527) (8,794)
CASH FLOWS PROVIDED BY
DISCONTINUED OPERATIONS................... 932 12,903
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NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS...................... (20,595) 4,109
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR...................... 34,908 14,780
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CASH AND CASH EQUIVALENTS
AT END OF FIRST QUARTER................... $ 14,313 $ 18,889
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CALIBER SYSTEM, INC.
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 twelve weeks ended March 23, 1996 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1996.
First quarter amounts for 1995 have been restated to reflect the spin-off of
Roadway Express, Inc. and the exit from the air freight business served by
Roadway Global Air, Inc. during 1995 which are reflected as discontinued
operations. During 1995, certain costs were estimated and recognized in
connection with the discontinuance of these businesses. Although actual results
could differ from these estimates, it is management's opinion that significant
adjustments to these estimates are not currently required.
For further information, refer to consolidated financial statements and
footnotes thereto included in the company's annual report on Form 10-K for the
year ended December 31, 1995.
Note B - Accounting Period
- --------------------------
The company 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.
Item 2. Management's Discussion and Analysis of Financial Condition
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and Results of Operations
-------------------------
Consolidated revenue for the first quarter ended March 23, 1996 amounted to
$582.1 million, an increase of $38.6 million or 7.1% over first quarter 1995
revenue of $543.5 million. Although revenue increased at all operating units
except Roberts Express (Roberts), first quarter revenues were impacted by severe
winter weather, including flooding in the northwest, a soft economy and
declining rate levels. Revenue at RPS, the company's small-package carrier,
increased to $287.7 million or 0.6% over first quarter 1995. Package volume was
below first quarter 1995 levels due primarily to the weather and the economy,
particularly in the retail sector. Although rates at RPS improved slightly over
1995 levels, a portion of the February rate increase has not been retained due
to aggressive discounting in the small-package market. Revenues at Viking
Freight (Viking), the company's superregional carrier amounted to $211.3
million, an increase of 13.6% over first quarter 1995. This increase came from
higher volume from existing customers, as well as new customers attracted by the
consolidation of the company's former regional carrier group. Rate levels at
Viking were below first quarter 1995 levels due to continued discounting and
overcapacity in the industry. Rates currently appear to be stabilizing. Caliber
Logistics revenue increased 49.2% for the first quarter of 1996 compared to
1995, reflecting increased penetration of the logistics market. Roberts, the
company's expedited carrier, experienced a revenue decline of 9.3% due
principally to the sluggish economy.
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Total operating expenses increased $53.9 million or 10.6% over the first quarter
1995. This increase resulted primarily from higher business volumes at Viking
and Caliber Logistics, which reported operating expense increases of 16.9% and
51.2%, respectively. Operating supplies and expenses at Viking were impacted not
only by volume growth but also by the consolidation costs associated with the
conversion of four regional freight carriers to a common operating system and
standardization of business practices among the regional operating units, a
process that continues. Operating expenses increased 3.6% at RPS due primarily
to the impact of the winter weather and increased fixed costs resulting from the
company's continuing expansion. The decline in insurance and claims related
expenses of 7.1% in the first quarter 1996 is attributable to on-going claims
management and safety-related programs. Depreciation expense increased 17.9%
over first quarter 1995 levels due to continuing expansion at RPS, and
continuing investments in technology and systems development primarily at RPS
and Viking.
Operating income amounted to $18.2 million for the first quarter 1996 compared
to $33.5 million for 1995 and operating margins declined from 6.2% to 3.1%.
Despite stringent cost controls at RPS, operating income decreased 23.6% from
the first quarter 1995. In addition to the weather, RPS was negatively impacted
by lower than planned volume and increased fixed costs from expansion. Viking's
operating margins were impacted by lower rates, consolidation costs, and to a
lesser extent weather, resulting in an increased operating loss of $7 million
over 1995.
The change in other expense, net, reflected additional interest expense (net of
amounts capitalized) of $1.5 million over first quarter 1995 levels and the loss
of interest income from discontinued operations, which amounted to $1.8 million
for the first quarter of 1995.
Income taxes were 43.2% of pre-tax income for the first quarter 1996 which
approximated the effective tax rate for the year ended December 31, 1995. This
rate exceeded the U.S. federal statutory rate due primarily to state income
taxes and non-deductible operating costs.
Discounting and the effects of overcapacity in the industry are expected to
continue throughout the remainder of 1996 causing industry margins to remain
under pressure. Although first quarter package volume at RPS was below plan, the
company expects an increase in current year revenue and operating income at RPS
through expanded service offerings and effective cost controls. By the end of
June, 1996 RPS will open 32 new terminals, extending service to 100% of the U.S.
population. RPS is also investing in state-of-the-art package handling equipment
and technology and increasing its penetration of the overnight ground delivery
market. The consolidation efforts at Viking are on target and are expected to be
completed by the end of 1996. Operating losses at Viking for the current year
are now expected to approximate $35 million with the majority of this loss being
incurred in the first half of 1996. All operating units will continue to
strengthen their respective service channels for customers wanting to work with
individual carriers for specific services and products, while the company also
directs significant resources to meeting customer requirements for blended
transportation, logistics and related information services.
Net cash provided by operating activities of $3 million was not sufficient to
fund net property additions of $34.5 million and dividends of $13.7 million,
requiring the company to incur outside borrowings. Borrowings under financing
agreements amounted to $235.4 million at the end of the first quarter. The
company believes it will be able to arrange financing through a combination of
new and existing sources that, together with cash flows from operations, will be
sufficient to fund its projected capital expenditures and provide adequate
7
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levels of working capital and funds for payments of dividends and interest.
Total capital expenditures in 1996 are currently projected at approximately $335
million.
The foregoing contains forward-looking statements that are based on current
expectations and are subject to a number of risks and uncertainties. Actual
results could differ materially from current expectations due to a number of
factors, including general economic conditions; weather conditions; competitive
initiatives and pricing pressures; availability and cost of capital; shifts in
market demand; the performance and needs of industries served by the company's
businesses; actual future costs of operating expenses such as fuel and related
taxes; self-insurance claims and employee wages and benefits; actual costs of
continuing investments in technology; and the actual costs and effects of the
continuing consolidation of the regional carriers.
PART II - OTHER INFORMATION
Item 5. Other Information
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In April, 1996, Robert J. Quinn was elected Vice President-Corporate
Planning effective immediately. Mr. Quinn previously served on special
assignment in Europe, and most recently was special assistant to the Chairman
of the company.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
--------
(10.1) Caliber System, Inc. Long-Term Stock Award Incentive Plan as
amended and restated as of January 2, 1996.
(10.2) Restricted Book Value Shares Plan For Caliber System, Inc. and
Certain Operating Companies as amended and restated as of
January 2, 1996.
(27) Financial Data Schedule
(b) Reports on Form 8-K Filed During the First Quarter of 1996
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A Form 8-K dated January 2, 1996 was filed under Item 5, Other
Materially Important Events, to announce the declaration of a spin-off
to the company's shareholders of record at the close of business on
December 29, 1995 of approximately 95% of the Common Stock of the
company's wholly-owned subsidiary, Roadway Express, Inc. (REX) on the
basis of one share of Common Stock of REX for every two outstanding
shares of Common Stock of the company.
In connection with the spin-off, the company changed its corporate name
to Caliber System, Inc. effective January 2, 1996.
8
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CALIBER SYSTEM, INC.
--------------------
(Company)
Date: May 3, 1996 By /s/ D. A. Wilson
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D. A. Wilson, Senior Vice
President-Finance and Planning,
Secretary and Chief Financial
Officer
Date: May 3, 1996 By /s/ Kathryn W. Dindo
------------- ---------------------
Kathryn W. Dindo,
Vice President and Controller
9
<PAGE> 1
Exhibit 10.1
CALIBER SYSTEM, INC.
LONG-TERM STOCK AWARD
INCENTIVE PLAN
(Amended and Restated as of January 2, 1996)
The purpose of the Caliber System, Inc. Long-Term Stock Award Incentive Plan
(hereinafter referred to as this Plan) is to provide a long-term
return-on-equity oriented stock incentive award for the officers of Caliber
System, Inc. and certain of its subsidiary and affiliated companies.
ARTICLE ONE: DEFINITIONS
1.1 The term "Affiliate" means any corporation affiliated with Caliber
System, Inc.
1.2 The term "Basic Stock Credit Award" means the number of shares of
Caliber Common Stock available for award under this Plan pursuant to
Subparagraph 3.1.1.
1.3 The term "Caliber" means Caliber System, Inc.
1.4 The term "Caliber Common Stock" means common stock of Caliber System,
Inc.
1.5 The term "Company" means the individual company within Caliber System,
Inc. by which the eligible Officer is employed: Caliber System, Inc., RPS,
Inc., Caliber Technology, Inc., Viking Freight, Inc., Caliber Logistics, Inc.
and affiliates, and Roberts Express, Inc., as the case may be, and any other
individuals or groups of individuals as the Board of Directors of the Company
or a committee designated by such Board may determine from time to time.
1.6 The term "Disability" means a physical or mental condition of Officer,
resulting from a bodily injury or disease
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2
or mental disorder which renders him incapable of performing duties for the
Company.
1.7 The term "Expatriate" shall mean an Officer of Caliber System, Inc. or
Affiliate working in a country other than the United States.
1.8 The term "Officer" means an officer of a Company determined to be
eligible for participation in this Plan by its board of directors.
1.9 The term "Plan Year" means calendar year 1991 or any subsequent
calendar year for which Basic or Supplemental Credits are awarded under this
Plan.
1.10 The term "Stock Credit" means credit for all shares of Caliber Common
Stock to be awarded in accordance with the provisions and subject to the
conditions contained herein. The term includes both the Basic Stock Credits
and Supplemental Stock Credits.
1.11 The term "Supplemental Stock Credit Award" means the number of shares
of Caliber Common Stock available for award under this Plan pursuant to
Subparagraph 3.1.2.
1.12 Notwithstanding any other provision of the Plan, liabilities for
Stock Credits allocated under the Plan for Plan Years commencing prior to
January 1, 1996 to an individual who was an employee of Roadway Express, Inc.
("REX") prior to December 15, 1995 and on January 1, 1996 ("REX Employee")
shall become an obligation under the Roadway Express, Inc. Long-Term Stock
Award Incentive Plan ("REX LTS Plan"). On and after
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3
January 1, 1996, all distributions to a REX Employee shall be made pursuant to
the terms of the REX LTS Plan. Effective January 1, 1996, the obligations
assumed by REX pursuant to the preceding provisions of this Section shall
reduce the Company's obligations under this Plan.
ARTICLE TWO: VALUATION OF STOCK CREDIT AWARDS
2.1 The Basic Stock Credit Award for Plan Year 1991 shall be valued at
$34.00 per share. The value of the Basic Stock Credit Award per share for each
Plan Year subsequent to 1991 during which this Plan remains in effect shall be
determined by the following formula: 1.16X minus D where:
X = The value of the Basic Stock Credit Award per share for the
immediately preceding Plan Year.
D = The amount of dividends paid per share for the then current Plan Year.
2.2 The value of the Supplemental Stock Credit Award per share for each Plan
Year during which this Plan remains in effect shall be equal to the average
price of a share of Caliber Common Stock acquired by the Caliber System, Inc.
Stock Bonus Plan during the Plan Year.
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4
ARTICLE THREE: ALLOCATION OF STOCK CREDIT AWARDS
3.1 The number of shares of Caliber Common Stock allocated to all eligible
individuals will be determined by the respective boards of directors of the
Companies, all within the maximum allowable shares permitted for the Plan Year
determined by the Board of Directors of Caliber.
3.1.1 The Basic Stock Credit Award is the number of shares awarded to an
Officer by the board of directors of his Company determined for each Plan Year.
3.1.2 The Supplemental Stock Credit Award shall consist of an additional
number of shares of Caliber Common Stock designated for award to an Officer, if
the amount of company contributions and other annual additions to his Caliber
System, Inc. Stock Bonus Plan and Caliber System, Inc. Stock Savings and
Retirement Income Plan participant accounts would otherwise exceed the
applicable maximum plan limitations imposed by reason of federal tax law
requirements. Such number of shares shall be determined by dividing (i) the
dollar amount by which the company contributions and other annual additions to
the Officer's accounts in the Stock Bonus Plan and Stock Savings and Retirement
Income Plan would otherwise exceed the applicable maximum limitation, by (ii)
the per share valuation of the Supplemental Stock Credit Award for that year.
3.2 All Stock Credits shall be entered on December 31 of the Plan Year for
the entire award for Officers employed by Caliber or an Affiliate on that date
and for a pro rata fraction
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5
of the award for Officers terminated on account of death, disability or
retirement.
3.3 For each Officer, a provisional cash account will be carried for
amounts equal to dividends that would be payable on the number of Stock Credits
credited to his account as of December 31 of the previous year as if such
shares had been distributed. As of the end of the then current Plan Year, such
cash credit shall be used to add to the number of Stock Credits otherwise to be
entered for him on the basis of the valuation set forth in Paragraph 2.1 for
such year; provided, however, that the value of the common stock of REX
received as a dividend upon the spin-off of REX from Caliber shall be
determined based on the average of the closing price of the common stock of REX
on the first 15 trading days after the spin-off of REX from Caliber and the
value of Stock Credits to be added pursuant to this sentence shall be
determined based on the average of the closing price of Caliber Common Stock on
the first 15 trading days after the spin-off of REX from Caliber.
3.4 All Stock Credits shall be increased or decreased, as the case may be,
to the same extent that outstanding Caliber Common Stock is increased or
decreased by reason of stock dividends, stock splits or other recapitalization.
Except as provided in Section 3.3, any other dividend in kind shall be
converted to its cash equivalent and treated as a cash dividend.
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6
ARTICLE FOUR: VESTING DURING EMPLOYMENT
4.1 All Stock Credits shall become fully vested for an Officer still in the
employ of Caliber or an Affiliate upon his death, disability or attainment of
age 55. Stock Credits shall otherwise vest only as provided in Article Five.
ARTICLE FIVE: DISTRIBUTION
5.1 Stock Credits shall vest and become convertible to shares of Caliber
Common Stock to be distributed as follows:
5.1.1 Shares of Caliber Common Stock shall be distributed in five
annual installments following his death, the date of his last employment
compensation payment by Caliber or an Affiliate or attainment of age 55,
whichever is the latest. The first installment shall be made on
February 1 of the following year.
5.1.2 Cash shall be paid in a lump sum at the time of the first annual
installment under Subparagraph 5.1.1; provided, however, that dividends payable
in shares of REX common stock as a result of the spin-off of REX from Caliber
shall be converted to Stock Credits in accordance with the provisions of
Section 3.3.
5.2 Notwithstanding anything to the contrary contained herein, no
distribution or payment shall be made under this ARTICLE FIVE unless the
following conditions have been satisfied:
5.2.1 Officer shall not have been dismissed from his employment for
violation of the Company's Code of Corporate Conduct.
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7
5.2.2 At any time prior to the date of final distribution, the Officer,
prior to attaining age 55, shall not have engaged in competition with the
Company directly or indirectly nor been employed in any capacity by or rendered
consulting services to any firm or company competing with Caliber or any of its
affiliates.
5.2.3 To the extent necessary to satisfy any obligations under law to
deduct amounts for withholding taxes, Caliber may convert shares of Caliber
Common Stock into cash for such purpose at fair market value as of the date
immediately preceding distribution.
5.3 After December 31, 1995 but prior to March 16, 2000, Basic Stock
Credits awarded may be converted by a participant, a trustee of any trust to
which Basic Stock Credits have been transferred, or a beneficiary who received
Basic Stock Credits as a result of the death of a participant (but excluding
any "Alternate Payee" as such term is defined in Section 414(p)(8) of the
Internal Revenue Code of 1986) up to a maximum of fifty percent (50%) of their
value to cash and restricted book value shares on terms established by Caliber
from time to time.
5.4 Supplemental Stock Credit Awards may be converted to restricted book
value shares under the Officers' Incentive Compensation Agreement in effect at
his Company, in a whole number determined on the basis of book value as of
December 31 of the Plan Year to which the Supplemental Stock Credits are
attributable subject, however, to Caliber's right to convert
<PAGE> 8
8
Supplemental Stock Credits to cash to satisfy any withholding tax liabilities
as set forth in Paragraph 5.2.3 provided that:
(i) he shall have attained age 55 by December 31 of the applicable Plan
Year; or
(ii) he shall have been awarded Stock Credits prior to January 1 of the
applicable Plan Year equivalent to 4,000 or more shares of Caliber
Common Stock in the aggregate under Company stock credit plans.
5.4.1 Notwithstanding anything to the contrary contained herein, the Book
Value calculation may be adjusted to such an extent as may be determined by the
Compensation Committee of the Board of Directors of Caliber, to preserve the
benefit of the Plan for the Officer and the Company if, in the opinion of such
Board or such committee, after consultation with the independent auditors,
changes in the accounting policies of the Company, acquisitions, spin-offs or
other unusual or extraordinary items have disproportionately and materially
affected the number of shares of its Common Stock outstanding or its
shareholders' equity.
5.5 In the event of a tender offer for Caliber Common Stock subject to
Regulations 14D and/or 14E issued under the Securities Exchange Act of 1934, as
amended, the acceptance of which tender offer is either (i) recommended to
shareholders by the Board of Directors of Caliber, (ii) not opposed by such
Board, or (iii) involves an acquisition device in which any of the shareholders
may exercise dissenter's rights under any
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provision of the Ohio Revised Code Chapter 1701; then in any such event, any
Stock Credit awards made to an Officer under this Plan shall immediately vest
and become subject to immediate distribution.
5.6 When Officer's employment with Caliber or an Affiliate has terminated,
the Board of Directors of the Company may waive any or all of the conditions,
provisions or contingencies of Paragraph 5.2 and may accelerate the
distribution of stock and payment of money pursuant to Paragraph 5.1 to such
date or dates as the Board of Directors of the Company shall determine, if, in
the sole judgment of said Board, the acceleration is justified (a) by the death
or disability of Officer or (b) by hardship.
ARTICLE SIX: MISCELLANEOUS
6.1 This Plan shall be governed by the laws of the State of Ohio.
6.2 In the event that any term hereof shall be held to be illegal or
invalid, it shall be deemed severed from this Plan.
ARTICLE SEVEN: DISTRIBUTION FOR CANADIAN EXPATRIATES
7.1 Stock Credits shall vest and become convertible to shares of Caliber
Common Stock to be distributed as follows:
7.1.1 Shares of Caliber Common Stock shall be distributed in a lump sum in
the year following his death or the date of his last employment compensation
payment by Caliber or an Affiliate, whichever is the latest; provided that all
<PAGE> 10
10
distributions shall be made on or before December 31 of the year following the
Expatriate's death, retirement or loss of office.
7.1.2 Cash also shall be paid in a lump sum within the time set forth in
Paragraph 7.1.1.
7.2 Notwithstanding anything to the contrary contained herein, no
distribution or payment shall be made under this ARTICLE SEVEN unless the
following conditions have been satisfied:
7.2.1 Expatriate shall not have been dismissed from his employment for
violation of the Company's Code of Corporate Conduct.
7.2.2 At any time prior to the date of final distribution, the Expatriate,
prior to attaining age 55, shall not have engaged in competition with the
Company directly or indirectly or been employed in any capacity by or rendered
consulting services to any firm or company competing with Caliber or any of its
affiliates.
7.2.3 To the extent necessary to satisfy any obligations under law to
deduct amounts for withholding taxes or source deductions, Caliber may convert
shares of Caliber Common Stock into cash for such purpose at fair market value
as of the date immediately preceding distribution.
7.3 In the event of a tender offer for Caliber Common Stock subject to
Regulations 14D and/or 14E issued under the Securities Exchange Act of 1934, as
amended, the acceptance of which tender offer is either (i) recommended to
shareholders by
<PAGE> 11
11
the Board of Directors of Caliber, (ii) not opposed by such Board, or (iii)
involves an acquisition device in which any of the shareholders may exercise
dissenter's rights under any provision of the Ohio Revised Code Chapter 1701;
then in any such event, any Stock Credit awards made to an Expatriate under
this Plan shall immediately vest.
7.4 When Expatriate's employment with Caliber or an Affiliate has
terminated, the Board of Directors of the Company may waive any or all of the
conditions, provisions or contingencies of Paragraph 7.2 and may accelerate the
distribution of stock and payment of money pursuant to Paragraph 7.1 to such
date or dates as the Board of Directors of the Company shall determine, if, in
the sole judgment of said Board, the acceleration is justified (a) by the death
or disability of Expatriate or (b) by hardship.
<PAGE> 1
Exhibit 10.2
RESTRICTED BOOK VALUE SHARES PLAN
FOR CALIBER SYSTEM, INC.
AND CERTAIN OPERATING COMPANIES
(As Amended and Restated as of January 2, 1996)
ARTICLE I: DEFINITIONS
1.1 The terms defined in this Article I and the various terms defined from
time to time in the text of this Plan shall have their defined meanings
throughout unless expressly stated otherwise or the context otherwise requires.
(a) "Basic Stock Credits" means Stock Credits awarded to participants in the
Stock Credit Plan, as approved by the Board of Directors of Caliber in its
discretion.
(b) "Book Value" as of a specified date means the value determined by dividing
the common shareholders' equity of Caliber by the total number of its
shares of Common Stock outstanding, excluding treasury shares, based upon
Caliber's annual consolidated balance sheet as audited by its independent
auditors as of the date in question. For the purpose of calculating the
Purchase Price under Section 4.1.3 and the Repurchase Price under Section
4.4.1 hereof, the Book Value calculation may be adjusted by the Committee,
in its sole discretion, after consultation with the independent auditors,
to reduce or eliminate the effect of any changes in accounting policies,
acquisitions, spin-offs or other unusual or extraordinary items.
(c) "Caliber" means Caliber System, Inc., an Ohio corporation, and any
successor.
<PAGE> 2
2
(d) "Committee" means a committee of the Board of Directors of Caliber
composed of three or more nonemployee directors who may not have any
interest in any Employer Incentive Compensation Plan and are not eligible
to participate in the Plan.
(e) "Common Stock" means the shares of no par value common stock of Caliber.
Such shares issued or transferred under the Plan may be treasury shares or
shares of original issuance.
(f) "Determination Date" means the date on which the independent auditors
issue their opinion to Caliber on the annual financial statements for the
preceding year ended December 31.
(g) "Disability" means a physical or mental condition of the Participant,
resulting from a bodily injury or disease or mental disorder, which
renders him incapable of performing duties for the Employer.
(h) "Employer" means Caliber or any other individual company within the
Caliber affiliated group of companies that employs the Participant and any
corporate successor to the business presently conducted by such affiliated
company.
(i) "Employer Incentive Compensation Plan" means an incentive plan which the
Employer has adopted for calendar year 1992 (and may adopt and amend in
subsequent years) which embodies a formula for determining the amount of
the Employer's net income which may be paid to Participants if the
Employer's performance meets certain standards which are a part of the
<PAGE> 3
3
Employer Incentive Compensation Plan. Except for decisions
reserved to the Committee hereunder, all decisions concerning the
Employer Incentive Compensation Plan including, without limitation,
eligibility to participate, award of benefits and the approval of
the exercise of any options available, shall be made by the Board
of Directors of the Employer.
(j) "Normal Retirement Date" means the first day of the calendar month
following the month in which the retiring Participant attains age
sixty-five (65).
(k) "Participant" means an individual who purchases RBV Shares as offered
through his Employer. As of January 2, 1996, the groups of individuals
who are eligible to participate in the Plan are (i) officers of Caliber;
RPS, Inc.; Caliber Technology, Inc.; Roberts Express, Inc.; Viking
Freight, Inc.; Caliber Logistics, Inc. and its affiliates; (ii)
RPS, Inc. Regional Managers; and (iii) any other individuals or groups of
individuals as the Committee (as defined in Section 1.1(c) of the Plan)
may determine from time to time.
(l) "Plan" means the Restricted Book Value Shares Plan for Caliber System,
Inc. and Certain Operating Companies, as in effect from time to time.
(m) "Plan Year" means any calendar year for which any Employer Incentive
Compensation Plan may be adopted.
<PAGE> 4
4
(n) "Price" for Common Stock means the "last" price quoted for shares of
Common Stock of Caliber on the date in question by the National
Association of Securities Dealers Automated Quotation System for the
National Over-The-Counter Market as set forth in The Wall Street Journal
if published, and if not published, as set forth in a newspaper of general
circulation selected by the Committee. If the Common Stock is listed on a
national stock exchange, the term "Price" for Common Stock as of a certain
date shall be the closing price for said Common Stock on such exchange, or
if no sale has occurred on such date, the closing bid price, in each case,
as quoted in The Wall Street Journal if published, but if not published,
as set forth in a newspaper of general circulation selected by the
Committee. Notwithstanding the preceding provisions of this Subsection,
the term "Price" for Common Stock as of December 31, 1995 shall be
determined based on the average of the closing price of Common Stock on
the first 15 trading days after the spin-off of Roadway Express, Inc.
from Caliber.
(o) "RBV Shares" means shares of Common Stock issued pursuant to, and
otherwise subject to the provisions of, Article IV hereof.
(p) "Stock Credit Plan" means the Caliber Long-Term Stock Award Incentive
Plan, as in effect from time to time.
(q) "Stock Credits" means Basic Stock Credits and Supplemental Stock Credits.
<PAGE> 5
5
(r) "Supplemental Stock Credits" means Stock Credits awarded to participants
in the Stock Credit Plan that reflect amounts of Employer contributions
and other annual additions that would have been made under tax qualified
employee benefit plans of Caliber but for limitations imposed by federal
tax law.
ARTICLE II: CONDITIONS OF ELIGIBILITY
An individual shall be eligible to participate in the Plan upon satisfaction
of the following conditions:
2.1 EMPLOYMENT AT WILL. The Employer has agreed to employ Participant and
Participant has agreed to serve the Employer in the capacity assigned under a
relationship rescindable at the will of either party. Nothing herein shall
limit the right of the Employer to transfer Participant to another position,
whether similar or not, nor limit the right of the Employer to discharge
Participant for any cause recognized by law as grounds for discharge without
liability.
2.2 FULL-TIME BEST EFFORTS. The Participant also has agreed to devote his
best efforts and substantially all of his business time and attention to the
affairs of the Employer (including the affairs of a subsidiary or other
affiliated company, if the Employer so elects).
2.3 MEANING OF TERMINATION OF EMPLOYMENT. The phrase "termination of
employment" and any variation thereof with respect to a Participant shall mean
that the Participant has ceased to serve his Employer or another Employer on a
full-time
<PAGE> 6
6
basis, whether as a result of resignation, dismissal, retirement, death or any
other reason.
ARTICLE III: METHODS OF PURCHASE OF RBV SHARES
3.1 PURCHASE WITH INCENTIVE COMPENSATION. For a Participant's services
rendered during his employment, the Employer shall pay him and Participant
shall accept compensation therefor an amount as determined by the Employer from
which Participant may elect to take a portion thereof in the form of RBV Shares
under Article IV hereof pursuant to an election procedure established by the
Employer.
3.2 PURCHASES WITH STOCK CREDITS. RBV Shares may also be purchased by a
Participant with Basic Stock Credits, or with amounts that would otherwise be
issued in the form of Supplemental Stock Credits, on terms established by
Caliber from time to time.
ARTICLE IV: RBV SHARES
4.1.1 RESTRICTED BOOK VALUE PORTION. The portion of the Participant's
incentive compensation or amounts of Stock Credits designated for the purchase
of RBV Shares hereunder is sometimes hereinafter referred to as the "Restricted
Book Value Portion".
4.1.2 DETERMINATION OF PURCHASE AMOUNT. The Restricted Book Value Portion
shall consist of two parts: one for (i) required tax withholdings, (ii)
Caliber System, Inc. Stock Savings and Retirement Income Plan (or other
Employer
<PAGE> 7
7
sponsored defined contribution plan) contributions and (iii) residual cash
otherwise attributable to any fractional share (the "Withholding Amount") and
the other for the actual purchase of RBV Shares (the "Purchase Amount"). The
Purchase Amount shall be equal to the Restricted Book Value Portion minus the
Withholding Amount; provided, however, that the Purchase Amount shall at all
times be subject to limitation by the Board of Directors of Caliber.
Notwithstanding the foregoing, in the event a limitation imposed by the Board
of Directors results in the payment of a portion of the Purchase Amount in
cash, Caliber may, at its discretion, include in the cash payment the amount of
residual cash otherwise attributable to any fractional share.
4.1.3 ISSUANCE OF RBV SHARES. The Purchase Amount shall be used to cause
the issuance at the Committee's convenience after the Determination Date (but
prior to March 16 of the year after the Plan Year) of certificates in the
Participant's name for that number of RBV Shares equal to the number of whole
shares of Common Stock which could have been purchased at Book Value on
December 31 of the Plan Year.
4.2 TRANSFER RESTRICTIONS. RBV Shares may not be sold, assigned, pledged,
encumbered, charged, transferred or disposed of in any way except as permitted
in Sections 4.3 and 4.4 hereof.
4.3 PERMITTED TRANSFERS. Section 4.2 notwithstanding, the Participant may
make a gift of or may otherwise transfer any of his RBV Shares to (i) any
member of his immediate family
<PAGE> 8
8
(which is defined to include his spouse, child, grandchild, parent, brother,
sister, niece or nephew, whether of the whole or half blood) or (ii) a trust,
partnership or S Corporation, of which the beneficiaries, partners or
shareholders are immediate family members or the Participant. In addition, on
the death or disability of the Participant, his RBV Shares may be transferred
to his estate or personal representative and to the person or persons entitled
thereto under his last will and testament or under the laws of descent and
distribution of his domicile. Any RBV Shares permitted to be transferred
pursuant to the provisions of this Section 4.3 shall continue to be RBV Shares
until repurchased in accordance with Section 4.4 hereof. The foregoing
notwithstanding, a permitted transferee of RBV Shares may subsequently transfer
any of such shares to another immediate family member of the Participant.
4.4 CONDITIONS OF REPURCHASE OR EXCHANGE. RBV Shares are subject to
repurchase or exchange as follows:
4.4.1 REPURCHASE PRICE. The price per share at which RBV Shares shall be
repurchased shall be the Book Value on December 31 of the year preceding the
date of repurchase at which the RBV Shares being repurchased, were initially
issued (the "Repurchase Price").
4.4.2 REPURCHASE AT PARTICIPANT'S ELECTION. On or after the fifth
anniversary date of the issuance of RBV Shares to the Participant under Section
4.1, the Participant may tender his
<PAGE> 9
9
RBV Shares for repurchase, and, if tendered, such shares shall be repurchased
at the Repurchase Price.
4.4.3 REPURCHASE UPON RETIREMENT OR DEATH. If the Participant's employment
terminates because of retirement at or prior to the Normal Retirement Date or
death prior to retirement, his RBV Shares (whether held by the Participant or
any transferee) must be returned for repurchase at the Repurchase Price as
follows: at least 10 percent of the Participant's RBV Shares (including any
issuable for his final year of employment) shall be repurchased on or before
April 1 of the second year following the year in which the Participant's
termination of employment occurred; thereafter, at least 20 percent in the
aggregate of said shares shall be repurchased on the following April 1 and at
least 30% on the next following April 1, and continuing thereafter so that
within a ten-year period all said shares shall have been returned for
repurchase.
4.4.4 REPURCHASE UPON OTHER TERMINATION OF EMPLOYMENT. Upon termination of
a Participant's employment with his Employer for any reason other than as
referred to in Section 4.4.3, all of the Participant's RBV Shares must be
returned for repurchase at the Repurchase Price within one year from the date
of such termination; provided, however, that RBV Shares purchased with
converted Stock Credits pursuant to Section 5.3 of the Stock Credit Plan after
such termination, if any, must be returned for repurchase at the Repurchase
Price within one year from the date of such purchase.
<PAGE> 10
10
4.4.5 REPURCHASE ONLY AFTER AUDIT. In the event RBV Shares are returned
for repurchase during January of any year pursuant to the preceding provisions
of this Article IV, such shares shall be repurchased on or about April 1 of
such year, but in any event after the Determination Date under the applicable
Employer Incentive Compensation Plan for the preceding year.
4.4.6 LEGENDING AND ESCROW OF CERTIFICATES. Certificates representing RBV
Shares shall bear a legend to the effect that they are subject to restriction
on transfer or disposition in accordance with this Plan. In aid of such
restrictions, and as a matter of administrative convenience, the Committee
shall, with the authority hereby given by the Participant, deposit for the
Participant's account the certificate or certificates representing the
Participant's RBV Shares, together with such appropriate documentation as may
be requested by the Committee, with a bank selected by the Committee under an
escrow agreement containing such terms and conditions as the Committee shall
determine. The Participant, however, retains the right to require any escrow
agent to redeliver the RBV Shares to the Participant subject to all of the
other provisions of this Article IV and this Plan.
4.4.7 EXCHANGE WITHOUT CASH. In lieu of any right or obligation to
repurchase RBV Shares for cash pursuant to the terms of this Plan, the
Committee may, but is not obligated to, authorize the issuance in exchange for
the RBV Shares otherwise to be purchased, of that number of shares of its
Common Stock
<PAGE> 11
11
equal to the number of RBV Shares exchanged times the ratio determined by
dividing the Repurchase Price by the Price for Common Stock as of December 31
of the year preceding the date of such exchange. The Common Stock thus issued
shall be free of the restrictions provided for in this Article IV but subject
to any restrictions under applicable securities laws.
4.4.8 EXCHANGE WITH CASH. Upon request of the Participant made at any time
the Participant desires to tender his RBV Shares for repurchase as permitted by
Section 4.4.2 hereof, the Committee may (but is not obligated to) permit the
Participant to tender an amount of cash equal to the positive difference of the
Price less the Repurchase Price as of December 31 of the year preceding the
tender, times the number of RBV Shares tendered therewith and to receive back
the same number of shares of Common Stock free of the restrictions provided for
in this Article IV but subject to any restrictions under applicable securities
law. Once a participant has made such a request, it may not be withdrawn
without the consent of the Committee.
4.4.9 CERTAIN TENDER OFFERS. In the event of a tender offer for the Common
Stock subject to Regulation 14D or 14E under the Securities Exchange Act of
1934, as amended, the acceptance of which tender offer is either (i)
recommended to shareholders by the Board of Directors of Caliber, or (ii) not
opposed by such Board, or (iii) involves an acquisition device in which any of
the shareholders may exercise dissenters' rights under any provision of Chapter
1701 of the Ohio Revised Code, then in any
<PAGE> 12
12
such event, the Committee may unilaterally confer upon the Participant the
benefits of both Sections 4.4.7 and 4.4.8 with respect to any or all of the
Participant's RBV Shares.
4.4.10 REPURCHASE UPON SPIN-OFF OF ROADWAY EXPRESS, INC. Upon the spin-off
of Roadway Express, Inc. from Caliber, each Participant who was an employee of
Roadway Express, Inc. on January 1, 1996 shall be required to return his RBV
Shares for repurchase at the Repurchase Price within one year from the date of
such spin-off.
4.5 REPURCHASE OR EXCHANGE IN CERTAIN SPECIAL CIRCUMSTANCES. The Committee
may also accelerate the date on which the Participant's RBV Shares may be
repurchased under Section 4.4 or exchanged for Common Stock under Section
4.4.7, to such date or dates as the Committee shall determine, if, in the sole
judgment of the Committee, the acceleration is justified (i) by the death or
disability of the Participant, (ii) by hardship suffered by the Participant, or
(iii) for any other reason which the Committee may deem to be in the best
interests of the Participant or his Employer.
4.6 SUBDIVISIONS AND COMBINATIONS OF SHARES. If any subdivision,
combination or other change of outstanding shares of Common Stock by
reclassification, distribution of a stock dividend, corporate reorganization,
consolidation, merger or otherwise shall occur, the number of RBV Shares issued
under Article IV shall be accordingly increased, decreased or otherwise
appropriately changed as the Committee may determine. To the
<PAGE> 13
13
extent that, because of any such change, the Participant, former Participant,
or his legal representative or transferee as permitted herein shall as the
owner of RBV Shares be entitled to new, additional or different shares of stock
or securities, the certificates for such new, additional or different shares or
securities, together with such appropriate documentation as may be requested by
the Committee, shall be deposited by the Participant, legal representative or
transferee under the escrow referred to in Section 4.4.6 hereof. All
provisions of Article IV shall be applicable to such new, additional or
different shares or securities issued with respect to RBV Shares.
4.7 RIGHTS, WARRANTS, ETC. If the Participant, former Participant, his
legal representative or transferee as permitted herein, shall receive rights,
warrants or fractional interest in respect of RBV Shares, such rights or
warrants may be held, exercised, sold or otherwise disposed of, and such
fractional interest may be settled free and clear of any restrictions under
Article IV, except any restrictions imposed by federal or state securities
laws.
ARTICLE V: MISCELLANEOUS PROVISIONS
5.1 AMENDMENT AND TERMINATION. The Board of Directors of Caliber may amend
or terminate the Plan at any time without the consent of any Participant or any
other person. In the event of any such termination, the Board may require each
holder of RBV Shares to tender them to Caliber for repurchase at the Repurchase
Price. Caliber shall not be required, however, to provide for
<PAGE> 14
14
any such repurchase and may make any other provision for the settlement of
outstanding awards that it considers, in its sole discretion, to be equitable.
5.2 DISPUTES. In the event that any disagreement, dispute or controversy
shall hereafter exist between an Employer and a Participant or the Committee
and a Participant as to any matter arising under this Plan, whether as to
construction, interpretation or operation thereof, or the respective rights and
liabilities of the parties hereunder, or as to the payment or receipt of any
sum of money, or otherwise, then such disagreement, dispute or controversy
shall be settled by arbitration by three arbitrators. Within thirty (30) days
after either party delivers to the other party a written request for
arbitration, each shall appoint one arbitrator and the two arbitrators shall
together then appoint a third arbitrator within ten (10) days after the first
two arbitrators are appointed. If either party fails to appoint an arbitrator
within such time, or if the two arbitrators fail to appoint the third
arbitrator within the specified period, then such arbitrator or such third
arbitrator, as the case may be, shall be selected pursuant to the rules of the
American Arbitration Association upon application of either party. It shall be
the duty of the arbitrators to make the determination required hereunder as
expeditiously as possible after their appointment. A determination by a
majority of the arbitrators shall be final and binding. Each party shall pay
the cost of his or its arbitrator and one-half of the cost of the
<PAGE> 15
15
third arbitrator and the cost of the arbitration itself. All
arbitration proceedings shall be held in the place of the Participant's
domicile.
5.3 ADOPTION BY EMPLOYERS. This Plan may be adopted by an Employer
by inclusion of the substance hereof in a specific incentive
compensation agreement or stand alone plan adopted by an Employer.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-23-1996
<CASH> 14,313
<SECURITIES> 0
<RECEIVABLES> 292,369
<ALLOWANCES> 10,605
<INVENTORY> 0
<CURRENT-ASSETS> 421,780
<PP&E> 1,495,568
<DEPRECIATION> 636,376
<TOTAL-ASSETS> 1,408,290
<CURRENT-LIABILITIES> 571,141
<BONDS> 0
<COMMON> 39,898
0
0
<OTHER-SE> 699,294
<TOTAL-LIABILITY-AND-EQUITY> 1,408,290
<SALES> 0
<TOTAL-REVENUES> 582,074
<CGS> 0
<TOTAL-COSTS> 563,893
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,949
<INCOME-TAX> 7,328
<INCOME-CONTINUING> 9,621
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,621
<EPS-PRIMARY> .24
<EPS-DILUTED> 0
</TABLE>
