<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[x] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (fee required)
For the fiscal year ended December 31, 1995
-----------------
OR
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
For the transition period from ________________ to _______________
Commission file number 0-10716
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CALIBER SYSTEM, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Ohio 34-1365496
------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3560 W. Market Street, P.O. Box 5459, Akron, Ohio 44334-0459
------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 665-5646
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None
------------------------------- --------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock-without par value
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(Title of Class)
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 29, 1996 was $917,790,000.
The number of shares of the issuer's common stock outstanding as of February
29, 1996 was 39,104,333.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's Annual Report to Shareholders for the year
ended December 31, 1995 are incorporated by reference into Parts I and II.
Certain portions of the registrant's proxy statement for the annual meeting of
shareholders to be held on May 8, 1996 are incorporated by reference into Part
III.
<PAGE> 2
PART I
Item 1. - Business.
- ------- ---------
The registrant, Caliber System, Inc. (formerly Roadway Services, Inc.),
is a corporation organized under the laws of the State of Ohio in 1982 and is
engaged through its subsidiaries in a broad range of transportation, logistics,
and related information services. On December 14, 1995, the shareholders of the
registrant approved the spin-off to the registrant's shareholders of
approximately 95% of the stock of its wholly-owned subsidiary, Roadway Express,
Inc., the registrant's national long haul, less-than-truckload (LTL) motor
freight carrier. The spin-off was completed at the beginning of 1996. On
November 6, 1995 the registrant announced plans to exit the air freight business
served by Roadway Global Air, Inc., its worldwide air freight carrier.
Additional information concerning the above transactions is set forth in the
discussion contained on pages 4, 5 and 19, and pages 30 through 33 of the
registrant's Annual Report to Shareholders for the year ended December 31, 1995,
and is incorporated herein by reference. The registrant's remaining operations
include a small-package carrier, a superregional freight carrier, a surface
expedited carrier and a contract logistics provider. These operations provide
services and solutions to meet customer requirements based upon shipment size,
distance, time in transit, and distribution needs. The registrant conducts
these operations principally through RPS, Inc. ("RPS", formerly Roadway Package
System, Inc.), Viking Freight, Inc. ("Viking", formerly Viking Freight System,
Inc.), Roberts Express, Inc. ("Roberts") and Caliber Logistics, Inc. ("Caliber
Logistics", formerly Roadway Logistics Systems, Inc.).
RPS serves customers in the small-package market throughout North
America and between North America and Europe, focusing primarily on the
business-to-business delivery of packages weighing up to 150 pounds. RPS
provides service to 98% of the United States, and, through RPS, Ltd., its
subsidiary, to 100% of Canada. RPS service extends to 27 European countries
through a partnership with General Parcel Logistics GmbH. RPS also offers
service offshore to Puerto Rico, Alaska and Hawaii via a ground/air network
operation. RPS provides other specialized transportation services to meet
specific customer requirements in the small-package market. RPS conducts its
operations primarily with owner-operated vehicles and, in addition, owns over
7,000 trailers. United Parcel Service is the dominant carrier in the portion of
the industry in which RPS competes. Competition focuses largely on providing
economical pricing and dependable service.
Viking is a superregional freight carrier, formed early in 1996 by the
consolidation of the businesses of four regional carrier subsidiaries, Central
Freight Lines Inc., Coles Express, Inc., Spartan Express, Inc., and Viking
Freight System, Inc., with regional coverage across the country. Viking's
primary business consists of handling shipments weighing less than 10,000 pounds
each. Most of their shipments require less than the full cargo and/or weight
capacity of a trailer and are more efficiently transported by sharing trailer
capacity with other shipments. Viking operates a dedicated trucking network
principally serving its core geographic markets with next-day and second-day
freight service. In addition, national service is provided
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<PAGE> 3
to meet specific customer requirements. With a fleet of over 20,000 trucks,
tractors and trailers, Viking serves 91% of the U.S. population in all 50 states
and Puerto Rico; it also serves Canada through an arrangement with Interlink
Freight Systems, Inc. The freight industry is extremely competitive. High levels
of competition and periodic industry overcapacity continue to result in
aggressive discounting and narrow margins. Viking competes primarily with other
regional freight carriers and, to a lesser extent, national freight and
small-package carriers.
Roberts is the largest surface expedited carrier in North America,
providing critical needs shipping and transportation for emergency shipments.
Roberts also provides similar service in Europe. Utilizing over 2,000 vehicles,
Roberts delivers shipments within 15 minutes of the promised delivery time in
96% of all cases. In addition to time-critical delivery, Roberts offers White
Glove Services(R), requiring specially equipped vehicles and highly trained
teams to handle such items as electronics, medical equipment, radioactive
materials, pressurized gases, trade show exhibits and works of art. Roberts
transports freight through independent owner-operators.
Caliber Logistics is a contract logistics provider with expertise across
the entire supply chain, from inbound materials management through distribution
to the final consumer. Services provided include transportation management,
dedicated transportation, warehouse operations and management, just-in-time
delivery programs (including light assembly and manufacturing), customer order
processing, returnable container management, freight bill payment and auditing
and other management services outsourced by its customers. Caliber Logistics
operates in a relatively new business area and further vigorous competition is
expected from existing competitors and new entrants.
At the end of 1995, the registrant and its affiliates employed
approximately 25,700 persons (on a full time equivalent basis) and utilized the
services of approximately 10,500 independent contractors.
All of the registrant's domestic motor carrier subsidiaries are subject
to regulation by the United States Department of Transportation.
The freight transportation industry is affected directly by the state of
the overall economy. Seasonal fluctuations affect tonnage, revenues, and
earnings, with the fall of each year being the busiest shipping period and the
months of December and January the slowest.
Item 2. - Properties.
- ------- -----------
Caliber System, Inc.
- --------------------
Corporate offices of the registrant and its information systems
subsidiary, Caliber Technology, Inc. (formerly Roadway Information Technology,
Inc.) are located in Akron, Ohio in leased facilities. Limited additional
corporate office space is located in nearby leased facilities.
-3-
<PAGE> 4
RPS, Inc.
- ---------
As of December 31, 1995, RPS operated 339 terminals, including 23 hub
facilities. Forty-six of the terminals, 19 of which are hub facilities, are
owned; and 293 terminals, including the other four hub facilities, are leased,
generally for terms of three years or less. Twelve of the terminals, including
three hub facilities, are operated by RPS, Ltd., RPS' Canadian subsidiary. The
23 hub facilities are strategically located to cover the geographic area served
by RPS. These facilities, averaging 97,500 square feet, range in size from
24,000 to 147,900 square feet.
RPS' corporate offices and information and data centers are located in
an approximately 350,000 square foot building owned by a subsidiary of the
registrant in the Pittsburgh, Pennsylvania area.
Viking Freight, Inc.
- --------------------
As of December 31, 1995, Viking operated 221 terminals. Eighty-four
of the terminals, with 4,450 loading spaces, are owned; and the remaining
137 terminals, with 3,128 loading spaces, are leased. The largest terminal
facility, located in Dallas, Texas, has 525 loading spaces and is owned by the
company. The company's general offices are located in leased facilities in San
Jose, California.
Roberts Express, Inc.
- -------------------------------------
Roberts' general offices are located in Akron, Ohio in owned facilities.
Roberts does not use terminal facilities in its business.
Caliber Logistics, Inc.
- -----------------------
Caliber Logistics' general offices are located in Hudson, Ohio in leased
facilities.
Item 3. - Legal Proceedings.
- ------- ------------------
The registrant is involved in various lawsuits arising in the ordinary
course of its business. In the opinion of management, the outcome of these
matters will not have a material adverse effect on the financial condition or
results of operations of the registrant.
Item 4. - Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
On December 14, 1995, the registrant held a special meeting of
shareholders at 901 Lakeside Ave., Cleveland, Ohio. The purpose of the meeting
was to vote on the proposals recommended by the Board of Directors to approve
the following:
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<PAGE> 5
Proposal One: The distribution by the registrant of at least 95% of the
outstanding shares of common stock of Roadway Express, Inc. ("REX"), a then
wholly-owned subsidiary of the registrant to the shareholders of record on
December 29, 1995, on the basis of one share of common stock of REX for each
two shares of common stock of the registrant. The results of the vote on
Proposal One were as follows:
<TABLE>
<CAPTION>
For Against Abstain Broker-Non-votes
---------- ------- ------ ----------------
<S> <C> <C> <C>
27,232,978 163,328 83,355 1,581,301
</TABLE>
Proposal Two: An amendment to the Amended Articles of Incorporation of the
registrant changing the name of the registrant to "Caliber System, Inc." The
results of the vote on Proposal Two were as follows:
<TABLE>
<CAPTION>
For Against Abstain Broker-Non-votes
---------- ------- ------ ----------------
<S> <C> <C> <C>
28,724,960 252,503 83,499 -0-
</TABLE>
Proposal Three: The adoption by REX, then a wholly-owned subsidiary of the
registrant, of the REX Management Incentive Stock Plan. The results of the vote
on Proposal Three were as follows:
<TABLE>
<CAPTION>
For Against Abstain Broker-Non-votes
---------- ------- ------ ----------------
<S> <C> <C> <C>
27,461,069 895,000 704,857 36
</TABLE>
-5-
<PAGE> 6
Executive Officers of the Registrant.
- -------------------------------------
<TABLE>
<CAPTION>
Name and Age Present Positions and Recent Business Experience
- ------------ ------------------------------------------------
<S> <C>
Donald C. Brown Vice President-Human Resources since January 1996; previously he served as Vice
President-Corporate Support Services during 1995; Assistant Controller from January 1992
through 1994; and Assistant to Vice President and Controller from December 1990 through
1991. Age 40.
John P. Chandler Vice President and Treasurer since January 1996; previously he served as Vice
President-Administration and Treasurer from January 1994 through 1995; Vice
President-Administration during 1993; and President of Roadway Package System, Inc. from
July 1990 to December 1992. Age 52.
Kathryn W. Dindo Vice President and Controller since January 1996; previously she served as Assistant
Controller from August 1994 through 1995; previous to employment with the registrant, she
was a partner with Ernst & Young LLP since 1985. Age 46.
Douglas G. Duncan Vice President-Corporate Marketing since January 1996; previously he served as Vice
President-Special Assignment from September 1995 through December 1995; previously he was
Vice President-Sales for Roadway Express, Inc. since January 1991. Age 44.
Jonathan T. Pavloff Vice President-Corporate Planning since February 1991; previously he served as
President of Caliber Technology, Inc., a registrant owned management information subsidiary,
from 1989 to February 1991. Age 46.
Daniel J. Sullivan Director since August 1990, President and Chief Executive Officer since August 1995;
and Chairman since October 1995; previously he served as President and Chief Operating
Officer from January 1994 to August 1995; Senior Vice President and President-National
Carrier Group during 1993; Vice President and President-National Carrier Group during 1992;
Vice President and Group Executive from July 1990 through 1991; and President of RPS, Inc.
through June 1990. Age 49.
D. A. Wilson Senior Vice President-Finance and Planning, Secretary and Chief Financial Officer
since January 1994; previously he served as Senior Vice President-Finance and Planning and
Secretary during 1993 and as Vice President-Finance and Secretary from 1989 through 1992.
Age 51.
</TABLE>
Officers are elected to serve on a calendar year basis except for the Chairman,
President, Treasurer and Secretary, who are elected for an annual term
following the annual meeting of shareholders. No family relationships exist
between any of the executive officers named above or between any executive
officer and any director of the registrant.
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<PAGE> 7
PART II
Item 5. - Market for Registrant's Common Equity and Related Stockholder
- ------- -------------------------------------------------------------
Matters.
--------
In response to the information called for by this Item, the material set
forth under the heading "Common Stock and Dividends" on page 39 of the
registrant's Annual Report to Shareholders for the year ended December 31, 1995,
is incorporated herein by reference.
Item 6. - Selected Financial Data.
- ------- ------------------------
In response to the information called for by this Item, the historical
data set forth for the years 1995, 1994, 1993, 1992 and 1991, and Notes (1), (2)
and (3) on pages 42 and 43 of the registrant's Annual Report to Shareholders for
the year ended December 31, 1995, are incorporated herein by reference.
Item 7. - Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations.
----------------------
In response to the information called for by this Item, the material set
forth on pages 19 through 22 of the registrant's Annual Report to Shareholders
for the year ended December 31, 1995, is incorporated herein by reference.
Item 8. - Financial Statements and Supplementary Data.
- ------- --------------------------------------------
The consolidated financial statements of the registrant and its
subsidiaries set forth on pages 24 through 38 and the Report of Independent
Auditors on page 23 of the registrant's Annual Report to Shareholders for the
year ended December 31, 1995, are incorporated herein by reference.
The material set forth under the heading "Summary of Quarterly Results
of Operations" on page 40 and 41 of the registrant's Annual Report to
Shareholders for the year ended December 31, 1995, is incorporated herein by
reference.
Item 9. - Changes in and Disagreements with Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure.
---------------------
None.
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<PAGE> 8
PART III
Item 10. - Directors and Executive Officers of the Registrant.
- -------- ---------------------------------------------------
In response to the information called for by Item 401 of Regulation S-K
with respect to directors of the registrant, the material set forth under the
heading "Information About Nominees for Directors" in the registrant's proxy
statement for the annual meeting of shareholders to be held on May 8, 1996,
which will be filed pursuant to Regulation 14A with the Securities and Exchange
Commission, is incorporated herein by reference.
In response to the information called for by Item 401 of Regulation S-K
with respect to executive officers of the registrant, the material set forth
under the heading "Executive Officers of the Registrant" in Part I of this Form
10-K Annual Report for the year ended December 31, 1995, is incorporated herein
by reference.
Item 11. - Executive Compensation.
- -------- -----------------------
In response to the information called for by this Item with respect to
directors of the registrant, the material set forth under the heading "Director
Compensation" in the registrant's proxy statement for the annual meeting of
shareholders to be held on May 8, 1996, which will be filed pursuant to
Regulation 14A with the Securities and Exchange Commission, is incorporated
herein by reference.
In response to the information called for by this Item with respect to
executive officers of the registrant, the material set forth under the heading
"Executive Compensation and Shareholdings by Executive Officers" in the
registrant's proxy statement for the annual meeting of shareholders to be held
on May 8, 1996, which will be filed pursuant to Regulation 14A with the
Securities and Exchange Commission, is incorporated herein by reference.
Item 12. - Security Ownership of Certain Beneficial Owners and Management.
- -------- ---------------------------------------------------------------
In response to the information called for by this Item, the material set
forth under the heading "Principal Holders of Company Common Stock on February
29, 1996," including the notes thereto; the material set forth under the heading
"Information About Nominees for Directors," including the notes thereto; and the
material set forth under the heading "Ownership of Company Common Stock by
Management," including the notes thereto, in the registrant's proxy statement
for the annual meeting of shareholders to be held on May 8, 1996, which will be
filed pursuant to Regulation 14A with the Securities and Exchange Commission, is
incorporated herein by reference.
Item 13. - Certain Relationships and Related Transactions.
- -------- -----------------------------------------------
None.
-8-
<PAGE> 9
PART IV
Item 14. - Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
- -------- -----------------------------------------------------------------
(a)(1) and (2) List of Financial Statements and Financial Statement
Schedules--The response to this portion of Item
14 is submitted as a separate section of this report.
(3) Exhibit Index--The response to this portion of Item 14 is
submitted as a separate section of this report.
(b) Reports on Form 8-K Filed in the Fourth Quarter of 1995--A
report on Form 8-K dated November 17, 1995 was filed under:
* Item 2, Acquisition or Disposal of Assets. - Announced plans
to exit the air freight business served by its subsidiary
Roadway Global Air, Inc. and to sell certain related assets.
* Item 7, Financial Statements, Pro Forma Financial Information
and Exhibits.-
The following pro forma financial information was
incorporated by reference to note (b) on page 32 and to pages
33 through 38 of the registrant's Proxy Statement for the
Special Meeting of Shareholders held on December 14, 1995.
Roadway Services, Inc. Pro Forma Condensed Financial
Statements:
* Unaudited Pro Forma Condensed Balance Sheet,
September 9, 1995
* Unaudited Pro Forma Statement of Consolidated Income,
Thirty-Six Weeks Ended September 9, 1995
* Unaudited Pro Forma Statement of Consolidated Income,
Year Ended December 31, 1994
* Unaudited Pro Forma Statement of Consolidated Income,
Thirty-Six Weeks Ended September 10, 1994
(c) Exhibits--The response to this portion of Item 14 is submitted
as a separate section of this report.
(d) Financial Statement Schedules--The response to this portion of
Item 14 is submitted as a separate section of this report.
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<PAGE> 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CALIBER SYSTEM, INC.
Date March 12, 1996 By /s/ Daniel J. Sullivan
-------------- -------------------------------------
Daniel J. Sullivan, Chairman,
President and Chief Executive Officer
Date March 12, 1996 By /s/ D. A. Wilson
-------------- -------------------------------------
D. A. Wilson, Senior Vice President-
Finance and Planning, Secretary
and Chief Financial Officer
Date March 12, 1996 By /s/ Kathryn W. Dindo
-------------- -------------------------------------
Kathryn W. Dindo,
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
CALIBER SYSTEM, INC.
Date March 12, 1996 By /s/ G. B. Beitzel
-------------- -------------------------------------
G. B. Beitzel, Director
Date March 12, 1996 By /s/ R. A. Chenoweth
-------------- -------------------------------------
R. A. Chenoweth, Director
Date March 12, 1996 By /s/ Charles R. Longsworth
-------------- -------------------------------------
Charles R. Longsworth, Director
Date March 12, 1996 By /s/ Daniel J. Sullivan
-------------- -------------------------------------
Daniel J. Sullivan, Director
Date March 12, 1996 By H. Mitchell Watson, Jr.
-------------- -------------------------------------
H. Mitchell Watson, Jr., Director
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<PAGE> 11
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) (1) AND (2), AND 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1995
CALIBER SYSTEM, INC.
AKRON, OHIO
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<PAGE> 12
FORM 10-K--ITEM 14(a) (1) AND (2)
CALIBER SYSTEM, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements, included in the registrant's
Annual Report to Shareholders for the year ended December 31, 1995, are
incorporated by reference in Item 8:
Consolidated Balance Sheets--December 31, 1995 and 1994--pages 24 and 25
Statements of Consolidated Income--Years ended December 31, 1995, 1994
and 1993--page 26
Statements of Consolidated Cash Flows--Years ended December 31, 1995,
1994 and 1993--page 27
Statements of Consolidated Shareholders' Equity--Years ended December
31, 1995, 1994 and 1993--pages 28 and 29
Notes to Consolidated Financial Statements--December 31, 1995--pages 30
through 38
The following consolidated financial statement schedule of Caliber System, Inc.
and subsidiaries is included in Item 14(d):
Schedule II-Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
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<PAGE> 13
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
CALIBER SYSTEM, INC.
Years Ended December 31, 1995, 1994 and 1993
(dollars in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL.A COL.B COL.C COL.D COL.E
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
DESCRIPTION BALANCE AT BEGINNING ------------------------------------ DEDUCTIONS-DESCRIBE BALANCE AT END
OF PERIOD (1) (2) OF PERIOD
CHARGED TO COST CHARGED TO OTHER
AND EXPENSES ACCOUNTS-DESCRIBE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Reserve related to
discontinuance of RGA $ - $64,925 $ - $14,991 (A) $49,934
Allowance for uncollectible
accounts $ 9,639 $12,737 $ - $ 9,790 (C) $12,586
1994
Allowance for uncollectible
accounts (B) $ 6,891 $ 9,274 $ - $ 6,526 (C) $ 9,639
1993
Allowance for uncollectible
accounts (B) $ 4,460 $ 7,225 $ 486 (D) $ 5,280 (C) $ 6,891
<FN>
(A) Charges against reserve.
(B) Restated to reflect the spin-off of Roadway Express, Inc. and exit from
the air freight business served by Roadway Global Air, Inc. (RGA).
(C) Uncollectible accounts written off, net of recoveries.
(D) Additions from business acquisition.
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
3.1 Second Amended Articles of Incorporation of the Registrant.
3.2 Restated Amended Code of Regulations of the Registrant effective May 10, 1989 (filed as Exhibit 3.2 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference).
9 Amended Restated Voting Trust Agreement effective November 1, 1992 (filed as Exhibit 9 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference).
10.1 Distribution Agreement between Roadway Services, Inc. and Roadway Express, Inc. dated December 29, 1995 (filed as Exhibit
10.1 to the Registrant's Current Report on Form 8-K dated January 18, 1996, and incorporated herein by reference).
10.2* Roadway Services, Inc. Long-Term Stock Award Incentive Plan (as Amended and Restated December 1992) (filed as Exhibit 10.1
to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by
reference).
10.3* Restricted Book Value Shares Plan for Roadway Services, Inc. and Certain Operating Companies (as Amended and Restated as of
January 13, 1994) (filed as Exhibit 4(c) to Post-Effective Amendment No. 3 to Registration Statement No. 33-44502, and
incorporated herein by reference).
10.4* Roadway Services, Inc. Directors' Deferred Fee Plan (as Amended and Restated as of May 10, 1995) (filed as Exhibit 10 to
the Registrant's Quarterly Report on Form 10-Q dated July 19, 1995, and incorporated herein by reference).
10.5* Roadway Services, Inc. 1994 Nonemployee Directors' Stock Plan (filed as Exhibit 10.4 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference).
10.6* Roadway Services, Inc. Retirement Plan for Nonemployee Directors (as Amended as of February 10, 1993) (filed as Exhibit
10.5 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by
reference).
10.7* Written description of Officers' Incentive Compensation Plan.
__________________________________
<FN>
* Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of this
report.
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT INDEX (CONTINUED)
<S> <C>
10.8(a)* Roadway Services, Inc. Excess Plan effective January 1, 1993 (filed as Exhibit 10.7(a) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference).
10.8(b)* Roadway Services, Inc. 401(a)(17) Benefit Plan effective January 1, 1993 (filed as Exhibit 10.7(b) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by
reference).
10.8(c)* Roadway Services, Inc. Administrative Document for Excess Plan and 401(a)(17) Benefit Plan effective January 1,
1993 (filed as Exhibit 10.7(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, and incorporated herein by reference).
10.9(a) Credit Agreement among Roadway Services, Inc., Several Lenders and Chemical Bank dated as of March 31, 1994
(filed as Exhibit 10 to the Registrant's Current Report on Form 8-K dated January 17, 1995, and incorporated
herein by reference).
10.9(b) Form of First Amendment and Waiver to Credit Agreement among Roadway Services, Inc., the several banks and other
financial institutions parties thereto and Chemical Bank, as agent for the lenders, dated as of September 29, 1995
(filed as Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated January 18, 1996, and incorporated
herein by reference).
13 Annual Report to Shareholders for the year ended December 31, 1995.
21 Significant Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
__________________________________
<FN>
* Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of this
report.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
SECOND AMENDED ARTICLES OF INCORPORATION
OF
CALIBER SYSTEM, INC.
ARTICLE I
The name of the Corporation shall be Caliber System, Inc.
ARTICLE II
The place in Ohio where the prindpal office of the Corporation is to be
located is in the City of Akron, County of Summit.
ARTICLE III
The Corporation is formed for the purpose of engaging in any lawful act
or activity for which corporations may be formed under Sections 1701.01 to
1701.98, inclusive, of the Ohio Revised Code.
<PAGE> 2
ARTICLE IV
The maximum number of shares which the Corporation is authorized to
have outstanding is 240,000,000 shares, consisting of 40,000,000 shares of
serial preferred stock without par value (hereinafter called Serial Preferred
Stock) and 200,000,000 shares of common stock without par value (hereinafter
called Common Stock).
The express terms of the shares of each class are as follows:
Division A
Serial Preferred Stock
The Serial Preferred Stock may be issued from time to time in one or more
series. Subject to the provisions of this Division A, which provisions shall
apply to all Serial Preferred Stock, the Board of Directors hereby is
authorized to cause such shares to be issued in one or more series and to adopt
from time to time amendments to these Amended Articles of Incorporation with
respect to each such series to fix: the division of such shares into series and
the designation and authorized number of shares of each series; the dividends
or distribution rate; the dates of payment of dividends or distributions
and the dates from which they are cumulative; liquidation price; redemption
rights and price; sinking fund requirements; conversion rights; and
restrictions on the issuance of shares of any class or series. The holders of
Serial Preferred Stock shall be entitled to one vote for each share upon all
matters presented to the shareholders; and, except as required by law, the
holders of Serial Preferred Stock and the holders of Common Stock shall vote
together as one class on all matters.
Division B
Common Stock
The Common Stock shall be subject to the express terms of the Serial
Preferred Stock and of any series thereof. The holders of shares of Common
Stock shall be entitled to one vote for each share upon all matters presented
to the shareholders. No holder of shares of Common Stock shall have a
preemptive right to subscribe to additional issues of the stock of this
Corporation of any or all classes or series.
ARTICLE V
These Amended Articles of Incorporation supersede the existing
Articles.
ARTICLE VI
Except as otherwise provided by law, the Articles, or the Regulations
of this Corporation, as they may respectively be amended, all of the powers of
this Corporation shall be possessed and exercised by the Board of Directors.
ARTICLE VII
The Corporation may redeem or purchase shares of any kind or class
issued by it, to such extent, at such time, in such manner and upon such terms
as its Board of Directors shall
<PAGE> 3
determine; provided, however, that the Corporation shall not redeem or purchase
its own shares if immediately thereafter its assets would be less than its
liabilities plus stated capital, or if the Corporation is insolvent, or if
there is reasonable ground to believe that by such redemption or purchase it
would be rendered insolvent
ARTICLE VIII
The number of Directors of this Corporation, which shall constitute the
whole Board; shall be such as from time to time shall be fixed by, or in the
manner provided in, the Code of Regulations, but in no case shall the number be
less than three. Directors need not be shareholders of this Corporation.
ARTICLE IX
A Director of this Corporation shall not be disqualified by such office
from dealing or contracting with this Corporation as a vendor, purchaser,
employee, agent or otherwise; nor shall any transaction or contract or act of
this Corporation be void or voidable or in any way invalidated or affected by
reason of the fact that any organization or member of any organization of which
such Director is a member or any corporation of which such Director is a
shareholder, officer or director is in any way interested in such transaction
or contract or act, provided that the fact that such member, such organization,
or such corporation is so interested in such transaction or contract or act has
been disclosed or is known to the Board of Directors of this Corporation or
such members thereof as shall be present at any meeting of such Board of
Directors at which action upon any such transaction or contract or act shall be
taken; and provided that if such fact is so disclosed or known, no such
Director shall be accountable or responsible to this Corporation for, or in
respect of, any such transaction or contract or act of this Corporation or for
any gains or profits realized by him by reason of the fact that he or any
organization of which he is a member, shareholder, officer or director is
interested in such transaction or contract or act.
ARTICLE X
Any provision contained in these Articles of Incorporation may be
amended, altered or repealed by the affirmative vote or consent of the holders
of shares entitling them to exercise a majority of the voting power of the
Corporation or by the affirmative vote of a majority of the holders of shares
of every particular class entitled by law or these Articles of Incorporation to
vote on such amendment, alteration or repeal, unless a greater vote is
mandatory under Article Xl; provided, however, the foregoing shall not prohibit
the Directors from amending, altering or repealing any article when permitted
by the General Corporation Law of Ohio, as amended.
ARTICLE Xl
(A) Any proposal or proceeding for the merger or consolidation of this
Corporation, or any combination or majority share acquisition of this
Corporation, or any sale, lease, or exchange of substantially all of the assets
of this Corporation shall not be effected unless a meeting of the shareholders
of this Corporation is held to act thereon and the votes of the holders of
voting stock of this Corporation outstanding representing not less than 66-2/3%
of the votes entitled to vote thereon are voted in favor thereof; provided,
however, notwithstanding anything to the contrary herein, the 66-2/3% vote
required under this Article Xl shall be changed to the percentage of votes
specified in Article XII hereof if, at a meeting of
<PAGE> 4
the Board of Directors legally called and held, 87.5% of the Directors shall
have voted to recommend approval of the proposal or proceeding to the
shareholders or if 100% of the Directors shall have consented thereto in
writing in accordance with the General Corporation Law of Ohio. The vote
required under this Article XI is in addition to the requirements of the
General Corporation Law of Ohio or the Securities Act, as amended (Ohio
Revised Code Ch. 1707), the Securities Exchange Act of 1934, as amended, and
any Rules or Regulations promulgated by the Securities and Exchange Commission
pursuant to that Act, or the law of any other state that may be applicable, and
it shall not be affected by the unconstitutionality of any such statute, rule
or regulation for any reason.
(B) In addition, this Article Xl may not be amended or repealed unless
the holders of voting stock of this Corporation outstanding and representing
66-2/3% of the votes entitled to vote thereon are voted in favor of any such
action.
ARTICLE XII
Except when a greater vote may be required pursuant to Article Xl
hereof, any proposal or proceeding for the: (1) sale, exchange or other
disposition of all, or substantially all, of the assets of the Corporation; (2)
merger or consolidation of the Corporation into a domestic corporation; (3)
merger or consolidation of the Corporation into a foreign corporation; (4)
combination or a majority share acquisition wherein this Corporation is the
acquiring corporation; or (5) the voluntary dissolution of this Corporation,
with respect to which the General Corporation Law of Ohio would require
shareholder authorization, shareholder authorization therefor shall be
sufficiently received if the proposal or proceeding in question receives the
affirmative vote of not less than a majority of the shares of the entire voting
power of the Corporation and of the shares of every class entitled to vote upon
the proposal or proceeding taken at a meeting of the shareholders duly called
and held for such respective purpose or evidenced without a meeting in
accordance with Section 1701.54, as it may be amended.
ARTICLE XIII
The right to cumulate votes in the election of Directors shall not
exist with respect to shares of capital stock of the Corporation.
<PAGE> 1
Exhibit 10.7
DESCRIPTION OF OFFICERS' INCENTIVE COMPENSATION
-----------------------------------------------
Officers are assigned earnings allocation factors related to their
responsibility. The amount of incentive compensation depends on the Company's
attainment of a standard return on beginning equity. Performance above or
below the standard affects incentive compensation accordingly. An officer
receives 100% of his allocation in cash unless he elects to take a portion in
the form of Restricted Book Value Shares pursuant to an election procedure
established by the Company. In December 1995, the Company's Board of Directors
excluded from the calculation the expenses recorded in 1995 relative to the
spinoff of Roadway Express, Inc., the discontinuance of Roadway Global Air,
Inc. and the consolidation of the companies comprising the regional carrier
group.
Subject to the conditions set forth below, approximately 75% of the cash
portion of an officer's allocation is estimated and paid as soon as possible
after January 1 of the year following the year for which the incentive
compensation was calculated (the Plan Year); and the balance of the cash and
any Restricted Book Value Shares are distributed at the Company's convenience
after Caliber's independent auditors certify the total amount of incentive
compensation payable, but in no case later than March 16 of the year after the
Plan Year.
Notwithstanding the provision requiring completion of service in the Company's
employ for the full Plan year, if an officer is not in the Company's employ on
December 31 of the Plan Year, the officer shall be allocated a portion (based
upon full weeks of service during the Plan Year) of the amount of his officer's
allocation that would otherwise have been earned for a full year performance if
any of the events of termination of employment described in Items (a), (b), (c)
and (d) below (including any conditions applicable to such events) have
occurred during the Plan Year; but the officer is allocated his entire
officer's allocation if his employment has been terminated pursuant to the
event described in Item (c) below. Any amounts are then paid in the manner
described above. The events of termination referred to above in this paragraph
are as follows:
(a) Death;
(b) Disability requiring retirement from gainful employment, provided that
the terms of Items (d)(ii) and (iii) below are complied with, unless
waived by the Company's Board of Directors;
(c) Retirement at or after the Officer's normal retirement date provided
the terms of Items (d)(i), (ii) and (iii) below are complied with,
unless waived by the Company's Board of Directors;
<PAGE> 2
(d) Termination of employment for reasons other than as set forth in the
preceding Items (a), (b), (c) or (e) below, provided that, in each
such case, termination occurred under such circumstances that the
Board of Directors determined that the officer acted at all times in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the Company; and upon condition that
he execute an agreement obligating him:
(i) not to accept employment with or render service in any manner
to a competitor of the Company for the period ending
with the distribution in full of the officer's allocation;
(ii) not to disclose to anyone confidential and secret information
that is a competitive asset of the Company, including,
without limitation, (1) customer information such as names,
addresses, sales histories, purchasing habits, credit status
and pricing levels, (2) prospective customer information and
lists, (3) product and system specifications, schematics,
designs and concepts developed by the Company; (4) personnel
data, (5) Company policy and procedural manuals and memoranda,
and (6) other confidential information used by the Company to
conduct its business; and
(iii) to deliver to the Company at the time of his termination of
employment all originals and copies of documents of
every kind and nature received by him in the course of his
employment with the Company which are in his care, custody and
control, except only such documents as are necessary to
evidence rights and obligations after the date of termination.
(e) Termination of employment initiated by the Company for reasons other
than as set forth in Items (a), (b) or (c) above, provided
that, in each case, such termination occurred under such circumstances
that the Board of Directors determined that the officer acted at all
times in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Company and upon condition
that he execute an agreement obligating him to comply with at least
the provisions of Items (d)(ii) and (iii) above.
In the event the officer's employment terminates prior to December 31 of the
Plan Year and his termination does not fall within any of the events (including
any of the conditions applicable to such events, set forth in Items (a), (b),
(c), (d) or (e) above) then the officer does not receive any part of his
officer's allocation of incentive compensation for the Plan Year in question.
<PAGE> 1
Exhibit 13
ANNUAL REPORT
1 9 9 5
[CALIBER LOGO]
<PAGE> 2
This annual report contains forward-looking statements that are based on current
expectations and are subject to certain risks and uncertainties that could cause
actual results to differ materially from those statements, including those
factors set forth in "Management's Discussion & Analysis" on pages 19 to 22.
<PAGE> 3
CONTENTS
[Graphic 1]
2 INTRODUCTION
3 FINANCIAL HIGHLIGHTS
4 FROM THE CHAIRMAN
8 CALIBER AT A GLANCE
10 CALIBER 2000
19 MANAGEMENT'S DISCUSSION & ANALYSIS
24 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
39 COMMON STOCK AND DIVIDENDS
40 SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
42 HISTORICAL DATA
44 DIRECTORS AND OFFICERS
47 SHAREHOLDER INFORMATION
<PAGE> 4
[Graphic 2]
[CAPTION]
1995 was a dramatic year -- a time of fundamental and constructive change for
Caliber. Within six months, the company spun off Roadway Express, exited the air
freight business served by Roadway Global Air, launched the consolidation of its
regional carrier group, reorganized its headquarters staff and changed its name
from Roadway Services to Caliber System. These initiatives impose substantial
short-term costs, but will produce a new company whose continuing operations are
proven performers -- well positioned to meet the future challenges of the
marketplace.
2
<PAGE> 5
<TABLE>
<CAPTION>
Revenue
<S> <C>
1995 1994
$2,448,172 $2,327,523
Income from Continuing Operations
1995 1994
$92,409 $98,537
Loss from Discontinued Operations
1995 1994
$(119,614) $(78,977)
Net Income (Loss)
1995 1994
$(27,205) $19,560
Earnings Per Share
from Continuing Operations
1995 1994
$2.34 $2.50
Loss Per Share
from Discontinued Operations
1995 1994
$(3.03) $(2.00)
Net Income (Loss) Per Share
1995 1994
$(0.69) $0.50
Cash Dividends Paid Per Share
1995 1994
$1.40 $1.40
Purchases of Property & Equipment
1995 1994
$288,134 $226,559
Debt
1995 1994
$197,500 --
Total Shareholders' Equity
1995 1994
$736,301 $1,015,394
</TABLE>
Dollars in thousands, except per share data
[BAR CHART]
FINANCIAL HIGHLIGHTS
$1.1 $1.4 $1.8 $2.3 $2.4
1991 1992 1993 1994 1995
Revenue (in billions)
$65.1 $86.5 $91.6 $98.5 $92.4
1991 1992 1993 1994 1995
Income from Continuing Operations (in millions)
3
<PAGE> 6
FROM THE CHAIRMAN
[Graphic 3]
[CAPTION]
"At Caliber, we are doing more than merely acknowledging our business
challenges: We are attacking them full force..."
1995 was a year of great change for our company. We met a challenging and
evolving marketplace head on, effecting several historic initiatives that
completely transformed the structure and identity of Roadway Services. We enter
1996 with a new name, Caliber System, Inc., and a clear vision of the future.
Caliber conveys high quality, high worth and precision, attributes fundamental
to what must be a bold, new image for our organization as we constantly strive
to meet the needs of our customers in an industry troubled by overcapacity and
the price slashing that results from that condition.
At Caliber, we are doing more than merely acknowledging our business challenges:
We are attacking them full force -- 1995 was pivotal in that respect. It is
appropriate that we review the events of the past several months which were
essential in properly positioning our company to successfully compete for the
rest of the decade and beyond.
In August, we announced the most significant change in our history: the spin-off
of Roadway Express (REX). Marketplace contention and competition within the
Roadway Services family, along with high costs and disappointing operating
results dictated that something dramatic be done. As well, we firmly believed
that shareholder value would be enhanced with a separation of the two companies.
Complete with performance-based, incentive equity programs for all employees, as
well as a plan to significantly downsize the organization in terms of facilities
and people, REX was spun off as an independent company to operate unencumbered
in a changing marketplace.
Two months after we announced the spin-off of REX, we made another difficult
decision: to exit the air freight business served by Roadway Global Air (RGA).
This action eliminated the on-going losses incurred by RGA, freeing resources
for investment in our high-priority businesses.
4
<PAGE> 7
We discontinued operations at RGA because the company did not meet our necessary
objectives, due to changes in market dynamics since it was formed two years ago.
We failed to generate a sufficient mix of next-day business and to sell all of
our business at yields that would allow for profitability. We are vigorously
pursuing alliances now with other air carriers to make that capability available
for customers who want a single-source transportation provider.
The third major change to reshape our company was the reorganization of the
Roadway Regional Group. We have consolidated the businesses of Viking, Central
Freight Lines, Spartan Express and Coles Express into one superregional carrier
- -- the new Viking Freight, Inc.
This structure will provide several important advantages, such as accelerating
the implementation of seamless regional and transcontinental freight services,
satisfying an important element in our strategy. Furthermore, it will remove
redundant management, administration and facilities, which should dramatically
lower costs.
The creation of a new, national Viking strategically positions the company to
compete head-to-head with major participants in the freight sector. It allows us
to leverage a powerful and unified brand identity -- Viking -- in every North
American market.
While all of this was evolving at the operating companies, we reorganized
Caliber's headquarters functions to reflect and support the new organization.
The net result was a more than 50% reduction in staff at Akron. We made some
difficult but absolutely necessary decisions during this process to improve the
efficiency of our company, making us more competitive.
These initiatives have left us with a leaner, more flexible and better focused
operation, with four business units serving customers across a broad range of
transportation and logistics market segments. RPS, Viking, Caliber Logistics
(formerly ROLS) and Roberts Express are uniquely positioned as growth
organizations to provide a blended product to corporate customers. Caliber's
continuing businesses have a proven record of performance and profitability,
with total revenues increasing 147% in the past five years, and profitability by
57% during the same time period. We will build on those strengths by continuing
to invest in new technologies and ideas, increasing Caliber's advantage in the
marketplace.
Overall in 1995, the results of continuing operations were hurt by the effect of
the sluggish economy, especially as it relates to the retail sector, and the
aforementioned excess capacity and aggressive discounting in the industry.
Revenue in 1995 was $2.45 billion compared with $2.33 billion in 1994. Income
after tax from continuing operations was $92.4 million or $2.34 per share
compared with $98.5 million or $2.50 per share for the prior year. Operating
margins were 6.4%, only slightly lower than last year's 7.1%. The 1995 results
include costs totaling $.18 per share associated with the consolidation of the
company's regional carriers and the write-off of goodwill for Coles Express.
Income after tax from continuing operations for 1994 reflects a charge of $.35
per share for the settlement with the Internal Revenue Service (IRS) of an
employment tax dispute with RPS.
REX and RGA have been treated as discontinued operations for financial reporting
purposes. Caliber System's net loss then, including the discontinued operations
and related costs, was $27.2 million, or $.69 per share in 1995 compared with
net income of $19.6 million or $.50 per share in 1994.
We look forward to 1996 and the remainder of the decade driven by our Caliber
2000 strategy. Our goal is to be a single-source provider for all of our
customers' transportation, logistics and related information needs by providing
a blended service offering that crosses the traditional channels of package,
freight, logistics and expedited capabilities. At the same time, we will
strengthen current service
5
<PAGE> 8
channels for customers who prefer to work with our individual carriers for
specific services and products. The key to Caliber 2000 is flexibility and ease
of use.
Critical to our blended service offering is the proper development and
application of technology. Customers not only expect us to deliver their
shipments on time, they also expect shipment-related information managed in real
time. Our companies must be able to tell customers where their shipments are and
when they will be delivered, as well as provide information that streamlines
both administrative and operating processes. At Caliber, we have plans to
leverage technology for the customer and our company internally, truly
differentiating our service.
The small-package sector is served by RPS, which has grown to $1.3 billion in
annual revenues. 1995 was a difficult year for our largest and most profitable
operating unit, which recorded a modest 6.3% revenue growth that was severely
impacted by declining retail sales. RPS controlled costs but returned an
operating profit 2% below 1994 before the effect of the settlement with the IRS.
Net income was slightly better than a year ago. With the opening of 33 terminals
in 1996, RPS will serve 100% of the U.S. and Canada. As well, RPS will expand
its Overnight Ground(SM) product with the opening of three hub facilities,
bringing its total of regional consolidation centers to 26. We are expecting RPS
to return to double-digit revenue growth and profitability improvement in 1996.
The new Viking serves the freight sector, providing regional next- or second-day
service on a national basis and is now well positioned to expand
transcontinental services to 91% of the U.S. population through its network of
216 terminals.
The 1995 results for our Regional Group were disappointing. Revenue fell
significantly below plan with only a 3.4% increase over 1994. All of our
carriers were negatively affected by the sluggish economy and the intense
pricing environment currently being experienced in the industry.
1996 will be another year of investment at Viking. We will continue with the
PRISM project, a major reengineering and information technology initiative which
began in 1994. As well, we will incur additional costs for the reorganization of
our four regional businesses which include conversion of the entire Viking
organization to a common operating system, reidentification of equipment to
convert to the Viking name and other consolidation costs. Operating losses for
1996 are expected to range from $25 to $30 million. However, following the
consolidation, we anticipate improvements in 1997 and later years.
Caliber Logistics, our fastest-growing operation, designs, implements and
manages logistics solutions that improve our customers' competitive positions
worldwide. Caliber Logistics serves the leading companies in our target
segments, which include industrial products, automotive, high-technology, health
care and retail customers. The company's services include transportation
management, dedicated contract carriage, finished product distribution and
just-in-time manufacturing support programs.
Caliber Logistics continued to outperform expectations with 1995 revenue growth
of 46%, while more than doubling its operating profit. We expect similar results
in 1996.
Roberts Express is the largest surface expedited carrier in North America,
specializing in time-definite, door-to-door delivery of truly critical shipments
by providing speed, reliability, shipment tracking and integrity, communications
and round-the-clock service. Roberts' superior service performance is reflected
in a 96% on-time delivery of shipments within 15 minutes of promise.
In 1995, Roberts used aggressive cost controls to maintain strong profit
margins. However, due to a softer market, revenues were lower than the prior
year. With additional technology initiatives planned for 1996 and new market
opportunities in the U.S. and Europe, Roberts expects continued growth and
profitability in the new year.
6
<PAGE> 9
Our former chairman, Joseph M. Clapp, retired at the end of 1995, after his work
was done with the spin-off of Roadway Express and the assembling of the new
management teams for both organizations. Joe was a giant in our industry and an
inspirational leader in our company. His careful direction and ultimate
accomplishments allow us to implement the strategy discussed herein. Joe made an
unparalleled contribution to Roadway for 28 years for which we shall always be
grateful.
We believe the Caliber 2000 strategy positions our company for rapid growth in
the next several years. The streamlined, more responsive Caliber created in 1995
will allow us to satisfy customer requirements for blended transportation,
logistics and information services. With a differentiated product and an
improved productivity and cost structure, we are committed to enhancing
shareholder value. Caliber indeed has a proper vision, but more importantly, the
people, technology and resources to make that vision a reality. We
enthusiastically look forward to 1996 as we strive to reach our goal of
unquestioned leadership in the transportation and logistics industry.
Sincerely,
/s/ Daniel J. Sullivan
Daniel J. Sullivan
Chairman, President and Chief Executive Officer
March 1, 1996
[Graphic 4]
[CAPTION]
"Caliber indeed has a proper vision, but more importantly, the people,
technology and resources to make that vision a reality."
7
<PAGE> 10
[Graphic 5]
PACKAGE
RPS, Caliber's flagship operating unit, is the second-largest ground
small-package carrier in the U.S. Just 11 years old, RPS has grown into a
billion-dollar business through an unmatched combination of technology,
information and value-added services. One of the carrier's greatest strengths is
its ability to customize innovative small-package transportation solutions to
meet each customer's needs. RPS is the industry leader in technology, with the
most sophisticated terminal and hub network deploying state-of-the-art material
handling and automated sortation equipment. Additionally, RPS provides customers
with up-to-the-minute information on every package as a standard service,
combining laser scanning technology and on-van communications systems. In 1996,
RPS will complete its aggressive domestic expansion and achieve 100% coverage of
the U.S.
[Graphic 6]
FREIGHT
Viking Freight now extends to the rest of the U.S. the rich tradition of quality
service that the company established as a regional carrier in the West. Its
performance for on-time delivery, consistency and responsiveness to changing
customer needs is second to none. As a superregional carrier, Viking will focus
on offering the same level of speed and precision for both regional and
transcontinental shipments, using an independent workforce that is highly
adaptable and efficient. Technology adds to the equation, with computer-assisted
dispatching and wireless communications providing real-time information exchange
and automatic shipment status updates. Viking's premium services and dynamic
load planning enable it to transport more freight faster and with less equipment
- -- which means a more cost-effective service.
8
<PAGE> 11
[Graphic 7]
LOGISTICS
Caliber Logistics (formerly ROLS) has an unrivaled breadth of experience in
designing, implementing and managing a wide range of customized logistics
solutions. In a growing, dynamic market, Caliber Logistics is the only contract
logistics provider with expertise across the entire supply chain. The company is
a single-source supplier with integrated international capability -- an added
bonus for global companies whose needs for logistics services span North America
and Europe. Caliber Logistics' proven ability, superior speed of implementation
and sophisticated information technology made it Microsoft(R)'s choice to
coordinate the nationwide launch of Windows 95(R) -- a demanding, time-definite
assignment. The company's dedication to responsive service makes it a natural
choice for customers with complex logistics requirements.
[Graphic 8]
EXPEDITED
Roberts Express is the largest surface expedited carrier in North America. It is
a business without peer in a growing market, offering non-stop, door-to-door
delivery of critical shipments anywhere, anytime, guaranteed. No other carrier
offers Roberts' time-specific delivery, which ensures shipment arrival within 15
minutes of schedule -- regardless of size or special handling requirements. In
addition, no competitor can match Roberts' geographic coverage or its
round-the-clock service. Its advanced information technology includes a
satellite system that tracks shipments continuously and communicates proactively
with customers. From transporting a replacement part for an automobile assembly
line to shipping the world's largest bar of soap, Roberts Express has set the
standard for speed, reliability and ease of use.
9
<PAGE> 12
CALIBER 2000
Caliber System was created amidst sweeping changes in 1995 and officially born
in the new year, following Roadway Services' spin-off of Roadway Express and its
exit from the air freight business served by Roadway Global Air. But Caliber is
more than just a new name for Roadway Services -- it is a new vision that will
meet the requirements of customers into the next century. Caliber 2000, the
company's strategy, is a commitment to provide blended transportation, logistics
and information solutions that encompass multiple service channels:
small-package (RPS); regional and national freight (Viking); logistics (Caliber
Logistics); and expedited, critical or time-definite shipment (Roberts Express).
The initiative also calls for strengthening each operating unit for customers
who prefer to work with Caliber's individual carriers for specific services and
products. Caliber has the resources, the technology and the expertise to respond
to any and all customer needs.
SMALL-PACKAGE -- RPS
After a decade of rapid growth, RPS is now the second-largest ground
small-package carrier in the U.S. RPS serves primarily the business-to-business
market, with more than one million deliveries each day. In addition to reaching
100% of the U.S. population in 1996, RPS will continue to grow its other North
American and offshore markets, which include Canada, Mexico, Puerto Rico and --
through a joint cooperation agreement with General Parcel Logistics GmbH -- 27
European countries.
In 1995, RPS opened 25 new facilities and launched Overnight Ground, a next-day
delivery service. Targeting a multi-billion-dollar market, RPS now provides a
cost-effective alternative to express package services. RPS doubled its number
of hubs providing Overnight Ground, which is now available to approximately 20%
of the U.S. population. Continued expansion is expected to increase next-day
volume by more than 50% in 1996, with service to most of the U.S. in place by
the year 2000.
RPS is an industry leader in technology. In 1995, the carrier developed a
breakthrough product called MULTICODE(SM), targeted for implementation in the
summer of 1996. MULTICODE is a redesign of the current package identification
system and can provide more than 300 characters of customer data in a single
two-dimensional symbol -- about 25 times the amount contained in RPS's existing
linear barcode label. With a simple scan, customers can access a wealth of
information such as the shipper, package and purchase order numbers,
[GRAPHIC 9]
[CAPTION]
RPS attributes much of its success to the application and continuous upgrade of
information systems that provide customers with better, faster and more accurate
package information. With MULTICODE, its redesigned package identification
system, shippers will have the ability to include more than 300 characters of
shipment information in a single two-dimensional symbol.
10
<PAGE> 13
[Graphic 10]
[CAPTION]
"The name 'Caliber' conveys high quality, high worth and precision -- attributes
fundamental to a bold, new corporate image."
11
<PAGE> 14
[Graphic 11]
[CAPTION]
"Customers not only expect carriers to deliver shipments on time, but also
expect them to manage shipment-related information in real time."
12
<PAGE> 15
consignee address and even package contents -- without ever opening the carton.
RPS's technological innovations also include MULTISHIP(SM), a multi-carrier
automated shipment processing system. With MULTISHIP, customers can weigh, rate
and route their packages and print barcode and address labels electronically --
reducing processing costs and improving efficiency. RPS has installed several
thousand of these systems and expects to double their usage in 1996.
FREIGHT -- VIKING
The new Viking Freight is now structured to serve the "virtual region" --
transporting freight across town, across the state or across the nation,
depending on specific customer requirements. Operating a network of 216
strategically located terminals, Viking serves 91% of the U.S. population in all
50 states and Puerto Rico, as well as Canada through an agreement with Interlink
Freight Systems, Inc. With coverage and quality combined, Viking's goal is to
provide 99% on-time service, an unparalleled accomplishment achieved by the
carrier's Western Division year in and year out.
A milestone of 1995 was the decision to consolidate Caliber's four regional
carriers into Viking Freight. The reorganization will accelerate the
implementation of matchless regional and transcontinental freight services. It
also positions Viking to rapidly expand its market share.
The new Viking structure will improve customer service and reduce costs by
eliminating redundancy in management, administration and facilities. Viking will
continue to move forward with its PRISM reengineering project -- a comprehensive
program developed to optimize and standardize manual and automated processes
throughout its network. For example, in 1996 Viking will deploy a common systems
platform to link the computers in all of its operations. Other PRISM initiatives
will include developing customer-driven, state-of-the-art information systems
and improving productivity and customer responsiveness by identifying and
implementing best practices in every area of the business.
LOGISTICS -- CALIBER LOGISTICS
A recognized leader in the high-growth contract logistics industry, Caliber
Logistics has expertise across the entire supply chain, from inbound materials
management through distribution to the final consumer. Responsible for
designing, applying and managing logistics solutions, Caliber Logistics has
strong capabilities in industrial engineering, logistics modeling and network
design.
[GRAPHIC 12]
[CAPTION]
As a regional carrier in the West, Viking consistently increased market share,
regularly earned the Distribution Magazine Quality Award and was named one of
the Top 100 Companies to Work for in America. With Caliber 2000, Viking will
extend its brand to establish a unified regional and national freight network
dedicated to the highest standards of efficiency, quality and service.
13
<PAGE> 16
An important element in the company's overall value to customers is improved
information exchange. Caliber Logistics' transportation management programs use
advanced electronic data interchange to speed communications between customers
and their suppliers. Faster communication translates into more cost-effective
logistics and competitive advantage.
An example of the company's technological leadership is Caliber Logistics' Rite
Routing Systems(R) -- a unique, highly automated, centralized traffic management
service that directs customers' daily transportation needs to Caliber Logistics'
routing control center in Hudson, Ohio. Using customized Rite Routing
technology, associates can effectively manage customers' inbound or outbound
shipments -- selecting the mode and carrier that will best meet delivery
requirements at the lowest possible cost.
EXPEDITED -- ROBERTS EXPRESS
As North America's largest surface expedited carrier, Roberts Express is a
needs-based company, which customers call upon when they have emergency
shipments or those that demand special care in handling.
Roberts performs to the highest standard by delivering shipments within 15
minutes of the promised delivery time in 96% of all cases. If a shipment should
ever be delayed, Roberts communicates proactively with the customer to explain
the service interruption while providing an updated delivery time.
In addition to time-critical delivery, Roberts offers White Glove Services(R),
requiring specially equipped vehicles and highly trained teams to properly
handle such items as electronics, medical equipment, radioactive materials,
pressurized gases, trade show exhibits and works of art. Thorough security
procedures ensure safe, as well as prompt, delivery. White Glove contracts have
covered everything from experimental drugs to space shuttle engines.
Customers also have access to a strategic blend of ground and air services.
Roberts' CharterAirSM is a customized solution that contracts the aircraft best
suited to accommodate the customer's requirements for shipment size, weight and
speed. On the ground, Roberts works with a fleet of approximately 1,800 vehicles
of five different sizes -- from minivans to tractor-trailers.
[GRAPHIC 13]
[CAPTION]
At GM's Lordstown facility, Caliber Logistics' custom-designed solution has
helped increase plant capacity, improve quality and lower handling costs.
Caliber Logistics uses parts sequencing, hourly just-in-time plant deliveries
and self-invoicing to reduce on-site parts inventory and accelerate
manufacturing speed.
14
<PAGE> 17
[Graphic 14]
[CAPTION] "Information services are merely the ante to get in the game. Caliber
is committed to applying technology, making its operating units more
efficient."
15
<PAGE> 18
[Graphic 15]
The heart of Roberts' operation is high-tech communications and information
exchange. The company's Customer Link(R) system use a satellite-linked computer
in each Roberts Express vehicle for continuous, real-time, two-way contact with
drivers anywhere in the U.S. and Canada. As a result, Roberts delivers its
customers' shipments within 15 minutes of commitment 96% of the time.
16
<PAGE> 19
[Graphic 16]
[CAPTION]
"Caliber 2000 is a comprehensive and coordinated strategy to provide customers
competitive advantage and exceptional value."
17
<PAGE> 20
[Graphic 17]
[CAPTION]
"...Caliber is not just a transportation company, but an information company as
well."
The proper development and application of technology is essential to each of
Caliber's operating units and to the Caliber 2000 strategy. In that respect,
Caliber is not just a transportation company, but an information company as
well. Caliber Technology (formerly Roadway Information Technology) connects the
respective service channels and customers, ensuring that all supply chain
participants achieve an integrated flow of information. Caliber is distinguished
from the competition by its ability to leverage technology to make all service
channels more efficient, translating into better service and greater value for
the customer.
An ambitious corporate plan will realize Caliber's vision by the end of the
decade. 1996 promises less structural change than 1995, and continued progress
as the company devotes itself to implementing the Caliber 2000 strategy while
effectively employing its resources.
A first step is positioning Caliber Technology to develop integrated customer
information systems. Standardized customer service solutions and sales force
automation applications are already in progress. In addition, Caliber is also
identifying and implementing "best practices" across all operating units and
expanding its corporate marketing and sales function to firmly establish its
leadership in providing blended solutions for customers. Caliber will also
develop a centralized customer service capability to give customers the ultimate
in efficiency, responsiveness and ease of use. With Caliber, one call is all it
will take -- no matter which operating unit provides the service.
Through its four operating units, Caliber will meet the changing needs of
customers who increasingly demand a broader range of transportation, logistics
and information services from a single-source provider. The company is committed
to making the Caliber 2000 vision a reality.
18
<PAGE> 21
ANNUAL REPORT
1995
MANAGEMENT'S DISCUSSION & ANALYSIS
Caliber System, Inc.
On December 14, 1995, the shareholders of Caliber System, Inc. (formerly Roadway
Services, Inc.) approved the spin-off to the company's shareholders of
approximately 95% of the stock of its wholly-owned subsidiary, Roadway Express
(REX), the company's national long haul, less-than-truckload (LTL) motor freight
carrier. In addition, during the last quarter of 1995, the company exited the
air freight business served by Roadway Global Air (RGA), a wholly-owned
subsidiary. REX and RGA have been reflected as discontinued operations in the
accompanying financial statements for 1995 and prior years. Therefore, this
discussion and analysis refers to only the continuing businesses of the company.
RESULTS OF OPERATIONS -- 1995 VS. 1994
Consolidated revenue in 1995 amounted to a record $2.45 billion, an increase of
$120.6 million or 5.2% over 1994, when revenues were positively impacted by the
24-day strike by the Teamsters against most unionized LTL carriers. Revenue
increased in 1995 at all operating units except Roberts Express (Roberts). The
largest share of the revenue growth was attributable to RPS (formerly Roadway
Package System) which reported revenue of $1.29 billion, an increase of $77.2
million or 6.3% over 1994. This increase was a result of growth in package
volume and the effects of a rate increase implemented in early 1995. Caliber
Logistics (formerly Roadway Logistics Systems) contributed significantly to the
revenue increase due to on-going expansion of the business, reporting a 45.9%
increase in revenue over 1994. Revenues at Viking Freight (formerly the Roadway
Regional Group) amounted to $834.1 million or an increase of 3.4% over 1994.
This increase was experienced despite a decline in revenue at Central Freight
Lines (Central) of 8.6% due to the impact of intrastate deregulation in Texas.
Overall, revenue fell short of plan at Viking as a result of the slowing economy
and the aggressive discounting and overcapacity being experienced in the
industry. Roberts experienced a revenue decline of 13.2% due principally to the
sluggish economy.
Operating expenses increased $130 million or 6% over 1994. This increase
resulted primarily from higher business volumes at all business units except
Roberts, with RPS and Viking reporting operating expense increases of 5.2% and
8.6%, respectively. Operating supplies and expenses at Viking were impacted by
costs of $6.6 million associated with the consolidation of the company's
regional carriers and the write-off of $3.1 million of goodwill for Coles
Express as a result of the adoption of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." As planned, Viking also incurred
additional costs related to PRISM, a major reengineering and information
technology project that was launched in 1994. Depreciation expense during 1995
at the company's information and technology unit was $6.7 million lower than
1994 due to certain information processing equipment becoming fully depreciated
in 1994. Insurance and claims related expenses declined $9.1 million in 1995
primarily as a result of on-going claims management and safety-related programs.
Higher than normal operating expenses were incurred in 1994 which included the
effect of a settlement with the IRS as described in Note J to the consolidated
financial statements. The net after-tax cost of the settlement amounted to $13.7
million or $.35 per share in 1994. Also included in 1994 was a charge to
operating expenses of $5.8 million related to federal legislation that required
the write-off of the remaining asset values of intrastate operating rights.
19
<PAGE> 22
ANNUAL REPORT
1995
MANAGEMENT'S DISCUSSION & ANALYSIS, CONTINUED
Operating income amounted to $155.7 million for 1995 compared to $165.1 million
in 1994. Overall operating results were negatively impacted by the aggressive
discounting of freight rates and the effects of the sluggish economy. The
resulting lower-than-planned volumes and higher operating expenses negatively
impacted margins in 1995, which declined from 7.1% in 1994 to 6.4% in 1995. RPS
was negatively impacted by the economy, particularly in the retail industry,
which affected its rate of growth. Despite stringent cost controls, operating
income was 2% below 1994 before the charge for the IRS settlement mentioned
above. Viking's margins were impacted by the consolidation costs and the
write-off of goodwill, previously mentioned, along with PRISM project costs,
resulting in an operating loss for Viking in 1995 of $31.5 million compared to
an operating profit in 1994 of $9.5 million. Caliber Logistics experienced
improved margins over the prior year. Effective cost controls at Roberts allowed
it to maintain its margins despite a decline in volume.
Other income, net, includes increased interest expense of $3.8 million as a
result of borrowings under new debt agreements put into place during 1995. Also
included is interest income on intercompany advances to discontinued operations
of $8.2 million in 1995 and $3.9 million in 1994 that will not continue in
future years.
Income taxes were 43% of income before income taxes. This rate exceeded the
U.S. federal statutory rate due primarily to state income taxes and
non-deductible operating costs.
RESULTS OF OPERATIONS -- 1994 VS. 1993
Consolidated revenue in 1994 amounted to $2.33 billion, an increase of $505
million or 27.7% over 1993. Record revenues were reported at all operating
units, with business volumes positively impacted in 1994 by the 24-day work
stoppage against most unionized LTL carriers.
The largest share of the revenue growth was attributable to RPS, which reported
revenue of $1.21 billion, an increase of $200 million or 20% over 1993. Viking
reported record revenues of $807 million, an increase of 32% over 1993.
Approximately $50 million of the increase at Viking resulted from the full-year
inclusion in 1994 of Central which was acquired on April 6, 1993. Revenues at
Caliber Logistics and Roberts increased 70% and 51%, respectively, over 1993.
Operating expenses increased $491.1 million or 29.4% over 1993. This increase
resulted primarily from higher business volumes at all business units. Also, as
previously mentioned, the inclusion of the IRS settlement, the charge related to
the federal legislation which required the write-off of the remaining asset
values of intrastate operating rights and the full-year inclusion of Central
impacted 1994 results.
Operating income amounted to $165.1 million for 1994 compared to $151.2 million
in 1993. The operating margin declined to 7.1% from 8.3% in 1993 largely due to
the above-mentioned factors. Record earnings in 1994 were recorded by RPS and
Roberts, with Caliber Logistics recording its first operating profit since
commencing operations in 1989. Operating income declined in 1994 for the
regional carriers due to increased expansion losses at Spartan Express and Coles
Express and costs related to the launch of PRISM.
20
<PAGE> 23
ANNUAL REPORT
1995
MANAGEMENT'S DISCUSSION & ANALYSIS, CONTINUED
Income taxes were 42.5% of income before income taxes. This rate exceeded the
U.S. federal statutory rate due primarily to state income taxes and
non-deductible operating costs.
LIQUIDITY AND CAPITAL RESOURCES
Early in 1995, the company entered into two new debt agreements, a $300 million
Credit Agreement and a $25 million revolving line of credit. Interest on
outstanding borrowings is based on variable rates. Borrowings under these
agreements were $197.5 million at December 31,1995. Net cash provided by
operating activities of $238 million was not sufficient to fund net property
additions of $282 million and dividends of $55 million, requiring the company to
incur outside borrowings. Although net advances to discontinued operations of
$60 million, which were to fund the continuation of RGA, will no longer be a use
of funds in future years, funds provided by operations in 1996 will need to be
supplemented by additional borrowings to meet the company's planned cash
requirements. Capital expenditures are expected to approximate $370 million in
1996, which is anticipated to require an increase in debt to over $300 million
by the fall of 1996. The company anticipates that it will be able to arrange
financing that, together with cash flows from operations, will be sufficient to
fund its projected capital expenditures and provide adequate levels of working
capital and funds for payment of dividends and interest. The future amount of
cash dividends is subject to the discretion of the Caliber Board of Directors.
Future dividend decisions will be based on, and affected by, a number of
factors, including future operating results, financial requirements of the
company and other factors. The impact of inflation on operating expenses has
been moderate in recent years. Most of the company's operating expenses reflect
current costs.
CURRENT TRENDS AND OUTLOOK
All operating units will continue to strengthen their current 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. Discounting and the effects of overcapacity in the
industry are anticipated to continue throughout 1996 in many of the markets
served by the company's operations, and it is expected that industry margins
will remain under pressure. It is anticipated that net rate levels at RPS will
somewhat improve as a result of a rate increase effective February 5, 1996,
although discounting will continue.
The transportation and related logistics industry serves a dynamically changing
marketplace in response to customer demand for information and quality,
time-based services. The company's focus will be to expand to meet emerging
customer requirements, even at the expense of short-term profits. Management
expects that 1996 spending for expansion, in particular at RPS, and for
technology and systems development will be substantial. Approximately 50% of
the total planned capital expenditures for 1996 will be for technology and
automated material handling equipment. At the end of 1995, RPS operated
approximately 340 facilities and served 98% of the U.S. population. With the
opening of 33 additional facilities in 1996, RPS will serve 100% of the U.S.
During 1995, RPS continued to develop Overnight Ground, a next-day delivery
service, doubling the number of hubs providing this service. In 1996, continued
expansion is expected to increase the volume of this service offering by more
than 50%, with service to most of the U.S. population in place by the year
2000. Consistent double-digit growth rates at RPS over the past decade were not
realized in 1995 due to a soft retail market, which accounts for a sizable part
of its business. Due to expanded service offerings and aggressive cost
controls, the company expects RPS to increase revenue and operating income
during 1996.
21
<PAGE> 24
ANNUAL REPORT
1995
MANAGEMENT'S DISCUSSION & ANALYSIS, CONTINUED
The consolidation of the company's four regional carriers into one superregional
carrier will continue throughout 1996 requiring substantial expenditures for
conversion of the entire organization to a single computer operating system,
reidentification of equipment and other consolidation costs. Investments for the
PRISM project will also continue. As a result of these investments, operating
losses at Viking for 1996 are expected to range from $25 to $30 million.
However, improvements are expected in 1997 following the completion of the
consolidation.
The foregoing outlook 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; competitive factors and
pricing pressures; 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; the
actual costs and effects of the continuing consolidation of the regional
carriers; and the risks described from time to time in the company's SEC
reports.
22
<PAGE> 25
ANNUAL REPORT
1995
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS
CALIBER SYSTEM, INC.
We have audited the accompanying consolidated balance sheets of Caliber System,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
statements of consolidated income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Caliber System,
Inc. and subsidiaries at December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
/S/ ERNST & YOUNG LLP
Akron, Ohio
January 23, 1996
23
<PAGE> 26
ANNUAL REPORT
1995
CONSOLIDATED BALANCE SHEETS: ASSETS
Caliber System, Inc.
<TABLE>
<CAPTION>
December 31
Dollars in thousands 1995 1994
- --------------------------------------------------------------------------------------------------------
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 34,908 $ 14,780
Accounts receivable, net of allowance for
uncollectible accounts 273,124 259,031
Prepaid expenses and supplies 66,630 43,584
Deferred income taxes - Note C 27,562 29,142
--------------------------------------------------------------------------------------
Total Current Assets 402,224 346,537
Property and Equipment - at cost
Land 111,453 106,899
Structures 377,002 309,736
Equipment 986,479 787,092
--------------------------------------------------------------------------------------
1,474,934 1,203,727
Less allowances for depreciation 617,587 497,659
--------------------------------------------------------------------------------------
Total Property and Equipment 857,347 706,068
Other Assets
Cost in excess of net assets of businesses
acquired, net of amortization 89,761 95,720
Net non-current assets of discontinued operations - Note B -- 318,916
Other assets 39,938 42,605
--------------------------------------------------------------------------------------
Total Other Assets 129,699 457,241
--------------------------------------------------------------------------------------
Total Assets $1,389,270 $1,509,846
--------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 27
ANNUAL REPORT
1995
CONSOLIDATED BALANCE SHEETS: LIABILITIES AND SHAREHOLDERS' EQUITY
CALIBER SYSTEM, INC.
<TABLE>
<CAPTION>
December 31
Dollars in thousands 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Accounts payable - Note F $ 219,406 $ 206,129
Salaries and wages 74,790 83,637
Self-insurance accruals 49,992 46,957
Dividend payable 13,671 13,653
Short-term debt - Note E 197,500 --
Net current liabilities of discontinued operations - Note B -- 59,384
---------------------------------------------------------------------------------------
Total Current Liabilities 555,359 409,760
Long-Term Liabilities
Self-insurance accruals - Note D 39,832 38,797
Deferred income taxes - Note C 57,778 45,895
---------------------------------------------------------------------------------------
Total Long-Term Liabilities 97,610 84,692
Shareholders' Equity
Serial preferred stock - without par value:
Authorized - 40,000,000 shares
Issued - none
Common stock - without par value:
Authorized - 200,000,000 shares
Issued - 40,896,414 shares 39,898 39,898
Additional capital 51,322 51,153
Earnings reinvested in the business 696,803 978,459
---------------------------------------------------------------------------------------
788,023 1,069,510
Less cost of common stock in treasury
(1995 - 1,394,000 shares, 1994 - 1,477,000 shares) 51,722 54,116
---------------------------------------------------------------------------------------
Total Shareholders' Equity 736,301 1,015,394
---------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $1,389,270 $1,509,846
---------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
25
<PAGE> 28
ANNUAL REPORT
1995
STATEMENTS OF CONSOLIDATED INCOME
CALIBER SYSTEM, INC.
<TABLE>
<CAPTION>
Years ended December 31
Dollars in thousands, except per share data 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 2,448,172 $ 2,327,523 $ 1,822,490
Operating Expenses
Salaries, wages and benefits 937,972 876,694 677,226
Purchased transportation 694,275 700,016 527,118
Operating supplies and expenses 428,980 362,219 288,089
Operating taxes and licenses 48,282 43,818 36,624
Insurance and claims 50,552 59,644 44,685
Provision for depreciation 132,383 120,029 97,565
-----------------------------------------------------------------------------------------------
Total Operating Expenses 2,292,444 2,162,420 1,671,307
-----------------------------------------------------------------------------------------------
Operating Income 155,728 165,103 151,183
Other income, net - Note F 6,407 6,377 10,486
-----------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 162,135 171,480 161,669
Provision for income taxes - Note C 69,726 72,943 70,064
-----------------------------------------------------------------------------------------------
Income from continuing operations 92,409 98,537 91,605
Discontinued Operations - Note B
Income (loss) from discontinued operations,
net of income taxes (69,950) (78,977) 27,730
Loss on discontinuance, net of income taxes (49,664) -- --
-----------------------------------------------------------------------------------------------
Income (Loss) from Discontinued Operations (119,614) (78,977) 27,730
-----------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of
accounting changes (27,205) 19,560 119,335
Cumulative effect of accounting changes - Note A
Continuing operations -- -- (3,440)
Discontinued operations -- -- (14,691)
-----------------------------------------------------------------------------------------------
-- -- (18,131)
-----------------------------------------------------------------------------------------------
Net Income (Loss) $ (27,205) $ 19,560 $ 101,204
-----------------------------------------------------------------------------------------------
Earnings (Loss) Per Share
Income from continuing operations $ 2.34 $ 2.50 $ 2.32
Discontinued operations:
Income (loss) from discontinued operations (1.77) (2.00) 0.70
Loss on discontinuance (1.26) -- --
-----------------------------------------------------------------------------------------------
(3.03) (2.00) 0.70
Cumulative effect of accounting changes - Note A
Continuing operations -- -- (0.09)
Discontinued operations -- -- (0.37)
-----------------------------------------------------------------------------------------------
-- -- (0.46)
-----------------------------------------------------------------------------------------------
Net Income (Loss) $ (0.69) $ 0.50 $ 2.56
-----------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
26
<PAGE> 29
ANNUAL REPORT
1995
STATEMENTS OF CONSOLIDATED CASH FLOWS
Caliber System, Inc.
<TABLE>
<CAPTION>
Years ended December 31
Dollars in thousands 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
<S> <C> <C> <C>
Income from continuing operations $ 92,409 $ 98,537 $ 88,165
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Cumulative effect of accounting changes -- -- 3,440
Depreciation and amortization 138,342 122,859 100,318
(Gain) loss on sales of property and equipment (1,643) 1,452 1,086
Issuance of treasury shares for stock plans 2,563 3,303 2,564
Changes in assets and liabilities, net of effects from
business acquisition and discontinued operations:
Accounts receivable (14,093) (56,850) (43,380)
Accounts payable and accrued items 7,465 111,993 13,900
Other assets and liabilities 12,910 2,555 (13,462)
- -----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 237,953 283,849 152,631
Cash Flows from Investing Activities
Purchases of property and equipment (288,134) (226,559) (146,374)
Sales of property and equipment 6,115 2,733 4,323
Net advances to discontinued operations (60,000) (57,000) (48,000)
Business acquisition, net of cash acquired -- -- (98,349)
- -----------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (342,019) (280,826) (288,400)
Cash Flows from Financing Activities
Dividends paid (54,688) (54,613) (52,903)
Dividends received from discontinued operations 7,500 12,000 27,000
Increase in short-term debt, net 197,500 -- --
Purchases of common stock for treasury -- -- (24,231)
Repayment of borrowings of acquired
business - Note I -- -- (32,116)
- -----------------------------------------------------------------------------------------------------------------
Net Cash Provided by (used in)
Financing Activities 150,312 (42,613) (82,250)
- -----------------------------------------------------------------------------------------------------------------
Cash flows provided by (used in) continuing
operations 46,246 (39,590) (218,019)
Cash flows (used in) provided by discontinued
operations (26,118) (40,764) 32,022
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 20,128 (80,354) (185,997)
Cash and cash equivalents at beginning of year 14,780 95,134 281,131
- -----------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 34,908 $ 14,780 $ 95,134
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
27
<PAGE> 30
ANNUAL REPORT
1995
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
CALIBER SYSTEM, INC.
<TABLE>
<CAPTION>
Common Stock
Amounts in thousands Shares Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1, 1993 40,896 $ 39,898
Net income -- --
Cash dividends declared ($1.37 1/2 per share) -- --
Net shares issued in connection with stock plans -- --
Common stock purchased for treasury -- --
- ---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 40,896 39,898
Net income -- --
Cash dividends declared ($1.40 per share) -- --
Net shares issued in connection with stock plans -- --
- ---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 40,896 39,898
Net loss -- --
Cash dividends declared ($1.40 per share) -- --
Distribution of Roadway Express - Note B -- --
Net shares issued in connection with stock plans -- --
- ---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 40,896 $ 39,898
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 31
ANNUAL REPORT
1995
<TABLE>
<CAPTION>
Earnings Total
Additional Reinvested in Shareholders'
Capital the Business Treasury Stock Equity
Amounts in thousands Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $ 50,392 $ 966,061 1,163 $ (34,991) $1,021,360
Net income -- 101,204 -- -- 101,204
Cash dividends declared ($1.37 1/2 per share) -- (53,746) -- -- (53,746)
Net shares issued in connection with stock plans 54 -- (86) 2,510 2,564
Common stock purchased for treasury -- -- 450 (24,231) (24,231)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 50,446 1,013,519 1,527 (56,712) 1,047,151
Net income -- 19,560 -- -- 19,560
Cash dividends declared ($1.40 per share) -- (54,620) -- -- (54,620)
Net shares issued in connection with stock plans 707 -- (50) 2,596 3,303
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 51,153 978,459 1,477 (54,116) 1,015,394
Net loss -- (27,205) -- -- (27,205)
Cash dividends declared ($1.40 per share) -- (54,706) -- -- (54,706)
Distribution of Roadway Express - Note B -- (199,745) -- -- (199,745)
Net shares issued in connection with stock plans 169 -- (83) 2,394 2,563
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $ 51,322 $ 696,803 1,394 $ (51,722) $ 736,301
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
29
<PAGE> 32
ANNUAL REPORT
1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Caliber System, Inc.
December 31, 1995
On December 14, 1995, the shareholders of Caliber System, Inc. (formerly Roadway
Services, Inc.) approved the spin-off to the company's shareholders of Roadway
Express, Inc. (REX), the company's national long haul, LTL motor freight
carrier. In addition, on November 6, 1995, the company announced plans to exit
the air freight business served by Roadway Global Air, Inc. (RGA), the company's
worldwide air freight carrier. REX and RGA have been reflected as discontinued
operations in the accompanying financial statements. Accordingly, unless
otherwise stated, the accompanying notes for all years presented exclude these
entities.
NOTE A -- ACCOUNTING POLICIES
Operations and Principles of Consolidation
The company's operations are exclusively in the transportation industry.
Operations, listed in relative significance based on consolidated revenues,
include a small-package carrier, a superregional freight carrier, a surface
expedited carrier and a contract logistics provider. The company serves
customers in most industries, with a concentration in the retail and
manufacturing industries. The consolidated financial statements include the
accounts and operations of the company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Property and Equipment
Depreciation of property and equipment is computed by the straight line method
based on the useful lives of the assets. Interest costs for the construction of
certain long-term assets are capitalized and amortized over the useful life of
the related asset. The company capitalized interest costs of $5.4 million during
1995.
Cost in Excess of Net Assets of Businesses Acquired
These costs ($108.9 million) are being amortized on the straight line method
over a 40-year period from the respective acquisition dates of the acquired
businesses. The carrying value of cost in excess of net assets of businesses
acquired ("goodwill") is reviewed to determine if an impairment is suggested. If
this review indicates that goodwill may not be recoverable, the company's
carrying value of the goodwill would be reduced.
Self-Insurance Accruals
The company is self-insured up to certain levels for health care, workers'
compensation, property damage, public liability and cargo claims. Accruals are
estimated each year based on historical claim costs and include estimated
amounts for incurred but not reported claims. Expenses resulting from workers'
compensation and health care claims are included in salaries, wages and benefits
in the statement of consolidated income.
Revenue
The company recognizes revenue as earned on the date freight is delivered.
Income Taxes
The company uses the liability method of accounting for income taxes. Deferred
income taxes are provided for temporary differences between financial statement
and income tax reporting using tax rates scheduled to be in effect at the time
the items giving rise to the deferred taxes reverse.
30
<PAGE> 33
ANNUAL REPORT
1995
NOTE A -- ACCOUNTING POLICIES, CONTINUED
Earnings Per Share
Earnings per share is computed on the average number of shares of common stock
outstanding during each year: 39,459,000 in 1995, 39,392,000 in 1994 and
39,521,000 in 1993.
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts. Although actual results could differ from these
estimates, significant adjustments to these estimates historically have not been
required.
Changes in Accounting Principles
During 1995, the company adopted the provisions of Statement of Financial
Accounting Standards No. (SFAS) 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement
requires impairment losses to be recognized for long-lived assets used in
continuing operations when indicators of impairment are present and the assets'
carrying value is not anticipated to be recovered through future operations or
sale. The adoption of SFAS 121 resulted in a charge to 1995 income from
continuing operations of $3.1 million or $.08 per share.
Effective January 1, 1993, the company adopted the provisions of SFAS 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS
109, "Accounting for Income Taxes." The net cumulative effect of adopting SFAS
106 and SFAS 109 resulted in a one-time charge to 1993 earnings of $3.4 million
or $.09 per share.
Reclassifications
Certain amounts presented in prior years' financial statements have been
reclassified to conform with the 1995 presentation.
NOTE B -- DISCONTINUED OPERATIONS
On January 2, 1996, the company distributed to shareholders 95% of the issued
and outstanding shares of common stock of REX, its wholly-owned subsidiary. This
distribution, which is intended to be tax-free for federal income tax purposes
to the company and its shareholders, was made to holders of record of the
company's common stock at the close of business on December 29, 1995.
Shareholders received one share of REX common stock for every two shares of
company common stock held on that date. The consolidated financial statements
reflect the distribution as of December 31, 1995, which resulted in a reduction
of the company's shareholders' equity of $199.7 million, representing the book
value of the net assets distributed. Accordingly, the company's balance sheet at
December 31, 1995 does not include the net assets of REX. The company's
remaining investment in REX amounted to $10.5 million and is included in other
assets.
On November 6, 1995, the company announced plans to exit the air freight
business served by its wholly-owned subsidiary, RGA. All domestic air freight
operations of RGA ceased November 20, 1995. All international air freight
operations ceased prior to year end. The company has recorded a pre-tax charge
of $64.9 million related to the discontinuance of this business. At December 31,
1995, RGA's liabilities approximated its assets.
31
<PAGE> 34
ANNUAL REPORT
1995
NOTE B -- DISCONTINUED OPERATIONS, CONTINUED
Income (loss) from discontinued operations for 1995, 1994 and 1993 consists of
the following:
<TABLE>
<CAPTION>
Dollars in thousands REX RGA Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1995
Revenue $ 2,288,845 $ 99,425 $2,388,270
Operating expenses 2,299,615 180,557 2,480,172
---------------------------------------------------------------------------------------------------
Operating loss (10,770) (81,132) (91,902)
Other expense, net (3,103) (6,571) (9,674)
---------------------------------------------------------------------------------------------------
Loss before income taxes (13,873) (87,703) (101,576)
Income tax benefit (1,206) (30,420) (31,626)
---------------------------------------------------------------------------------------------------
Loss from Discontinued Operations $ (12,667) $ (57,283) $ (69,950)
---------------------------------------------------------------------------------------------------
Year ended December 31, 1994
Revenue $ 2,171,117 $ 73,364 $2,244,481
Operating expenses 2,200,055 157,792 2,357,847
---------------------------------------------------------------------------------------------------
Operating loss (28,938) (84,428) (113,366)
Other expense, net (1,775) (3,901) (5,676)
---------------------------------------------------------------------------------------------------
Loss before income taxes (30,713) (88,329) (119,042)
Income tax benefit (9,268) (30,797) (40,065)
---------------------------------------------------------------------------------------------------
Loss from Discontinued Operations $ (21,445) $ (57,532) $ (78,977)
---------------------------------------------------------------------------------------------------
Year ended December 31, 1993
Revenue $ 2,323,696 $ 9,754 $2,333,450
Operating expenses 2,250,883 29,339 2,280,222
---------------------------------------------------------------------------------------------------
Operating income (loss) 72,813 (19,585) 53,228
Other expense, net (104) (388) (492)
---------------------------------------------------------------------------------------------------
Income (loss) before income taxes 72,709 (19,973) 52,736
Income tax provision (benefit) 31,890 (6,884) 25,006
---------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect
of accounting changes 40,819 (13,089) 27,730
Net cumulative effect of accounting changes
(SFAS 106 and SFAS 109) (14,691) -- (14,691)
---------------------------------------------------------------------------------------------------
Income (Loss) from Discontinued Operations $ 26,128 $ (13,089) $ 13,039
---------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 35
ANNUAL REPORT
1995
NOTE B -- DISCONTINUED OPERATIONS, CONTINUED
The loss on discontinuance for 1995 consists of the following:
<TABLE>
<CAPTION>
Dollars in thousands
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Loss on Discontinuance Before Income Taxes
Shut-down costs related to the discontinuance of RGA $ 64,925
Transaction costs for the spin-off of REX 7,518
---------------------------------------------------------------------------------------------------
72,443
Income tax benefit (22,779)
---------------------------------------------------------------------------------------------------
Loss on Discontinuance $ 49,664
---------------------------------------------------------------------------------------------------
</TABLE>
Summarized balance sheet data for REX and RGA at December 31, 1994 follows:
<TABLE>
<CAPTION>
Dollars in thousands REX RGA Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current Assets
Accounts receivable, net $ 229,488 $ 14,041 $ 243,529
Other 42,186 3,376 45,562
---------------------------------------------------------------------------------------------------
Total Current Assets 271,674 17,417 289,091
Property and equipment, net 474,166 29,483 503,649
Other assets 12,764 -- 12,764
---------------------------------------------------------------------------------------------------
Total Non-current Assets 486,930 29,483 516,413
Current Liabilities
Accounts payable 118,525 13,487 132,012
Salaries and wages 133,976 2,134 136,110
Other 77,113 3,240 80,353
---------------------------------------------------------------------------------------------------
Total Current Liabilities 329,614 18,861 348,475
Long-term liabilities 193,838 3,659 197,497
---------------------------------------------------------------------------------------------------
Net Assets of Discontinued Operations $ 235,152 $ 24,380 $ 259,532
---------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 36
ANNUAL REPORT
1995
NOTE C -- INCOME TAXES
Significant components of the company's deferred tax liabilities and assets
consist of the following:
<TABLE>
<CAPTION>
Dollars in thousands 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
Deferred Tax Liabilities
<S> <C> <C>
Depreciation $ 57,465 $ 48,256
Pensions 27,107 17,981
---------------------------------------------------------------------------------------------------
Total Deferred Tax Liabilities 84,572 66,237
Deferred Tax Assets
Self-insurance accruals 37,592 33,687
Other employee benefits 12,006 10,661
Other 4,758 5,136
---------------------------------------------------------------------------------------------------
Total Deferred Tax Assets 54,356 49,484
---------------------------------------------------------------------------------------------------
Net Deferred Tax Liabilities $ 30,216 $ 16,753
---------------------------------------------------------------------------------------------------
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Dollars in thousands 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
Taxes Currently Payable
<S> <C> <C> <C>
Federal $ 55,436 $ 75,871 $ 55,883
State and local 6,424 11,360 13,309
---------------------------------------------------------------------------------------------------
61,860 87,231 69,192
Deferred Taxes (Credits)
Federal 7,059 (12,823) 997
State and local 807 (1,465) (125)
---------------------------------------------------------------------------------------------------
7,866 (14,288) 872
---------------------------------------------------------------------------------------------------
Provision for Income Taxes $ 69,726 $ 72,943 $ 70,064
---------------------------------------------------------------------------------------------------
</TABLE>
Income tax payments, including amounts for discontinued operations, totaled $41
million in 1995, $60.2 million in 1994 and $101.2 million in 1993.
The effective tax rate differs from the federal statutory rate as set forth in
the following reconciliation:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
State and local income taxes, net of federal
tax benefit 2.9 3.8 5.3
Non-deductible operating costs 2.8 1.8 1.1
Other, net 2.3 1.9 1.9
---------------------------------------------------------------------------------------------------
Effective Tax Rate 43.0% 42.5% 43.3%
---------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 37
ANNUAL REPORT
1995
NOTE D -- EMPLOYEE BENEFIT PLANS
Retirement Plans
The company has defined benefit pension plans covering certain employees. The
benefits are based on, among other things, years of service and average
compensation during employment with the company. The company's funding policy is
to contribute amounts to the plans sufficient to meet the minimum funding
requirements, plus such additional amounts the company may determine to be
appropriate.
In connection with the distribution of REX, the assets and liabilities
attributable to pensions for REX active employees will be transferred from one
of the company's pension plans to a new plan established by REX. The effect of
this transfer, which is reflected for both years in the following tables, was to
increase the company's prepaid pension cost by approximately $41.8 million in
1995. The following table reconciles the funded status of the company's pension
plans to prepaid pension cost which is reflected in other assets in the
consolidated balance sheet.
<TABLE>
<CAPTION>
Dollars in thousands 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial Present Value of Benefit Obligations
Accumulated benefit obligation, including vested benefits
of $177,369 in 1995 and $156,362 in 1994 $ 201,995 $ 174,896
---------------------------------------------------------------------------------------------------
Projected benefit obligation for service rendered to date $ 231,774 $ 216,762
Plan assets at fair value, primarily listed stocks, bonds
and U.S. government securities 305,378 249,190
---------------------------------------------------------------------------------------------------
Plan assets greater than projected benefit obligation 73,604 32,428
Unrecognized net (gain) loss (46,019) 7,939
Unrecognized prior service cost 20,102 21,912
Unrecognized net asset at transition (18,269) (19,674)
---------------------------------------------------------------------------------------------------
Prepaid Pension Cost $ 29,418 $ 42,605
---------------------------------------------------------------------------------------------------
</TABLE>
Net pension cost of company plans consists of the following:
<TABLE>
<CAPTION>
Dollars in thousands 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned during the year $ 12,685 $ 11,845 $ 9,400
Interest cost on projected benefit obligation 8,495 7,450 6,090
Actual return on plan assets (10,615) (5,517) (4,869)
Net amortization and deferral 3,367 274 679
---------------------------------------------------------------------------------------------------
Net Pension Cost $ 13,932 $ 14,052 $ 11,300
---------------------------------------------------------------------------------------------------
</TABLE>
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation were 7% and 4% in 1995 and in 1994. The expected long-term rate of
return on assets was 7.75%.
The company contributed $14.6 million in 1995, $14 million in 1994 and $13.4
million in 1993 to various employee defined contribution plans which invest
primarily in company stock. Annual contributions are related to company
profitability and employees' salaries and wages.
35
<PAGE> 38
ANNUAL REPORT
1995
NOTE D -- EMPLOYEE BENEFIT PLANS, CONTINUED
Postretirement Health Care Benefits
The company provides health care benefits to certain retirees who contribute to
the costs of these benefits. The following table sets forth the amounts
reflected in long-term self-insurance accruals in the consolidated balance
sheet:
<TABLE>
<CAPTION>
Dollars in thousands 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated Postretirement Benefit Obligation
Retirees $ (4,590) $ (4,390)
Fully eligible active plan participants (4,131) (3,942)
Other active plan participants (9,910) (9,465)
---------------------------------------------------------------------------------------------------
(18,631) (17,797)
Unrecognized net (gain) loss (1,545) (666)
---------------------------------------------------------------------------------------------------
Accrued Postretirement Benefit Cost $ (20,176) $ (18,463)
---------------------------------------------------------------------------------------------------
</TABLE>
Net periodic postretirement benefit cost consists of the following:
<TABLE>
<CAPTION>
Dollars in thousands 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits earned during the year $ 1,523 $ 1,263 $ 1,326
Interest cost on accumulated postretirement
benefit obligation 1,302 1,202 952
Net amortization and deferral (22) 10 --
---------------------------------------------------------------------------------------------------
Net Postretirement Benefit Cost $ 2,803 $ 2,475 $ 2,278
---------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1995 and 1994, the assumed health care cost trend rate was 12%
for 1996 and 1995 and is assumed to decrease gradually to 6.25% by 2006 and
remain at that level thereafter. Increasing the assumed health care cost trend
rates by one percentage point in each year would not have a material effect. The
weighted average discount rate used in determining the actuarial present value
of the accumulated postretirement benefit obligation was 7% at December 31, 1995
and 1994.
NOTE E -- DEBT
At December 31, 1995, short-term debt consisted of borrowings of $185 million
under an unsecured $300 million Credit Agreement with several banks which
expires in March 1999 and $12.5 million under an unsecured $25 million revolving
line of credit with a bank which expires in March 1996. Interest on outstanding
borrowings is based on various rates as defined in the agreements. These
agreements, which were entered into by the company during the first quarter of
1995, contain restrictions on secured borrowings and require the company to
maintain a minimum level of consolidated net worth. The weighted average
interest rate on all borrowings during 1995 was 6.44%. Due to the short-term
nature of the debt, the outstanding balance approximates fair value. Total
interest payments amounted to $8.5 million during 1995.
36
<PAGE> 39
ANNUAL REPORT
1995
NOTE F -- OTHER FINANCIAL DATA
Accounts payable consists of the following:
<TABLE>
<CAPTION>
Dollars in thousands 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trade and other payables $ 177,015 $ 146,017
Drafts outstanding 27,854 48,007
Taxes, other than income 14,537 12,105
---------------------------------------------------------------------------------------------------
Total Accounts Payable $ 219,406 $ 206,129
---------------------------------------------------------------------------------------------------
</TABLE>
Other income and (expense) consists of the following:
<TABLE>
<CAPTION>
Dollars in thousands 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 982 $ 2,357 $ 9,189
Interest income from discontinued operations 8,227 3,899 425
Interest expense (3,800) -- --
Other, net 998 121 872
---------------------------------------------------------------------------------------------------
Other Income, net $ 6,407 $ 6,377 $ 10,486
---------------------------------------------------------------------------------------------------
</TABLE>
Interest income from discontinued operations represents intercompany interest
charged to REX and RGA for borrowings directly attributable to these entities.
NOTE G -- SHAREHOLDERS' EQUITY
The Board of Directors is authorized to issue shares of serial preferred stock
in one or more series and to fix the terms and conditions of the preferred
shares, including: dividend rates and payment dates; liquidation prices;
redemption rights and prices; sinking fund requirements; conversion rights; and
restrictions on issuance. Voting rights would be on the same basis as
outstanding common shares.
NOTE H -- OPERATING LEASES
The company leases various facilities and equipment under noncancelable
operating leases requiring minimum future rentals aggregating $75.7 million
payable as follows: 1996 -- $24.5 million, 1997 -- $17.1 million, 1998 -- $10.7
million, 1999 -- $6.4 million, 2000 -- $4 million and thereafter $13 million.
Rental expense for operating leases was $46 million in 1995, $36.4 million in
1994 and $32.6 million in 1993.
37
<PAGE> 40
ANNUAL REPORT
1995
NOTE I -- ACQUISITION
On April 6, 1993, the company acquired Central Freight Lines Inc., Texas'
largest regional carrier, for cash at a total cost of $102.1 million. The
acquisition of Central was accounted for as a purchase, and the cost in excess
of net assets acquired was $16.4 million. The earnings of Central are included
in the accompanying statements of consolidated income since acquisition and are
not material in relation to consolidated operations.
NOTE J -- COMMITMENTS AND CONTINGENCIES
During 1994, the company reached agreement with the Internal Revenue Service and
the Department of Justice related to the classification of certain drivers at
the company's small-package carrier for the years 1985 through 1993 for
employment tax purposes. The net after-tax cost of the settlement amounted to
$13.7 million or $.35 per share and is included in the 1994 statement of
consolidated income.
Various legal proceedings arising from the normal conduct of business are
pending but, in the opinion of management, the ultimate disposition of these
matters will have no material effect on the financial condition of the company.
38
<PAGE> 41
ANNUAL REPORT
1995
COMMON STOCK AND DIVIDENDS
Caliber System, Inc.
Caliber System, Inc. common stock began trading on the New York Stock Exchange
under the symbol "CBB" on November 29, 1995. Previously, the company was listed
on The Nasdaq Stock Market under the trading symbol "ROAD." Caliber System is
included in the Dow Jones Transportation Average, a major barometer of the U.S.
transportation industry.
Cash dividends declared per share totaled $1.40 in 1995 and in 1994. The number
of holders of record of the company's common stock at December 31, 1995 was
approximately 7,700. The high and low prices at which Caliber System common
stock traded for each calendar quarter in 1995 and 1994 are shown below.
<TABLE>
<CAPTION>
Dividends Declared
Price Range Per Share
1995 High 1995 Low 1994 High 1994 Low 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31 $ 56 3/4 $ 47 3/4 $ 74 1/4 $ 59 1/2 $ .35 $ .35
June 30 49 1/2 42 72 62 1/2 .35 .35
September 30 56 1/2 45 1/2 64 1/2 53 3/4 .35 .35
December 31 53 1/2 42 11/16 58 46 .35 .35
- ------------------------------------------------------------------------------------------------------------------
$ 1.40 $ 1.40
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The company offers a dividend reinvestment plan through its stock transfer
agent, KeyCorp Shareholder Services, Inc. The plan provides an opportunity for
registered shareholders of the company to automatically purchase additional
shares of Caliber System common stock with dividends. Further information
regarding the plan is on the inside back cover of this report.
An information booklet which provides answers to questions regarding the
ownership and transfer of stock is also available to shareholders of the
company. Copies may be obtained by contacting the company at the address or
telephone number listed on the inside back cover of this report.
39
<PAGE> 42
ANNUAL REPORT
1995
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
Caliber System, Inc.
<TABLE>
<CAPTION>
Income from Loss from
Operating Continuing Discontinued
Dollars in thousands, except per share data Revenue Income Operations Operations
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Quarter Ended 1995 (a)
March 25 $ 543,469 $ 33,472 $ 21,530 $ (15,679)
June 17 550,779 31,739 22,357 (24,359)
September 9 552,741 33,029 22,218 (19,890)
December 31 (b) 801,183 57,488 26,304 (59,686)
----------------------------------------------------------------------------------------------------
$ 2,448,172 $ 155,728 $ 92,409 $ (119,614)
----------------------------------------------------------------------------------------------------
Quarter Ended 1994 (a,c)
March 26 $ 477,576 $ 33,479 $ 20,526 $ (4,614)
June 18 550,175 48,039 30,152 (51,878)
September 10 531,153 35,316 20,565 (8,916)
December 31 (d) 768,619 48,269 27,294 (13,569)
----------------------------------------------------------------------------------------------------
$ 2,327,523 $ 165,103 $ 98,537 $ (78,977)
----------------------------------------------------------------------------------------------------
</TABLE>
(a) Quarterly amounts have been restated to reflect the
spin-off of Roadway Express and the exit from the air
freight business served by Roadway Global Air as
described in Note B to the consolidated financial
statements.
(b) Includes costs associated with the consolidation of the
company's regional carriers and adoption of SFAS 121 as
described in Management's Discussion & Analysis.
(c) Includes effect of Teamsters strike as described in
Management's Discussion & Analysis.
(d) Includes effect of IRS settlement as described in Note J
to the consolidated financial statements.
The company uses a 13 four-week period calendar with 12 weeks
in each of the first three quarters and 16 weeks in the fourth
quarter.
40
<PAGE> 43
ANNUAL REPORT
1995
<TABLE>
<CAPTION>
Income from Loss from
Continuing Discontinued Net
Net Operations Operations Income (Loss) Average Shares
Dollars in thousands, except per share data Income (Loss) Per Share Per Share Per Share Outstanding
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Quarter Ended 1995 (a)
March 25 $ 5,851 $ 0.54 $ (0.39) $ 0.15 39,434,000
June 17 (2,002) 0.57 (0.62) (0.05) 39,467,000
September 9 2,328 0.56 (0.50) 0.06 39,470,000
December 31 (b) (33,382) 0.67 (1.52) (0.85) 39,463,000
----------------------------------------------------------------------------------------------------------------
$ (27,205) $ 2.34 $ (3.03) $ (0.69)
----------------------------------------------------------------------------------------------------------------
Quarter Ended 1994 (a,c)
March 26 $ 15,912 $ 0.52 $ (0.12) $ 0.40 39,372,000
June 18 (21,726) 0.76 (1.31) (0.55) 39,395,000
September 10 11,649 0.53 (0.23) 0.30 39,402,000
December 31 (d) 13,725 0.69 (0.34) 0.35 39,399,000
----------------------------------------------------------------------------------------------------------------
$ 19,560 $ 2.50 $ (2.00) $ 0.50
----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Quarterly amounts have been restated to reflect the
spin-off of Roadway Express and the exit from the air
freight business served by Roadway Global Air as
described in Note B to the consolidated financial
statements.
(b) Includes costs associated with the consolidation of the
company's regional carriers and adoption of SFAS 121 as
described in Management's Discussion & Analysis.
(c) Includes effect of Teamsters strike as described in
Management's Discussion & Analysis.
(d) Includes effect of IRS settlement as described in Note J
to the consolidated financial statements.
The company uses a 13 four-week period calendar with 12 weeks
in each of the first three quarters and 16 weeks in the fourth
quarter.
41
<PAGE> 44
ANNUAL REPORT
1995
HISTORICAL DATA
Caliber System, Inc.
<TABLE>
<CAPTION>
Amounts in thousands, except per share data 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 2,448,172 $ 2,327,523 $1,822,490 $1,391,898
Operating Expenses
Salaries, wages and benefits 937,972 876,694 677,226 473,711
Purchased transportation 694,275 700,016 527,118 432,634
Operating supplies and expenses 428,980 362,219 288,089 217,626
Operating taxes and licenses 48,282 43,818 36,624 23,330
Insurance and claims 50,552 59,644 44,685 31,667
Provision for depreciation 132,383 120,029 97,565 74,599
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 2,292,444 2,162,420 1,671,307 1,253,567
- ---------------------------------------------------------------------------------------------------------------------
Operating Income (Loss) 155,728 165,103 151,183 138,331
Other income, net 6,407 6,377 10,486 11,886
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes 162,135 171,480 161,669 150,217
Income tax provision (benefit) 69,726 72,943 70,064 63,722
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 92,409 98,537 91,605 86,495
Discontinued Operations (1)
Income (loss) from discontinued operations,
net of income taxes (69,950) (78,977) 27,730 60,912
Loss on discontinuance, net of income taxes (49,664) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Income (Loss) from Discontinued Operations (119,614) (78,977) 27,730 60,912
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of
accounting changes (27,205) 19,560 119,335 147,407
Cumulative effect of accounting changes (2)
Continuing operations -- -- (3,440) --
Discontinued operations -- -- (14,691) --
- ---------------------------------------------------------------------------------------------------------------------
-- -- (18,131) --
- ---------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ (27,205) $ 19,560 $ 101,204 $ 147,407
- ---------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share (3)
Income (loss) from continuing operations $ 2.34 $ 2.50 $ 2.32 $ 2.19
Discontinued operations:
Income (loss) from discontinued operations (1.77) (2.00) 0.70 1.54
Loss on discontinuance (1.26) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
(3.03) (2.00) 0.70 1.54
Cumulative effect of accounting changes
Continuing operations -- -- (0.09) --
Discontinued operations -- -- (0.37) --
- ---------------------------------------------------------------------------------------------------------------------
-- -- (0.46) --
- ---------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ (0.69) $ 0.50 $ 2.56 $ 3.73
- ---------------------------------------------------------------------------------------------------------------------
Cash dividends declared per share $ 1.40 $ 1.40 $ 1.37 1/2 $ 1.27 1/2
Average number of shares of common stock
outstanding 39,459 39,392 39,521 39,521
Total Shareholders' Equity $ 736,301 $ 1,015,394 $1,047,151 $1,021,360
Total Assets $ 1,389,270 $ 1,509,846 $1,466,509 $1,350,072
</TABLE>
(1) Includes Roadway Express and Roadway Global Air as described in Note B to
the consolidated financial statements.
(2) Changes in methods of accounting for income taxes and retiree medical
benefits in 1993.
(3) Earnings per share are computed on the average number of shares of common
stock outstanding during each year.
42
<PAGE> 45
ANNUAL REPORT
1995
HISTORICAL DATA, CONTINUED
Caliber Systems, Inc.
<TABLE>
<CAPTION>
Amounts in thousands, except per share data 1991 1990 1989 1988 1987
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ 1,114,179 $ 989,609 $ 818,803 $ 482,135 $ 310,965
Operating Expenses
Salaries, wages and benefits 387,247 342,724 294,628 147,295 85,631
Purchased transportation 357,818 314,659 258,163 207,766 150,309
Operating supplies and expenses 164,727 151,136 131,883 83,330 64,548
Operating taxes and licenses 18,925 15,808 14,353 6,830 4,470
Insurance and claims 24,667 26,545 23,672 18,591 11,319
Provision for depreciation 57,712 47,132 37,720 21,095 15,694
- ---------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 1,011,096 898,004 760,419 484,907 331,971
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss) 103,083 91,605 58,384 (2,772) (21,006)
Other income, net 7,793 5,520 5,253 10,207 9,285
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes 110,876 97,125 63,637 7,435 (11,721)
Income tax provision (benefit) 45,761 38,452 24,225 2,806 (5,262)
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 65,115 58,673 39,412 4,629 (6,459)
Discontinued Operations (1)
Income (loss) from discontinued operations,
net of income taxes 62,208 60,407 56,109 75,610 56,967
Loss on discontinuance, net of income taxes -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Discontinued Operations 62,208 60,407 56,109 75,610 56,967
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of
accounting changes 127,323 119,080 95,521 80,239 50,508
Cumulative effect of accounting changes (2)
Continuing operations -- -- -- -- --
Discontinued operations -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 127,323 $ 119,080 $ 95,521 $ 80,239 $ 50,508
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share (3)
Income (loss) from continuing operations $ 1.67 $ 1.50 $ 1.01 $ 0.12 $ (0.16)
Discontinued operations:
Income (loss) from discontinued operations 1.60 1.55 1.43 1.88 1.42
Loss on discontinuance -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
1.60 1.55 1.43 1.88 1.42
Cumulative effect of accounting changes
Continuing operations -- -- -- -- --
Discontinued operations -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 3.27 $ 3.05 $ 2.44 $ 2.00 $ 1.26
- --------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared per share $ 1.17 1/2 $ 1.10 $ 1.10 $ 1.10 $ 1.10
Average number of shares of common stock
outstanding 38,906 39,023 39,154 40,120 40,217
Total Shareholders' Equity $ 890,256 $ 777,795 $ 718,292 $ 670,389 $ 661,661
Total Assets $ 1,200,434 $ 1,006,019 $ 908,065 $ 828,107 $ 600,302
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL DATA, CONTINUED
Caliber Systems, Inc.
Amounts in thousands, except per share data 1986 1985
- ----------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 213,854 $ 147,922
Operating Expenses
Salaries, wages and benefits 63,165 45,287
Purchased transportation 108,526 84,315
Operating supplies and expenses 47,004 23,551
Operating taxes and licenses 4,158 5,258
Insurance and claims 9,474 4,655
Provision for depreciation 12,124 8,169
- ----------------------------------------------------------------------------------
Total Operating Expenses 244,451 171,235
- ----------------------------------------------------------------------------------
Operating Income (Loss) (30,597) (23,313)
Other income, net 10,477 4,878
- -----------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes (20,120) (18,435)
Income tax provision (benefit) (10,736) (10,305)
- ----------------------------------------------------------------------------------
Income (loss) from continuing operations (9,384) (8,130)
Discontinued Operations (1)
Income (loss) from discontinued operations,
net of income taxes 85,850 84,041
Loss on discontinuance, net of income taxes -- --
- ----------------------------------------------------------------------------------
Income (Loss) from Discontinued Operations 85,850 84,041
- ----------------------------------------------------------------------------------
Income (loss) before cumulative effect of
accounting changes 76,466 75,911
Cumulative effect of accounting changes (2)
Continuing operations -- --
Discontinued operations -- --
- ----------------------------------------------------------------------------------
-- --
- ----------------------------------------------------------------------------------
Net Income (Loss) $ 76,466 $ 75,911
- ----------------------------------------------------------------------------------
Earnings (Loss) Per Share (3)
Income (Loss) from continuing operations $ (0.23) $ (0.20)
Discontinued operations:
Income (loss) from discontinued operations 2.14 2.10
Loss on discontinuance -- --
- ----------------------------------------------------------------------------------
2.14 2.10
Cumulative effect of accounting changes
Continuing operations -- --
Discontinued operations -- --
- ----------------------------------------------------------------------------------
-- --
- ----------------------------------------------------------------------------------
Net Income (Loss) $ 1.91 $ 1.90
- ----------------------------------------------------------------------------------
Cash dividends declared per share $ 1.10 $ 1.02 1/2
Average number of shares of common stock
outstanding 40,114 39,931
Total Shareholders' Equity $ 654,235 $ 613,836
Total Assets $ 590,028 $ 586,494
</TABLE>
Start-ups and Acquisitions
March 1985 RPS operations commenced
August 1988 Viking Freight acquired
September 1989 Caliber Logistics operations commenced
June 1992 Coles Express acquired
April 1993 Central Freight Lines acquired
43
<PAGE> 46
ANNUAL REPORT
1995
DIRECTORS & OFFICERS
Caliber System, Inc.
Board of Directors
George B. Beitzel 1,3,4,5
Retired Senior Vice President and Director
International Business Machines Corporation
Armonk, New York
R. A. Chenoweth 1,3
Principal
Buckingham, Doolittle & Burroughs
A Legal Professional Association
Akron, Ohio
Norman C. Harbert 2,5
Chairman and CEO
The Hawk Group
Cleveland, Ohio
Harry L. Kavetas 1,4
Executive Vice President and CFO
Eastman Kodak Company
Rochester, New York
Charles R. Longsworth 1,2,4
Chairman Emeritus
The Colonial Williamsburg Foundation
Williamsburg, Virginia
G. James Roush 2,3,4
Private Investor
Seattle, Washington
Daniel J. Sullivan 4,5
Chairman, President and CEO
of the company
H. Mitchell Watson, Jr. 1,2,5
President
Sigma Group of America
Westport, Connecticut
Officers
Donald C. Brown
Vice President -- Human Resources
John P. Chandler
Vice President and Treasurer
Kathryn W. Dindo
Vice President and Controller
Douglas G. Duncan
Vice President -- Corporate Marketing
David B. Edmonds
Vice President -- Corporate Sales
Jonathan T. Pavloff
Vice President -- Corporate Planning
Daniel J. Sullivan
Chairman, President and CEO
Douglas A. Wilson
Senior Vice President -- Finance and Planning,
Secretary and CFO
1 Audit Committee -- Chairman, R. A. Chenoweth
2 Compensation Committee -- Chairman, Charles R. Longsworth
3 Director Affairs Committee -- Chairman, G. James Roush
4 Executive and Finance Committee -- Chairman, George B. Beitzel
5 Planning Committee -- Chairman, Daniel J. Sullivan
44
<PAGE> 47
ANNUAL REPORT
1995
OFFICERS, CONTINUED
Operating Companies
RPS
Gordon N. Bloom
Vice President -- Information Technology
Paul S. Callahan
Vice President - Central Division
Mary K. Coulter
Vice President -- Customer Service
Eric W. Damon
Vice President -- Finance and Administration
Edward S. DiSalvo
Vice President -- Sales
David L. Gerschultz
Vice President -- Southern Division
Stephen W. Handy
Vice President -- Operations Planning and Engineering
Ivan T. Hofmann
President
Leland E. Holly III
Vice President -- Human Resources
Bram B. Johnson
Vice President -- Marketing
Ronald E. Joseph
Vice President -- Transportation, Safety and Maintenance
J. Allan Tepper
Vice President -- Western Division
Thomas R. Warren
Vice President -- Operations
Robert T. Young
Vice President -- Eastern Division
Viking Freight
Randolph C. Bangham
Chairman
Thomas G. Connard
Vice President -- Midwest/Southern Division, Operations
James A. D'Alessio
Vice President -- Northeastern Division, Sales
Robert T. Drake
Vice President -- Northeastern Division, Operations
Peter J. Foley
Vice President -- Sales
J. Bruce Gebhardt
Vice President -- Marketing
Tilton Gore
Vice President -- Western Division, Operations
Joseph E. Hall
Vice President -- Southwestern Division, Operations
David H. Hess, Jr.
Senior Vice President -- Sales and Marketing
John B. Keen
Senior Vice President -- Finance and CFO
Peter G. Kennon
Vice President -- Line Operations
William J. Mahan
Executive Vice President -- Operations
Michael T. Marcum
Vice President -- Corporate Account Sales
Raul Martinez
Vice President -- Maintenance
45
<PAGE> 48
ANNUAL REPORT
1995
OFFICERS, CONTINUED
Operating Companies
Viking Freight, continued
Jim D. Matt
Vice President -- Midwest/Southern Division, Sales
Thomas K. Morehouse
Vice President -- Southwestern Division, Sales
Ronald G. Pelzel
President
Richard L. Scott
Vice President -- Information Systems
Philip W. Smith
Vice President -- Corporate Planning
Terry L. Stambaugh
Senior Vice President -- Human Resources
Caliber Logistics
Wayne S. Chapman
Vice President -- Logistics Operations
Thomas I. Escott
Vice President -- Sales and Marketing
Bill F. Jones
Vice President -- Transportation and Business Development
David J. Krause
Vice President -- Finance and Administration
Rodger G. Marticke
President
Sheila P. Martin
Vice President -- Information Technology
Anthony R. Richmond
President -- MediQuik Express, Inc.
Roberts Express
Joel N. Childs
Vice President -- Marketing
John P. Palma
Vice President -- Sales
John G. Pickard
Vice President -- Service
Robert J. Reitz
Vice President -- Finance and Treasurer
R. Bruce Simpson
President
James F. Snider II
Vice President and General Manager
White Glove Services Division
Caliber Technology
Gerald A. Long
President
46
<PAGE> 49
ANNUAL REPORT
1995
SHAREHOLDER INFORMATION
Caliber System, Inc. is a value-added service provider of a broad range of
transportation, logistics and related information services.
Corporate Headquarters
3560 West Market Street
P.O. Box 5459
Akron, Ohio 44334-0459
(330) 665-5646
Caliber System's operating units are:
Caliber Logistics, Inc., a contract logistics provider, designs, implements and
manages a wide scope of customized logistics solutions for businesses in North
America and Europe.
5455 Darrow Road
Hudson, Ohio 44236
(216) 342-3000
RPS, Inc., Caliber's largest operating company, is a business-to-business,
small-package carrier, providing service to 98% of the U.S. as well as Mexico
and Puerto Rico. It also serves 100% of Canada through its subsidiary, RPS,
Ltd., and 27 European countries through a joint cooperation agreement with
General Parcel Logistics GmbH. RPS presently has a terminal network of 340
facilities.
1000 RPS Drive
Moon Township, Pennsylvania 15108
(412) 269-1000
Roberts Express, Inc., North America's largest surface expedited carrier,
provides time-specific, non-stop delivery of critical shipments throughout the
U.S and Canada.
2088 South Arlington Road
P.O. Box 7162
Akron, Ohio 44306
(330) 773-3381
Viking Freight, Inc., a superregional freight carrier, provides regional and
transcontinental service to 91% of the U.S. as well as Canada and Mexico through
a network of 216 facilities.
411 East Plumeria Drive
San Jose, California 95134
(408) 922-7200
Caliber Technology, Inc. provides computer-based solutions for customers as well
as integrated information systems for each of Caliber's operating units.
1077 Gorge Boulevard
Akron, Ohio 44310
(330) 384-8184
Annual Meeting
The annual meeting of shareholders of Caliber System, Inc. will be held on
Wednesday, May 8, 1996 at 9 a.m. Eastern Daylight Time at the Akron West Hilton,
3180 West Market Street, Akron, Ohio. Formal notice and proxy statement, with
proxy, will be mailed on or about April 8, 1996, to each shareholder of record
on March 22, 1996. Shareholders are requested to execute and return proxies.
Transfer Agent and Registrar
KeyCorp Shareholder Services, Inc.
P.O. Box 6477
Cleveland, Ohio 44101-1477
(216) 813-5745 or (800) 542-7792
Dividend Reinvestment Plan
Registered shareholders of Caliber System, Inc. are eligible to participate in a
dividend reinvestment plan through KeyCorp Shareholder Services, Inc., the
company's stock transfer agent. For information regarding the plan, contact the
company's transfer agent.
Annual report design by The Carson Group, Inc.
Photography by Studio Martone
<PAGE> 50
APPENDIX TO EHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
Graphic No. Document Page
- ----------- -------------
1 Photograph of road
2 Photograph of vehicles from the four service
channels 2
3 Photograph of the Chairman of the Board of
Directors 4
4 Photograph of individuals reviewing work
materials 7
5 Photograph of individual delivering packages 8
6 Photograph of Viking truck 8
7 Photograph of vehicle parts in a rack 9
8 Photograph of driver with computer inside
truck 9
9 Photograph of slanted windows 10
10 Photograph of RPS package van 11
11 Photograph of Viking truck in front of the
St. Louis Gateway Arch 12
12 Photograph of capitol building in St. Louis 13
13 Photograph of sidewalk with design of world 14
14 Photograph of individuals on sidewalk with
design of world 15
15 Photograph of a mountain 16
16 Photograph of Roberts vehicle on road 17
17 Photograph of a road 18
<PAGE> 51
Caliber System, Inc.
3560 West Market Street
P.O. Box 5459
Akron, Ohio 44334-0459
<PAGE> 52
APPENDIX TO EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
<TABLE>
<CAPTION>
Graphic No. Document Page
---------- -------------
<S> <C> <C>
1 Photograph of road
2 Pbotograph of vehicles from the four service channels 2
3 Photograph of the Chairman of the Board of Directors 4
4 Photograph of individuals reviewing work materials 7
5 Photograph of individual delivering parkages 8
6 Photograph of Viking truck 8
7 Photograph of vehicle parts in a rack 9
8 Photograph of driver with computer inside truck 9
9 Photograph of slanted windows 10
10 Photograph of RPS package van 11
11 Photograph of Viking truck in front of the St. Louis Gateway Arch 12
12 Photograph of capitol building in St. Louis 13
13 Photograph of sidewalk with design of would 14
14 Photograph of individuals on sidewalk with design of world 15
15 Photograph of a mountain 16
16 Photograph of Roberts vehicle on road 17
17 Photograph of a road 18
</TABLE>
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
------------------------------
<TABLE>
<CAPTION>
State or Jurisdiction
Subsidiary of Incorporation
---------- ----------------------
<S> <C>
RPS, Inc. Delaware
RPS, Ltd. Canada
Roadway Package System S.A. de C.V. Mexico
Roadway Telemarketing, Inc. Delaware
Services Development Corporation Delaware
Circle Investment Co. Delaware
Caliber Customer Support, Inc. Delaware
Viking Freight, Inc. California
Spartan Express, Inc. South Carolina
(d/b/a Viking Freight -- Midwest/Southern Division)
Coles Express, Inc. Delaware
(d/b/a Viking Freight -- Northeastern Division)
Central Freight Lines, Inc. Texas
(d/b/a Viking Freight -- Southwestern Division)
Caliber Logistics, Inc. Ohio
Caliber Dedicated Transportation, Inc. Delaware
MediQuik Express, Inc. Ohio
Pivot Systems, Inc. Delaware
ROLS Marketing Services, Inc. Delaware
Warehouse Services, Inc. Delaware
Caliber Logistics (Canada), Inc. Ontario
Caliber Intermodal, Inc. Delaware
Roberts Transportation Services, Inc. Ohio
Roberts Express, Inc. Ohio
Roberts Express, B.V. Netherlands
Roberts Express SARL France
Roberts Express GmbH Germany
North Coast Express, Inc. Ohio
Roberts Air Freight, Inc. Ohio
AutoQuik, Inc. Delaware
Third Party Services, Inc. Delaware
Caliber Technology, Inc. Ohio
Roadway Tire Company Ohio
Triangle Investment Co. Delaware
Transport Financial Corporation Delaware
Roadway Services (Canada), (1991) Ltd. Canada
The Roadway Company (Europe), Inc. Delaware
Transportation Research, Inc. Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Caliber System, Inc. of our report dated January 23, 1996, included in the
1995 Annual Report to Shareholders of Caliber System, Inc.
Our audits also included the financial statement schedule of Caliber System,
Inc. listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference of our report dated January
23, 1996, with respect to the consolidated financial statements incorporated
herein by reference and our report included in the preceding paragraph, with
respect to the financial statement schedule included in this Annual Report
(Form 10-K) of Caliber System, Inc., in the following Registration Statements
and related Prospectuses:
<TABLE>
<CAPTION>
REGISTRATION
NUMBER DESCRIPTION OF REGISTRATION STATEMENT FILING DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
33-44502 Restricted Book Value Shares Plan for December 12, 1991
Roadway Services, Inc. and Certain Operating
Companies - Form S-8
33-44757 Roadway Services, Inc. Nonemployee December 31, 1991
Directors' Stock Plan - Form S-8
33-52605 Roadway Services, Inc. Stock Savings and March 10, 1994
Retirement Income Plan and Trust - Form S-8
34-65449 Viking Financial Security Plan - Form S-8 December 28, 1995
34-65499 The Merrill Lynch, Pierce, Fenner & Smith December 29, 1995
Incorporated Special Prototype Profit Sharing
Plan and Trust for Independent Contractors -
Form S-3
</TABLE>
ERNST & YOUNG LLP
Akron, Ohio
March 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 34,908
<SECURITIES> 0
<RECEIVABLES> 273,124
<ALLOWANCES> 12,586
<INVENTORY> 0
<CURRENT-ASSETS> 402,224
<PP&E> 1,474,934
<DEPRECIATION> 617,587
<TOTAL-ASSETS> 1,389,270
<CURRENT-LIABILITIES> 555,359
<BONDS> 0
<COMMON> 39,898
0
0
<OTHER-SE> 696,403
<TOTAL-LIABILITY-AND-EQUITY> 1,389,270
<SALES> 0
<TOTAL-REVENUES> 2,448,172
<CGS> 0
<TOTAL-COSTS> 2,292,444
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 162,135
<INCOME-TAX> 69,726
<INCOME-CONTINUING> 92,409
<DISCONTINUED> (119,614)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,205)
<EPS-PRIMARY> (.69)
<EPS-DILUTED> (.69)
</TABLE>
