<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the Period ended September 13, 1997.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from ______ to ______.
Commission file number 0-600
ROADWAY EXPRESS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-0492670
- ------------------------------------------------ ------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No)
1077 Gorge Boulevard Akron, OH 44310
- --------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (330) 384-1717
---------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No .
--- ---
The number of shares of common stock ($.01 par value) outstanding as of October
11, 1997 was 20,542,171.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
September 13, 1997 December 31, 1996
----------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 45,638 $ 36,243
Accounts receivable, net 308,347 260,789
Other current assets 21,462 16,847
----------------------------------------------------------------------
Total current assets 375,447 313,879
Carrier operating property at cost 1,376,642 1,392,048
Allowance for depreciation 1,013,956 1,013,954
----------------------------------------------------------------------
Net carrier operating property 362,686 378,094
Deferred income taxes 14,665 17,651
----------------------------------------------------------------------
Total assets $ 752,798 $ 709,624
======================================================================
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 163,759 $ 135,248
Salaries and wages payable 112,142 110,124
Other current liabilities 56,391 52,545
----------------------------------------------------------------------
Total current liabilities 332,292 297,917
Long-term liabilities
Casualty claims payable 60,550 66,674
Future equipment repairs 21,249 24,281
Accrued pension and retiree medical 96,963 96,156
----------------------------------------------------------------------
Total long-term liabilities 178,762 187,111
Shareholders' equity
Common Stock - $.01 par value
Authorized - 100,000,000 shares
Issued - 20,556,714 shares 206 206
Other shareholders' equity 241,538 224,390
----------------------------------------------------------------------
Total shareholders' equity 241,744 224,596
----------------------------------------------------------------------
Total liabilities and equity $ 752,798 $ 709,624
======================================================================
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
1
<PAGE> 3
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Twelve Weeks Ended
(Third Quarter)
September 13, 1997 September 7, 1996
----------------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C>
Revenue $ 642,195 $ 540,942
Operating expenses:
Salaries, wages and benefits 406,420 355,154
Operating supplies and expenses 107,125 89,491
Purchased transportation 68,144 44,893
Operating taxes and licenses 18,081 17,614
Insurance and claims expense 13,340 10,517
Provision for depreciation 10,847 14,213
Net (gain) on disposal of operating property (780) (935)
----------------------------------------------------
Total operating expenses 623,177 530,947
----------------------------------------------------
Operating income 19,018 9,995
Other income (expense), net (209) (364)
----------------------------------------------------
Income before income taxes 18,809 9,631
Provision for income taxes 8,403 5,051
----------------------------------------------------
Net income $ 10,406 $ 4,580
====================================================
Net income per share $ 0.50 $ 0.22
Average shares outstanding 20,548 20,541
<CAPTION>
Thirty-six Weeks Ended
(Three Quarters)
September 13, 1997 September 7, 1996
----------------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C>
Revenue $ 1,842,244 $ 1,590,654
Operating expenses:
Salaries, wages and benefits 1,176,128 1,052,349
Operating supplies and expenses 314,331 266,643
Purchased transportation 177,121 124,788
Operating taxes and licenses 54,474 53,300
Insurance and claims expense 44,202 30,523
Provision for depreciation 35,282 45,047
Net (gain) on disposal of operating property (2,671) (4,256)
----------------------------------------------------
Total operating expenses 1,798,867 1,568,394
----------------------------------------------------
Operating income 43,377 22,260
Other income (expense), net (361) (874)
----------------------------------------------------
Income before income taxes 43,016 21,386
Provision for income taxes 19,321 10,130
----------------------------------------------------
Net income $ 23,695 $ 11,256
====================================================
Net income per share $ 1.15 $ 0.55
Average shares outstanding 20,544 20,527
See notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE> 4
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Thirty-six Weeks Ended
(Three Quarters)
September 13, 1997 September 7, 1996
----------------------------------------------------
(dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 23,695 $ 11,256
Depreciation and amortization 35,220 45,084
Other operating adjustments (20,518) (46,181)
----------------------------------------------------
Net cash provided by operating activities 38,397 10,159
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property (22,576) (20,102)
Sales of carrier operating property 11,651 10,068
Business acquisition (15,000) -
----------------------------------------------------
Net cash used by investing activities (25,925) (10,034)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (3,077) (2,053)
----------------------------------------------------
Net cash used by financing activities (3,077) (2,053)
Net increase (decrease) in cash and cash equivalents 9,395 (1,928)
Cash and cash equivalents at beginning of period 36,243 23,341
----------------------------------------------------
Cash and cash equivalents at end of period $ 45,638 $ 21,413
====================================================
See notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE> 5
Roadway Express, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note A--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the thirty-six
weeks ending September 13, 1997 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the registrant's annual report on Form 10-K for the year
ended December 31, 1996.
Note B--Accounting Period
The registrant operates on 13 four-week accounting periods with 12 weeks in
each of the first three quarters and 16 weeks in the fourth quarter.
Note C--Provision for Income Taxes
Taxes provided exceed the U.S. statutory rate primarily due to non-deductible
operating costs, and foreign and state taxes.
<TABLE>
<CAPTION>
Twelve Weeks Ended Thirty-six Weeks Ended
(Third Quarter) (Three Quarters)
September 13, 1997 September 7, 1996 September 13, 1997 September 7, 1996
--------------------------------------------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C> <C>
U.S. Federal $ 5,875 $ 3,637 $14,004 $ 5,538
U.S. State 1,258 585 2,547 1,232
Foreign 1,270 829 2,770 3,360
--------------------------------------------------------------------------------------
Total $ 8,403 $ 5,051 $19,321 $10,130
======================================================================================
</TABLE>
Note D-Impact of Recently Issued Accounting Standards
The Company will adopt the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share", as of December 31, 1997. The
adoption of SFAS 128 is expected to have no impact on the Company's calculation
of earnings per share.
Note E-Acquisition of Reimer Express Lines, Ltd.
On April 30, 1997, the Company acquired all of the outstanding shares of Reimer
Express Lines, Ltd., a privately held common carrier in Winnipeg, Manitoba,
Canada for $15 million in cash. The purchase agreement also contains provisions
for additional payments of up to $10 million, subject to Reimer achieving
defined performance criteria over a five year period. Reimer provides truckload
and LTL service throughout Canada, and international service to and from
Canada.
4
<PAGE> 6
Note E-Acquisition of Reimer Express Lines, Ltd. (continued)
The acquisition was funded with existing cash, and was recorded under the
purchase method of accounting. The results of Reimer's operations subsequent to
the date of acquisition are included in the Company's consolidated financial
statements. The excess of the purchase price over the net assets acquired has
been recorded as goodwill, which will be amortized on a straight-line basis
over 20 years.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company had net income of $10,406,000 or $0.50 per share, for the third
quarter ended September 13, 1997, compared to income of $4,580,000, or $0.22
per share, in the same quarter last year. This improvement in earnings is
primarily the result of revenue growth, stable prices, and cost controls
relating to our ongoing network improvements. Revenues were $642,195,000 for
the third quarter of 1997, an 18.7% improvement over third quarter 1996 revenue
of $540,942,000.
Total tonnage was up 11.8% in the third quarter compared to the prior year
quarter. The addition of Reimer accounted for 44% of this increase.
Less-than-truckload (LTL) tons were up 11.1% and truckload tonnage was up
14.9%. Net revenue per ton has increased 6.2% above the third quarter 1996.
This increase reflects the impact of the January 1 price increase and the
variable fuel surcharge which was instituted at the end of the third quarter,
1996, as well as a temporary influx of small-package freight during the UPS
work stoppage. During the third quarter of 1997, shipments were up 21.0% over
the prior year quarter. Small-package freight accounted for nearly half of this
growth in shipments, increased revenues by 3.0%, and adversely impacted
operating costs per ton.
Operating expenses per ton (excluding gain on sale of operating property) were
up 5.0% compared to third quarter 1996. Salaries and wages per ton increased by
2.4% due to the additional small shipments and the 3.8% wage and benefit
increase on April 1, 1997, under the terms of the Teamster contract, as well as
by an increase in workers' compensation expenses. Operating supplies and
expenses were up 19.7% due largely to additional equipment lease expense
brought on by the increased volume of freight and the operating lease agreement
discussed below. Purchased transportation and insurance costs increased faster
than business levels this quarter. Purchased transportation costs increased
51.8%, reflecting the Company's increasing use of railroads in certain linehaul
operations, the increased use of commission agents for pickup and delivery
service, and Reimer's use of union owner-operators for linehaul service.
Insurance and claims expense increased $2.8 million over third quarter 1996,
primarily due to an intensive review to settle existing claims in 1996, which
resulted in non-recurring cost reductions related to liability insurance.
Depreciation expense continues to decline as more revenue equipment becomes
fully depreciated and as we reduce the number of terminal facilities. The
Company's system count has been reduced to 409 terminals, compared to 436
terminals at the end of the third quarter 1996.
The tax expense for the first three quarters of 1997 and 1996 differs from the
Federal statutory rate due to the impact of state taxes, taxes on profitable
foreign operations, and non-deductible operating expenses as described in Note
C to the Condensed Consolidated Financial Statements.
At the end of the quarter, there were no borrowings against the credit
facilities; cash flow from operations has been sufficient to meet working
capital needs. As previously reported, the Company entered into a second
operating lease agreement to replace an additional 3,250 linehaul trailers
during 1997 (11% of the fleet). Under these agreements, we have now replaced
approximately 5,700 aging trailers with new leased units.
5
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The National Master Freight Agreement, our Contract with the International
Brotherhood of Teamsters, expires on March 31, 1998. There was an announcement
on September 16, 1997 that the Teamsters and Trucking Management, Inc., the
multi-employer bargaining agent for our industry, began meeting as the Joint
Industry Development Committee. Through the Committee, the Teamsters and
Trucking Management Inc. will make joint recommendations to assist the
negotiators of the Contract. Formal Contract talks are expected to begin later
this year.
The portions of narrative set forth in this discussion that are not historical
in nature are forward-looking statements. The Company's actual future
performance and operating and financial results may differ from those described
in the forward-looking statements as a result of a variety of factors that,
besides those mentioned, include the condition of the industry and the economy
and the success of the Company's operating plans.
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On October 8, 1997, the Board of Directors announced a cash dividend of $0.05
per share on the Company's common stock payable on December 1, 1997, to
shareholders of record on November 14, 1997.
The annual meeting of shareholders of Roadway Express, Inc. will be held on
Wednesday, March 25, 1998, at 9:00 a.m. Eastern Standard Time at the Sheraton
Suites Hotel, 1989 Front St., Cuyahoga Falls, Ohio. Formal notice and proxy
statement, with proxy, and the Annual Report To Shareholders will be mailed on
or about February 20, 1998, to each shareholder of record as of February 10,
1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No.
- -----------
27 Financial Data Schedule.
List of the Current Reports on Form 8-K which were filed during the current
quarter--none.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ROADWAY EXPRESS, INC.
Date: October 24, 1997 By: /s/ J. Dawson Cunningham
---------------- --------------------------------------------
J. Dawson Cunningham, Vice President-Finance
and Administration, and Treasurer (Principal
Financial and Accounting Officer)
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXRACTED FROM ROADWAY
EXPRESS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
THE THREE QUARTERS ENDED SEPTEMBER 13, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-13-1997
<CASH> 45,638
<SECURITIES> 0
<RECEIVABLES> 308,347
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 375,447
<PP&E> 1,376,642
<DEPRECIATION> 1,013,956
<TOTAL-ASSETS> 752,798
<CURRENT-LIABILITIES> 332,292
<BONDS> 0
0
0
<COMMON> 206
<OTHER-SE> 241,538
<TOTAL-LIABILITY-AND-EQUITY> 752,798
<SALES> 0
<TOTAL-REVENUES> 1,842,244
<CGS> 0
<TOTAL-COSTS> 1,798,867
<OTHER-EXPENSES> 361
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 43,016
<INCOME-TAX> 19,321
<INCOME-CONTINUING> 23,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,695
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
</TABLE>
