<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 June 21, 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.
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(Exact name of registrant as specified in its charter)
Delaware 34-0492670
- -------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No)
incorporation or organization)
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 July 18,
1997 was 20,554,423.
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 21, 1997 December 31, 1996
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(dollars in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 41,022 $ 36,243
Accounts receivable, net 275,740 260,789
Other current assets 20,689 16,847
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Total current assets 337,451 313,879
Carrier operating property at cost 1,379,252 1,392,048
Allowance for depreciation 1,015,907 1,013,954
Net carrier operating property 363,345 378,094
Deferred income taxes 18,428 17,651
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Total assets $ 719,224 $ 709,624
=====================================================
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 134,825 $ 135,248
Salaries and wages payable 111,989 110,124
Other current liabilities 51,809 52,545
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Total current liabilities 298,623 297,917
Long-term liabilities
Casualty claims payable 65,590 66,674
Future equipment repairs 22,407 24,281
Accrued pension and retiree medical 100,416 96,156
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Total long-term liabilities 188,413 187,111
Shareholders' equity
Common Stock - $.01 par value
Authorized - 100,000,000 shares
Issued - 20,556,714 shares 206 206
Other shareholders' equity 231,982 224,390
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Total shareholders' equity 232,188 224,596
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Total liabilities and equity $ 719,224 $ 709,624
=====================================================
<FN>
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.
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 3
<TABLE>
<CAPTION>
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
Twelve Weeks Ended
(Second Quarter)
June 21, 1997 June 15, 1996
-----------------------------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C>
Revenue $ 609,374 $ 532,749
Operating expenses:
Salaries, wages and benefits 387,427 351,621
Operating supplies and expenses 105,259 90,070
Purchased transportation 60,759 40,537
Operating taxes and licenses 17,549 18,070
Insurance and claims expense 13,963 10,517
Provision for depreciation 11,807 15,298
Net (gain) on disposal of operating property (1,307) (687)
------------------------------------------------------------------
Total operating expenses 595,457 525,426
------------------------------------------------------------------
Operating income 13,917 7,323
Other income (expense), net 69 (178)
------------------------------------------------------------------
Income before income taxes 13,986 7,145
Provision for income taxes 6,219 3,092
------------------------------------------------------------------
Net income $ 7,767 $ 4,053
==================================================================
Net income per share $ 0.38 $ 0.20
Average shares outstanding 20,536 20,484
<CAPTION>
Twenty-four Weeks Ended
(Two Quarters)
June 21, 1997 June 15, 1996
-----------------------------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C>
Revenue $ 1,200,049 $ 1,049,712
Operating expenses:
Salaries, wages and benefits 769,708 697,195
Operating supplies and expenses 207,206 177,152
Purchased transportation 108,977 79,895
Operating taxes and licenses 36,393 35,686
Insurance and claims expense 30,862 20,006
Provision for depreciation 24,435 30,834
Net (gain) on disposal of operating property (1,891) (3,321)
------------------------------------------------------------------
Total operating expenses 1,175,690 1,037,447
------------------------------------------------------------------
Operating income 24,359 12,265
Other income (expense), net (152) (510)
------------------------------------------------------------------
Income before income taxes 24,207 11,755
Provision for income taxes 10,918 5,079
------------------------------------------------------------------
Net income $ 13,289 $ 6,676
==================================================================
Net income per share $ 0.65 $ 0.33
Average shares outstanding 20,542 20,520
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Twenty-four Weeks Ended
(Two Quarters)
June 21, 1997 June 15, 1996
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(dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 13,289 $ 6,676
Depreciation and amortization 24,319 30,854
Other operating adjustments (14,454) (30,324)
-----------------------------------------------------------
Net cash provided by operating activities 23,154 7,206
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property (9,548) (13,068)
Sales of carrier operating property 8,220 6,205
Business acquisition (15,000) -
-----------------------------------------------------------
Net cash used by investing activities (16,328) (6,863)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (2,047) (1,027)
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Net cash used by financing activities (2,047) (1,027)
Net increase (decrease) in cash and cash equivalents 4,779 (684)
Cash and cash equivalents at beginning of period 36,243 23,341
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Cash and cash equivalents at end of period $ 41,022 $ 22,657
===========================================================
</TABLE>
See notes to condensed consolidated financial statements.
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 twenty-four weeks ended June 21, 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>
Twenty-four Weeks Ended
(Two Quarters)
June 21, 1997 June 15, 1996
------------------------------------------
(amounts in thousands)
<S> <C> <C>
U.S. Federal $ 8,129 $ 1,901
U.S. State 1,289 647
Foreign 1,500 2,531
------------------------------------------
Total $ 10,918 $ 5,079
==========================================
</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 $7,767,000, or $0.38 per share, for the second
quarter ended June 21, 1997, compared to income of $4,053,000, or $0.20 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
nearly completed network improvements. Revenues were $609,374,000 for the second
quarter of 1997, a 14.4% improvement over second quarter 1996 revenue of
$532,749,000.
On April 30, Roadway finalized its acquisition of Reimer Express Lines, Ltd., a
Canadian carrier. Reimer became a wholly-owned subsidiary which provides both
domestic Canadian and international service to and from Canada. As a result of
this acquisition, Roadway closed its former Canadian operating company,
resulting in a pre-tax charge to operations of $1,053,000 and reducing earnings
by $0.03 per share for the second quarter. The primary costs attributable to
that closure include severance compensation for displaced employees and
fulfillment of ongoing lease commitments.
Total tonnage was up 11.6% in the second quarter compared to the prior year
quarter. The addition of Reimer accounted for 42% of this increase.
Less-than-truckload (LTL) tons were up 10.1% and truckload tonnage was up 18.3%.
Net revenue per ton has increased 2.5% above the second quarter 1996 (5.0%
excluding Reimer). 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.
Operating expenses per ton (excluding gain on sale of operating property) were
up 1.6% compared to second quarter 1996. Purchased transportation and insurance
costs increased faster than business levels this quarter. Purchased
transportation costs increased 49.9%, 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. Salaries and wages were impacted by the tonnage growth 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. Despite
these increases, salaries and wages per ton declined by 1.3% compared to second
quarter 1996. This reflects increased use of purchased transportation mentioned
above, and the impact of continued savings from the Company's network refinement
efforts, which have reduced freight handling and eliminated certain
administrative costs. Insurance and claims expense increased $3.4 million over
second 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 413 terminals, compared to 451
terminals at the end of the second quarter 1996.
The tax expense attributable to the operating income for the first two 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.
5
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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 and to purchase Reimer. 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 replaced
approximately 5,200 aging trailers with new leased units.
The National Master Freight Agreement, our Contract with the International
Brotherhood of Teamsters, expires on March 31, 1998. There was an announcement
during the quarter that the Teamsters and Trucking Management, Inc., the
multi-employer bargaining agent for our industry, formed a Joint Industry
Development Committee. The Committee will conduct studies to help labor and
management representatives make joint recommendations to the negotiators of the
Contract.
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 July 9, 1997, the Board of Directors announced a cash dividend of $0.05 per
share on the Company's common stock payable on September 2, 1997, to
shareholders of record on August 15, 1997.
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.
6
<PAGE> 8
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: July 31, 1997 By: /s/ J. Dawson Cunningham
------------- -------------------------------------------
J. Dawson Cunningham, Vice President-Finance
and Administration, and Treasurer (Principal
Financial and Accounting Officer)
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROADWAY
EXPRESS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
THE TWO QUARTERS ENDED JUNE 21, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-21-1997
<CASH> 41,022
<SECURITIES> 0
<RECEIVABLES> 275,740
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 337,451
<PP&E> 1,379,252
<DEPRECIATION> 1,015,907
<TOTAL-ASSETS> 719,224
<CURRENT-LIABILITIES> 298,623
<BONDS> 0
<COMMON> 206
0
0
<OTHER-SE> 231,982
<TOTAL-LIABILITY-AND-EQUITY> 719,224
<SALES> 0
<TOTAL-REVENUES> 1,200,049
<CGS> 0
<TOTAL-COSTS> 1,175,690
<OTHER-EXPENSES> 152
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,207
<INCOME-TAX> 10,918
<INCOME-CONTINUING> 13,289
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,289
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
