<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 20, 1998.
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 (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 June 20,
1998 was 20,553,130.
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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 20, 1998 December 31, 1997
----------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 94,132 $ 58,505
Accounts receivable, net 275,163 288,050
Other current assets 16,090 16,357
----------------------------------------------------------------------
Total current assets 385,385 362,912
Carrier operating property at cost 1,358,938 1,366,569
Allowance for depreciation 1,004,969 1,008,485
----------------------------------------------------------------------
Net carrier operating property 353,969 358,084
Goodwill, net 8,314 8,747
Deferred income taxes 15,287 14,243
----------------------------------------------------------------------
Total assets $ 762,955 $ 743,986
======================================================================
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 171,353 $ 165,536
Salaries and wages payable 111,553 103,609
Other current liabilities 50,223 53,657
----------------------------------------------------------------------
Total current liabilities 333,129 322,802
Long-term liabilities
Casualty claims payable 52,460 55,267
Future equipment repairs 17,594 19,773
Accrued pension and retiree medical 100,818 96,708
----------------------------------------------------------------------
Total long-term liabilities 170,872 171,748
Shareholders' equity
Common Stock - $.01 par value
Authorized - 100,000,000 shares
Issued - 20,556,714 shares 206 206
Other shareholders' equity 258,748 249,230
----------------------------------------------------------------------
Total shareholders' equity 258,954 249,436
----------------------------------------------------------------------
Total liabilities and equity $ 762,955 $ 743,986
======================================================================
</TABLE>
Note: The balance sheet at December 31, 1997 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
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ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Twelve Weeks Ended
(Second Quarter)
June 20, 1998 June 21, 1997
----------------------------------------------------
(in thousands, except per share data)
<S> <C> <C>
Revenue $ 609,352 $ 609,374
Operating expenses:
Salaries, wages and benefits 397,748 387,427
Operating supplies and expenses 103,883 105,259
Purchased transportation 58,089 60,759
Operating taxes and licenses 18,098 17,549
Insurance and claims expense 13,405 13,963
Provision for depreciation 9,512 11,807
Net (gain) on disposal of operating property (461) (1,307)
----------------------------------------------------
Total operating expenses 600,274 595,457
----------------------------------------------------
Operating income 9,078 13,917
Other income, net 178 69
----------------------------------------------------
Income before income taxes 9,256 13,986
Provision for income taxes 3,949 6,219
----------------------------------------------------
Net income 5,307 7,767
====================================================
Net income per share - basic $ 0.26 $ 0.39
Net income per share - diluted $ 0.27 $ 0.38
Average shares outstanding - basic 20,110 20,220
Average shares outstanding - diluted 20,352 20,536
Dividends declared per share $ 0.05 $ 0.05
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Twenty-four Weeks Ended
(Two Quarters)
June 20, 1998 June 21, 1997
----------------------------------------------------
(in thousands, except per share data)
<S> <C> <C>
Revenue $ 1,231,015 $ 1,200,049
Operating expenses:
Salaries, wages and benefits 798,231 769,708
Operating supplies and expenses 214,085 207,206
Purchased transportation 115,126 108,977
Operating taxes and licenses 37,451 36,393
Insurance and claims expense 28,383 30,862
Provision for depreciation 19,407 24,435
Net (gain) on disposal of operating property (1,570) (1,891)
----------------------------------------------------
Total operating expenses 1,211,113 1,175,690
----------------------------------------------------
Operating income 19,902 24,359
Other income (expense), net 880 (152)
----------------------------------------------------
Income before income taxes 20,782 24,207
Provision for income taxes 8,866 10,918
----------------------------------------------------
Net income 11,916 13,289
====================================================
Net income per share - basic $ 0.59 $ 0.66
Net income per share - diluted $ 0.59 $ 0.65
Average shares outstanding - basic 20,109 20,226
Average shares outstanding - diluted 20,344 20,542
Dividends declared per share $ 0.10 $ 0.10
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Twenty-four Weeks Ended
(Two Quarters)
June 20, 1998 June 21, 1997
----------------------------------------------------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 11,916 $ 13,289
Depreciation and amortization 19,840 24,319
Other operating adjustments 15,119 (14,454)
----------------------------------------------------
Net cash provided by operating activities 46,875 23,154
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property (19,761) (9,548)
Sales of carrier operating property 6,038 8,220
Business acquisition - (15,000)
----------------------------------------------------
Net cash used by investing activities (13,723) (16,328)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (2,053) (2,047)
Issuance of treasury shares 4,528 -
----------------------------------------------------
Net cash provided (used) from financing activities 2,475 (2,047)
Net increase in cash and cash equivalents 35,627 4,779
Cash and cash equivalents at beginning of period 58,505 36,243
====================================================
Cash and cash equivalents at end of period $ 94,132 $ 41,022
====================================================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
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 24 weeks ended June 20, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. 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, 1997.
Note B--Accounting Period
The registrant operates on a 13 four-week period calendar with 12 weeks in each
of the first three quarters and 16 weeks in the fourth quarter.
Note C--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 Twenty-four Weeks Ended
(Second Quarter) (Two Quarters)
June 20, 1998 June 21, 1997 June 20, 1998 June 21, 1997
------------------- ------------------- ----------------- -------------------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Federal $3,935 $4,913 $ 8,568 $ 8,129
U.S. State 410 664 921 1,289
Foreign (396) 642 (623) 1,500
------------------- ------------------- ----------------- -------------------
Total $3,949 $6,219 $ 8,866 $ 10,918
=================== =================== ================= ===================
</TABLE>
Note D--Earnings per Share
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-four Weeks Ended
(Second Quarter) (Two Quarters)
June 20, 1998 June 21, 1997 June 20, 1998 June 21, 1997
------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income $ 5,307 $ 7,767 $ 11,916 $ 13,289
==============================================================================
Weighted-average shares for
basic earnings per share 20,110 20,220 20,109 20,226
Management incentive stock plans 242 316 235 316
------------------------------------------------------------------------------
Weighted-average shares for
diluted earnings per share 20,352 20,536 20,344 20,542
==============================================================================
Earnings per share - basic $ 0.26 $ 0.39 $ 0.59 $ 0.66
Earnings per share - diluted $ 0.27 $ 0.38 $ 0.59 $ 0.65
</TABLE>
5
<PAGE> 7
Note E--Comprehensive Income
Comprehensive income differs from net income due to foreign currency translation
adjustments as shown below:
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-four Weeks Ended
(Second Quarter) (Two Quarters)
June 20, 1998 June 21, 1997 June 20, 1998 June 21, 1997
------------------ ----------------- ------------------ --------------------
(in thousands)
<S> <C> <C> <C> <C>
Net income $ 5,307 $ 7,767 $ 11,916 $ 13,289
Foreign currency translation
adjustments (523) 123 (567) 98
=============================================================================
Comprehensive income $ 4,784 $ 7,890 $ 11,349 $ 13,387
=============================================================================
</TABLE>
Note F--Impact of Recently Issued Accounting Standards
The Company adopted the provisions of the AICPA Statement of Position 98-1 (SOP
98-1), Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use, effective January 1, 1998. The adoption of SOP 98-1 increased net
income and diluted earnings per share through June 20, 1998, by $526,000 and
$0.03, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Revenue for the second quarter of 1998 was $609.4 million, which was flat when
compared to the second quarter of 1997. A 2.5% increase in revenue per ton was
offset by a 2.4% decrease in tonnage. Despite the successful contract
negotiations that culminated in a tentative agreement with the International
Brotherhood of Teamsters six weeks before the expiration of the contract, the
Company experienced a diversion of freight to non-union carriers that continued
into the second quarter, resulting from fears of service interruptions.
Less-than-truckload (LTL) tonnage was down 2.6% and truckload tonnage was down
1.7%, compared to second quarter 1997.
The operating ratio deteriorated to 98.5%, compared to 97.7% in the second
quarter 1997. Operating costs per ton rose 3.3% compared to the second quarter
of 1997. Salaries, wages, and benefit costs per ton increased by 5.2%, or $10.39
per ton. Of this amount, $2.39 per ton is attributable to wage increases under
the new labor contract. The remaining increase is due to operational
inefficiencies, primarily in terminal operations, due in part to the reduced
volume of freight. Direct labor costs accounted for 81% of the increase in
salaries, wages, and benefits during the quarter. Purchased transportation costs
decreased by $2.7 million, or 4.4%. Rail costs declined $4.5 million as the
portion of miles on the rail decreased to 24.8%, compared to 27.7% in 1997. The
use of cartage and commission agents in the pickup and delivery operations
increased by $1.9 million over the prior year quarter.
Depreciation expense continues to decline as more revenue equipment becomes
fully depreciated and the Company increases its use of leased equipment. Also,
the Company's system count has been reduced to 403 terminals, compared to 413
terminals at the end of the second quarter 1997.
The tax expense attributable to the operating income for the first two quarters
of 1998 and 1997 differs from the Federal statutory rate due to the impact of
state taxes, taxes on foreign operations, and non-deductible operating expenses
as described in Note C to the Condensed Consolidated Financial Statements.
The Company's cash position continues to improve. At the end of the quarter,
cash and marketable securities amounted to $94.1 million, a $35.6 million
increase over year-end 1997. Cash flow from operations is sufficient to meet
working capital needs, planned capital expenditures, and the recently announced
plan to purchase from time to time up to $20 million of the Company's common
stock on the open market. The Company entered into a third operating lease
agreement to replace an additional 3,250 (approximately 10%) of the linehaul
trailers during 1998. Under these
6
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agreements approximately 7,200 of a planned total of 10,000 trailers have been
replaced with leased units through June 20, 1998.
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 7, 1998, the Board of Directors declared a cash dividend of $0.05 per
share on the Company's common stock, payable on September 8, 1998, to
shareholders of record on August 21, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No.
- -----------
10.21 Schedule of documents not filed which are substantially identical
in all material respects to previously filed documents.
27 Financial Data Schedule
List of the Current Reports on Form 8-K which were filed during the current
quarter.
Date of Form 8-K Items reported
- ---------------- --------------
June 24, 1998 Registrant's announcement that its Board of Directors
authorized the purchase of up to $20 million of the Company's
common stock.
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 9, 1998 By: /s/ J. Dawson Cunningham
------------ --------------------------------------
J. Dawson Cunningham, Executive Vice
President, Chief Financial Officer and
Treasurer
Date: July 9, 1998 By: /s/ John G. Coleman
------------ --------------------------------------
John G. Coleman, Controller
7
<PAGE> 1
Exhibit 10.21
Schedule of Documents Not Filed which are substantially identical in all
material respects to previously filed documents.
1. Master Lease Agreement between Roadway Express, Inc. and ABN AMRO Bank N.V.
dated March 3, 1997. This lease agreement for 3,250 linehaul trailers is
identical in all material respects to the Master Lease Agreement dated
March 15, 1996, which was filed as Exhibit 10.18 to the registrant's Form
10-Q for the period ended June 15, 1996. This new lease agreement covers an
additional 3,250 trailers selected by the Company from the same pool of
linehaul trailers specified in the first lease.
2. Master Lease Agreement between Roadway Express, Inc. and ABN AMRO Bank N.V.
dated April 1, 1998. This lease agreement for 3,250 linehaul trailers is
identical in all material respects to the Master Lease Agreement dated
March 15, 1996, which was filed as Exhibit 10.18 to the registrant's Form
10-Q for the period ended June 15, 1996. This new lease agreement covers an
additional 3,250 trailers selected by the Company from the same pool of
linehaul trailers specified in the first lease.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROADWAY
EXPRESS INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER
ENDED JUNE 20, 1998 (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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-20-1998
<CASH> 94,132
<SECURITIES> 0
<RECEIVABLES> 275,163
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 385,385
<PP&E> 1,358,938
<DEPRECIATION> 1,004,969
<TOTAL-ASSETS> 762,955
<CURRENT-LIABILITIES> 333,129
<BONDS> 0
0
0
<COMMON> 206
<OTHER-SE> 258,748
<TOTAL-LIABILITY-AND-EQUITY> 762,955
<SALES> 0
<TOTAL-REVENUES> 1,231,015
<CGS> 0
<TOTAL-COSTS> 1,211,113
<OTHER-EXPENSES> (880)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 20,782
<INCOME-TAX> 8,866
<INCOME-CONTINUING> 11,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,916
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.59
</TABLE>
