<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 March 28, 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
incorporation or 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 April
25, 1998 was 20,539,717.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
March 28, 1998 December 31, 1997
---------------------------------
(in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 73,853 $ 58,505
Accounts receivable, net 278,718 288,050
Other current assets 19,331 16,357
------------------------------
Total current assets 371,902 362,912
Carrier operating property at cost 1,360,761 1,366,569
Allowance for depreciation 1,004,532 1,008,485
------------------------------
Net carrier operating property 356,229 358,084
Goodwill, net 8,726 8,747
Deferred income taxes 15,021 14,243
------------------------------
Total assets $ 751,878 $ 743,986
===============================
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 143,653 $ 165,536
Salaries and wages payable 112,381 103,609
Other current liabilities 70,419 53,657
------------------------------
Total current liabilities 326,453 322,802
Long-term liabilities
Casualty claims payable 52,649 55,267
Future equipment repairs 18,810 19,773
Accrued pension and retiree medical 98,762 96,708
------------------------------
Total long-term liabilities 170,221 171,748
Shareholders' equity
Common Stock - $.01 par value
Authorized - 100,000,000 shares
Issued - 20,556,714 shares 206 206
Other shareholders' equity 254,998 249,230
------------------------------
Total shareholders' equity 255,204 249,436
------------------------------
Total liabilities and equity $ 751,878 $ 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.
<PAGE> 3
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Twelve Weeks Ended
(First Quarter)
March 28, 1998 March 29, 1997
----------------------------------------
(in thousands, except per share data)
<S> <C> <C>
Revenue $ 621,663 $ 590,675
Operating expenses:
Salaries, wages and benefits 400,483 382,281
Operating supplies and expenses 110,202 101,947
Purchased transportation 57,037 48,218
Operating taxes and licenses 19,353 18,844
Insurance and claims expense 14,978 16,899
Provision for depreciation 9,895 12,628
Net (gain) on disposal of operating property (1,109) (584)
----------------------------
Total operating expenses 610,839 580,233
----------------------------
Operating income 10,824 10,442
Other income (expense), net 702 (221)
----------------------------
Income before income taxes 11,526 10,221
Provision for income taxes 4,917 4,699
============================
Net income 6,609 5,522
============================
Net income per share - basic $ 0.33 $ 0.27
Net income per share - diluted $ 0.32 $ 0.27
Average shares outstanding - basic 20,108 20,232
Average shares outstanding - diluted 20,337 20,548
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 CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Twelve Weeks Ended
(First Quarter)
March 28, 1998 March 29, 1997
-------------------------------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,609 $ 5,522
Depreciation and amortization 9,917 12,646
Other operating adjustments 2,304 (10,674)
---------------------------
Net cash provided by operating activities 18,830 7,494
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property (10,126) (6,222)
Sales of carrier operating property 3,194 2,716
---------------------------
Net cash used by investing activities (6,932) (3,506)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (1,015) (1,026)
Purchase (issuance) of treasury shares 4,465 -
---------------------------
Net cash provided (used) from financing activities 3,450 (1,026)
Net increase in cash and cash equivalents 15,348 2,962
Cash and cash equivalents at beginning of period 58,505 36,243
---------------------------
Cash and cash equivalents at end of period $ 73,853 $ 39,205
===========================
</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 12 weeks ended March 28, 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
(First Quarter)
March 28, 1998 March 29, 1997
----------------------------------------------------
(in thousands)
<S> <C> <C>
U.S. Federal $ 4,633 $ 3,216
U.S. State 511 625
Foreign (227) 858
----------------------------------------------------
Total $ 4,917 $ 4,699
====================================================
</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
(First Quarter)
March 28, 1998 March 29, 1997
-----------------------------------------------------
(in thousands, except per share data)
<S> <C> <C>
Net income $ 6,609 $ 5,522
=====================================================
Weighted-average shares for
basic earnings per share 20,108 20,232
Management incentive stock plan 229 316
-----------------------------------------------------
Weighted-average shares for
diluted earnings per share 20,337 20,548
=====================================================
Earnings per share - basic $ 0.33 $ 0.27
Earnings per share - diluted $ 0.32 $ 0.27
</TABLE>
4
<PAGE> 6
Note E--Comprehensive Income
Comprehensive income differs from net income due to foreign currency translation
adjustments as shown below:
<TABLE>
<CAPTION>
Twelve Weeks Ended
(First Quarter)
March 28, 1998 March 29, 1997
------------------------- --------------------------
(in thousands)
<S> <C> <C>
Net income $ 6,609 $ 5,522
Foreign currency translation adjustments (44) (25)
=====================================================
Comprehensive income $ 6,565 $ 5,497
=====================================================
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Revenue for the first quarter of 1998 was $621.7 million, up 5.2% compared to
the first quarter of 1997. This increase is the result of a 4.0% increase in
tonnage coupled with a 1.2% increase in revenue per ton. Less-than-truckload
(LTL) tonnage was up 2.1% and truckload tonnage was up 12.4%, compared to first
quarter 1997. Excluding the impact of the Reimer acquisition, daily tonnage
levels were flat, and revenue per ton increased 3.9% compared to the same period
last year.
The operating ratio of 98.3% was flat compared to 1997, due to an increase in
operating expenses of 5.3%. Operating costs per ton rose 1.2% compared to the
first quarter of 1997. Salaries, wages, and benefit costs rose by 4.8%,
primarily due to a 3.8% increase in hourly wage and benefit rates on April 1,
1997, under the terms of the Teamster contract. Purchased transportation costs
increased 18.3%, reflecting Reimer's use of owner operators, the Company's
increasing use of railroads in certain linehaul operations, and the expanding
use of commission agents in the pickup and delivery operations. Operating
supplies and expenses were up 8.1% over the prior year quarter due to additional
equipment lease expense, terminal supplies, and administrative expenses. These
increases were partially offset by lower fuel costs due to declining fuel
prices.
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 405 terminals, compared to 415
terminals at the end of the first quarter 1997.
The tax expense attributable to the operating income for the first 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; cash flow from operations is
sufficient to meet working capital needs and planned capital expenditures. 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
agreements approximately 6,900 of a planned total of 10,000 trailers have been
replaced with leased units through the end of quarter 1, 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.
5
<PAGE> 7
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on March 25, 1998. Six
matters were voted upon at this meeting: (i) the election of seven members to
the Board of Directors; (ii) approval of the Equity Ownership Plan; (iii)
approval of the Nonemployee Directors' Equity and Deferred Compensation Plan;
(iv) approval of the Nonemployee Directors' Stock Option Plan; (v) approval of
the Amendment to the 1996 Employee Stock Purchase Plan; and (vi) ratification of
the appointment of Ernst & Young LLP as the independent auditors. There were
18,923,660 shares voted and 1,633,054 shares not voted. The following table
shows the results of the vote.
<TABLE>
<CAPTION>
PROPOSAL FOR AGAINST WITHHELD
<S> <C> <C> <C>
Election of Directors
Frank P. Doyle 18,730,466 193,194
Dale F. Frey 18,714,694 208,966
J. Meek 18,732,073 191,587
Robert E. Mercer 18,688,442 235,218
Carl W. Schafer 18,724,929 198,731
Sarah Roush Werner 18,733,634 190,026
Michael W. Wickham 18,689,623 234,037
Equity Ownership Plan 14,315,687 1,771,477 2,836,496
Nonemployee Directors' Equity and Deferred
Compensation Plan 15,167,454 1,048,539 2,707,667
Nonemployee Directors' Stock Option Plan 15,139,872 1,071,514 2,712,274
Amendment to the 1996 Employee Stock
Purchase Plan 15,865,649 387,191 2,670,820
Appointment of Ernst & Young LLP as auditors
18,729,563 124,730 69,367
</TABLE>
ITEM 5. OTHER INFORMATION
On March 25, 1998, the Company's Board of Directors elected Michael W. Wickham
to serve as Chairman of the Board of Directors and Chief Executive Officer for
Roadway Express. The Board also elected James D. Staley to succeed Wickham as
President, and designated Staley Chief Operating Officer (COO). J. Dawson
Cunningham was elected Executive Vice President, Chief Financial Officer (CFO)
and Treasurer. John D. Bronneck was elected to replace Staley as the Company's
Vice President - Operations. Terry M. Gilbert was elected Vice President -
Northeast Division to succeed Bronneck. Wickham succeeded Robert E. Mercer as
Chairman, who remains a member of the Board.
On April 8, 1998, the Motor Freight Carriers Association ("MFCA") announced that
the membership of the International Brotherhood of Teamsters (the "Teamsters")
had ratified a new, five-year National Master Freight Agreement (the
"Contract"). The MFCA represents Roadway Express and five other union carriers.
Negotiations are continuing in supplemental contracts that affect a small
portion of the Company's Teamster employees. Management believes that it is more
likely than not that these supplemental contracts will be settled in a favorable
manner in the near future, and will not cause a disruption of service.
On April 15, 1998, the Board of Directors announced a cash dividend of $0.05 per
share on the Company's common stock payable on June 1, 1998, to shareholders of
record on May 15, 1998.
6
<PAGE> 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No.
- -----------
27 Financial Data Schedule.
List of the Current Reports on Form 8-K that 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: May 11, 1998 By: /s/ J. Dawson Cunningham
------------ ---------------------------
J. Dawson Cunningham, Executive Vice President,
Chief Financial Officer and Treasurer
Date: May 11, 1998 By: /s/ John G. Coleman
------------ ----------------------
John G. Coleman, Controller
7
<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 MARCH 28, 1998 (UNAUDITED)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-28-1998
<CASH> 73,853
<SECURITIES> 0
<RECEIVABLES> 278,718
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 371,902
<PP&E> 1,360,761
<DEPRECIATION> 1,004,532
<TOTAL-ASSETS> 751,878
<CURRENT-LIABILITIES> 326,453
<BONDS> 0
0
0
<COMMON> 206
<OTHER-SE> 254,998
<TOTAL-LIABILITY-AND-EQUITY> 751,878
<SALES> 0
<TOTAL-REVENUES> 621,663
<CGS> 0
<TOTAL-COSTS> 610,839
<OTHER-EXPENSES> (702)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,526
<INCOME-TAX> 4,917
<INCOME-CONTINUING> 6,609
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,609
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.32
</TABLE>
