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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
For the fiscal year ended December 31, 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 (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
---------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
(Title of class)
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 Regulations S-K 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 26, 1998 Common Stock, $.01 Par Value -- $274,232,809.
The number of shares outstanding of the issuer's classes of common stock as of
February 26, 1998 Common Stock, $.01 Par Value -- 20,530,608 shares
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Annual Report to Shareholders for the year ended
December 31, 1997, are incorporated by reference into Parts I and II. Certain
portions of the definitive proxy statement relating to the registrant's Annual
Meeting of Shareholders held on March 25, 1998, are incorporated by reference
into Part III.
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PART I
ITEM 1. -- BUSINESS
(a) General development of the business. Roadway Express, Inc. (the "Company" or
"Roadway"), a Delaware corporation founded in 1930, provides less-than-truckload
("LTL") freight services on two day and longer major city-to-city routes
("lanes") in North America, and on international lanes to and from North
America. On January 2, 1996, Roadway was spun-off from Roadway Services, Inc.
(the "former parent"), which was a holding company formed by Roadway in 1982.
The Company's headquarters are at 1077 Gorge Boulevard, Akron, Ohio, 44310.
(b) Segment information. The operation of the company is conducted in primarily
one industry segment, the interstate transportation of LTL freight.
(c) Description of the business. Roadway provides LTL transportation of general
commodity freight by motor vehicle, in North America and elsewhere. General
commodity freight includes apparel, appliances, automotive parts, chemicals,
food, furniture, glass, machinery, metal and metal products, non-bulk petroleum
products, rubber, textiles, wood, and miscellaneous manufactured products.
Roadway offers LTL service within Canada and Mexico through its subsidiaries,
and also offers service to and from 66 additional countries worldwide through
offshore agents. The Company serves over one-half million customers in North
America.
Roadway is affected directly by the state of the overall economy, but no single
segment of the economy (e.g., general retail merchandise, automotive, chemical)
accounts for more than 10% of the Company's revenues. Seasonal fluctuations
affect tonnage, revenues and operating results. Normally, the fall of each year
is the Company's busiest shipping period; the months of December and January of
each year are the slowest. Shipment levels, operating costs, and operating
results can also be adversely affected by inclement weather. During 1997, no
single customer accounted for more than 2% of the Company's total revenues, and
the ten largest customers accounted for approximately 9% of the Company's total
revenue.
The LTL business is extremely competitive, resulting in narrow margins.
Roadway's primary competitors in the national LTL market are Yellow Freight
System, Consolidated Freightways Corp., and ABF Freight System. The Company also
competes for LTL freight with other national and international LTL carriers as
well as regional LTL motor carriers, truckload carriers, small package carriers,
private carriage, freight forwarders, railroads and airlines. Based on reported
revenue for 1997, Roadway is one of the largest LTL motor carriers in the United
States. Competition for freight is based primarily upon price and service
(transit time). To maintain and improve market share, the Company offers and
negotiates various discounts. The Company works directly with customers on an
account-by-account basis to find ways to improve efficiencies and contain costs
to improve both customer and carrier profitability.
Deregulation of most of the trucking industry, begun in 1980 and largely
completed by Congress in 1995, has given rise to intense competition. New
entrants, some of which have grown rapidly in regional markets, include some
non-union carriers that may have lower labor costs than the Company.
At year-end 1997, the Company had over 26,000 employees. Approximately 75% of
the Company's employees are represented by various labor unions, primarily the
International Brotherhood of Teamsters (the "Teamsters"). The current National
Master Freight Agreement (the "Contract") with the Teamsters expires on March
31, 1998. The Company is represented by the Motor Freight Carriers Association
(the "MFCA"), along with the other three largest LTL trucking companies in the
United States. On February 9, 1998, the MFCA and the Teamsters announced that a
tentative agreement had been reached on a new 5-year Contract. The Company
believes that its current relations with the Teamsters are satisfactory.
The U.S. Department of Transportation ("DOT"), which retains limited oversight
authority over motor carriers, currently regulates Roadway's operations in
interstate commerce. Recently enacted Federal legislation has preempted
regulation by the states of price, routes, and service in intrastate freight
transportation. The Company, like other interstate motor carriers, is subject to
certain safety requirements governing interstate operations prescribed by the
DOT. The Company has earned a "satisfactory" rating (the highest of three
grading categories) from the DOT. In addition, vehicle weight and dimensions
remain subject to both Federal and state regulation. More restrictive
limitations on vehicle weight and size, or on trailer length or configuration,
could adversely affect the operating results of the Company.
At December 31, 1997, the Company owned a total of 10,341 tractors and 27,473
trailers. The average age of the intercity tractors was 8.5 years, and that of
the intercity trailers was 9.6 years. The Company also operated 6,852
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intercity trailers under a long-term lease. There is sufficient capacity to meet
normal requirements. Short-term leased equipment is used to meet peak demands.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, positions, and ages of the persons who
serve as Executive Officers of the Company.
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NAME PRESENT POSITIONS AND RECENT BUSINESS EXPERIENCE
- --------------------------------------------------------------------------------
J. Dawson Cunningham Vice President-Finance and
Administration, and Treasurer
since August 1990. Age 51.
Louis J. Esposito Vice President-Sales since
September 1995; previously he
served as Vice President-Midwest
Division from December 1990
through September 1995. Age 55.
John M. Glenn Vice President-General Counsel and
Secretary since January 1996.
Previous to employment with the
Company he was Vice President and
General Counsel of Roadway
Services, Inc. since 1987. Age 66.
James D. Staley Vice President-Operations since
1993; previously he served as Vice
President-Northeast Division from
May 1989 through 1992. Age 48.
Michael W. Wickham President and Chief Executive
Officer; previously he served as
President from July 1990 through
1995. Age 51.
- --------------------------------------------------------------------------------
No family relationships exist between any of the executive officers named above
or between any executive officer and any director of the Company.
ITEM 2. -- PROPERTIES
At December 31, 1997, the Company operated 407 terminal facilities, of which 277
were Company owned and 130 were leased, generally for terms of three years or
less. The number of loading spaces, a measure of freight handling capacity,
totaled 13,992, of which 12,001 were at Company owned facilities and 1,991 were
at leased facilities. Thirty of the owned facilities are major
consolidation/distribution centers that are in strategic locations throughout
the continental United States and Canada. These 30 facilities contain 5,411
loading spaces, ranging in size from 71 to 426 loading spaces, and average
87,200 square feet, ranging from 31,000 to 220,000 square feet. All significant
leased and owned facilities were being utilized at year-end 1997, and are
adequate to meet current needs.
The Company owns its main headquarters offices of approximately 259,000 square
feet, situated on 39.7 acres of which 14.7 are owned, and 25 leased under a
long-term contract expiring in 2009, but renewable to 2084. Approximately
148,000 square feet of office space for certain headquarters department
functions are leased at other locations.
ITEM 3. -- LEGAL PROCEEDINGS
The Company is involved in various lawsuits arising in the ordinary course of
its business. In the opinion of the management of the Company, the outcome of
these matters will not have a material adverse effect on the Company's financial
condition or results of operations.
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ITEM 4. -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. -- MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information under the caption "Common stock" in the table headed "Selected
Quarterly Financial Data" on page 33 of the registrant's Annual Report to
Shareholders for the year ended December 31, 1997, filed with this Form 10-K as
page 21 of Exhibit 13, is incorporated herein by reference.
ITEM 6. -- SELECTED FINANCIAL DATA
The information set forth under the heading "Historical Data" for the years
1997, 1996, 1995, 1994, and 1993, on pages 34 and 35 of the registrant's Annual
Report to Shareholders for the year ended December 31, 1997, filed with this
Form 10-K as page 22 of Exhibit 13, is incorporated herein by reference.
ITEM 7. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 18 through 22 of the registrant's Annual Report to
Shareholders for the year ended December 31, 1997, filed with this Form 10-K as
pages 1 through 4 of Exhibit 13, is incorporated herein by reference.
Subsequent Event. On February 9, 1998, the MFCA, which represents the Company,
and the Teamsters announced that a tentative agreement had been reached on a new
5-year Contract.
While most of the information provided herein is historical, some of the
comments made are forward-looking statements. The Company's actual performance
may differ from that forecast as a result of variable factors such as the state
of the national economy, capacity and rate levels in the motor freight industry,
and success of the Company's operating plans.
ITEM 8. -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, notes to consolidated financial
statements, and report of independent auditors appearing on pages 23 through 32
of the registrant's Annual Report to Shareholders for the year ended December
31, 1997 are incorporated herein by reference.
The summary of quarterly results of operations appearing on page 33 of the
registrant's Annual Report to Shareholders for the year ended December 31, 1997
is incorporated herein by reference.
See list of financial statements under Item 14 (a) 1.
ITEM 9. -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 10. -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required concerning the directors is set forth under the caption
"Election of Directors" on page 2 of the definitive proxy statement (the
"Proxy") relating to the registrant's Annual Meeting of Shareholders held on
March 25, 1998, and is incorporated herein by reference.
The information required concerning the executive officers is set forth under
the caption "Executive Officers of the Registrant" in Item 1 of this document,
and is incorporated herein by reference.
ITEM 11. -- EXECUTIVE COMPENSATION.
The information required concerning director compensation is set forth under the
caption "Director Compensation" on page 3 of the Proxy, and is incorporated
herein by reference.
The information required concerning executive compensation is set forth under
the caption "Compensation of Executive Officers" on pages 6 through 8 of the
Proxy, and is incorporated herein by reference.
ITEM 12. -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required concerning security ownership of certain beneficial
owners and management is set forth under the caption "Beneficial Ownership of
Common Stock" on pages 4 and 5 of the Proxy, and is incorporated herein by
reference.
ITEM 13. -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. List of financial statements contained in Roadway's Annual Report to
Shareholders for the year ended December 31, 1997, and filed as Exhibit
13 to this Form 10-K:
<TABLE>
<CAPTION>
Annual
Report Exhibit 13
page(s) page(s)
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<S> <C> <C>
Consolidated balance sheets at December 31, 1997 and 1996 23 5
Statements of consolidated income
for the years ended December 31, 1997, 1996, and 1995 24 6
Statements of consolidated shareholders' equity
for the years ended December 31, 1997, 1996, and 1995 25 7
Statements of consolidated cash flows
for the years ended December 31, 1997, 1996, and 1995 26 8
Notes to consolidated financial statements 27-32 9-19
Report of independent auditors dated January 21, 1998 32 20
Selected quarterly financial data for 1997 and 1996 33 21
</TABLE>
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ITEM 14. -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
(a) 2. The following financial statement schedule is included on page 9 of this
Form 10-K:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because of the absence of the conditions under
which they are required or because information called for is shown in the
financial statements and notes thereto in the 1997 Annual Report to
Shareholders.
(a) 3. Exhibit Index
Exhibit No.
- -----------
3.1 Second Restated Certificate of Incorporation of Roadway Express,
Inc. Adopted by Board of Directors' Resolution dated December 15,
1995 by unanimous written consent of the directors, and adopted by
written consent of the sole shareholder on December 22, 1995.
(filed as Exhibit 3.1 to the registrant's Annual Report on Form
10-K for the year ended December 31, 1995, and incorporated herein
by reference).
3.2 Restated Amended By-laws of Roadway Express, Inc. Adopted by Board
of Directors' Resolution dated December 15, 1995 by unanimous
written consent of the directors and adopted by written consent of
the sole shareholder on December 22, 1995. (filed as Exhibit 3.2
to the registrant's Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated herein by reference).
10.1 Distribution Agreement between Roadway Services, Inc. and Roadway
Express, Inc. (filed as Exhibit 2.1 to the Registrant's General
Form for Registration of Securities on Form 10 dated November 28,
1995, and incorporated herein by reference).
10.2 Tax Matters Agreement between Roadway Services, Inc. and Roadway
Express, Inc. (filed as Exhibit 10.2 to the Registrant's General
Form for Registration of Securities on Form 10 dated November 28,
1995, and incorporated herein by reference).
10.3 Data Processing and Information Technology Agreement between
Roadway Services, Inc. and Roadway Express, Inc. (filed as Exhibit
10.3 to the Registrant's General Form for Registration of
Securities on Form 10/A-1 dated December 11, 1995, and
incorporated herein by reference).
10.4 Services and Support Agreement between Roadway Services, Inc. and
Roadway Express, Inc. (filed as Exhibit 10.4 to the Registrant's
General Form for Registration of Securities on Form 10 dated
November 28, 1995, and incorporated herein by reference).
10.5 Intellectual Property Agreement between Roadway Services, Inc. and
Roadway Express, Inc. (filed as Exhibit 10.5 to the Registrant's
General Form for Registration of Securities on Form 10/A-1 dated
December 11, 1995, and incorporated herein by reference).
10.6 Agreement on Employee Matters between Roadway Services, Inc. and
Roadway Express, Inc. (filed as Exhibit 10.6 to the Registrant's
General Form for Registration of Securities on Form 10/A-1 dated
December 11, 1995, and incorporated herein by reference).
10.7 National Master Freight Agreement between Roadway Express, Inc.
and the International Brotherhood of Teamsters (filed as Exhibit
10.7 to the Registrant's General Form for Registration of
Securities on Form 10 dated November 28, 1995, and incorporated
herein by reference).
10.8 Alternative Dispute Resolution Agreement between Roadway Services,
Inc. and Roadway Express, Inc. (filed as Exhibit 10.8 to the
Registrant's General Form for Registration of Securities on Form
10 dated November 28, 1995, and incorporated herein by reference).
10.9 Director and Officer Indemnification Agreements (filed as Exhibit
10.9 to the Registrant's General Form for Registration of
Securities on Form 10/A-1 dated December 11, 1995, and
incorporated herein by reference).
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ITEM 14. -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
(a) 3. Exhibit Index (continued)
Exhibit No.
- -----------
10.10* Roadway Express, Inc. Management Incentive Stock Plan (filed as
Exhibit 10.10 to the Registrant's General Form for Registration of
Securities on Form 10 dated November 28, 1995, and incorporated
herein by reference).
10.11* Roadway Express, Inc. Stock Credit Plan (filed as Exhibit 10.11
to the Registrant's General Form for Registration of Securities on
Form 10 dated November 28, 1995, and incorporated herein by
reference).
10.12* Roadway Express, Inc. Excess Plan (filed as Exhibit 10.12 to the
Registrant's General Form for Registration of Securities on Form
10 dated November 28, 1995, and incorporated herein by reference).
10.13* Roadway Express, Inc. 401(a)(17) Benefit Plan (filed as Exhibit
10.13 to the Registrant's General Form for Registration of
Securities on Form 10 dated November 28, 1995, and incorporated
herein by reference).
10.14* Roadway Express, Inc. Administrative Document for Excess Plan
and 401(a)(17) Benefit Plan (filed as Exhibit 10.14 to the
Registrant's General Form for Registration of Securities on Form
10 dated November 28, 1995, and incorporated herein by reference).
10.15 Roadway Express, Inc. 401(k) Stock Savings Plan (filed as Exhibit
4.3 to the Registrant's Registration Statement on Form S-8 dated
December 19, 1995 and incorporated herein by reference).
10.16 * Summary Description of Officers' Incentive Compensation Plan
(filed as Exhibit 10.16 to the registrant's Annual Report on Form
10-K for the year ended December 31, 1995, and incorporated herein
by reference).
10.17 $25,000,000 Revolving Credit Facility by and between Roadway
Express, Inc. and Bank One, Akron, NA. (filed as Exhibit 10.17 to
the registrant's Annual Report on Form 10-K for the year ended
December 31, 1995, and incorporated herein by reference).
10.18 Operating lease agreement by and between Roadway Express, Inc. and
ABN AMRO North America, Inc. (filed as Exhibit 10.18 to the
registrant's Quarterly Report on Form 10-Q for the period ended
June 15, 1996, and incorporated herein by reference).
10.19 $25,000,000 Credit Agreement between Roadway Express, Inc. and
Morgan Guaranty Trust Company of New York (filed as Exhibit 10.19
to the registrant's Quarterly Report on Form 10-Q for the period
ended September 7, 1996, and incorporated herein by reference).
10.20 Amendment to the $25,000,000 Credit Agreements between Roadway
Express, Inc., Morgan Guaranty Trust Company of New York, and Bank
One of Akron, N.A. (filed as exhibit 10.20 to the registrant's
Quarterly Report on Form 10-Q for the period ended March 29, 1997,
and incorporated herein by reference).
10.21 Schedule of documents not filed which are substantially identical
in all material respects to previously filed documents (filed as
exhibit 10.21 to the registrant's Quarterly Report on Form 10-Q
for the period ended March 29, 1997, and incorporated herein by
reference).
13 Annual Report to Shareholders for the year ended December 31,
1997. Only those portions expressly referenced herein are
incorporated into this Form 10-K. Other portions are not required
and, therefore, are not filed as part of this form 10-K.
21 List of Subsidiaries.
23 Consent of Independent Auditors.
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ITEM 14. -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
(a) 3. Exhibit Index (continued)
Exhibit No.
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27.1 Financial Data Schedule for the year ended December 31, 1997.
27.2 Financial Data Schedule for the three quarters ended September 13,
1997, restated to reflect the adoption of SFAS 128.
27.3 Financial Data Schedule for the two quarters ended June 21, 1997,
restated to reflect the adoption of SFAS 128.
27.4 Financial Data Schedule for the year ended December 31, 1996,
restated to reflect the adoption of SFAS 128.
- --------------------------------------------------------------------------------
* Designates a compensation plan for Directors or Executive Officers.
(b) Reports on Form 8-K filed in the Fourth Quarter of 1997 -- none.
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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 March 25, 1998 By /s/ Michael W. Wickham
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Michael W. Wickham, President
and Chief Executive Officer
Date March 25, 1998 By /s/ J. Dawson Cunningham
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J. Dawson Cunningham, Vice
President-Finance and
Administration, and Treasurer
(Principal Financial and
Accounting Officer)
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.
Date March 25, 1998 By /s/ Frank P. Doyle
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Frank P. Doyle, Director
Date March 25, 1998 By /s/ Phillip J. Meek
-------------- ---------------------
Phillip J. Meek, Director
Date March 25, 1998 By /s/ Robert E. Mercer
-------------- ----------------------
Robert E. Mercer, Director
Date March 25, 1998 By /s/ Carl W. Schafer
-------------- ---------------------
Carl W. Schafer, Director
Date March 25, 1998 By /s/ Sarah Roush Werner
-------------- ------------------------
Sarah Roush Werner, Director
Date March 25, 1998 By /s/ Michael W. Wickham
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Michael W. Wickham, Director
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<TABLE>
<CAPTION>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(dollars in thousands)
- ---------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ---------------------------------------------------------------------------------------------------------------------
Additions
- ---------------------------------------------------------------------------------------------------------------------
Charged to
Balance at Charged to Other
Beginning of Cost and Accounts - Deductions Balance at End
Description Period Expenses Describe -Describe of Period
- --------------------------------- ---------------- ---------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C>
1997
Allowance for
uncollectible accounts $ 2,802 $ 13,783 - $ 11,762 (1) $ 4,823
Valuation allowance on
deferred tax assets 5,300 1,500 - 6,100 (2) 700
-------- --------- ---------- --------
Total $ 8,102 $ 15,283 - $ 17,862 $ 5,523
======== ======== ======== ========
1996
Allowance for
uncollectible accounts $ 3,284 $ 9,780 - $ 10,262 (1) $ 2,802
Valuation allowance on
deferred tax assets 7,500 1,800 - 4,000 (3) 5,300
-------- --------- --------- - --------
Total $ 10,784 $ 11,580 - $ 14,262 $ 8,102
======== ======== ======== ========
1995
Allowance for
uncollectible accounts $ 4,400 $ 11,315 - $ 12,431 (1) $ 3,284
Valuation allowance on
deferred tax assets 6,200 1,300 - - 7,500
-------- --------- --------- --------
Total $ 10,600 $ 12,615 - $ 12,431 $ 10,784
======= ======== ======== ========
- ---------------------------------------------------------------------------------------------------------------------
<FN>
(1) Uncollectible amounts written off, net of recoveries.
(2) Valuation allowance decreased due to utilization of foreign tax credits.
(3) Valuation allowance adjusted due to decrease in foreign tax credits.
</FN>
</TABLE>
9
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Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1997 COMPARED TO 1996
- ---------------------
Revenue increased $298 million, or 12.6% over 1996, to a record $2.67 billion in
1997. Tonnage was up 9.1% over the prior year, with 45% of this increase due to
the acquisition of Reimer Express Lines, Ltd. on April 30, 1997.
Less-than-truckload (LTL) tonnage was up 7.7%, while truckload tonnage increased
15.4% during the year. Most of the truckload tonnage increase was attributable
to new Reimer freight. LTL rates per ton increased 3.9%, and truckload rates per
ton increased 3.5%. Overall revenue rates per ton improved by 3.2% in 1997,
primarily because of the general rate increase on January 1, the strength of the
overall economy, and capacity reduction in the transportation industry. Revenue
per ton was also impacted by the acquisition of Reimer.
Roadway Express, Inc. has historically used, and continues to use, its own union
employees for the vast majority of linehaul and pickup and delivery services. In
recent years, the Company has increased use of rail transportation for linehaul
service, and commission agents for pickup and delivery service to outlying
areas. In addition, the Reimer operation utilizes union owner-operators for
linehaul service. These factors have shifted expenses, as the increased use of
purchased transportation results in reductions in salaries, wages and benefits,
operating expenses, and equipment needs. Purchased transportation increased
38.6%, to 10.0% of revenue in 1997 from 8.2% in 1996. For the year 1997, the
Company increased the use of railroads in linehaul operations from 23.4% to
28.0%, the maximum allowed under the National Master Freight Agreement (the
"Contract") with the International Brotherhood of Teamsters (the "Teamsters"),
of which the Company is a signatory.
Salaries, wages, and benefits were 63.6% of revenue in 1997, down from 65.1% in
1996. Despite a 3.8% increase in union wages and benefits on April 1, 1997,
additional workers' compensation expenses, and greater incentive plan payments,
in conjunction with the factors mentioned in the preceding paragraph, salaries
and wages per ton increased only 0.8% in 1997. The union increase is specified
under the terms of the Contract, which became effective April 1, 1994, expires
March 31, 1998, and contains annual wage and benefit rate increases. Workers'
compensation expense, which is part of salaries, wages, and benefits on the
income statement, returned to more historic levels in 1997. The increase in 1997
is due to the aggressive administrative approach to claims management taken in
1996 after the spin-off.
Depreciation expense continues to decline as more revenue equipment becomes
fully depreciated, operating leases are utilized for refurbished trailers, and
the number of terminal facilities is reduced. The Company's system count has
been reduced to 407 terminals, down from 484 and 424 at the beginning of 1996
and 1997. The sale of unused
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facilities resulted in a $6 million gain in 1997. While the Company plans to
sell additional unused facilities in 1998, we do not anticipate this level of
gain on future sales.
Operating tax and license expense decreased to 2.8% of revenue from 3.2% in
1996, due to the lower highway use taxes. These taxes would be expected to
decrease as purchased transportation increased.`
The Company's improved freight handling techniques and the network refinements
have reduced freight handling and the resultant cargo claims. Compared to 1996,
cargo claims expense per ton has declined by 7.1%. This improvement was offset
by a $9.5 million increase in liability insurance expense in 1997, largely due
to the aggressive claims management during 1996.
The operating income of $61.3 million or 2.3% of revenue in 1997 compares to an
operating income of $43.9 million or 1.9% of revenue in 1996. The 1997 results
reflect improved freight rates, operational refinements in the network, and
reduced depreciation expense. Total operating expenses per ton increased 2.7% in
1997, to $313.02, compared to $304.77 in 1996. The Company plans to continue the
focus on controlling unit costs, managing our system to capacity, and adjusting
our freight mix to improve yields.
The tax expense in 1997 differs from the Federal statutory rate due to the
utilization of foreign tax credit carry forwards, non-deductible operating
expenses, and state taxes. The impact of the foreign tax credits helped to
reduce the Company's 1997 effective tax rate to 39.2%, down from 48.5% in 1996.
1996 COMPARED TO 1995
- ---------------------
Revenue for 1996 was $2.4 billion as compared to $2.3 billion in 1995. This
increase of $84 million, or 3.7%, was due to higher business levels coupled with
a marginal increase in freight rates during 1996. Network refinement and mergers
among our competitors removed excess capacity from the market, which helped to
ease the extreme competitive pressure on freight rates and discounts experienced
in 1995.
Despite the higher business volume, increased fuel prices, and the 3.8% increase
in union labor wage and benefit rates, operating expenses were up only 1.6%
compared to 1995. On a per ton basis, expenses were reduced 0.3% compared to
1995.
In 1996, certain productivity gains through reengineering efforts partially
offset the wage and benefit increase. These included increased use of rail lines
to transport freight in linehaul operations and the continued reduction of the
terminal network. During 1996 we closed an additional 60 terminals, reducing the
terminal count to 424, down from 586 at the beginning of 1995.
2
<PAGE> 3
Cargo claims expense per ton declined by 11.2% year over year. The continued
strong safety performance of our work force combined with an aggressive
administrative approach to claims management also contributed to a reduction in
workers' compensation and liability insurance expenses. Depreciation expense
declined as more revenue equipment became fully depreciated, and as the number
of terminal facilities was reduced.
New safety programs were initiated to control losses and claims, and late in
1995 an intensive project was initiated to review and settle existing claims.
These efforts resulted in a net reduction of workers' compensation expenses by
$10 million in 1996.
A 15.6% increase in the base price of diesel fuel during 1996 added $8.8 million
to operating expenses during the year. Fuel contracts were utilized to assure
availability of fuel and moderate the impact of potential fuel price swings. The
Company adopted a variable rate fuel surcharge at the end of the third quarter
of 1996 to recover additional costs caused by rising fuel prices.
The operating income of $43.9 million or 1.9% of revenue in 1996 compares to an
operating loss of $10.8 million or 0.5% of revenue in 1995. The 1996 results
reflect stabilizing freight rates, cost controls, and emphasis on utilizing our
network improvements. The 1995 results reflect intense discounting of freight
rates, overcapacity in the LTL market, and the corresponding adverse effect on
operating margins.
The tax expense in 1996 differs from the Federal statutory rate due to the
impact of state taxes, non-deductible operating expenses, and higher taxes on
foreign operations.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company had cash and cash equivalents of $59 million at December 31, 1997.
This is a 61% improvement over the $36 million at the end of 1996. The Company
has a $57 million line of credit available, and remains debt free. During the
last several years, a higher percentage of freight has been delivered under
standard contracts, which have more lenient credit terms. This has caused a two
day increase in the average payment time by customers and an adverse effect on
cash flows. Capital expenditures are financed primarily through internally
generated funds. Future expenditures are expected to be financed in a similar
manner, except for a planned replacement in 1998 of an additional 10% of the
Company's linehaul trailer fleet through an operating lease arrangement. During
1996 and 1997, a total of 20% of the Company's linehaul trailers were replaced
under this lease. In addition to the leases mentioned above, capital
expenditures of $75 million are planned for 1998, up from $37 million in 1997.
Capital expenditures for facilities are expected to be limited as the Company
refines the use of its existing terminal network to better utilize capacity,
improve efficiency and reduce fixed costs. Revenue equipment expenditures will
increase over the levels of recent years as the Company begins replacing older
linehaul tractors. Management believes that cash flows from operations and
financing sources will be sufficient to support its working capital needs,
3
<PAGE> 4
projected capital expenditures, dividends to shareholders, and funds for other
corporate or business needs during 1998, as was the case in 1997.
Freight rate levels continued to recover during 1997 from the depressed 1995
levels as noted above, but are still not sufficient to provide adequate returns
for Roadway and much of the LTL industry. Because of this, a 5.4% general rate
increase was implemented on January 1, 1998. Although no assurances can be
given, management believes that economic conditions will allow us to retain a
reasonable portion of this increase. It now appears that LTL industry capacity
is more in line with demand, which is in contrast with the over capacity
situation for much of 1995 and 1996.
Formal negotiations with the Teamsters began in late December, in advance of the
March 31, 1998 expiration of the Contract. The Company is being represented by
the Motor Freight Carriers Association, which represents the four largest
trucking companies in the United States. Statements released by the Teamsters
and the Association in late January indicated that "substantial progress has
been made on all of the major issues." It is the intention of both parties to
have the Contract settled well before the current Contract expires, to avoid a
diversion of freight to non-union carriers by customers who are wary of a repeat
of the 1994 strike.
The Company has developed employee retention incentive programs to maintain
adequate computer programming capabilities that will enable timely development,
conversion, and implementation of planned software enhancements necessary to
successfully manage Year 2000 issues. The Company does not expect the additional
expenses to materially affect operating results.
The impact of inflation on operating expenses has been moderate in recent years.
OTHER MATTERS
- -------------
The Company receives notices from the EPA from time to time identifying it as a
potentially responsible party ("PRP") under the comprehensive Environmental
Response Compensation and Liability Act for various Superfund sites. Management
does not believe that any involvement of the Company at any of these sites will
have a material impact on its results of operations or financial condition.
Effective January 1, 1997, the Company adopted the provisions of the American
Institute of Certified Public Accountants Statement of Position (SOP) 96-1,
"Environmental Remediation Liabilities." The Adoption of SOP 96-1 did not have a
material effect on the Company's results of operations.
<PAGE> 5
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Roadway Express, Inc. and Subsidiaries
DECEMBER 31
1997 1996
---------------------------------
(dollars in thousands, except per
share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 58,505 $ 36,243
Accounts receivable, net 288,050 260,789
Prepaid expenses and supplies 9,348 15,688
Deferred income taxes 7,009 -
--------------- ---------------
Total current assets 362,912 312,720
Carrier operating property, at cost 1,366,569 1,392,048
Less allowance for depreciation 1,008,485 1,013,954
--------------- ---------------
Net carrier operating property 358,084 378,094
Goodwill 8,747 1,159
Deferred income taxes 14,243 17,651
--------------- ---------------
Total assets $ 743,986 $ 709,624
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 165,536 $ 135,248
Salaries and wages 103,609 110,124
Freight and casualty claims payable 53,657 52,545
--------------- ---------------
Total current liabilities 322,802 297,917
Long-term liabilities:
Casualty claims payable 55,267 66,674
Accrued pension and retiree medical 96,708 96,156
Future equipment repairs 19,773 24,281
--------------- ---------------
Total long-term liabilities 171,748 187,111
Shareholders' equity:
Preferred stock
Authorized--20,000,000 shares
Issued--none - -
Common stock--$.01 par value
Authorized--100,000,000 shares
Issued--20,556,714 shares 206 206
Additional paid-in capital 43,523 43,100
Earnings reinvested in the business 218,552 185,758
Accumulated other comprehensive income (4,276) (4,283)
Unearned portion of restricted stock awards (3,973) -
Treasury shares (162,107 shares in 1997 and
11,949 shares in 1996) (4,596) (185)
--------------- ---------------
Total shareholders' equity 249,436 224,596
--------------- ---------------
Total liabilities and shareholders' equity $ 743,986 $ 709,624
=============== ===============
See accompanying notes.
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED INCOME
Roadway Express, Inc. and Subsidiaries
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
Revenue $ 2,670,944 $ 2,372,718 $ 2,288,844
Operating expenses:
Salaries, wages and benefits 1,699,692 1,544,926 1,545,000
Operating supplies and expenses 462,895 409,900 395,170
Purchased transportation 268,344 193,640 158,494
Operating taxes and licenses 74,777 75,041 74,720
Insurance and claims 60,920 50,856 54,826
Provision for depreciation 49,010 62,681 71,669
Net gain on sale of carrier operating property (5,955) (8,256) (267)
--------------------------------------------------
Total operating expenses 2,609,683 2,328,788 2,299,612
--------------------------------------------------
Operating income (loss) 61,261 43,930 (10,768)
Other income (expense):
Interest expense (2,076) (1,764) (3,098)
Other, net 1,471 304 (9)
--------------------------------------------------
(605) (1,460) (3,107)
--------------------------------------------------
Income (loss) before income taxes 60,656 42,470 (13,875)
Provision (benefit) for income taxes 23,751 20,582 (1,206)
--------------------------------------------------
Net income (loss) $ 36,905 $ 21,888 $ (12,669)
==================================================
Earnings (loss) per share - basic $ 1.83 $ 1.08 $ (0.62)
==================================================
Earnings (loss) per share - diluted $ 1.80 $ 1.07 $ (0.62)
==================================================
See accompanying notes.
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
Roadway Express, Inc. and Subsidiaries
EARNINGS ACCUMULATED UNEARNED
ADDITIONAL INVESTED OTHER PORTION OF
COMMON PAID IN IN THE COMPREHENSIVE RESTRICTED TREASURY
TOTAL STOCK CAPITAL BUSINESS INCOME STOCK AWARDS STOCK
----------------------------------------------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Balance at January 1, 1995 $ 252,941 $ 206 $ 43,100 $ 212,644 $ (3,009)
Net loss (12,669) (12,669)
Foreign currency translation
adjustments (1,607) (1,607)
-------------
TOTAL COMPREHENSIVE LOSS (14,276)
Dividends paid to former (7,500) (7,500)
parent
Transfer of accrued pension
costs, net of taxes (25,523) (25,523)
----------------------------------------------------------------------------------------------
Balance at December 31, 1995 205,642 206 43,100 166,952 (4,616)
YEAR ENDED DECEMBER 31, 1996
Net income 21,888 21,888
Foreign currency translation
adjustments 333 333
-------------
TOTAL COMPREHENSIVE INCOME 22,221
Dividends declared-$.15 per
share (3,082) (3,082)
Purchase of 11,949 shares
for treasury (185) (185)
----------------------------------------------------------------------------------------------
Balance at December 31, 1996 224,596 206 43,100 185,758 (4,283) (185)
YEAR ENDED DECEMBER 31, 1997
Net income 36,905 36,905
Foreign currency translation
adjustments 7 7
-------------
TOTAL COMPREHENSIVE INCOME 36,912
Dividends declared--$.20 per
share (4,111) (4,111)
Purchase of 150,158 shares
for treasury (4,411) (4,411)
Restricted stock award (3,550) 423 (3,973)
activity
----------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ 249,436 $ 206 $ 43,523 $ 218,552 $ (4,276) $ (3,973) $ (4,596)
==============================================================================================
See accompanying notes.
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED CASH FLOWS
Roadway Express, Inc. and Subsidiaries
YEAR ENDED DECEMBER 31
1997 1996 1995
-------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 36,905 $ 21,888 $ (12,669)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 49,558 62,729 71,682
Gain on sale of carrier operating property (5,955) (8,256) (267)
Changes in assets and liabilities:
Accounts receivable (14,760) (33,668) 2,368
Other assets (480) 3,839 (18,521)
Accounts payable and accrued items 12,987 1,826 (29,286)
Long-term liabilities (15,364) (24,398) 25,711
------------------------------------------
Net cash provided by operating activities 62,891 23,960 39,018
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property (36,902) (26,521) (26,385)
Sales of carrier operating property 20,135 18,762 4,388
Purchase of subsidiary (15,000) - -
------------------------------------------
Net cash used in investing activities (31,767) (7,759) (21,997)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (4,103) (3,078) (7,500)
Purchases of treasury shares (4,411) (185) -
Net borrowings - - (10,000)
------------------------------------------
Net cash used in financing activities (8,514) (3,263) (17,500)
Effect of exchange rate changes on cash (348) (36) (208)
------------------------------------------
Net increase (decrease) in cash and cash
equivalents 22,262 12,902 (687)
Cash and cash equivalents at beginning of year 36,243 23,341 24,028
------------------------------------------
Cash and cash equivalents at end of year $ 58,505 $ 36,243 $ 23,341
==========================================
See accompanying notes.
</TABLE>
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Roadway Express, Inc. and Subsidiaries
December 31, 1997
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Roadway Express, Inc. (the "Company") provides long-haul, less-than-truck load
("LTL") freight services in North America and offers services to an additional
66 countries worldwide in a single business segment. Approximately 75% of the
Company's employees are represented by various labor unions, primarily the
International Brotherhood of Teamsters ("IBT"). The current agreement with the
IBT expires on March 31, 1998.
The Company was a wholly-owned subsidiary of Roadway Services, Inc. (the "former
parent") through 1995. The Company was spun-off effective January 2, 1996 in a
distribution of the Company's common stock to existing shareholders of the
former parent at a rate of one share of Company common stock for every two
shares of common stock outstanding of the former parent (the "spin-off").
2. ACCOUNTING POLICIES
Earnings (Loss) Per Share--In 1997, the Financial Accounting Standards Board
issued Statement (SFAS) No. 128, Earnings per Share. SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. All earnings per share amounts for all periods have
been presented, and where appropriate, restated to conform to the SFAS No. 128
requirements.
Principles of Consolidation--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 Equivalents--The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Depreciation--Depreciation of carrier operating property is computed by the
straight-line method based on the useful lives of the assets. The useful life of
structures ranges from 15 to 33 years, and equipment from 3 to 10 years.
Financial Instruments--The carrying value of cash and cash equivalents, accounts
receivable, accounts payable and short-term borrowings approximate their fair
value due to the short-term nature of these instruments.
Goodwill--Goodwill represents costs in excess of net assets of acquired
businesses which are amortized using the straight-line method primarily over a
period of 20 years. The Company evaluates the realizability of goodwill based on
the undiscounted cash flows of the businesses acquired over the remaining
amortization period. Should the review indicate that goodwill is not
recoverable, the Company's carrying value of goodwill would be reduced by the
estimated shortfall of the cash flows. No reduction of goodwill for impairment
has been necessary to date.
9
<PAGE> 10
2. ACCOUNTING POLICIES (CONTINUED)
Casualty Claims Payable--These accruals represent claims for property damage and
public liability and workers' compensation, including estimated amounts for
incurred but not reported claims. Expenses resulting from workers' compensation
claims are included in salaries, wages and benefits in the accompanying
statements of consolidated income.
Revenue Recognition--The Company recognizes revenue as earned on the date of
freight delivery to consignee. Related expenses are recognized as incurred.
Future Equipment Repairs--This accrual represents the estimated costs of
anticipated major future repairs on inter-city tractors purchased prior to
January 1, 1996.
Stock Based Compensation--The Company accounts for stock based compensation in
accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees.
Foreign Currency Translation--Income statement items are translated at average
currency exchange rates. Transaction gains and losses are included in
determining net income. All balance sheet accounts of foreign operations are
translated at the current exchange rate as of the end of the period. The
resulting translation adjustment is recorded as a separate component of
shareholders' equity.
Use of Estimates in the Financial Statements--The preparation of the financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
revenues and expenses during the period, the reported amount of assets and
liabilities, and disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from these estimates.
Late in 1995 an intensive project was initiated to review and settle existing
workers' compensation claims. The effect on net income in 1996 was an increase
of approximately $5,200,000 or $0.25 per share assuming dilution.
Comprehensive Income--Effective in the fourth quarter of 1997, the Company
adopted SFAS No. 130, Reporting Comprehensive Income, which requires, among
other things, that foreign currency translation adjustments be included in
comprehensive income. Foreign currency translation adjustments totaling
$4,276,000 have been included in other comprehensive income for the 1997
statements. Prior year financial statements have been reclassified to conform to
the 1997 statements. The adoption of SFAS No. 130 had no impact on the Company's
net income or shareholders' equity.
Impact of Recently Issued Accounting Standard--In June 1997, the FASB issued
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, which changes the way public companies report segment information
in annual financial statements. SFAS No. 131 is effective for the Company in
1998. Management does not expect the adoption of SFAS No. 131 to have a material
impact on the Company's financial statement disclosures.
Reclassifications--Certain items in the 1996 financial statements have been
reclassified to conform to the 1997 presentation.
10
<PAGE> 11
3. 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 Canadian common carrier for $15,000,000.
The purchase agreement also contains provisions for additional payments of up to
$10,000,000, subject to Reimer achieving defined performance criteria over a
five year period. Any such increases to the purchase price will be recorded as
additional goodwill. Reimer provides truckload and LTL service throughout
Canada, and international service to and from Canada.
The acquisition was paid in 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.
4. EARNINGS PER SHARE
<TABLE>
<CAPTION>
The following table sets forth the computation of basic and diluted earnings per
share:
1997 1996 1995
--------------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C> <C>
Net income (loss) $ 36,905 $ 21,888 $ (12,669)
==================================================
Weighted-average shares for
basic earnings per share 20,210 20,338 20,557
Management incentive stock plan 316 195 -
--------------------------------------------------
Weighted-average shares for
diluted earnings per share 20,526 20,533 20,557
==================================================
Basic earnings (loss) per share $ 1.83 $ 1.08 $ (0.62)
==================================================
Diluted earnings (loss) per share $ 1.80 $ 1.07 $ (0.62)
==================================================
</TABLE>
11
<PAGE> 12
5. CARRIER OPERATING PROPERTY
<TABLE>
<CAPTION>
Carrier operating properties at December 31 consisted of the following:
1997 1996
------------------------------------
(dollars in thousands)
<S> <C> <C>
Land $ 77,350 $ 78,916
Structures 363,409 362,271
Revenue equipment 749,844 778,891
Other operating property 175,966 171,970
------------------------------------
Carrier operating property, at cost 1,366,569 1,392,048
Less allowance for depreciation 1,008,485 1,013,954
------------------------------------
Net carrier operating property $ 358,084 $ 378,094
====================================
</TABLE>
6. ACCOUNTS PAYABLE
<TABLE>
<CAPTION>
Items classified as accounts payable consist of the following:
1997 1996
------------------------------------
(dollars in thousands)
<S> <C> <C>
Trade and other payables $ 74,055 $ 62,843
Drafts outstanding 32,162 18,417
Income taxes payable 9,463 6,571
Deferred tax liabilities - 2,070
Taxes, other than income 25,044 24,226
Multiemployer health, welfare, and pension plans 24,812 21,121
------------------------------------
$ 165,536 $ 135,248
====================================
</TABLE>
12
<PAGE> 13
7. INCOME TAXES
The Company files a consolidated tax return reflecting its operations and those
of its domestic subsidiaries. Prior to the spin-off, the domestic operations of
the Company were included in the consolidated federal income tax return of the
former parent. The provision for income taxes for 1995 reflects an allocation
from the former parent of federal income taxes computed on a separate return
basis.
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Current taxes:
Federal $ 21,523 $ 4,615 $ 4,758
State 3,852 1,382 243
Foreign 1,436 4,613 4,494
----------------------------------------
26,811 10,610 9,495
Deferred taxes:
Federal (2,794) 8,869 (9,649)
State (417) 1,103 (1,103)
Foreign 151 - 51
----------------------------------------
(3,060) 9,972 (10,701)
----------------------------------------
Provision (benefit) for income taxes $ 23,751 $ 20,582 $ (1,206)
========================================
</TABLE>
Income tax payments amounted to $26,435,000 in 1997, $9,197,000 in 1996 and
$11,704,000 in 1995.
<TABLE>
<CAPTION>
Income (loss) before income taxes consists of the following:
1997 1996 1995
----------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Domestic $ 56,400 $ 36,212 $ (23,315)
Foreign 4,256 6,258 9,440
----------------------------------------------
$ 60,656 $ 42,470 $ (13,875)
==============================================
</TABLE>
13
<PAGE> 14
7. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
Significant components of the Company's deferred taxes are as follows:
1997 1996
-------------------------------
(dollars in thousands)
<S> <C> <C>
Deferred tax assets:
Freight and casualty claims $ 39,828 $ 41,962
Retirement benefit liabilities 35,766 37,501
Other 24,591 17,014
Foreign tax credit carry forward 700 5,300
Valuation allowance (700) (5,300)
-------------------------------
Total deferred tax assets 100,185 96,477
Deferred tax liabilities:
Depreciation 50,788 55,278
Multiemployer pension plans 28,145 25,618
-------------------------------
Total deferred tax liabilities 78,933 80,896
-------------------------------
Net deferred tax assets $ 21,252 $ 15,581
===============================
</TABLE>
The valuation allowance decreased during 1997 due to the utilization of the
foreign tax credit carry forward, of which $700,000 remain, expiring in 2001.
Management has determined that it is more likely than not that the remaining
deferred tax assets will be realized.
<TABLE>
<CAPTION>
The effective tax rate (benefit) differs from the federal statutory rate as set
forth in the following reconciliation:
1997 1996 1995
---------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% (35.0%)
State income taxes, net of federal
tax benefit 3.7 3.8 (4.0)
Non-deductible operating costs 4.0 4.9 16.4
Impact of foreign operations (3.1) 5.0 14.1
Other, net (0.4) (0.2) (0.2)
---------------------------------------
Effective tax rate 39.2% 48.5% (8.7%)
=======================================
</TABLE>
8. EMPLOYEE BENEFIT PLANS
MULTIEMPLOYER PLANS
The Company charged to operations $144,702,000 in 1997, $124,358,000 in 1996 and
$111,864,000 in 1995 for contributions to multiemployer pension plans for
employees subject to labor contracts. The Company also charged to operations
$148,951,000 in 1997, $138,558,000 in 1996 and $130,166,000 in 1995 for
contributions to multiemployer plans that provide health and welfare benefits to
employees and certain retirees who are or were subject to labor contracts. These
amounts were determined in accordance with provisions of industry labor
contracts. Under provisions of the Multiemployer Pension
14
<PAGE> 15
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
MULTIEMPLOYER PLANS (CONTINUED)
Plan Act of 1980, total or partial withdrawal from a plan would result in an
obligation to fund a portion of the plan's unfunded vested liability. Management
has no intention of changing operations so as to subject the Company to any
material obligation.
RETIREMENT PLANS
The Company sponsors a defined benefit pension plan for employees not subject to
labor contracts. Pension 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 sufficient to meet the minimum
funding requirements set forth by the Employee Retirement Income Security Act of
1974, plus any additional amounts as the Company may determine to be
appropriate.
<TABLE>
<CAPTION>
Net periodic pension cost includes the following components:
1997 1996
---------------------------------
(dollars in thousands)
<S> <C> <C>
Service cost of benefits earned during the year $ 9,615 $ 9,742
Interest cost on projected benefit obligation 13,430 13,140
Actual return on plan assets (29,779) (20,390)
Net amortization and deferral 12,386 6,180
---------------------------------
Net periodic pension cost $ 5,652 $ 8,672
=================================
</TABLE>
Pension expense amounted to $9,300,000 for 1995 and was allocated from the
former parent's pension plan to the Company based on amounts that would
approximate net pension cost on a stand-alone basis.
15
<PAGE> 16
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
RETIREMENT PLANS (CONTINUED)
<TABLE>
<CAPTION>
As of December 31, 1997, pension plan assets exceeded projected benefit
obligations by $25,290,000. The following table sets forth the funded status and
related accrued pension costs recognized in the consolidated balance sheets:
1997 1996
---------------------------------
(dollars in thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation,
including vested benefits of $121,850 in 1997
and $132,596 in 1996 $ 154,746 $ 150,610
=================================
Projected benefit obligation for service
rendered to date $ 192,386 $ 188,473
Plan assets at fair value, primarily listed stocks,
bonds and U. S. government securities 217,676 182,713
---------------------------------
Plan assets less than (in excess of) projected
benefit obligation (25,290) 5,760
Unrecognized net gain 104,746 75,935
Unrecognized prior service cost (43,396) (47,094)
Unrecognized net asset at transition 15,384 16,744
---------------------------------
Accrued pension cost $ 51,444 $ 51,345
=================================
</TABLE>
In arriving at the pension obligation and net periodic pension costs the
consulting actuary used certain assumptions. For both 1997 and 1996, the assumed
weighted-average discount rate was 7.5%; the rate of increase in future
compensation levels was 3.25%; and the expected long-term rate of return on
assets was 8.0%.
The Company charged to operations $7,290,000 in 1997, $7,138,000 in 1996 and
$9,299,000 in 1995 relating to various employee defined contribution plans.
These plans generally cover employees not subject to labor contracts. Annual
contributions are related to the level of voluntary employee participation.
POST RETIREMENT HEALTHCARE BENEFITS
The Company provides health care benefits to eligible retirees hired prior to
February 1, 1997 who were not subject to labor contracts. The health care plans
contain contributions and cost-sharing features such as deductibles and
coinsurance.
16
<PAGE> 17
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
POST RETIREMENT HEALTHCARE BENEFITS
<TABLE>
<CAPTION>
Net periodic post retirement benefit cost includes the following components:
1997 1996 1995
----------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Service cost of benefits earned during the year $ 1,128 $ 1,168 $ 2,100
Interest cost on accumulated post retirement
benefit obligation 1,748 1,778 2,508
Net amortization and deferral (1,049) (980) (147)
----------------------------------------
Net post retirement benefit cost $ 1,827 $ 1,966 $ 4,461
========================================
</TABLE>
<TABLE>
<CAPTION>
The following table sets forth the amounts recognized in the consolidated
balance sheet:
1997 1996
------------------------------------
(dollars in thousands)
<S> <C> <C>
Accumulated post retirement benefit obligation:
Retirees $ 4,715 $ 5,459
Fully eligible active plan participants 3,169 2,572
Other active plan participants 16,488 16,730
------------------------------------
24,372 24,761
Unrecognized net gain 20,892 20,050
------------------------------------
Accrued post retirement benefit cost $ 45,264 $ 44,811
====================================
</TABLE>
Post retirement benefit payments amounted to $1,375,000 in 1997, $1,421,000 in
1996 and $975,000 in 1995.
At December 31, 1997, the assumed health care cost trend rate is 9.0% for 1998
and is assumed to decrease gradually to 5.0% by 2006 and remain at that level
thereafter. The health care cost trend rate assumption has a significant effect
on the amounts reported. For example, increasing the assumed health care cost
trend rates by one percentage point in each year would increase the accumulated
post retirement benefit obligation as of December 31, 1997 by $3.3 million, and
the aggregate of the service and interest cost components of net periodic post
retirement benefit cost for 1997 by $0.4 million.
The weighted-average discount rate assumed in determining the actuarial present
value of the accumulated post retirement benefit obligation was 7.5% in 1997,
7.5% in 1996 and 7.0% in 1995.
17
<PAGE> 18
9. STOCK PLANS
MANAGEMENT INCENTIVE STOCK PLAN
The Roadway Express, Inc. Management Incentive Stock Plan (the "Stock Plan")
authorizes the granting of up to an aggregate of 1,200,000 shares of common
stock at the discretion of the Compensation Committee to officers and certain
employees of the Company. An award of incentive stock involves the immediate
transfer to a participant of a specific number of shares of the Company's common
stock in consideration of the performance of future services and attainment of
specific performance levels. The participant is immediately entitled to voting,
dividend and certain other ownership rights in the shares. The Compensation
Committee approved grants of 316,000 shares which were awarded in 1996 and are
recorded as the unearned portion of restricted stock awards. The grants,
originally recorded at market price, are amortized to compensation expense over
the period for which the stock is restricted. Compensation expense relating to
the Stock Plan amounted to $728,000 in 1997 and $623,000 in 1996.
OTHER STOCK PLANS
Under the Roadway Express, Inc. Employees' Stock Purchase Plan, all full-time
eligible employees may purchase shares of the Company's common stock up to 10%
of their respective compensation through payroll deductions. The purchase price
under the plan is 85% of the fair market value of the Company's common stock.
The Roadway Express Union Stock Plan provides stock awards to employees subject
to labor contracts who meet the eligibility and performance requirements of
providing a safe, reliably-staffed and injury-free work environment. During 1997
and 1996, shares totaling 192,000 and 123,000, respectively, were allocated for
issuance or grant under these plans, with expense recognized of $1,118,000 and
$456,000, respectively.
The effect of applying the fair value method of accounting for the Company's
stock award plans, in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation, results in net income and earnings per share that are not
materially different from amounts reported.
10. LEASES
The Company leases certain terminals and revenue equipment under noncancellable
operating leases requiring minimum future rentals aggregating $95,360,000
payable as follows: 1998--$16,970,000; 1999--$16,490,000; 2000--$14,580,000;
2001--$13,130,000; 2002--$8,290,000 and thereafter $25,900,000. Rental expense
for operating leases was $14,997,000, $5,400,000, and $5,900,000, for 1997, 1996
and 1995, respectively.
11. CREDIT FACILITIES
At December 31, 1997, the Company had $57,000,000 available through unsecured
credit facilities with certain banks. Borrowings under the agreements generally
bear interest at LIBOR plus .25%, and include covenants that require the Company
to maintain certain financial ratios, including a minimum level of consolidated
net worth. Interest expense not including accruals for income tax purposes
amounted to $451,000 in 1997 and $139,000 in 1996.
18
<PAGE> 19
12. CONTINGENCIES
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.
Effective January 1, 1997, the Company adopted the provisions of the American
Institute of Certified Public Accountants Statement of Position (SOP) 96-1,
"Environmental Remediation Liabilities". The Adoption of SOP 96-1 did not have a
material effect on the Company's results of operations.
The Company has received notices from the Environmental Protection Agency (EPA)
that it has been identified as a potentially responsible party (PRP) under the
Comprehensive Environmental Response Compensation and Liability Act (Superfund)
at certain hazardous waste sites. Such designations are made regardless of the
Company's limited involvement at each site. The claims for remediation have been
asserted against numerous other entities which are believed to be financially
solvent and are expected to fulfill their proportionate share. The Company
accrues for losses associated with environmental remediation obligations when
such losses are probable and reasonably estimable. Based on its investigations,
the Company believes that its obligation with regard to these sites is at most
de minimis and no significant liability exists, although there can be no
assurances in this regard.
13. ALLOCATIONS AND RELATED PARTY TRANSACTIONS
The Company and the former parent have entered into certain agreements to govern
their relationship subsequent to the spin-off. These agreements provide for
allocation of taxes and certain other liabilities and obligations arising from
periods prior to the spin-off.
The Company has contracted with the former parent to receive information systems
services. The Company incurred charges of approximately $30,029,000 in 1997,
$28,424,000 in 1996 and $29,335,000 in 1995 for the information system services
provided by the former parent.
The Company had a short-term borrowing arrangement with the former parent prior
to the spin-off which allowed for borrowings up to $50,000,000 based on the
prime lending rate of a commercial lending institution less 1%. Interest expense
amounted to $1,641,000 in 1995. Interest payments to the former parent were
$8,119,000 in 1995. Interest paid includes amounts in connection with tax
examinations.
19
<PAGE> 20
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of Roadway Express, Inc.
We have audited the accompanying consolidated balance sheets of Roadway Express,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
statements of consolidated income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1997. 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 Roadway Express,
Inc. and subsidiaries at December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Akron, Ohio
January 21, 1998
20
<PAGE> 21
<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA
Roadway Express, Inc. and subsidiaries
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
1997 1996 1997 1996 1997 1996 1997 1996
--------------------------------------------------------------------------------------------------------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $ 590,675 $ 516,963 $ 609,374 $ 532,749 $ 642,195 $540,942 $ 828,700 $782,064
Operating
income $ 10,442 $ 4,942 $ 13,917 $ 7,323 $ 19,018 $ 9,995 $ 17,884 $ 21,670
Net income $ 5,522 $ 2,623 $ 7,767 $ 4,053 $ 10,406 $ 4,580 $ 13,210 $ 10,632
Earnings per
share:
-basic $ 0.27 $ 0.13 $ 0.39 $ 0.20 $ 0.51 $ 0.22 $ 0.66 $ 0.53
-diluted $ 0.27 $ 0.13 $ 0.38 $ 0.20 $ 0.50 $ 0.22 $ 0.65 $ 0.52
Common stock:
-High $ 23 7/8 $ 18 $ 23 1/4 $ 17 3/4 $ 25 $ 16 3/8 $ 29 7/8 $ 19 1/2
-Low $ 16 5/8 $ 10 1/4 $ 16 $ 13 3/8 $ 21 $ 12 1/2 $ 19 11/16 $ 14 1/8
Dividends
declared per $ 0.05 - $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05
share
Average shares
outstanding
-basic 20,232 20,557 20,220 20,384 20,232 20,225 20,167 20,230
-diluted 20,548 20,557 20,536 20,484 20,548 20,541 20,483 20,546
</TABLE>
The Company uses 13 four-week accounting periods with 12 weeks in each of the
first three quarters and 16 weeks in the fourth quarter.
Trading in Roadway Common Stock commenced on January 2, 1996 after the spin-off.
There are approximately 22,000 holders of record of Common Stock. The Company's
stock trades on the NASDAQ Stock Market under the symbol ROAD. The NASDAQ Stock
Market is a highly regulated electronic securities market comprised of competing
Market Makers whose trading is supported by a communications network linking
them to quotation dissemination, trade reporting, and order execution systems.
21
<PAGE> 22
<TABLE>
<CAPTION>
HISTORICAL DATA
Roadway Express, Inc. and Subsidiaries
1997 1996 1995 1994 1993
------------------------------------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenue $2,670,944 $2,372,718 $2,288,844 $2,171,117 $2,323,696
Operating expenses
Salaries, wages and benefits 1,699,692 1,544,926 1,545,000 1,512,235 1,559,462
Operating supplies and expenses 462,895 409,900 395,170 388,268 384,079
Purchased transportation 268,344 193,640 158,494 105,486 82,693
Operating taxes and licenses 74,777 75,041 74,720 74,031 78,769
Insurance and claims 60,920 50,856 54,826 46,913 50,306
Provision for depreciation 49,010 62,681 71,669 75,750 96,126
Net (gain) loss on sale of carrier
operating property (5,955) (8,256) (267) (2,628) (552)
------------------------------------------------------------------------
Total operating expenses 2,609,683 2,328,788 2,299,612 2,200,055 2,250,883
Operating income (loss) 61,261 43,930 (10,768) (28,938) 72,813
Other income (expense) - net (605) (1,460) (3,107) (1,775) (104)
------------------------------------------------------------------------
Income (loss) before income taxes and
cumulative effect of accounting changes 60,656 42,470 (13,875) (30,713) 72,709
Provision (benefit) for income taxes 23,751 20,582 (1,206) (9,268) 31,890
------------------------------------------------------------------------
Income (loss) before cumulative effect of
accounting changes 36,905 21,888 (12,669) (21,445) 40,819
Cumulative effect of accounting changes(1) - - - - (14,691)
========================================================================
Net income (loss) $36,905 $21,888 ($12,669) ($21,445) $26,128
========================================================================
Earnings (loss) per share:(2)
Before cumulative effect of accounting
changes - basic $1.83 $1.08 ($0.62) ($1.04) $1.98
Cumulative effect of accounting changes - - - - (0.71)
------------------------------------------------------------------------
Earnings (loss) per share - basic 1.83 1.08 (0.62) (1.04) 1.27
Earnings (loss) per share - diluted $1.80 $1.07 ($0.62) ($1.04) $1.27
========================================================================
Cash dividends declared per share (3) $0.20 $0.15 - - -
Average number of shares
outstanding - basic 20,210 20,338 20,557 20,557 20,557
Average number of shares
outstanding - diluted 20,526 20,533 20,557 20,557 20,557
Total shareholders' equity $249,436 $224,596 $205,642 $252,941 $298,868
Total assets $743,986 $709,624 $713,607 $745,840 $740,402
Tons of Freight - less-than-truckload 6,717 6,238 6,053 5,598 6,221
- truckload 1,620 1,403 1,444 1,439 1,639
========================================================================
Total 8,337 7,641 7,497 7,037 7,860
========================================================================
Intercity miles 724,683 650,602 642,224 588,499 648,831
Ton miles 10,923,998 9,873,927 9,647,661 8,792,871 9,714,031
- --------------------------------------------------------------------------------------------------------------------
<FN>
Notes: (1) Changes in methods of accounting for income taxes and retiree
medical benefits in 1993.
(2) Earnings per share for the years 1993 through 1995 were
retroactively computed based on the number of shares outstanding
following the spin-off.
(3) Dividends declared for years 1993 though 1995 were paid to former
parent and are not applicable.
</FN>
</TABLE>
22
<PAGE> 1
Exhibit 21
LIST OF SUBSIDIARIES
1. Roadway Express International, Inc., a Delaware corporation
2. TNL-Roadway S.A. de C.V., a Mexican corporation
3. Roadway Express, B.V., a Netherlands corporation
4. Roadway Express (Canada), Inc., an Alberta corporation
5. Rexsis, Inc., an Ohio corporation
6. Transcontinental Lease S.A. de C.V., a Mexican corporation
7. Reimer Express Lines (REL), Ltd., a Canadian corporation
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
To the Board of Directors
Roadway Express, Inc.
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Roadway Express, Inc. of our report dated January 21, 1998, included in the
1997 Annual Report to Shareholders of Roadway Express, Inc.
Our audits also included the financial statement schedule of Roadway Express,
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 consolidated 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 in the Registration Statement
Post-Effective Amendment No. 1 to Form S-8 No. 33-80685 pertaining to the
Roadway Express, Inc. 401(k) Stock Savings Plan and in the Registration
Statement on Form S-8 No. 333-2563 pertaining to the Roadway Express, Inc. 1996
Employee Stock Purchase Plan of our report dated January 21, 1998, 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 Roadway
Express, Inc.
ERNST & YOUNG LLP
Akron, Ohio
March 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROADWAY
EXPRESS, INC AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER, 31 1997 (AUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 58,505
<SECURITIES> 0
<RECEIVABLES> 288,050
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 362,912
<PP&E> 1,366,569
<DEPRECIATION> 1,008,485
<TOTAL-ASSETS> 743,986
<CURRENT-LIABILITIES> 322,802
<BONDS> 0
0
0
<COMMON> 206
<OTHER-SE> 249,230
<TOTAL-LIABILITY-AND-EQUITY> 743,986
<SALES> 0
<TOTAL-REVENUES> 2,670,944
<CGS> 0
<TOTAL-COSTS> 2,609,683
<OTHER-EXPENSES> 605
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 60,656
<INCOME-TAX> 23,751
<INCOME-CONTINUING> 36,905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,905
<EPS-PRIMARY> 1.83
<EPS-DILUTED> 1.80
</TABLE>
<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 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> 1.17
<EPS-DILUTED> 1.15
</TABLE>
<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
0
0
<COMMON> 206
<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> 0.66
<EPS-DILUTED> 0.65
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROADWAY
EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1996 (AUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 36,234
<SECURITIES> 0
<RECEIVABLES> 260,789
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 313,879
<PP&E> 1,392,048
<DEPRECIATION> 1,013,954
<TOTAL-ASSETS> 709,624
<CURRENT-LIABILITIES> 297,917
<BONDS> 0
0
0
<COMMON> 206
<OTHER-SE> 224,390
<TOTAL-LIABILITY-AND-EQUITY> 709,624
<SALES> 0
<TOTAL-REVENUES> 2,372,718
<CGS> 0
<TOTAL-COSTS> 2,328,788
<OTHER-EXPENSES> 1,460
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 42,470
<INCOME-TAX> 20,582
<INCOME-CONTINUING> 21,888
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,888
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.07
</TABLE>
