<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 25, 2000.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ______ to ______.
Commission file number 0-600
ROADWAY EXPRESS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-0492670
- ------------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer Identification No)
incorporation or organization)
1077 Gorge Boulevard Akron, OH 44310
- ------------------------------------ --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (330) 384-1717
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
----- -----
The number of shares of common stock ($.01 par value) outstanding as of April
22, 2000 was 19,371,203.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
March 25, 2000 December 31, 1999
---------------------------------
(in thousands, except share data)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 69,706 $ 80,797
Accounts receivable, net 294,581 299,599
Other current assets 19,851 17,940
----------------------------
Total current assets 384,138 398,336
Carrier operating property, at cost 1,368,416 1,356,533
Less allowance for depreciation 978,214 976,205
----------------------------
Net carrier operating property 390,202 380,328
Goodwill, net 14,421 15,360
Deferred income taxes 41,118 37,384
----------------------------
Total assets $ 829,879 $ 831,408
============================
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 182,181 $ 190,499
Salaries and wages 126,262 120,695
Other current liabilities 53,106 52,165
----------------------------
Total current liabilities 361,549 363,359
Long-term liabilities
Casualty claims payable 45,890 49,077
Future equipment repairs 8,724 9,805
Accrued pension and retiree medical 117,854 118,212
----------------------------
Total long-term liabilities 172,468 177,094
Shareholders' equity
Common Stock - $.01 par value
Authorized - 100,000,000 shares
Issued - 20,556,714 shares 206 206
Other shareholders' equity 295,656 290,749
----------------------------
Total shareholders' equity 295,862 290,955
----------------------------
Total liabilities and shareholders' equity $ 829,879 $ 831,408
============================
</TABLE>
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
1
<PAGE> 3
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Twelve Weeks Ended
(First Quarter)
March 25,2000 March 27, 1999
-------------------------------
(in thousands, except per share data)
<S> <C> <C>
Revenue $ 677,319 $ 605,278
Operating expenses:
Salaries, wages and benefits 422,115 395,330
Operating supplies and expenses 126,624 97,917
Purchased transportation 67,498 58,334
Operating taxes and licenses 19,047 18,138
Insurance and claims expense 12,769 13,102
Provision for depreciation 11,351 9,339
Net loss (gain) on disposal of operating property 569 (354)
-------------------------
Total operating expenses 659,973 591,806
-------------------------
Operating income 17,346 13,472
Other income, net 756 455
-------------------------
Income before income taxes 18,102 13,927
Provision for income taxes 7,712 5,988
-------------------------
Net income $ 10,390 $ 7,939
=========================
Earnings per share - basic $ 0.56 $ 0.42
Earnings per share - diluted $ 0.55 $ 0.42
Average shares outstanding - basic 18,693 18,800
Average shares outstanding - diluted 18,973 18,985
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 25, 2000 March 27, 1999
------------------------------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 10,390 $ 7,939
Depreciation and amortization 11,335 9,283
Other operating adjustments (9,546) (84)
-------------------------
Net cash provided by operating activities 12,179 17,138
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property (22,047) (12,005)
Sales of carrier operating property 253 2,835
-------------------------
Net cash used by investing activities (21,794) (9,170)
CASH FLOWS FROM FINANCING ACTIVITIES
Treasury stock activity - net (508) 151
Dividends paid (968) (967)
-------------------------
Net cash used by financing activities (1,476) (816)
Net (decrease) increase in cash and cash equivalents (11,091) 7,152
Cash and cash equivalents at beginning of period 80,797 60,232
-------------------------
Cash and cash equivalents at end of period $ 69,706 $ 67,384
=========================
</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 twelve weeks ending March 25, 2000 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. 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, 1999.
Note B--Accounting Period
The registrant operates on 13 four-week accounting periods with 12 weeks in each
of the first three quarters and 16 weeks in the fourth quarter.
Note C--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 25, 2000 March 27, 1999
----------------------------------------
(in thousands, except per share data)
<S> <C> <C>
Net income $ 10,390 $ 7,939
========================================
Weighted-average shares for
Basic earnings per share 18,693 18,800
Management incentive stock plans 280 185
----------------------------------------
Weighted-average shares for
Diluted earnings per share 18,973 18,985
========================================
Earnings per share - basic $ 0.56 $ 0.42
Earnings per share - diluted $ 0.55 $ 0.42
</TABLE>
4
<PAGE> 6
Note D--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 25, 2000 March 27, 1999
----------------------------------------
(in thousands)
<S> <C> <C>
Net income $ 10,390 $ 7,939
Foreign currency translation
adjustments (85) 597
----------------------------------------
Comprehensive income $ 10,305 $ 8,536
========================================
</TABLE>
Note E--Contingent Matter
The Company's former parent is currently under examination by the Internal
Revenue Service for tax years 1994 and 1995, years prior to the spin-off of the
Company. The IRS has proposed substantial adjustments for these tax years for
multiemployer pension plan deductions. The IRS is challenging the timing, not
the validity of these deductions. The Company is unable to predict the ultimate
outcome of this matter, however, its former parent intends to vigorously contest
these proposed adjustments.
Under a tax sharing agreement entered into by the Company and its former parent
at the time of the spin-off, the Company is obligated to reimburse the former
parent for any additional taxes and interest which relate to the Company's
business prior to the spin-off. The amount and timing of such payments, if any,
is dependent on the ultimate resolution of the former parent's disputes with the
IRS and the determination of the nature and extent of the obligations under the
tax sharing agreement. The Company has established certain reserves with respect
to these proposed adjustments. There can be no assurance, however, that the
amount or timing of any liability of the Company to the former parent will not
have a material adverse effect on the Company's results of operations and
financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company had net income of $10.4 million or $0.55 per share (diluted), for
the first quarter ended March 25, 2000, compared to net income of $7.9 million,
or $0.42 per share (diluted) in the same quarter last year, an increase of
30.9%. Revenues were $677.3 million in the current quarter, up $72.0 million, or
11.9%, from first quarter 1999.
The Company delivered 1.9 million tons of freight in the current quarter, up
6.9% compared to the prior year quarter. Less-than-truckload (LTL) tons were up
7.4% and truckload tons were up 4.9%. Net revenue per ton was $347.46, up 4.7%
compared to the same quarter last year. The improvement in revenue per ton was
driven by a general rate increase in the fourth quarter of 1999, and a variable
rate fuel surcharge based on the national average price of diesel fuel. The
improvement in revenue per ton was somewhat offset by an increase in the average
shipment size (up 1.3% to 1,132 pounds) and a small decrease in the average
length of haul (down 0.6% to 1,295 miles), both of which tend to put downward
pressure on rate levels. These changes in the shipment characteristics reflect
the strategic direction of the Company relative to freight mix and regional
service offerings. Total operating expenses were up $68.2 million, or 4.3% per
ton, compared to the first quarter of 1999.
Salaries, wages, and benefits increased 6.8%, which was commensurate with the
increased tonnage. Expense increases for direct labor in three key areas were:
linehaul drivers up 8.4%, pickup and delivery drivers up 6.8%, and dock workers
up 9.0%. Retirement and medical benefit costs increased 4.5%. Indirect salary
and wages costs were flat.
5
<PAGE> 7
Operating supplies and expenses were up $28.7 million, or 21.0% per ton,
primarily due to the increase in fuel prices and higher fuel use, which together
caused 40% of the increase. The remainder of the increase was driven by
increases in equipment rental, maintenance, and other direct terminal and
transportation expenses, as well as purchased services for information
technology and outsourced administrative processes.
Purchased transportation expenses were up $9.2 million, or 8.3% per ton.
Increases in three types of purchased transportation services caused this
growth: railroads in certain linehaul operations; the use of owner-operators by
our subsidiaries; and purchased pickup and delivery (P&D) services for our
seamless P&D offering. The portion of linehaul miles utilizing rail was 26.5% in
the first quarter of 2000, versus 26.8% in the first quarter of 1999.
Insurance and claims expense decreased 8.8% per ton, which reflects reductions
in cargo loss and damage costs. Depreciation expense increased $2.0 million over
the first quarter of 1999. This increase reflects recent capital expenditures,
primarily for revenue equipment and data processing equipment and software.
The tax rate for the first quarter of 2000 and 1999 differs from the Federal
statutory rate due to the impact of state taxes, taxes on foreign operations,
and non-deductible operating expenses.
At the end of the quarter, cash and marketable securities amounted to $69.7
million, an $11.1 million decrease from year-end 1999. Cash flow from operations
has been sufficient to meet working capital needs.
The Company is taking actions to improve operating margins, such as cost
controls, sales and marketing initiatives, working with specific customers to
improve the yield on freight, and changing the freight mix as noted above.
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,
labor relations, and the success of the Company's operating plans.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not hold any market risk sensitive instruments for trading
purposes. The Company's primary market risks include fluctuations in interest
rates, currency exchange rates, and fuel prices.
The Company's earnings are affected by changes in interest rates related to its
trailer leases. During 1998, the Company entered into interest rate swap
agreements with major commercial banks to fix the interest rate of its trailer
leases from previous variable interest rates. The value of the leases upon which
the payments are based was not changed. The agreements, which expire from 2002
to 2004, fix the Company's interest costs at rates varying from 6.07% to 7.12%
on leases valued at $38.0 million. An interest rate variation of 1% would have
no material impact on the Company.
Roadway may incur economic losses due to adverse changes in foreign currency
exchange rates, primarily with fluctuations in the Canadian dollar and Mexican
peso. A 10% adverse change in foreign currency exchange rates would have less
than $2 million impact on future cash flows of the Company.
Increases in fuel prices are mitigated by a variable rate fuel surcharge which
was in place during the first quarter of 2000. This fuel surcharge is applicable
when the national average diesel fuel price exceeds $1.10 per gallon. During the
current quarter fuel surcharges ranged from 1.5% to 4.0% of revenue on LTL
shipments.
6
<PAGE> 8
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 22, 2000. Two
matters were voted upon at this meeting: (i) the election of seven members to
the Board of Directors, and (ii) ratification of the appointment of Ernst &
Young LLP as the independent auditors. There were 17,300,783 shares voted of the
19,374,160 shares outstanding and entitled to vote. 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 17,051,840 248,943
John F. Fiedler 17,076,808 223,975
Dale F. Frey 17,052,104 248,679
Phillip J. Meek 17,063,880 236,903
Carl W. Schafer 17,062,265 238,518
Sarah Roush Werner 17,076,169 224,614
Michael W. Wickham 16,958,978 341,805
Appointment of Ernst & Young LLP as
independent auditors 17,117,414 114,968 68,401
</TABLE>
ITEM 5. OTHER INFORMATION
On February 1, 2000, the Board of Directors declared a cash dividend of $0.05
per share on the Company's common stock paid on March 1, 2000, to shareholders
of record on February 15, 2000.
On March 7, 2000, Roadway Express, Inc. and its subsidiary, Reimer Express Lines
Ltd. of Canada, received system-wide ISO 9002 certification. This certification
is a comprehensive, standardized, and highly respected measurement of an
organization's commitment to the delivery of a quality product or service. It is
the only internationally recognized certification of a company's quality
standards.
On April 13, 2000, the Board of Directors declared a cash dividend of $0.05 per
share on the Company's common stock payable on June 1, 2000, to shareholders of
record on May 12, 2000.
Also on April 13, 2000, the Board of directors elected John J. Gasparovic, 42,
to the position of Vice President and General Counsel, effective May 1, 2000.
John M. Glenn, who has served as Roadway Express General Counsel since January
1996, will continue in his capacity as Corporate Secretary and as of-counsel for
the Company.
7
<PAGE> 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No.
- -----------
27 Financial Data Schedule.
List of the Current Reports on Form 8-K which were filed during the current
quarter--none.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ROADWAY EXPRESS, INC.
Date: May 2, 2000 By: /s/ J. Dawson Cunningham
----------- ---------------------------
J. Dawson Cunningham, Executive Vice President,
Chief Financial Officer, and Treasurer
Date: May 2, 2000 By: /s/ John G. Coleman
----------- ----------------------
John G. Coleman, Controller
8
<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 25, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-25-2000
<CASH> 69,706
<SECURITIES> 0
<RECEIVABLES> 294,581
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 384,138
<PP&E> 1,368,416
<DEPRECIATION> 978,214
<TOTAL-ASSETS> 829,879
<CURRENT-LIABILITIES> 361,549
<BONDS> 0
0
0
<COMMON> 206
<OTHER-SE> 295,656
<TOTAL-LIABILITY-AND-EQUITY> 829,879
<SALES> 0
<TOTAL-REVENUES> 677,319
<CGS> 0
<TOTAL-COSTS> 659,973
<OTHER-EXPENSES> (756)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 18,102
<INCOME-TAX> 7,712
<INCOME-CONTINUING> 10,390
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,390
<EPS-BASIC> 0.56
<EPS-DILUTED> 0.55
</TABLE>
