-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PI7nNHMcN9cmf3+tmDK5qucIxxDONZO4VbtGUMFR5w/KqD1vHxGFEDaHsV8BElaw sMTQR9+DXlhQbjkUC2ZABQ== 0000950152-96-000987.txt : 19960315 0000950152-96-000987.hdr.sgml : 19960315 ACCESSION NUMBER: 0000950152-96-000987 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960314 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIBER SYSTEMS INC CENTRAL INDEX KEY: 0000701708 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 341365496 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-11573 FILM NUMBER: 96534942 BUSINESS ADDRESS: STREET 1: 1077 GORGE BLVD STREET 2: P O BOX 88 CITY: AKRON STATE: OH ZIP: 44309 BUSINESS PHONE: 2163848184 FORMER COMPANY: FORMER CONFORMED NAME: ROADWAY SERVICES INC DATE OF NAME CHANGE: 19920703 10-K405 1 CALIBER SYSTEMS, INC. 10-K405 1 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 (fee required) For the fiscal year ended December 31, 1995 ----------------- OR [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 (no fee required) For the transition period from ________________ to _______________ Commission file number 0-10716 ------- CALIBER SYSTEM, INC. ----------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-1365496 ------------------------------- -------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 3560 W. Market Street, P.O. Box 5459, Akron, Ohio 44334-0459 ------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (216) 665-5646 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered None ------------------------------- -------------------------------- Securities registered pursuant to Section 12(g) of the Act: Common Stock-without 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 Regulation S-K (Section 229.405 of this chapter) 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 29, 1996 was $917,790,000. The number of shares of the issuer's common stock outstanding as of February 29, 1996 was 39,104,333. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the registrant's Annual Report to Shareholders for the year ended December 31, 1995 are incorporated by reference into Parts I and II. Certain portions of the registrant's proxy statement for the annual meeting of shareholders to be held on May 8, 1996 are incorporated by reference into Part III. 2 PART I Item 1. - Business. - ------- --------- The registrant, Caliber System, Inc. (formerly Roadway Services, Inc.), is a corporation organized under the laws of the State of Ohio in 1982 and is engaged through its subsidiaries in a broad range of transportation, logistics, and related information services. On December 14, 1995, the shareholders of the registrant approved the spin-off to the registrant's shareholders of approximately 95% of the stock of its wholly-owned subsidiary, Roadway Express, Inc., the registrant's national long haul, less-than-truckload (LTL) motor freight carrier. The spin-off was completed at the beginning of 1996. On November 6, 1995 the registrant announced plans to exit the air freight business served by Roadway Global Air, Inc., its worldwide air freight carrier. Additional information concerning the above transactions is set forth in the discussion contained on pages 4, 5 and 19, and pages 30 through 33 of the registrant's Annual Report to Shareholders for the year ended December 31, 1995, and is incorporated herein by reference. The registrant's remaining operations include a small-package carrier, a superregional freight carrier, a surface expedited carrier and a contract logistics provider. These operations provide services and solutions to meet customer requirements based upon shipment size, distance, time in transit, and distribution needs. The registrant conducts these operations principally through RPS, Inc. ("RPS", formerly Roadway Package System, Inc.), Viking Freight, Inc. ("Viking", formerly Viking Freight System, Inc.), Roberts Express, Inc. ("Roberts") and Caliber Logistics, Inc. ("Caliber Logistics", formerly Roadway Logistics Systems, Inc.). RPS serves customers in the small-package market throughout North America and between North America and Europe, focusing primarily on the business-to-business delivery of packages weighing up to 150 pounds. RPS provides service to 98% of the United States, and, through RPS, Ltd., its subsidiary, to 100% of Canada. RPS service extends to 27 European countries through a partnership with General Parcel Logistics GmbH. RPS also offers service offshore to Puerto Rico, Alaska and Hawaii via a ground/air network operation. RPS provides other specialized transportation services to meet specific customer requirements in the small-package market. RPS conducts its operations primarily with owner-operated vehicles and, in addition, owns over 7,000 trailers. United Parcel Service is the dominant carrier in the portion of the industry in which RPS competes. Competition focuses largely on providing economical pricing and dependable service. Viking is a superregional freight carrier, formed early in 1996 by the consolidation of the businesses of four regional carrier subsidiaries, Central Freight Lines Inc., Coles Express, Inc., Spartan Express, Inc., and Viking Freight System, Inc., with regional coverage across the country. Viking's primary business consists of handling shipments weighing less than 10,000 pounds each. Most of their shipments require less than the full cargo and/or weight capacity of a trailer and are more efficiently transported by sharing trailer capacity with other shipments. Viking operates a dedicated trucking network principally serving its core geographic markets with next-day and second-day freight service. In addition, national service is provided -2- 3 to meet specific customer requirements. With a fleet of over 20,000 trucks, tractors and trailers, Viking serves 91% of the U.S. population in all 50 states and Puerto Rico; it also serves Canada through an arrangement with Interlink Freight Systems, Inc. The freight industry is extremely competitive. High levels of competition and periodic industry overcapacity continue to result in aggressive discounting and narrow margins. Viking competes primarily with other regional freight carriers and, to a lesser extent, national freight and small-package carriers. Roberts is the largest surface expedited carrier in North America, providing critical needs shipping and transportation for emergency shipments. Roberts also provides similar service in Europe. Utilizing over 2,000 vehicles, Roberts delivers shipments within 15 minutes of the promised delivery time in 96% of all cases. In addition to time-critical delivery, Roberts offers White Glove Services(R), requiring specially equipped vehicles and highly trained teams to handle such items as electronics, medical equipment, radioactive materials, pressurized gases, trade show exhibits and works of art. Roberts transports freight through independent owner-operators. Caliber Logistics is a contract logistics provider with expertise across the entire supply chain, from inbound materials management through distribution to the final consumer. Services provided include transportation management, dedicated transportation, warehouse operations and management, just-in-time delivery programs (including light assembly and manufacturing), customer order processing, returnable container management, freight bill payment and auditing and other management services outsourced by its customers. Caliber Logistics operates in a relatively new business area and further vigorous competition is expected from existing competitors and new entrants. At the end of 1995, the registrant and its affiliates employed approximately 25,700 persons (on a full time equivalent basis) and utilized the services of approximately 10,500 independent contractors. All of the registrant's domestic motor carrier subsidiaries are subject to regulation by the United States Department of Transportation. The freight transportation industry is affected directly by the state of the overall economy. Seasonal fluctuations affect tonnage, revenues, and earnings, with the fall of each year being the busiest shipping period and the months of December and January the slowest. Item 2. - Properties. - ------- ----------- Caliber System, Inc. - -------------------- Corporate offices of the registrant and its information systems subsidiary, Caliber Technology, Inc. (formerly Roadway Information Technology, Inc.) are located in Akron, Ohio in leased facilities. Limited additional corporate office space is located in nearby leased facilities. -3- 4 RPS, Inc. - --------- As of December 31, 1995, RPS operated 339 terminals, including 23 hub facilities. Forty-six of the terminals, 19 of which are hub facilities, are owned; and 293 terminals, including the other four hub facilities, are leased, generally for terms of three years or less. Twelve of the terminals, including three hub facilities, are operated by RPS, Ltd., RPS' Canadian subsidiary. The 23 hub facilities are strategically located to cover the geographic area served by RPS. These facilities, averaging 97,500 square feet, range in size from 24,000 to 147,900 square feet. RPS' corporate offices and information and data centers are located in an approximately 350,000 square foot building owned by a subsidiary of the registrant in the Pittsburgh, Pennsylvania area. Viking Freight, Inc. - -------------------- As of December 31, 1995, Viking operated 221 terminals. Eighty-four of the terminals, with 4,450 loading spaces, are owned; and the remaining 137 terminals, with 3,128 loading spaces, are leased. The largest terminal facility, located in Dallas, Texas, has 525 loading spaces and is owned by the company. The company's general offices are located in leased facilities in San Jose, California. Roberts Express, Inc. - ------------------------------------- Roberts' general offices are located in Akron, Ohio in owned facilities. Roberts does not use terminal facilities in its business. Caliber Logistics, Inc. - ----------------------- Caliber Logistics' general offices are located in Hudson, Ohio in leased facilities. Item 3. - Legal Proceedings. - ------- ------------------ The registrant is involved in various lawsuits arising in the ordinary course of its business. In the opinion of management, the outcome of these matters will not have a material adverse effect on the financial condition or results of operations of the registrant. Item 4. - Submission of Matters to a Vote of Security Holders. - ------- ---------------------------------------------------- On December 14, 1995, the registrant held a special meeting of shareholders at 901 Lakeside Ave., Cleveland, Ohio. The purpose of the meeting was to vote on the proposals recommended by the Board of Directors to approve the following: -4- 5 Proposal One: The distribution by the registrant of at least 95% of the outstanding shares of common stock of Roadway Express, Inc. ("REX"), a then wholly-owned subsidiary of the registrant to the shareholders of record on December 29, 1995, on the basis of one share of common stock of REX for each two shares of common stock of the registrant. The results of the vote on Proposal One were as follows:
For Against Abstain Broker-Non-votes ---------- ------- ------ ---------------- 27,232,978 163,328 83,355 1,581,301
Proposal Two: An amendment to the Amended Articles of Incorporation of the registrant changing the name of the registrant to "Caliber System, Inc." The results of the vote on Proposal Two were as follows:
For Against Abstain Broker-Non-votes ---------- ------- ------ ---------------- 28,724,960 252,503 83,499 -0-
Proposal Three: The adoption by REX, then a wholly-owned subsidiary of the registrant, of the REX Management Incentive Stock Plan. The results of the vote on Proposal Three were as follows:
For Against Abstain Broker-Non-votes ---------- ------- ------ ---------------- 27,461,069 895,000 704,857 36
-5- 6 Executive Officers of the Registrant. - -------------------------------------
Name and Age Present Positions and Recent Business Experience - ------------ ------------------------------------------------ Donald C. Brown Vice President-Human Resources since January 1996; previously he served as Vice President-Corporate Support Services during 1995; Assistant Controller from January 1992 through 1994; and Assistant to Vice President and Controller from December 1990 through 1991. Age 40. John P. Chandler Vice President and Treasurer since January 1996; previously he served as Vice President-Administration and Treasurer from January 1994 through 1995; Vice President-Administration during 1993; and President of Roadway Package System, Inc. from July 1990 to December 1992. Age 52. Kathryn W. Dindo Vice President and Controller since January 1996; previously she served as Assistant Controller from August 1994 through 1995; previous to employment with the registrant, she was a partner with Ernst & Young LLP since 1985. Age 46. Douglas G. Duncan Vice President-Corporate Marketing since January 1996; previously he served as Vice President-Special Assignment from September 1995 through December 1995; previously he was Vice President-Sales for Roadway Express, Inc. since January 1991. Age 44. Jonathan T. Pavloff Vice President-Corporate Planning since February 1991; previously he served as President of Caliber Technology, Inc., a registrant owned management information subsidiary, from 1989 to February 1991. Age 46. Daniel J. Sullivan Director since August 1990, President and Chief Executive Officer since August 1995; and Chairman since October 1995; previously he served as President and Chief Operating Officer from January 1994 to August 1995; Senior Vice President and President-National Carrier Group during 1993; Vice President and President-National Carrier Group during 1992; Vice President and Group Executive from July 1990 through 1991; and President of RPS, Inc. through June 1990. Age 49. D. A. Wilson Senior Vice President-Finance and Planning, Secretary and Chief Financial Officer since January 1994; previously he served as Senior Vice President-Finance and Planning and Secretary during 1993 and as Vice President-Finance and Secretary from 1989 through 1992. Age 51.
Officers are elected to serve on a calendar year basis except for the Chairman, President, Treasurer and Secretary, who are elected for an annual term following the annual meeting of shareholders. No family relationships exist between any of the executive officers named above or between any executive officer and any director of the registrant. -6- 7 PART II Item 5. - Market for Registrant's Common Equity and Related Stockholder - ------- ------------------------------------------------------------- Matters. -------- In response to the information called for by this Item, the material set forth under the heading "Common Stock and Dividends" on page 39 of the registrant's Annual Report to Shareholders for the year ended December 31, 1995, is incorporated herein by reference. Item 6. - Selected Financial Data. - ------- ------------------------ In response to the information called for by this Item, the historical data set forth for the years 1995, 1994, 1993, 1992 and 1991, and Notes (1), (2) and (3) on pages 42 and 43 of the registrant's Annual Report to Shareholders for the year ended December 31, 1995, are incorporated herein by reference. Item 7. - Management's Discussion and Analysis of Financial Condition and - ------- --------------------------------------------------------------- Results of Operations. ---------------------- In response to the information called for by this Item, the material set forth on pages 19 through 22 of the registrant's Annual Report to Shareholders for the year ended December 31, 1995, is incorporated herein by reference. Item 8. - Financial Statements and Supplementary Data. - ------- -------------------------------------------- The consolidated financial statements of the registrant and its subsidiaries set forth on pages 24 through 38 and the Report of Independent Auditors on page 23 of the registrant's Annual Report to Shareholders for the year ended December 31, 1995, are incorporated herein by reference. The material set forth under the heading "Summary of Quarterly Results of Operations" on page 40 and 41 of the registrant's Annual Report to Shareholders for the year ended December 31, 1995, is incorporated herein by reference. Item 9. - Changes in and Disagreements with Accountants on Accounting and - ------- --------------------------------------------------------------- Financial Disclosure. --------------------- None. -7- 8 PART III Item 10. - Directors and Executive Officers of the Registrant. - -------- --------------------------------------------------- In response to the information called for by Item 401 of Regulation S-K with respect to directors of the registrant, the material set forth under the heading "Information About Nominees for Directors" in the registrant's proxy statement for the annual meeting of shareholders to be held on May 8, 1996, which will be filed pursuant to Regulation 14A with the Securities and Exchange Commission, is incorporated herein by reference. In response to the information called for by Item 401 of Regulation S-K with respect to executive officers of the registrant, the material set forth under the heading "Executive Officers of the Registrant" in Part I of this Form 10-K Annual Report for the year ended December 31, 1995, is incorporated herein by reference. Item 11. - Executive Compensation. - -------- ----------------------- In response to the information called for by this Item with respect to directors of the registrant, the material set forth under the heading "Director Compensation" in the registrant's proxy statement for the annual meeting of shareholders to be held on May 8, 1996, which will be filed pursuant to Regulation 14A with the Securities and Exchange Commission, is incorporated herein by reference. In response to the information called for by this Item with respect to executive officers of the registrant, the material set forth under the heading "Executive Compensation and Shareholdings by Executive Officers" in the registrant's proxy statement for the annual meeting of shareholders to be held on May 8, 1996, which will be filed pursuant to Regulation 14A with the Securities and Exchange Commission, is incorporated herein by reference. Item 12. - Security Ownership of Certain Beneficial Owners and Management. - -------- --------------------------------------------------------------- In response to the information called for by this Item, the material set forth under the heading "Principal Holders of Company Common Stock on February 29, 1996," including the notes thereto; the material set forth under the heading "Information About Nominees for Directors," including the notes thereto; and the material set forth under the heading "Ownership of Company Common Stock by Management," including the notes thereto, in the registrant's proxy statement for the annual meeting of shareholders to be held on May 8, 1996, which will be filed pursuant to Regulation 14A with the Securities and Exchange Commission, is incorporated herein by reference. Item 13. - Certain Relationships and Related Transactions. - -------- ----------------------------------------------- None. -8- 9 PART IV Item 14. - Exhibits, Financial Statement Schedules, and Reports on Form 8-K. - -------- ----------------------------------------------------------------- (a)(1) and (2) List of Financial Statements and Financial Statement Schedules--The response to this portion of Item 14 is submitted as a separate section of this report. (3) Exhibit Index--The response to this portion of Item 14 is submitted as a separate section of this report. (b) Reports on Form 8-K Filed in the Fourth Quarter of 1995--A report on Form 8-K dated November 17, 1995 was filed under: * Item 2, Acquisition or Disposal of Assets. - Announced plans to exit the air freight business served by its subsidiary Roadway Global Air, Inc. and to sell certain related assets. * Item 7, Financial Statements, Pro Forma Financial Information and Exhibits.- The following pro forma financial information was incorporated by reference to note (b) on page 32 and to pages 33 through 38 of the registrant's Proxy Statement for the Special Meeting of Shareholders held on December 14, 1995. Roadway Services, Inc. Pro Forma Condensed Financial Statements: * Unaudited Pro Forma Condensed Balance Sheet, September 9, 1995 * Unaudited Pro Forma Statement of Consolidated Income, Thirty-Six Weeks Ended September 9, 1995 * Unaudited Pro Forma Statement of Consolidated Income, Year Ended December 31, 1994 * Unaudited Pro Forma Statement of Consolidated Income, Thirty-Six Weeks Ended September 10, 1994 (c) Exhibits--The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statement Schedules--The response to this portion of Item 14 is submitted as a separate section of this report. -9- 10 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. CALIBER SYSTEM, INC. Date March 12, 1996 By /s/ Daniel J. Sullivan -------------- ------------------------------------- Daniel J. Sullivan, Chairman, President and Chief Executive Officer Date March 12, 1996 By /s/ D. A. Wilson -------------- ------------------------------------- D. A. Wilson, Senior Vice President- Finance and Planning, Secretary and Chief Financial Officer Date March 12, 1996 By /s/ Kathryn W. Dindo -------------- ------------------------------------- Kathryn W. Dindo, Vice President and Controller 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. CALIBER SYSTEM, INC. Date March 12, 1996 By /s/ G. B. Beitzel -------------- ------------------------------------- G. B. Beitzel, Director Date March 12, 1996 By /s/ R. A. Chenoweth -------------- ------------------------------------- R. A. Chenoweth, Director Date March 12, 1996 By /s/ Charles R. Longsworth -------------- ------------------------------------- Charles R. Longsworth, Director Date March 12, 1996 By /s/ Daniel J. Sullivan -------------- ------------------------------------- Daniel J. Sullivan, Director Date March 12, 1996 By H. Mitchell Watson, Jr. -------------- ------------------------------------- H. Mitchell Watson, Jr., Director -10- 11 ANNUAL REPORT ON FORM 10-K ITEM 14(a) (1) AND (2), AND 14(d) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE FINANCIAL STATEMENT SCHEDULE YEAR ENDED DECEMBER 31, 1995 CALIBER SYSTEM, INC. AKRON, OHIO -11- 12 FORM 10-K--ITEM 14(a) (1) AND (2) CALIBER SYSTEM, INC. AND SUBSIDIARIES LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE The following consolidated financial statements, included in the registrant's Annual Report to Shareholders for the year ended December 31, 1995, are incorporated by reference in Item 8: Consolidated Balance Sheets--December 31, 1995 and 1994--pages 24 and 25 Statements of Consolidated Income--Years ended December 31, 1995, 1994 and 1993--page 26 Statements of Consolidated Cash Flows--Years ended December 31, 1995, 1994 and 1993--page 27 Statements of Consolidated Shareholders' Equity--Years ended December 31, 1995, 1994 and 1993--pages 28 and 29 Notes to Consolidated Financial Statements--December 31, 1995--pages 30 through 38 The following consolidated financial statement schedule of Caliber System, Inc. and subsidiaries is included in Item 14(d): Schedule II-Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. -12- 13 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS CALIBER SYSTEM, INC. Years Ended December 31, 1995, 1994 and 1993 (dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------ COL.A COL.B COL.C COL.D COL.E - ------------------------------------------------------------------------------------------------------------------------------------ ADDITIONS DESCRIPTION BALANCE AT BEGINNING ------------------------------------ DEDUCTIONS-DESCRIBE BALANCE AT END OF PERIOD (1) (2) OF PERIOD CHARGED TO COST CHARGED TO OTHER AND EXPENSES ACCOUNTS-DESCRIBE - ------------------------------------------------------------------------------------------------------------------------------------ 1995 Reserve related to discontinuance of RGA $ - $64,925 $ - $14,991 (A) $49,934 Allowance for uncollectible accounts $ 9,639 $12,737 $ - $ 9,790 (C) $12,586 1994 Allowance for uncollectible accounts (B) $ 6,891 $ 9,274 $ - $ 6,526 (C) $ 9,639 1993 Allowance for uncollectible accounts (B) $ 4,460 $ 7,225 $ 486 (D) $ 5,280 (C) $ 6,891 (A) Charges against reserve. (B) Restated to reflect the spin-off of Roadway Express, Inc. and exit from the air freight business served by Roadway Global Air, Inc. (RGA). (C) Uncollectible accounts written off, net of recoveries. (D) Additions from business acquisition.
14
EXHIBIT INDEX 3.1 Second Amended Articles of Incorporation of the Registrant. 3.2 Restated Amended Code of Regulations of the Registrant effective May 10, 1989 (filed as Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference). 9 Amended Restated Voting Trust Agreement effective November 1, 1992 (filed as Exhibit 9 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference). 10.1 Distribution Agreement between Roadway Services, Inc. and Roadway Express, Inc. dated December 29, 1995 (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated January 18, 1996, and incorporated herein by reference). 10.2* Roadway Services, Inc. Long-Term Stock Award Incentive Plan (as Amended and Restated December 1992) (filed as Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference). 10.3* Restricted Book Value Shares Plan for Roadway Services, Inc. and Certain Operating Companies (as Amended and Restated as of January 13, 1994) (filed as Exhibit 4(c) to Post-Effective Amendment No. 3 to Registration Statement No. 33-44502, and incorporated herein by reference). 10.4* Roadway Services, Inc. Directors' Deferred Fee Plan (as Amended and Restated as of May 10, 1995) (filed as Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q dated July 19, 1995, and incorporated herein by reference). 10.5* Roadway Services, Inc. 1994 Nonemployee Directors' Stock Plan (filed as Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference). 10.6* Roadway Services, Inc. Retirement Plan for Nonemployee Directors (as Amended as of February 10, 1993) (filed as Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference). 10.7* Written description of Officers' Incentive Compensation Plan. __________________________________ * Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of this report.
15
EXHIBIT INDEX (CONTINUED) 10.8(a)* Roadway Services, Inc. Excess Plan effective January 1, 1993 (filed as Exhibit 10.7(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference). 10.8(b)* Roadway Services, Inc. 401(a)(17) Benefit Plan effective January 1, 1993 (filed as Exhibit 10.7(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference). 10.8(c)* Roadway Services, Inc. Administrative Document for Excess Plan and 401(a)(17) Benefit Plan effective January 1, 1993 (filed as Exhibit 10.7(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference). 10.9(a) Credit Agreement among Roadway Services, Inc., Several Lenders and Chemical Bank dated as of March 31, 1994 (filed as Exhibit 10 to the Registrant's Current Report on Form 8-K dated January 17, 1995, and incorporated herein by reference). 10.9(b) Form of First Amendment and Waiver to Credit Agreement among Roadway Services, Inc., the several banks and other financial institutions parties thereto and Chemical Bank, as agent for the lenders, dated as of September 29, 1995 (filed as Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated January 18, 1996, and incorporated herein by reference). 13 Annual Report to Shareholders for the year ended December 31, 1995. 21 Significant Subsidiaries of the Registrant. 23 Consent of Ernst & Young LLP. 27 Financial Data Schedule. __________________________________ * Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of this report.
EX-3.1 2 EXHIBIT 3.1 1 EXHIBIT 3.1 SECOND AMENDED ARTICLES OF INCORPORATION OF CALIBER SYSTEM, INC. ARTICLE I The name of the Corporation shall be Caliber System, Inc. ARTICLE II The place in Ohio where the prindpal office of the Corporation is to be located is in the City of Akron, County of Summit. ARTICLE III The Corporation is formed for the purpose of engaging in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code. 2 ARTICLE IV The maximum number of shares which the Corporation is authorized to have outstanding is 240,000,000 shares, consisting of 40,000,000 shares of serial preferred stock without par value (hereinafter called Serial Preferred Stock) and 200,000,000 shares of common stock without par value (hereinafter called Common Stock). The express terms of the shares of each class are as follows: Division A Serial Preferred Stock The Serial Preferred Stock may be issued from time to time in one or more series. Subject to the provisions of this Division A, which provisions shall apply to all Serial Preferred Stock, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and to adopt from time to time amendments to these Amended Articles of Incorporation with respect to each such series to fix: the division of such shares into series and the designation and authorized number of shares of each series; the dividends or distribution rate; the dates of payment of dividends or distributions and the dates from which they are cumulative; liquidation price; redemption rights and price; sinking fund requirements; conversion rights; and restrictions on the issuance of shares of any class or series. The holders of Serial Preferred Stock shall be entitled to one vote for each share upon all matters presented to the shareholders; and, except as required by law, the holders of Serial Preferred Stock and the holders of Common Stock shall vote together as one class on all matters. Division B Common Stock The Common Stock shall be subject to the express terms of the Serial Preferred Stock and of any series thereof. The holders of shares of Common Stock shall be entitled to one vote for each share upon all matters presented to the shareholders. No holder of shares of Common Stock shall have a preemptive right to subscribe to additional issues of the stock of this Corporation of any or all classes or series. ARTICLE V These Amended Articles of Incorporation supersede the existing Articles. ARTICLE VI Except as otherwise provided by law, the Articles, or the Regulations of this Corporation, as they may respectively be amended, all of the powers of this Corporation shall be possessed and exercised by the Board of Directors. ARTICLE VII The Corporation may redeem or purchase shares of any kind or class issued by it, to such extent, at such time, in such manner and upon such terms as its Board of Directors shall 3 determine; provided, however, that the Corporation shall not redeem or purchase its own shares if immediately thereafter its assets would be less than its liabilities plus stated capital, or if the Corporation is insolvent, or if there is reasonable ground to believe that by such redemption or purchase it would be rendered insolvent ARTICLE VIII The number of Directors of this Corporation, which shall constitute the whole Board; shall be such as from time to time shall be fixed by, or in the manner provided in, the Code of Regulations, but in no case shall the number be less than three. Directors need not be shareholders of this Corporation. ARTICLE IX A Director of this Corporation shall not be disqualified by such office from dealing or contracting with this Corporation as a vendor, purchaser, employee, agent or otherwise; nor shall any transaction or contract or act of this Corporation be void or voidable or in any way invalidated or affected by reason of the fact that any organization or member of any organization of which such Director is a member or any corporation of which such Director is a shareholder, officer or director is in any way interested in such transaction or contract or act, provided that the fact that such member, such organization, or such corporation is so interested in such transaction or contract or act has been disclosed or is known to the Board of Directors of this Corporation or such members thereof as shall be present at any meeting of such Board of Directors at which action upon any such transaction or contract or act shall be taken; and provided that if such fact is so disclosed or known, no such Director shall be accountable or responsible to this Corporation for, or in respect of, any such transaction or contract or act of this Corporation or for any gains or profits realized by him by reason of the fact that he or any organization of which he is a member, shareholder, officer or director is interested in such transaction or contract or act. ARTICLE X Any provision contained in these Articles of Incorporation may be amended, altered or repealed by the affirmative vote or consent of the holders of shares entitling them to exercise a majority of the voting power of the Corporation or by the affirmative vote of a majority of the holders of shares of every particular class entitled by law or these Articles of Incorporation to vote on such amendment, alteration or repeal, unless a greater vote is mandatory under Article Xl; provided, however, the foregoing shall not prohibit the Directors from amending, altering or repealing any article when permitted by the General Corporation Law of Ohio, as amended. ARTICLE Xl (A) Any proposal or proceeding for the merger or consolidation of this Corporation, or any combination or majority share acquisition of this Corporation, or any sale, lease, or exchange of substantially all of the assets of this Corporation shall not be effected unless a meeting of the shareholders of this Corporation is held to act thereon and the votes of the holders of voting stock of this Corporation outstanding representing not less than 66-2/3% of the votes entitled to vote thereon are voted in favor thereof; provided, however, notwithstanding anything to the contrary herein, the 66-2/3% vote required under this Article Xl shall be changed to the percentage of votes specified in Article XII hereof if, at a meeting of 4 the Board of Directors legally called and held, 87.5% of the Directors shall have voted to recommend approval of the proposal or proceeding to the shareholders or if 100% of the Directors shall have consented thereto in writing in accordance with the General Corporation Law of Ohio. The vote required under this Article XI is in addition to the requirements of the General Corporation Law of Ohio or the Securities Act, as amended (Ohio Revised Code Ch. 1707), the Securities Exchange Act of 1934, as amended, and any Rules or Regulations promulgated by the Securities and Exchange Commission pursuant to that Act, or the law of any other state that may be applicable, and it shall not be affected by the unconstitutionality of any such statute, rule or regulation for any reason. (B) In addition, this Article Xl may not be amended or repealed unless the holders of voting stock of this Corporation outstanding and representing 66-2/3% of the votes entitled to vote thereon are voted in favor of any such action. ARTICLE XII Except when a greater vote may be required pursuant to Article Xl hereof, any proposal or proceeding for the: (1) sale, exchange or other disposition of all, or substantially all, of the assets of the Corporation; (2) merger or consolidation of the Corporation into a domestic corporation; (3) merger or consolidation of the Corporation into a foreign corporation; (4) combination or a majority share acquisition wherein this Corporation is the acquiring corporation; or (5) the voluntary dissolution of this Corporation, with respect to which the General Corporation Law of Ohio would require shareholder authorization, shareholder authorization therefor shall be sufficiently received if the proposal or proceeding in question receives the affirmative vote of not less than a majority of the shares of the entire voting power of the Corporation and of the shares of every class entitled to vote upon the proposal or proceeding taken at a meeting of the shareholders duly called and held for such respective purpose or evidenced without a meeting in accordance with Section 1701.54, as it may be amended. ARTICLE XIII The right to cumulate votes in the election of Directors shall not exist with respect to shares of capital stock of the Corporation. EX-10.7 3 EXHIBIT 10.7 1 Exhibit 10.7 DESCRIPTION OF OFFICERS' INCENTIVE COMPENSATION ----------------------------------------------- Officers are assigned earnings allocation factors related to their responsibility. The amount of incentive compensation depends on the Company's attainment of a standard return on beginning equity. Performance above or below the standard affects incentive compensation accordingly. An officer receives 100% of his allocation in cash unless he elects to take a portion in the form of Restricted Book Value Shares pursuant to an election procedure established by the Company. In December 1995, the Company's Board of Directors excluded from the calculation the expenses recorded in 1995 relative to the spinoff of Roadway Express, Inc., the discontinuance of Roadway Global Air, Inc. and the consolidation of the companies comprising the regional carrier group. Subject to the conditions set forth below, approximately 75% of the cash portion of an officer's allocation is estimated and paid as soon as possible after January 1 of the year following the year for which the incentive compensation was calculated (the Plan Year); and the balance of the cash and any Restricted Book Value Shares are distributed at the Company's convenience after Caliber's independent auditors certify the total amount of incentive compensation payable, but in no case later than March 16 of the year after the Plan Year. Notwithstanding the provision requiring completion of service in the Company's employ for the full Plan year, if an officer is not in the Company's employ on December 31 of the Plan Year, the officer shall be allocated a portion (based upon full weeks of service during the Plan Year) of the amount of his officer's allocation that would otherwise have been earned for a full year performance if any of the events of termination of employment described in Items (a), (b), (c) and (d) below (including any conditions applicable to such events) have occurred during the Plan Year; but the officer is allocated his entire officer's allocation if his employment has been terminated pursuant to the event described in Item (c) below. Any amounts are then paid in the manner described above. The events of termination referred to above in this paragraph are as follows: (a) Death; (b) Disability requiring retirement from gainful employment, provided that the terms of Items (d)(ii) and (iii) below are complied with, unless waived by the Company's Board of Directors; (c) Retirement at or after the Officer's normal retirement date provided the terms of Items (d)(i), (ii) and (iii) below are complied with, unless waived by the Company's Board of Directors; 2 (d) Termination of employment for reasons other than as set forth in the preceding Items (a), (b), (c) or (e) below, provided that, in each such case, termination occurred under such circumstances that the Board of Directors determined that the officer acted at all times in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Company; and upon condition that he execute an agreement obligating him: (i) not to accept employment with or render service in any manner to a competitor of the Company for the period ending with the distribution in full of the officer's allocation; (ii) not to disclose to anyone confidential and secret information that is a competitive asset of the Company, including, without limitation, (1) customer information such as names, addresses, sales histories, purchasing habits, credit status and pricing levels, (2) prospective customer information and lists, (3) product and system specifications, schematics, designs and concepts developed by the Company; (4) personnel data, (5) Company policy and procedural manuals and memoranda, and (6) other confidential information used by the Company to conduct its business; and (iii) to deliver to the Company at the time of his termination of employment all originals and copies of documents of every kind and nature received by him in the course of his employment with the Company which are in his care, custody and control, except only such documents as are necessary to evidence rights and obligations after the date of termination. (e) Termination of employment initiated by the Company for reasons other than as set forth in Items (a), (b) or (c) above, provided that, in each case, such termination occurred under such circumstances that the Board of Directors determined that the officer acted at all times in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and upon condition that he execute an agreement obligating him to comply with at least the provisions of Items (d)(ii) and (iii) above. In the event the officer's employment terminates prior to December 31 of the Plan Year and his termination does not fall within any of the events (including any of the conditions applicable to such events, set forth in Items (a), (b), (c), (d) or (e) above) then the officer does not receive any part of his officer's allocation of incentive compensation for the Plan Year in question. EX-13 4 EXHIBIT 13 1 Exhibit 13 ANNUAL REPORT 1 9 9 5 [CALIBER LOGO] 2 This annual report contains forward-looking statements that are based on current expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those statements, including those factors set forth in "Management's Discussion & Analysis" on pages 19 to 22. 3 CONTENTS [Graphic 1] 2 INTRODUCTION 3 FINANCIAL HIGHLIGHTS 4 FROM THE CHAIRMAN 8 CALIBER AT A GLANCE 10 CALIBER 2000 19 MANAGEMENT'S DISCUSSION & ANALYSIS 24 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES 39 COMMON STOCK AND DIVIDENDS 40 SUMMARY OF QUARTERLY RESULTS OF OPERATIONS 42 HISTORICAL DATA 44 DIRECTORS AND OFFICERS 47 SHAREHOLDER INFORMATION 4 [Graphic 2] [CAPTION] 1995 was a dramatic year -- a time of fundamental and constructive change for Caliber. Within six months, the company spun off Roadway Express, exited the air freight business served by Roadway Global Air, launched the consolidation of its regional carrier group, reorganized its headquarters staff and changed its name from Roadway Services to Caliber System. These initiatives impose substantial short-term costs, but will produce a new company whose continuing operations are proven performers -- well positioned to meet the future challenges of the marketplace. 2 5
Revenue 1995 1994 $2,448,172 $2,327,523 Income from Continuing Operations 1995 1994 $92,409 $98,537 Loss from Discontinued Operations 1995 1994 $(119,614) $(78,977) Net Income (Loss) 1995 1994 $(27,205) $19,560 Earnings Per Share from Continuing Operations 1995 1994 $2.34 $2.50 Loss Per Share from Discontinued Operations 1995 1994 $(3.03) $(2.00) Net Income (Loss) Per Share 1995 1994 $(0.69) $0.50 Cash Dividends Paid Per Share 1995 1994 $1.40 $1.40 Purchases of Property & Equipment 1995 1994 $288,134 $226,559 Debt 1995 1994 $197,500 -- Total Shareholders' Equity 1995 1994 $736,301 $1,015,394
Dollars in thousands, except per share data [BAR CHART] FINANCIAL HIGHLIGHTS $1.1 $1.4 $1.8 $2.3 $2.4 1991 1992 1993 1994 1995 Revenue (in billions) $65.1 $86.5 $91.6 $98.5 $92.4 1991 1992 1993 1994 1995 Income from Continuing Operations (in millions) 3 6 FROM THE CHAIRMAN [Graphic 3] [CAPTION] "At Caliber, we are doing more than merely acknowledging our business challenges: We are attacking them full force..." 1995 was a year of great change for our company. We met a challenging and evolving marketplace head on, effecting several historic initiatives that completely transformed the structure and identity of Roadway Services. We enter 1996 with a new name, Caliber System, Inc., and a clear vision of the future. Caliber conveys high quality, high worth and precision, attributes fundamental to what must be a bold, new image for our organization as we constantly strive to meet the needs of our customers in an industry troubled by overcapacity and the price slashing that results from that condition. At Caliber, we are doing more than merely acknowledging our business challenges: We are attacking them full force -- 1995 was pivotal in that respect. It is appropriate that we review the events of the past several months which were essential in properly positioning our company to successfully compete for the rest of the decade and beyond. In August, we announced the most significant change in our history: the spin-off of Roadway Express (REX). Marketplace contention and competition within the Roadway Services family, along with high costs and disappointing operating results dictated that something dramatic be done. As well, we firmly believed that shareholder value would be enhanced with a separation of the two companies. Complete with performance-based, incentive equity programs for all employees, as well as a plan to significantly downsize the organization in terms of facilities and people, REX was spun off as an independent company to operate unencumbered in a changing marketplace. Two months after we announced the spin-off of REX, we made another difficult decision: to exit the air freight business served by Roadway Global Air (RGA). This action eliminated the on-going losses incurred by RGA, freeing resources for investment in our high-priority businesses. 4 7 We discontinued operations at RGA because the company did not meet our necessary objectives, due to changes in market dynamics since it was formed two years ago. We failed to generate a sufficient mix of next-day business and to sell all of our business at yields that would allow for profitability. We are vigorously pursuing alliances now with other air carriers to make that capability available for customers who want a single-source transportation provider. The third major change to reshape our company was the reorganization of the Roadway Regional Group. We have consolidated the businesses of Viking, Central Freight Lines, Spartan Express and Coles Express into one superregional carrier - -- the new Viking Freight, Inc. This structure will provide several important advantages, such as accelerating the implementation of seamless regional and transcontinental freight services, satisfying an important element in our strategy. Furthermore, it will remove redundant management, administration and facilities, which should dramatically lower costs. The creation of a new, national Viking strategically positions the company to compete head-to-head with major participants in the freight sector. It allows us to leverage a powerful and unified brand identity -- Viking -- in every North American market. While all of this was evolving at the operating companies, we reorganized Caliber's headquarters functions to reflect and support the new organization. The net result was a more than 50% reduction in staff at Akron. We made some difficult but absolutely necessary decisions during this process to improve the efficiency of our company, making us more competitive. These initiatives have left us with a leaner, more flexible and better focused operation, with four business units serving customers across a broad range of transportation and logistics market segments. RPS, Viking, Caliber Logistics (formerly ROLS) and Roberts Express are uniquely positioned as growth organizations to provide a blended product to corporate customers. Caliber's continuing businesses have a proven record of performance and profitability, with total revenues increasing 147% in the past five years, and profitability by 57% during the same time period. We will build on those strengths by continuing to invest in new technologies and ideas, increasing Caliber's advantage in the marketplace. Overall in 1995, the results of continuing operations were hurt by the effect of the sluggish economy, especially as it relates to the retail sector, and the aforementioned excess capacity and aggressive discounting in the industry. Revenue in 1995 was $2.45 billion compared with $2.33 billion in 1994. Income after tax from continuing operations was $92.4 million or $2.34 per share compared with $98.5 million or $2.50 per share for the prior year. Operating margins were 6.4%, only slightly lower than last year's 7.1%. The 1995 results include costs totaling $.18 per share associated with the consolidation of the company's regional carriers and the write-off of goodwill for Coles Express. Income after tax from continuing operations for 1994 reflects a charge of $.35 per share for the settlement with the Internal Revenue Service (IRS) of an employment tax dispute with RPS. REX and RGA have been treated as discontinued operations for financial reporting purposes. Caliber System's net loss then, including the discontinued operations and related costs, was $27.2 million, or $.69 per share in 1995 compared with net income of $19.6 million or $.50 per share in 1994. We look forward to 1996 and the remainder of the decade driven by our Caliber 2000 strategy. Our goal is to be a single-source provider for all of our customers' transportation, logistics and related information needs by providing a blended service offering that crosses the traditional channels of package, freight, logistics and expedited capabilities. At the same time, we will strengthen current service 5 8 channels for customers who prefer to work with our individual carriers for specific services and products. The key to Caliber 2000 is flexibility and ease of use. Critical to our blended service offering is the proper development and application of technology. Customers not only expect us to deliver their shipments on time, they also expect shipment-related information managed in real time. Our companies must be able to tell customers where their shipments are and when they will be delivered, as well as provide information that streamlines both administrative and operating processes. At Caliber, we have plans to leverage technology for the customer and our company internally, truly differentiating our service. The small-package sector is served by RPS, which has grown to $1.3 billion in annual revenues. 1995 was a difficult year for our largest and most profitable operating unit, which recorded a modest 6.3% revenue growth that was severely impacted by declining retail sales. RPS controlled costs but returned an operating profit 2% below 1994 before the effect of the settlement with the IRS. Net income was slightly better than a year ago. With the opening of 33 terminals in 1996, RPS will serve 100% of the U.S. and Canada. As well, RPS will expand its Overnight Ground(SM) product with the opening of three hub facilities, bringing its total of regional consolidation centers to 26. We are expecting RPS to return to double-digit revenue growth and profitability improvement in 1996. The new Viking serves the freight sector, providing regional next- or second-day service on a national basis and is now well positioned to expand transcontinental services to 91% of the U.S. population through its network of 216 terminals. The 1995 results for our Regional Group were disappointing. Revenue fell significantly below plan with only a 3.4% increase over 1994. All of our carriers were negatively affected by the sluggish economy and the intense pricing environment currently being experienced in the industry. 1996 will be another year of investment at Viking. We will continue with the PRISM project, a major reengineering and information technology initiative which began in 1994. As well, we will incur additional costs for the reorganization of our four regional businesses which include conversion of the entire Viking organization to a common operating system, reidentification of equipment to convert to the Viking name and other consolidation costs. Operating losses for 1996 are expected to range from $25 to $30 million. However, following the consolidation, we anticipate improvements in 1997 and later years. Caliber Logistics, our fastest-growing operation, designs, implements and manages logistics solutions that improve our customers' competitive positions worldwide. Caliber Logistics serves the leading companies in our target segments, which include industrial products, automotive, high-technology, health care and retail customers. The company's services include transportation management, dedicated contract carriage, finished product distribution and just-in-time manufacturing support programs. Caliber Logistics continued to outperform expectations with 1995 revenue growth of 46%, while more than doubling its operating profit. We expect similar results in 1996. Roberts Express is the largest surface expedited carrier in North America, specializing in time-definite, door-to-door delivery of truly critical shipments by providing speed, reliability, shipment tracking and integrity, communications and round-the-clock service. Roberts' superior service performance is reflected in a 96% on-time delivery of shipments within 15 minutes of promise. In 1995, Roberts used aggressive cost controls to maintain strong profit margins. However, due to a softer market, revenues were lower than the prior year. With additional technology initiatives planned for 1996 and new market opportunities in the U.S. and Europe, Roberts expects continued growth and profitability in the new year. 6 9 Our former chairman, Joseph M. Clapp, retired at the end of 1995, after his work was done with the spin-off of Roadway Express and the assembling of the new management teams for both organizations. Joe was a giant in our industry and an inspirational leader in our company. His careful direction and ultimate accomplishments allow us to implement the strategy discussed herein. Joe made an unparalleled contribution to Roadway for 28 years for which we shall always be grateful. We believe the Caliber 2000 strategy positions our company for rapid growth in the next several years. The streamlined, more responsive Caliber created in 1995 will allow us to satisfy customer requirements for blended transportation, logistics and information services. With a differentiated product and an improved productivity and cost structure, we are committed to enhancing shareholder value. Caliber indeed has a proper vision, but more importantly, the people, technology and resources to make that vision a reality. We enthusiastically look forward to 1996 as we strive to reach our goal of unquestioned leadership in the transportation and logistics industry. Sincerely, /s/ Daniel J. Sullivan Daniel J. Sullivan Chairman, President and Chief Executive Officer March 1, 1996 [Graphic 4] [CAPTION] "Caliber indeed has a proper vision, but more importantly, the people, technology and resources to make that vision a reality." 7 10 [Graphic 5] PACKAGE RPS, Caliber's flagship operating unit, is the second-largest ground small-package carrier in the U.S. Just 11 years old, RPS has grown into a billion-dollar business through an unmatched combination of technology, information and value-added services. One of the carrier's greatest strengths is its ability to customize innovative small-package transportation solutions to meet each customer's needs. RPS is the industry leader in technology, with the most sophisticated terminal and hub network deploying state-of-the-art material handling and automated sortation equipment. Additionally, RPS provides customers with up-to-the-minute information on every package as a standard service, combining laser scanning technology and on-van communications systems. In 1996, RPS will complete its aggressive domestic expansion and achieve 100% coverage of the U.S. [Graphic 6] FREIGHT Viking Freight now extends to the rest of the U.S. the rich tradition of quality service that the company established as a regional carrier in the West. Its performance for on-time delivery, consistency and responsiveness to changing customer needs is second to none. As a superregional carrier, Viking will focus on offering the same level of speed and precision for both regional and transcontinental shipments, using an independent workforce that is highly adaptable and efficient. Technology adds to the equation, with computer-assisted dispatching and wireless communications providing real-time information exchange and automatic shipment status updates. Viking's premium services and dynamic load planning enable it to transport more freight faster and with less equipment - -- which means a more cost-effective service. 8 11 [Graphic 7] LOGISTICS Caliber Logistics (formerly ROLS) has an unrivaled breadth of experience in designing, implementing and managing a wide range of customized logistics solutions. In a growing, dynamic market, Caliber Logistics is the only contract logistics provider with expertise across the entire supply chain. The company is a single-source supplier with integrated international capability -- an added bonus for global companies whose needs for logistics services span North America and Europe. Caliber Logistics' proven ability, superior speed of implementation and sophisticated information technology made it Microsoft(R)'s choice to coordinate the nationwide launch of Windows 95(R) -- a demanding, time-definite assignment. The company's dedication to responsive service makes it a natural choice for customers with complex logistics requirements. [Graphic 8] EXPEDITED Roberts Express is the largest surface expedited carrier in North America. It is a business without peer in a growing market, offering non-stop, door-to-door delivery of critical shipments anywhere, anytime, guaranteed. No other carrier offers Roberts' time-specific delivery, which ensures shipment arrival within 15 minutes of schedule -- regardless of size or special handling requirements. In addition, no competitor can match Roberts' geographic coverage or its round-the-clock service. Its advanced information technology includes a satellite system that tracks shipments continuously and communicates proactively with customers. From transporting a replacement part for an automobile assembly line to shipping the world's largest bar of soap, Roberts Express has set the standard for speed, reliability and ease of use. 9 12 CALIBER 2000 Caliber System was created amidst sweeping changes in 1995 and officially born in the new year, following Roadway Services' spin-off of Roadway Express and its exit from the air freight business served by Roadway Global Air. But Caliber is more than just a new name for Roadway Services -- it is a new vision that will meet the requirements of customers into the next century. Caliber 2000, the company's strategy, is a commitment to provide blended transportation, logistics and information solutions that encompass multiple service channels: small-package (RPS); regional and national freight (Viking); logistics (Caliber Logistics); and expedited, critical or time-definite shipment (Roberts Express). The initiative also calls for strengthening each operating unit for customers who prefer to work with Caliber's individual carriers for specific services and products. Caliber has the resources, the technology and the expertise to respond to any and all customer needs. SMALL-PACKAGE -- RPS After a decade of rapid growth, RPS is now the second-largest ground small-package carrier in the U.S. RPS serves primarily the business-to-business market, with more than one million deliveries each day. In addition to reaching 100% of the U.S. population in 1996, RPS will continue to grow its other North American and offshore markets, which include Canada, Mexico, Puerto Rico and -- through a joint cooperation agreement with General Parcel Logistics GmbH -- 27 European countries. In 1995, RPS opened 25 new facilities and launched Overnight Ground, a next-day delivery service. Targeting a multi-billion-dollar market, RPS now provides a cost-effective alternative to express package services. RPS doubled its number of hubs providing Overnight Ground, which is now available to approximately 20% of the U.S. population. Continued expansion is expected to increase next-day volume by more than 50% in 1996, with service to most of the U.S. in place by the year 2000. RPS is an industry leader in technology. In 1995, the carrier developed a breakthrough product called MULTICODE(SM), targeted for implementation in the summer of 1996. MULTICODE is a redesign of the current package identification system and can provide more than 300 characters of customer data in a single two-dimensional symbol -- about 25 times the amount contained in RPS's existing linear barcode label. With a simple scan, customers can access a wealth of information such as the shipper, package and purchase order numbers, [GRAPHIC 9] [CAPTION] RPS attributes much of its success to the application and continuous upgrade of information systems that provide customers with better, faster and more accurate package information. With MULTICODE, its redesigned package identification system, shippers will have the ability to include more than 300 characters of shipment information in a single two-dimensional symbol. 10 13 [Graphic 10] [CAPTION] "The name 'Caliber' conveys high quality, high worth and precision -- attributes fundamental to a bold, new corporate image." 11 14 [Graphic 11] [CAPTION] "Customers not only expect carriers to deliver shipments on time, but also expect them to manage shipment-related information in real time." 12 15 consignee address and even package contents -- without ever opening the carton. RPS's technological innovations also include MULTISHIP(SM), a multi-carrier automated shipment processing system. With MULTISHIP, customers can weigh, rate and route their packages and print barcode and address labels electronically -- reducing processing costs and improving efficiency. RPS has installed several thousand of these systems and expects to double their usage in 1996. FREIGHT -- VIKING The new Viking Freight is now structured to serve the "virtual region" -- transporting freight across town, across the state or across the nation, depending on specific customer requirements. Operating a network of 216 strategically located terminals, Viking serves 91% of the U.S. population in all 50 states and Puerto Rico, as well as Canada through an agreement with Interlink Freight Systems, Inc. With coverage and quality combined, Viking's goal is to provide 99% on-time service, an unparalleled accomplishment achieved by the carrier's Western Division year in and year out. A milestone of 1995 was the decision to consolidate Caliber's four regional carriers into Viking Freight. The reorganization will accelerate the implementation of matchless regional and transcontinental freight services. It also positions Viking to rapidly expand its market share. The new Viking structure will improve customer service and reduce costs by eliminating redundancy in management, administration and facilities. Viking will continue to move forward with its PRISM reengineering project -- a comprehensive program developed to optimize and standardize manual and automated processes throughout its network. For example, in 1996 Viking will deploy a common systems platform to link the computers in all of its operations. Other PRISM initiatives will include developing customer-driven, state-of-the-art information systems and improving productivity and customer responsiveness by identifying and implementing best practices in every area of the business. LOGISTICS -- CALIBER LOGISTICS A recognized leader in the high-growth contract logistics industry, Caliber Logistics has expertise across the entire supply chain, from inbound materials management through distribution to the final consumer. Responsible for designing, applying and managing logistics solutions, Caliber Logistics has strong capabilities in industrial engineering, logistics modeling and network design. [GRAPHIC 12] [CAPTION] As a regional carrier in the West, Viking consistently increased market share, regularly earned the Distribution Magazine Quality Award and was named one of the Top 100 Companies to Work for in America. With Caliber 2000, Viking will extend its brand to establish a unified regional and national freight network dedicated to the highest standards of efficiency, quality and service. 13 16 An important element in the company's overall value to customers is improved information exchange. Caliber Logistics' transportation management programs use advanced electronic data interchange to speed communications between customers and their suppliers. Faster communication translates into more cost-effective logistics and competitive advantage. An example of the company's technological leadership is Caliber Logistics' Rite Routing Systems(R) -- a unique, highly automated, centralized traffic management service that directs customers' daily transportation needs to Caliber Logistics' routing control center in Hudson, Ohio. Using customized Rite Routing technology, associates can effectively manage customers' inbound or outbound shipments -- selecting the mode and carrier that will best meet delivery requirements at the lowest possible cost. EXPEDITED -- ROBERTS EXPRESS As North America's largest surface expedited carrier, Roberts Express is a needs-based company, which customers call upon when they have emergency shipments or those that demand special care in handling. Roberts performs to the highest standard by delivering shipments within 15 minutes of the promised delivery time in 96% of all cases. If a shipment should ever be delayed, Roberts communicates proactively with the customer to explain the service interruption while providing an updated delivery time. In addition to time-critical delivery, Roberts offers White Glove Services(R), requiring specially equipped vehicles and highly trained teams to properly handle such items as electronics, medical equipment, radioactive materials, pressurized gases, trade show exhibits and works of art. Thorough security procedures ensure safe, as well as prompt, delivery. White Glove contracts have covered everything from experimental drugs to space shuttle engines. Customers also have access to a strategic blend of ground and air services. Roberts' CharterAirSM is a customized solution that contracts the aircraft best suited to accommodate the customer's requirements for shipment size, weight and speed. On the ground, Roberts works with a fleet of approximately 1,800 vehicles of five different sizes -- from minivans to tractor-trailers. [GRAPHIC 13] [CAPTION] At GM's Lordstown facility, Caliber Logistics' custom-designed solution has helped increase plant capacity, improve quality and lower handling costs. Caliber Logistics uses parts sequencing, hourly just-in-time plant deliveries and self-invoicing to reduce on-site parts inventory and accelerate manufacturing speed. 14 17 [Graphic 14] [CAPTION] "Information services are merely the ante to get in the game. Caliber is committed to applying technology, making its operating units more efficient." 15 18 [Graphic 15] The heart of Roberts' operation is high-tech communications and information exchange. The company's Customer Link(R) system use a satellite-linked computer in each Roberts Express vehicle for continuous, real-time, two-way contact with drivers anywhere in the U.S. and Canada. As a result, Roberts delivers its customers' shipments within 15 minutes of commitment 96% of the time. 16 19 [Graphic 16] [CAPTION] "Caliber 2000 is a comprehensive and coordinated strategy to provide customers competitive advantage and exceptional value." 17 20 [Graphic 17] [CAPTION] "...Caliber is not just a transportation company, but an information company as well." The proper development and application of technology is essential to each of Caliber's operating units and to the Caliber 2000 strategy. In that respect, Caliber is not just a transportation company, but an information company as well. Caliber Technology (formerly Roadway Information Technology) connects the respective service channels and customers, ensuring that all supply chain participants achieve an integrated flow of information. Caliber is distinguished from the competition by its ability to leverage technology to make all service channels more efficient, translating into better service and greater value for the customer. An ambitious corporate plan will realize Caliber's vision by the end of the decade. 1996 promises less structural change than 1995, and continued progress as the company devotes itself to implementing the Caliber 2000 strategy while effectively employing its resources. A first step is positioning Caliber Technology to develop integrated customer information systems. Standardized customer service solutions and sales force automation applications are already in progress. In addition, Caliber is also identifying and implementing "best practices" across all operating units and expanding its corporate marketing and sales function to firmly establish its leadership in providing blended solutions for customers. Caliber will also develop a centralized customer service capability to give customers the ultimate in efficiency, responsiveness and ease of use. With Caliber, one call is all it will take -- no matter which operating unit provides the service. Through its four operating units, Caliber will meet the changing needs of customers who increasingly demand a broader range of transportation, logistics and information services from a single-source provider. The company is committed to making the Caliber 2000 vision a reality. 18 21 ANNUAL REPORT 1995 MANAGEMENT'S DISCUSSION & ANALYSIS Caliber System, Inc. On December 14, 1995, the shareholders of Caliber System, Inc. (formerly Roadway Services, Inc.) approved the spin-off to the company's shareholders of approximately 95% of the stock of its wholly-owned subsidiary, Roadway Express (REX), the company's national long haul, less-than-truckload (LTL) motor freight carrier. In addition, during the last quarter of 1995, the company exited the air freight business served by Roadway Global Air (RGA), a wholly-owned subsidiary. REX and RGA have been reflected as discontinued operations in the accompanying financial statements for 1995 and prior years. Therefore, this discussion and analysis refers to only the continuing businesses of the company. RESULTS OF OPERATIONS -- 1995 VS. 1994 Consolidated revenue in 1995 amounted to a record $2.45 billion, an increase of $120.6 million or 5.2% over 1994, when revenues were positively impacted by the 24-day strike by the Teamsters against most unionized LTL carriers. Revenue increased in 1995 at all operating units except Roberts Express (Roberts). The largest share of the revenue growth was attributable to RPS (formerly Roadway Package System) which reported revenue of $1.29 billion, an increase of $77.2 million or 6.3% over 1994. This increase was a result of growth in package volume and the effects of a rate increase implemented in early 1995. Caliber Logistics (formerly Roadway Logistics Systems) contributed significantly to the revenue increase due to on-going expansion of the business, reporting a 45.9% increase in revenue over 1994. Revenues at Viking Freight (formerly the Roadway Regional Group) amounted to $834.1 million or an increase of 3.4% over 1994. This increase was experienced despite a decline in revenue at Central Freight Lines (Central) of 8.6% due to the impact of intrastate deregulation in Texas. Overall, revenue fell short of plan at Viking as a result of the slowing economy and the aggressive discounting and overcapacity being experienced in the industry. Roberts experienced a revenue decline of 13.2% due principally to the sluggish economy. Operating expenses increased $130 million or 6% over 1994. This increase resulted primarily from higher business volumes at all business units except Roberts, with RPS and Viking reporting operating expense increases of 5.2% and 8.6%, respectively. Operating supplies and expenses at Viking were impacted by costs of $6.6 million associated with the consolidation of the company's regional carriers and the write-off of $3.1 million of goodwill for Coles Express as a result of the adoption of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." As planned, Viking also incurred additional costs related to PRISM, a major reengineering and information technology project that was launched in 1994. Depreciation expense during 1995 at the company's information and technology unit was $6.7 million lower than 1994 due to certain information processing equipment becoming fully depreciated in 1994. Insurance and claims related expenses declined $9.1 million in 1995 primarily as a result of on-going claims management and safety-related programs. Higher than normal operating expenses were incurred in 1994 which included the effect of a settlement with the IRS as described in Note J to the consolidated financial statements. The net after-tax cost of the settlement amounted to $13.7 million or $.35 per share in 1994. Also included in 1994 was a charge to operating expenses of $5.8 million related to federal legislation that required the write-off of the remaining asset values of intrastate operating rights. 19 22 ANNUAL REPORT 1995 MANAGEMENT'S DISCUSSION & ANALYSIS, CONTINUED Operating income amounted to $155.7 million for 1995 compared to $165.1 million in 1994. Overall operating results were negatively impacted by the aggressive discounting of freight rates and the effects of the sluggish economy. The resulting lower-than-planned volumes and higher operating expenses negatively impacted margins in 1995, which declined from 7.1% in 1994 to 6.4% in 1995. RPS was negatively impacted by the economy, particularly in the retail industry, which affected its rate of growth. Despite stringent cost controls, operating income was 2% below 1994 before the charge for the IRS settlement mentioned above. Viking's margins were impacted by the consolidation costs and the write-off of goodwill, previously mentioned, along with PRISM project costs, resulting in an operating loss for Viking in 1995 of $31.5 million compared to an operating profit in 1994 of $9.5 million. Caliber Logistics experienced improved margins over the prior year. Effective cost controls at Roberts allowed it to maintain its margins despite a decline in volume. Other income, net, includes increased interest expense of $3.8 million as a result of borrowings under new debt agreements put into place during 1995. Also included is interest income on intercompany advances to discontinued operations of $8.2 million in 1995 and $3.9 million in 1994 that will not continue in future years. Income taxes were 43% of income before income taxes. This rate exceeded the U.S. federal statutory rate due primarily to state income taxes and non-deductible operating costs. RESULTS OF OPERATIONS -- 1994 VS. 1993 Consolidated revenue in 1994 amounted to $2.33 billion, an increase of $505 million or 27.7% over 1993. Record revenues were reported at all operating units, with business volumes positively impacted in 1994 by the 24-day work stoppage against most unionized LTL carriers. The largest share of the revenue growth was attributable to RPS, which reported revenue of $1.21 billion, an increase of $200 million or 20% over 1993. Viking reported record revenues of $807 million, an increase of 32% over 1993. Approximately $50 million of the increase at Viking resulted from the full-year inclusion in 1994 of Central which was acquired on April 6, 1993. Revenues at Caliber Logistics and Roberts increased 70% and 51%, respectively, over 1993. Operating expenses increased $491.1 million or 29.4% over 1993. This increase resulted primarily from higher business volumes at all business units. Also, as previously mentioned, the inclusion of the IRS settlement, the charge related to the federal legislation which required the write-off of the remaining asset values of intrastate operating rights and the full-year inclusion of Central impacted 1994 results. Operating income amounted to $165.1 million for 1994 compared to $151.2 million in 1993. The operating margin declined to 7.1% from 8.3% in 1993 largely due to the above-mentioned factors. Record earnings in 1994 were recorded by RPS and Roberts, with Caliber Logistics recording its first operating profit since commencing operations in 1989. Operating income declined in 1994 for the regional carriers due to increased expansion losses at Spartan Express and Coles Express and costs related to the launch of PRISM. 20 23 ANNUAL REPORT 1995 MANAGEMENT'S DISCUSSION & ANALYSIS, CONTINUED Income taxes were 42.5% of income before income taxes. This rate exceeded the U.S. federal statutory rate due primarily to state income taxes and non-deductible operating costs. LIQUIDITY AND CAPITAL RESOURCES Early in 1995, the company entered into two new debt agreements, a $300 million Credit Agreement and a $25 million revolving line of credit. Interest on outstanding borrowings is based on variable rates. Borrowings under these agreements were $197.5 million at December 31,1995. Net cash provided by operating activities of $238 million was not sufficient to fund net property additions of $282 million and dividends of $55 million, requiring the company to incur outside borrowings. Although net advances to discontinued operations of $60 million, which were to fund the continuation of RGA, will no longer be a use of funds in future years, funds provided by operations in 1996 will need to be supplemented by additional borrowings to meet the company's planned cash requirements. Capital expenditures are expected to approximate $370 million in 1996, which is anticipated to require an increase in debt to over $300 million by the fall of 1996. The company anticipates that it will be able to arrange financing that, together with cash flows from operations, will be sufficient to fund its projected capital expenditures and provide adequate levels of working capital and funds for payment of dividends and interest. The future amount of cash dividends is subject to the discretion of the Caliber Board of Directors. Future dividend decisions will be based on, and affected by, a number of factors, including future operating results, financial requirements of the company and other factors. The impact of inflation on operating expenses has been moderate in recent years. Most of the company's operating expenses reflect current costs. CURRENT TRENDS AND OUTLOOK All operating units will continue to strengthen their current service channels for customers wanting to work with individual carriers for specific services and products, while the company also directs significant resources to meeting customer requirements for blended transportation, logistics and related information services. Discounting and the effects of overcapacity in the industry are anticipated to continue throughout 1996 in many of the markets served by the company's operations, and it is expected that industry margins will remain under pressure. It is anticipated that net rate levels at RPS will somewhat improve as a result of a rate increase effective February 5, 1996, although discounting will continue. The transportation and related logistics industry serves a dynamically changing marketplace in response to customer demand for information and quality, time-based services. The company's focus will be to expand to meet emerging customer requirements, even at the expense of short-term profits. Management expects that 1996 spending for expansion, in particular at RPS, and for technology and systems development will be substantial. Approximately 50% of the total planned capital expenditures for 1996 will be for technology and automated material handling equipment. At the end of 1995, RPS operated approximately 340 facilities and served 98% of the U.S. population. With the opening of 33 additional facilities in 1996, RPS will serve 100% of the U.S. During 1995, RPS continued to develop Overnight Ground, a next-day delivery service, doubling the number of hubs providing this service. In 1996, continued expansion is expected to increase the volume of this service offering by more than 50%, with service to most of the U.S. population in place by the year 2000. Consistent double-digit growth rates at RPS over the past decade were not realized in 1995 due to a soft retail market, which accounts for a sizable part of its business. Due to expanded service offerings and aggressive cost controls, the company expects RPS to increase revenue and operating income during 1996. 21 24 ANNUAL REPORT 1995 MANAGEMENT'S DISCUSSION & ANALYSIS, CONTINUED The consolidation of the company's four regional carriers into one superregional carrier will continue throughout 1996 requiring substantial expenditures for conversion of the entire organization to a single computer operating system, reidentification of equipment and other consolidation costs. Investments for the PRISM project will also continue. As a result of these investments, operating losses at Viking for 1996 are expected to range from $25 to $30 million. However, improvements are expected in 1997 following the completion of the consolidation. The foregoing outlook contains forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from current expectations due to a number of factors, including general economic conditions; competitive factors and pricing pressures; shifts in market demand; the performance and needs of industries served by the company's businesses; actual future costs of operating expenses such as fuel and related taxes, self-insurance claims and employee wages and benefits; actual costs of continuing investments in technology; the actual costs and effects of the continuing consolidation of the regional carriers; and the risks described from time to time in the company's SEC reports. 22 25 ANNUAL REPORT 1995 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS TO THE BOARD OF DIRECTORS CALIBER SYSTEM, INC. We have audited the accompanying consolidated balance sheets of Caliber System, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related statements of consolidated income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. 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 Caliber System, Inc. and subsidiaries at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. /S/ ERNST & YOUNG LLP Akron, Ohio January 23, 1996 23 26 ANNUAL REPORT 1995 CONSOLIDATED BALANCE SHEETS: ASSETS Caliber System, Inc.
December 31 Dollars in thousands 1995 1994 - -------------------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents $ 34,908 $ 14,780 Accounts receivable, net of allowance for uncollectible accounts 273,124 259,031 Prepaid expenses and supplies 66,630 43,584 Deferred income taxes - Note C 27,562 29,142 -------------------------------------------------------------------------------------- Total Current Assets 402,224 346,537 Property and Equipment - at cost Land 111,453 106,899 Structures 377,002 309,736 Equipment 986,479 787,092 -------------------------------------------------------------------------------------- 1,474,934 1,203,727 Less allowances for depreciation 617,587 497,659 -------------------------------------------------------------------------------------- Total Property and Equipment 857,347 706,068 Other Assets Cost in excess of net assets of businesses acquired, net of amortization 89,761 95,720 Net non-current assets of discontinued operations - Note B -- 318,916 Other assets 39,938 42,605 -------------------------------------------------------------------------------------- Total Other Assets 129,699 457,241 -------------------------------------------------------------------------------------- Total Assets $1,389,270 $1,509,846 --------------------------------------------------------------------------------------
24 27 ANNUAL REPORT 1995 CONSOLIDATED BALANCE SHEETS: LIABILITIES AND SHAREHOLDERS' EQUITY CALIBER SYSTEM, INC.
December 31 Dollars in thousands 1995 1994 - --------------------------------------------------------------------------------------------------------- Current Liabilities Accounts payable - Note F $ 219,406 $ 206,129 Salaries and wages 74,790 83,637 Self-insurance accruals 49,992 46,957 Dividend payable 13,671 13,653 Short-term debt - Note E 197,500 -- Net current liabilities of discontinued operations - Note B -- 59,384 --------------------------------------------------------------------------------------- Total Current Liabilities 555,359 409,760 Long-Term Liabilities Self-insurance accruals - Note D 39,832 38,797 Deferred income taxes - Note C 57,778 45,895 --------------------------------------------------------------------------------------- Total Long-Term Liabilities 97,610 84,692 Shareholders' Equity Serial preferred stock - without par value: Authorized - 40,000,000 shares Issued - none Common stock - without par value: Authorized - 200,000,000 shares Issued - 40,896,414 shares 39,898 39,898 Additional capital 51,322 51,153 Earnings reinvested in the business 696,803 978,459 --------------------------------------------------------------------------------------- 788,023 1,069,510 Less cost of common stock in treasury (1995 - 1,394,000 shares, 1994 - 1,477,000 shares) 51,722 54,116 --------------------------------------------------------------------------------------- Total Shareholders' Equity 736,301 1,015,394 --------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $1,389,270 $1,509,846 ---------------------------------------------------------------------------------------
See notes to consolidated financial statements. 25 28 ANNUAL REPORT 1995 STATEMENTS OF CONSOLIDATED INCOME CALIBER SYSTEM, INC.
Years ended December 31 Dollars in thousands, except per share data 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------- Revenue $ 2,448,172 $ 2,327,523 $ 1,822,490 Operating Expenses Salaries, wages and benefits 937,972 876,694 677,226 Purchased transportation 694,275 700,016 527,118 Operating supplies and expenses 428,980 362,219 288,089 Operating taxes and licenses 48,282 43,818 36,624 Insurance and claims 50,552 59,644 44,685 Provision for depreciation 132,383 120,029 97,565 ----------------------------------------------------------------------------------------------- Total Operating Expenses 2,292,444 2,162,420 1,671,307 ----------------------------------------------------------------------------------------------- Operating Income 155,728 165,103 151,183 Other income, net - Note F 6,407 6,377 10,486 ----------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 162,135 171,480 161,669 Provision for income taxes - Note C 69,726 72,943 70,064 ----------------------------------------------------------------------------------------------- Income from continuing operations 92,409 98,537 91,605 Discontinued Operations - Note B Income (loss) from discontinued operations, net of income taxes (69,950) (78,977) 27,730 Loss on discontinuance, net of income taxes (49,664) -- -- ----------------------------------------------------------------------------------------------- Income (Loss) from Discontinued Operations (119,614) (78,977) 27,730 ----------------------------------------------------------------------------------------------- Income (loss) before cumulative effect of accounting changes (27,205) 19,560 119,335 Cumulative effect of accounting changes - Note A Continuing operations -- -- (3,440) Discontinued operations -- -- (14,691) ----------------------------------------------------------------------------------------------- -- -- (18,131) ----------------------------------------------------------------------------------------------- Net Income (Loss) $ (27,205) $ 19,560 $ 101,204 ----------------------------------------------------------------------------------------------- Earnings (Loss) Per Share Income from continuing operations $ 2.34 $ 2.50 $ 2.32 Discontinued operations: Income (loss) from discontinued operations (1.77) (2.00) 0.70 Loss on discontinuance (1.26) -- -- ----------------------------------------------------------------------------------------------- (3.03) (2.00) 0.70 Cumulative effect of accounting changes - Note A Continuing operations -- -- (0.09) Discontinued operations -- -- (0.37) ----------------------------------------------------------------------------------------------- -- -- (0.46) ----------------------------------------------------------------------------------------------- Net Income (Loss) $ (0.69) $ 0.50 $ 2.56 -----------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 26 29 ANNUAL REPORT 1995 STATEMENTS OF CONSOLIDATED CASH FLOWS Caliber System, Inc.
Years ended December 31 Dollars in thousands 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Income from continuing operations $ 92,409 $ 98,537 $ 88,165 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Cumulative effect of accounting changes -- -- 3,440 Depreciation and amortization 138,342 122,859 100,318 (Gain) loss on sales of property and equipment (1,643) 1,452 1,086 Issuance of treasury shares for stock plans 2,563 3,303 2,564 Changes in assets and liabilities, net of effects from business acquisition and discontinued operations: Accounts receivable (14,093) (56,850) (43,380) Accounts payable and accrued items 7,465 111,993 13,900 Other assets and liabilities 12,910 2,555 (13,462) - ----------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 237,953 283,849 152,631 Cash Flows from Investing Activities Purchases of property and equipment (288,134) (226,559) (146,374) Sales of property and equipment 6,115 2,733 4,323 Net advances to discontinued operations (60,000) (57,000) (48,000) Business acquisition, net of cash acquired -- -- (98,349) - ----------------------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (342,019) (280,826) (288,400) Cash Flows from Financing Activities Dividends paid (54,688) (54,613) (52,903) Dividends received from discontinued operations 7,500 12,000 27,000 Increase in short-term debt, net 197,500 -- -- Purchases of common stock for treasury -- -- (24,231) Repayment of borrowings of acquired business - Note I -- -- (32,116) - ----------------------------------------------------------------------------------------------------------------- Net Cash Provided by (used in) Financing Activities 150,312 (42,613) (82,250) - ----------------------------------------------------------------------------------------------------------------- Cash flows provided by (used in) continuing operations 46,246 (39,590) (218,019) Cash flows (used in) provided by discontinued operations (26,118) (40,764) 32,022 - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 20,128 (80,354) (185,997) Cash and cash equivalents at beginning of year 14,780 95,134 281,131 - ----------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 34,908 $ 14,780 $ 95,134 - -----------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 27 30 ANNUAL REPORT 1995 STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY CALIBER SYSTEM, INC.
Common Stock Amounts in thousands Shares Amount - --------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1993 40,896 $ 39,898 Net income -- -- Cash dividends declared ($1.37 1/2 per share) -- -- Net shares issued in connection with stock plans -- -- Common stock purchased for treasury -- -- - --------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1993 40,896 39,898 Net income -- -- Cash dividends declared ($1.40 per share) -- -- Net shares issued in connection with stock plans -- -- - --------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1994 40,896 39,898 Net loss -- -- Cash dividends declared ($1.40 per share) -- -- Distribution of Roadway Express - Note B -- -- Net shares issued in connection with stock plans -- -- - --------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1995 40,896 $ 39,898 - ---------------------------------------------------------------------------------------------------------------------
28 31 ANNUAL REPORT 1995
Earnings Total Additional Reinvested in Shareholders' Capital the Business Treasury Stock Equity Amounts in thousands Shares Amount - ----------------------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1993 $ 50,392 $ 966,061 1,163 $ (34,991) $1,021,360 Net income -- 101,204 -- -- 101,204 Cash dividends declared ($1.37 1/2 per share) -- (53,746) -- -- (53,746) Net shares issued in connection with stock plans 54 -- (86) 2,510 2,564 Common stock purchased for treasury -- -- 450 (24,231) (24,231) - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1993 50,446 1,013,519 1,527 (56,712) 1,047,151 Net income -- 19,560 -- -- 19,560 Cash dividends declared ($1.40 per share) -- (54,620) -- -- (54,620) Net shares issued in connection with stock plans 707 -- (50) 2,596 3,303 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1994 51,153 978,459 1,477 (54,116) 1,015,394 Net loss -- (27,205) -- -- (27,205) Cash dividends declared ($1.40 per share) -- (54,706) -- -- (54,706) Distribution of Roadway Express - Note B -- (199,745) -- -- (199,745) Net shares issued in connection with stock plans 169 -- (83) 2,394 2,563 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1995 $ 51,322 $ 696,803 1,394 $ (51,722) $ 736,301 - -----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 29 32 ANNUAL REPORT 1995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Caliber System, Inc. December 31, 1995 On December 14, 1995, the shareholders of Caliber System, Inc. (formerly Roadway Services, Inc.) approved the spin-off to the company's shareholders of Roadway Express, Inc. (REX), the company's national long haul, LTL motor freight carrier. In addition, on November 6, 1995, the company announced plans to exit the air freight business served by Roadway Global Air, Inc. (RGA), the company's worldwide air freight carrier. REX and RGA have been reflected as discontinued operations in the accompanying financial statements. Accordingly, unless otherwise stated, the accompanying notes for all years presented exclude these entities. NOTE A -- ACCOUNTING POLICIES Operations and Principles of Consolidation The company's operations are exclusively in the transportation industry. Operations, listed in relative significance based on consolidated revenues, include a small-package carrier, a superregional freight carrier, a surface expedited carrier and a contract logistics provider. The company serves customers in most industries, with a concentration in the retail and manufacturing industries. 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 and Cash Equivalents The company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Property and Equipment Depreciation of property and equipment is computed by the straight line method based on the useful lives of the assets. Interest costs for the construction of certain long-term assets are capitalized and amortized over the useful life of the related asset. The company capitalized interest costs of $5.4 million during 1995. Cost in Excess of Net Assets of Businesses Acquired These costs ($108.9 million) are being amortized on the straight line method over a 40-year period from the respective acquisition dates of the acquired businesses. The carrying value of cost in excess of net assets of businesses acquired ("goodwill") is reviewed to determine if an impairment is suggested. If this review indicates that goodwill may not be recoverable, the company's carrying value of the goodwill would be reduced. Self-Insurance Accruals The company is self-insured up to certain levels for health care, workers' compensation, property damage, public liability and cargo claims. Accruals are estimated each year based on historical claim costs and include estimated amounts for incurred but not reported claims. Expenses resulting from workers' compensation and health care claims are included in salaries, wages and benefits in the statement of consolidated income. Revenue The company recognizes revenue as earned on the date freight is delivered. Income Taxes The company uses the liability method of accounting for income taxes. Deferred income taxes are provided for temporary differences between financial statement and income tax reporting using tax rates scheduled to be in effect at the time the items giving rise to the deferred taxes reverse. 30 33 ANNUAL REPORT 1995 NOTE A -- ACCOUNTING POLICIES, CONTINUED Earnings Per Share Earnings per share is computed on the average number of shares of common stock outstanding during each year: 39,459,000 in 1995, 39,392,000 in 1994 and 39,521,000 in 1993. Use of Estimates in the Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts. Although actual results could differ from these estimates, significant adjustments to these estimates historically have not been required. Changes in Accounting Principles During 1995, the company adopted the provisions of Statement of Financial Accounting Standards No. (SFAS) 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement requires impairment losses to be recognized for long-lived assets used in continuing operations when indicators of impairment are present and the assets' carrying value is not anticipated to be recovered through future operations or sale. The adoption of SFAS 121 resulted in a charge to 1995 income from continuing operations of $3.1 million or $.08 per share. Effective January 1, 1993, the company adopted the provisions of SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS 109, "Accounting for Income Taxes." The net cumulative effect of adopting SFAS 106 and SFAS 109 resulted in a one-time charge to 1993 earnings of $3.4 million or $.09 per share. Reclassifications Certain amounts presented in prior years' financial statements have been reclassified to conform with the 1995 presentation. NOTE B -- DISCONTINUED OPERATIONS On January 2, 1996, the company distributed to shareholders 95% of the issued and outstanding shares of common stock of REX, its wholly-owned subsidiary. This distribution, which is intended to be tax-free for federal income tax purposes to the company and its shareholders, was made to holders of record of the company's common stock at the close of business on December 29, 1995. Shareholders received one share of REX common stock for every two shares of company common stock held on that date. The consolidated financial statements reflect the distribution as of December 31, 1995, which resulted in a reduction of the company's shareholders' equity of $199.7 million, representing the book value of the net assets distributed. Accordingly, the company's balance sheet at December 31, 1995 does not include the net assets of REX. The company's remaining investment in REX amounted to $10.5 million and is included in other assets. On November 6, 1995, the company announced plans to exit the air freight business served by its wholly-owned subsidiary, RGA. All domestic air freight operations of RGA ceased November 20, 1995. All international air freight operations ceased prior to year end. The company has recorded a pre-tax charge of $64.9 million related to the discontinuance of this business. At December 31, 1995, RGA's liabilities approximated its assets. 31 34 ANNUAL REPORT 1995 NOTE B -- DISCONTINUED OPERATIONS, CONTINUED Income (loss) from discontinued operations for 1995, 1994 and 1993 consists of the following:
Dollars in thousands REX RGA Total - --------------------------------------------------------------------------------------------------------------------- Year ended December 31, 1995 Revenue $ 2,288,845 $ 99,425 $2,388,270 Operating expenses 2,299,615 180,557 2,480,172 --------------------------------------------------------------------------------------------------- Operating loss (10,770) (81,132) (91,902) Other expense, net (3,103) (6,571) (9,674) --------------------------------------------------------------------------------------------------- Loss before income taxes (13,873) (87,703) (101,576) Income tax benefit (1,206) (30,420) (31,626) --------------------------------------------------------------------------------------------------- Loss from Discontinued Operations $ (12,667) $ (57,283) $ (69,950) --------------------------------------------------------------------------------------------------- Year ended December 31, 1994 Revenue $ 2,171,117 $ 73,364 $2,244,481 Operating expenses 2,200,055 157,792 2,357,847 --------------------------------------------------------------------------------------------------- Operating loss (28,938) (84,428) (113,366) Other expense, net (1,775) (3,901) (5,676) --------------------------------------------------------------------------------------------------- Loss before income taxes (30,713) (88,329) (119,042) Income tax benefit (9,268) (30,797) (40,065) --------------------------------------------------------------------------------------------------- Loss from Discontinued Operations $ (21,445) $ (57,532) $ (78,977) --------------------------------------------------------------------------------------------------- Year ended December 31, 1993 Revenue $ 2,323,696 $ 9,754 $2,333,450 Operating expenses 2,250,883 29,339 2,280,222 --------------------------------------------------------------------------------------------------- Operating income (loss) 72,813 (19,585) 53,228 Other expense, net (104) (388) (492) --------------------------------------------------------------------------------------------------- Income (loss) before income taxes 72,709 (19,973) 52,736 Income tax provision (benefit) 31,890 (6,884) 25,006 --------------------------------------------------------------------------------------------------- Income (loss) before cumulative effect of accounting changes 40,819 (13,089) 27,730 Net cumulative effect of accounting changes (SFAS 106 and SFAS 109) (14,691) -- (14,691) --------------------------------------------------------------------------------------------------- Income (Loss) from Discontinued Operations $ 26,128 $ (13,089) $ 13,039 ---------------------------------------------------------------------------------------------------
32 35 ANNUAL REPORT 1995 NOTE B -- DISCONTINUED OPERATIONS, CONTINUED The loss on discontinuance for 1995 consists of the following:
Dollars in thousands - --------------------------------------------------------------------------------------------------------------------- Loss on Discontinuance Before Income Taxes Shut-down costs related to the discontinuance of RGA $ 64,925 Transaction costs for the spin-off of REX 7,518 --------------------------------------------------------------------------------------------------- 72,443 Income tax benefit (22,779) --------------------------------------------------------------------------------------------------- Loss on Discontinuance $ 49,664 ---------------------------------------------------------------------------------------------------
Summarized balance sheet data for REX and RGA at December 31, 1994 follows:
Dollars in thousands REX RGA Total - --------------------------------------------------------------------------------------------------------------------- Current Assets Accounts receivable, net $ 229,488 $ 14,041 $ 243,529 Other 42,186 3,376 45,562 --------------------------------------------------------------------------------------------------- Total Current Assets 271,674 17,417 289,091 Property and equipment, net 474,166 29,483 503,649 Other assets 12,764 -- 12,764 --------------------------------------------------------------------------------------------------- Total Non-current Assets 486,930 29,483 516,413 Current Liabilities Accounts payable 118,525 13,487 132,012 Salaries and wages 133,976 2,134 136,110 Other 77,113 3,240 80,353 --------------------------------------------------------------------------------------------------- Total Current Liabilities 329,614 18,861 348,475 Long-term liabilities 193,838 3,659 197,497 --------------------------------------------------------------------------------------------------- Net Assets of Discontinued Operations $ 235,152 $ 24,380 $ 259,532 ---------------------------------------------------------------------------------------------------
33 36 ANNUAL REPORT 1995 NOTE C -- INCOME TAXES Significant components of the company's deferred tax liabilities and assets consist of the following:
Dollars in thousands 1995 1994 - --------------------------------------------------------------------------------------------------------------------- Deferred Tax Liabilities Depreciation $ 57,465 $ 48,256 Pensions 27,107 17,981 --------------------------------------------------------------------------------------------------- Total Deferred Tax Liabilities 84,572 66,237 Deferred Tax Assets Self-insurance accruals 37,592 33,687 Other employee benefits 12,006 10,661 Other 4,758 5,136 --------------------------------------------------------------------------------------------------- Total Deferred Tax Assets 54,356 49,484 --------------------------------------------------------------------------------------------------- Net Deferred Tax Liabilities $ 30,216 $ 16,753 ---------------------------------------------------------------------------------------------------
The provision for income taxes consists of the following:
Dollars in thousands 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------- Taxes Currently Payable Federal $ 55,436 $ 75,871 $ 55,883 State and local 6,424 11,360 13,309 --------------------------------------------------------------------------------------------------- 61,860 87,231 69,192 Deferred Taxes (Credits) Federal 7,059 (12,823) 997 State and local 807 (1,465) (125) --------------------------------------------------------------------------------------------------- 7,866 (14,288) 872 --------------------------------------------------------------------------------------------------- Provision for Income Taxes $ 69,726 $ 72,943 $ 70,064 ---------------------------------------------------------------------------------------------------
Income tax payments, including amounts for discontinued operations, totaled $41 million in 1995, $60.2 million in 1994 and $101.2 million in 1993. The effective tax rate differs from the federal statutory rate as set forth in the following reconciliation:
1995 1994 1993 --------------------------------------------------------------------------------------------------- Federal statutory tax rate 35.0% 35.0% 35.0% State and local income taxes, net of federal tax benefit 2.9 3.8 5.3 Non-deductible operating costs 2.8 1.8 1.1 Other, net 2.3 1.9 1.9 --------------------------------------------------------------------------------------------------- Effective Tax Rate 43.0% 42.5% 43.3% ---------------------------------------------------------------------------------------------------
34 37 ANNUAL REPORT 1995 NOTE D -- EMPLOYEE BENEFIT PLANS Retirement Plans The company has defined benefit pension plans covering certain employees. The 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 to the plans sufficient to meet the minimum funding requirements, plus such additional amounts the company may determine to be appropriate. In connection with the distribution of REX, the assets and liabilities attributable to pensions for REX active employees will be transferred from one of the company's pension plans to a new plan established by REX. The effect of this transfer, which is reflected for both years in the following tables, was to increase the company's prepaid pension cost by approximately $41.8 million in 1995. The following table reconciles the funded status of the company's pension plans to prepaid pension cost which is reflected in other assets in the consolidated balance sheet.
Dollars in thousands 1995 1994 - --------------------------------------------------------------------------------------------------------------------- Actuarial Present Value of Benefit Obligations Accumulated benefit obligation, including vested benefits of $177,369 in 1995 and $156,362 in 1994 $ 201,995 $ 174,896 --------------------------------------------------------------------------------------------------- Projected benefit obligation for service rendered to date $ 231,774 $ 216,762 Plan assets at fair value, primarily listed stocks, bonds and U.S. government securities 305,378 249,190 --------------------------------------------------------------------------------------------------- Plan assets greater than projected benefit obligation 73,604 32,428 Unrecognized net (gain) loss (46,019) 7,939 Unrecognized prior service cost 20,102 21,912 Unrecognized net asset at transition (18,269) (19,674) --------------------------------------------------------------------------------------------------- Prepaid Pension Cost $ 29,418 $ 42,605 ---------------------------------------------------------------------------------------------------
Net pension cost of company plans consists of the following:
Dollars in thousands 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------- Service cost of benefits earned during the year $ 12,685 $ 11,845 $ 9,400 Interest cost on projected benefit obligation 8,495 7,450 6,090 Actual return on plan assets (10,615) (5,517) (4,869) Net amortization and deferral 3,367 274 679 --------------------------------------------------------------------------------------------------- Net Pension Cost $ 13,932 $ 14,052 $ 11,300 ---------------------------------------------------------------------------------------------------
The weighted average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7% and 4% in 1995 and in 1994. The expected long-term rate of return on assets was 7.75%. The company contributed $14.6 million in 1995, $14 million in 1994 and $13.4 million in 1993 to various employee defined contribution plans which invest primarily in company stock. Annual contributions are related to company profitability and employees' salaries and wages. 35 38 ANNUAL REPORT 1995 NOTE D -- EMPLOYEE BENEFIT PLANS, CONTINUED Postretirement Health Care Benefits The company provides health care benefits to certain retirees who contribute to the costs of these benefits. The following table sets forth the amounts reflected in long-term self-insurance accruals in the consolidated balance sheet:
Dollars in thousands 1995 1994 - --------------------------------------------------------------------------------------------------------------------- Accumulated Postretirement Benefit Obligation Retirees $ (4,590) $ (4,390) Fully eligible active plan participants (4,131) (3,942) Other active plan participants (9,910) (9,465) --------------------------------------------------------------------------------------------------- (18,631) (17,797) Unrecognized net (gain) loss (1,545) (666) --------------------------------------------------------------------------------------------------- Accrued Postretirement Benefit Cost $ (20,176) $ (18,463) ---------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost consists of the following:
Dollars in thousands 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------- Service cost of benefits earned during the year $ 1,523 $ 1,263 $ 1,326 Interest cost on accumulated postretirement benefit obligation 1,302 1,202 952 Net amortization and deferral (22) 10 -- --------------------------------------------------------------------------------------------------- Net Postretirement Benefit Cost $ 2,803 $ 2,475 $ 2,278 ---------------------------------------------------------------------------------------------------
At December 31, 1995 and 1994, the assumed health care cost trend rate was 12% for 1996 and 1995 and is assumed to decrease gradually to 6.25% by 2006 and remain at that level thereafter. Increasing the assumed health care cost trend rates by one percentage point in each year would not have a material effect. The weighted average discount rate used in determining the actuarial present value of the accumulated postretirement benefit obligation was 7% at December 31, 1995 and 1994. NOTE E -- DEBT At December 31, 1995, short-term debt consisted of borrowings of $185 million under an unsecured $300 million Credit Agreement with several banks which expires in March 1999 and $12.5 million under an unsecured $25 million revolving line of credit with a bank which expires in March 1996. Interest on outstanding borrowings is based on various rates as defined in the agreements. These agreements, which were entered into by the company during the first quarter of 1995, contain restrictions on secured borrowings and require the company to maintain a minimum level of consolidated net worth. The weighted average interest rate on all borrowings during 1995 was 6.44%. Due to the short-term nature of the debt, the outstanding balance approximates fair value. Total interest payments amounted to $8.5 million during 1995. 36 39 ANNUAL REPORT 1995 NOTE F -- OTHER FINANCIAL DATA Accounts payable consists of the following:
Dollars in thousands 1995 1994 - --------------------------------------------------------------------------------------------------------------------- Trade and other payables $ 177,015 $ 146,017 Drafts outstanding 27,854 48,007 Taxes, other than income 14,537 12,105 --------------------------------------------------------------------------------------------------- Total Accounts Payable $ 219,406 $ 206,129 ---------------------------------------------------------------------------------------------------
Other income and (expense) consists of the following:
Dollars in thousands 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------- Interest income $ 982 $ 2,357 $ 9,189 Interest income from discontinued operations 8,227 3,899 425 Interest expense (3,800) -- -- Other, net 998 121 872 --------------------------------------------------------------------------------------------------- Other Income, net $ 6,407 $ 6,377 $ 10,486 ---------------------------------------------------------------------------------------------------
Interest income from discontinued operations represents intercompany interest charged to REX and RGA for borrowings directly attributable to these entities. NOTE G -- SHAREHOLDERS' EQUITY The Board of Directors is authorized to issue shares of serial preferred stock in one or more series and to fix the terms and conditions of the preferred shares, including: dividend rates and payment dates; liquidation prices; redemption rights and prices; sinking fund requirements; conversion rights; and restrictions on issuance. Voting rights would be on the same basis as outstanding common shares. NOTE H -- OPERATING LEASES The company leases various facilities and equipment under noncancelable operating leases requiring minimum future rentals aggregating $75.7 million payable as follows: 1996 -- $24.5 million, 1997 -- $17.1 million, 1998 -- $10.7 million, 1999 -- $6.4 million, 2000 -- $4 million and thereafter $13 million. Rental expense for operating leases was $46 million in 1995, $36.4 million in 1994 and $32.6 million in 1993. 37 40 ANNUAL REPORT 1995 NOTE I -- ACQUISITION On April 6, 1993, the company acquired Central Freight Lines Inc., Texas' largest regional carrier, for cash at a total cost of $102.1 million. The acquisition of Central was accounted for as a purchase, and the cost in excess of net assets acquired was $16.4 million. The earnings of Central are included in the accompanying statements of consolidated income since acquisition and are not material in relation to consolidated operations. NOTE J -- COMMITMENTS AND CONTINGENCIES During 1994, the company reached agreement with the Internal Revenue Service and the Department of Justice related to the classification of certain drivers at the company's small-package carrier for the years 1985 through 1993 for employment tax purposes. The net after-tax cost of the settlement amounted to $13.7 million or $.35 per share and is included in the 1994 statement of consolidated income. 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. 38 41 ANNUAL REPORT 1995 COMMON STOCK AND DIVIDENDS Caliber System, Inc. Caliber System, Inc. common stock began trading on the New York Stock Exchange under the symbol "CBB" on November 29, 1995. Previously, the company was listed on The Nasdaq Stock Market under the trading symbol "ROAD." Caliber System is included in the Dow Jones Transportation Average, a major barometer of the U.S. transportation industry. Cash dividends declared per share totaled $1.40 in 1995 and in 1994. The number of holders of record of the company's common stock at December 31, 1995 was approximately 7,700. The high and low prices at which Caliber System common stock traded for each calendar quarter in 1995 and 1994 are shown below.
Dividends Declared Price Range Per Share 1995 High 1995 Low 1994 High 1994 Low 1995 1994 - ------------------------------------------------------------------------------------------------------------------ March 31 $ 56 3/4 $ 47 3/4 $ 74 1/4 $ 59 1/2 $ .35 $ .35 June 30 49 1/2 42 72 62 1/2 .35 .35 September 30 56 1/2 45 1/2 64 1/2 53 3/4 .35 .35 December 31 53 1/2 42 11/16 58 46 .35 .35 - ------------------------------------------------------------------------------------------------------------------ $ 1.40 $ 1.40 - ------------------------------------------------------------------------------------------------------------------
The company offers a dividend reinvestment plan through its stock transfer agent, KeyCorp Shareholder Services, Inc. The plan provides an opportunity for registered shareholders of the company to automatically purchase additional shares of Caliber System common stock with dividends. Further information regarding the plan is on the inside back cover of this report. An information booklet which provides answers to questions regarding the ownership and transfer of stock is also available to shareholders of the company. Copies may be obtained by contacting the company at the address or telephone number listed on the inside back cover of this report. 39 42 ANNUAL REPORT 1995 SUMMARY OF QUARTERLY RESULTS OF OPERATIONS Caliber System, Inc.
Income from Loss from Operating Continuing Discontinued Dollars in thousands, except per share data Revenue Income Operations Operations - --------------------------------------------------------------------------------------------------------------------- Quarter Ended 1995 (a) March 25 $ 543,469 $ 33,472 $ 21,530 $ (15,679) June 17 550,779 31,739 22,357 (24,359) September 9 552,741 33,029 22,218 (19,890) December 31 (b) 801,183 57,488 26,304 (59,686) ---------------------------------------------------------------------------------------------------- $ 2,448,172 $ 155,728 $ 92,409 $ (119,614) ---------------------------------------------------------------------------------------------------- Quarter Ended 1994 (a,c) March 26 $ 477,576 $ 33,479 $ 20,526 $ (4,614) June 18 550,175 48,039 30,152 (51,878) September 10 531,153 35,316 20,565 (8,916) December 31 (d) 768,619 48,269 27,294 (13,569) ---------------------------------------------------------------------------------------------------- $ 2,327,523 $ 165,103 $ 98,537 $ (78,977) ----------------------------------------------------------------------------------------------------
(a) Quarterly amounts have been restated to reflect the spin-off of Roadway Express and the exit from the air freight business served by Roadway Global Air as described in Note B to the consolidated financial statements. (b) Includes costs associated with the consolidation of the company's regional carriers and adoption of SFAS 121 as described in Management's Discussion & Analysis. (c) Includes effect of Teamsters strike as described in Management's Discussion & Analysis. (d) Includes effect of IRS settlement as described in Note J to the consolidated financial statements. The company uses a 13 four-week period calendar with 12 weeks in each of the first three quarters and 16 weeks in the fourth quarter. 40 43 ANNUAL REPORT 1995
Income from Loss from Continuing Discontinued Net Net Operations Operations Income (Loss) Average Shares Dollars in thousands, except per share data Income (Loss) Per Share Per Share Per Share Outstanding - ------------------------------------------------------------------------------------------------------------------------------------ Quarter Ended 1995 (a) March 25 $ 5,851 $ 0.54 $ (0.39) $ 0.15 39,434,000 June 17 (2,002) 0.57 (0.62) (0.05) 39,467,000 September 9 2,328 0.56 (0.50) 0.06 39,470,000 December 31 (b) (33,382) 0.67 (1.52) (0.85) 39,463,000 ---------------------------------------------------------------------------------------------------------------- $ (27,205) $ 2.34 $ (3.03) $ (0.69) ---------------------------------------------------------------------------------------------------------------- Quarter Ended 1994 (a,c) March 26 $ 15,912 $ 0.52 $ (0.12) $ 0.40 39,372,000 June 18 (21,726) 0.76 (1.31) (0.55) 39,395,000 September 10 11,649 0.53 (0.23) 0.30 39,402,000 December 31 (d) 13,725 0.69 (0.34) 0.35 39,399,000 ---------------------------------------------------------------------------------------------------------------- $ 19,560 $ 2.50 $ (2.00) $ 0.50 ----------------------------------------------------------------------------------------------------------------
(a) Quarterly amounts have been restated to reflect the spin-off of Roadway Express and the exit from the air freight business served by Roadway Global Air as described in Note B to the consolidated financial statements. (b) Includes costs associated with the consolidation of the company's regional carriers and adoption of SFAS 121 as described in Management's Discussion & Analysis. (c) Includes effect of Teamsters strike as described in Management's Discussion & Analysis. (d) Includes effect of IRS settlement as described in Note J to the consolidated financial statements. The company uses a 13 four-week period calendar with 12 weeks in each of the first three quarters and 16 weeks in the fourth quarter. 41 44 ANNUAL REPORT 1995 HISTORICAL DATA Caliber System, Inc.
Amounts in thousands, except per share data 1995 1994 1993 1992 - --------------------------------------------------------------------------------------------------------------------- Revenue $ 2,448,172 $ 2,327,523 $1,822,490 $1,391,898 Operating Expenses Salaries, wages and benefits 937,972 876,694 677,226 473,711 Purchased transportation 694,275 700,016 527,118 432,634 Operating supplies and expenses 428,980 362,219 288,089 217,626 Operating taxes and licenses 48,282 43,818 36,624 23,330 Insurance and claims 50,552 59,644 44,685 31,667 Provision for depreciation 132,383 120,029 97,565 74,599 - --------------------------------------------------------------------------------------------------------------------- Total Operating Expenses 2,292,444 2,162,420 1,671,307 1,253,567 - --------------------------------------------------------------------------------------------------------------------- Operating Income (Loss) 155,728 165,103 151,183 138,331 Other income, net 6,407 6,377 10,486 11,886 - --------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes 162,135 171,480 161,669 150,217 Income tax provision (benefit) 69,726 72,943 70,064 63,722 - --------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations 92,409 98,537 91,605 86,495 Discontinued Operations (1) Income (loss) from discontinued operations, net of income taxes (69,950) (78,977) 27,730 60,912 Loss on discontinuance, net of income taxes (49,664) -- -- -- - --------------------------------------------------------------------------------------------------------------------- Income (Loss) from Discontinued Operations (119,614) (78,977) 27,730 60,912 - --------------------------------------------------------------------------------------------------------------------- Income (loss) before cumulative effect of accounting changes (27,205) 19,560 119,335 147,407 Cumulative effect of accounting changes (2) Continuing operations -- -- (3,440) -- Discontinued operations -- -- (14,691) -- - --------------------------------------------------------------------------------------------------------------------- -- -- (18,131) -- - --------------------------------------------------------------------------------------------------------------------- Net Income (Loss) $ (27,205) $ 19,560 $ 101,204 $ 147,407 - --------------------------------------------------------------------------------------------------------------------- Earnings (Loss) Per Share (3) Income (loss) from continuing operations $ 2.34 $ 2.50 $ 2.32 $ 2.19 Discontinued operations: Income (loss) from discontinued operations (1.77) (2.00) 0.70 1.54 Loss on discontinuance (1.26) -- -- -- - --------------------------------------------------------------------------------------------------------------------- (3.03) (2.00) 0.70 1.54 Cumulative effect of accounting changes Continuing operations -- -- (0.09) -- Discontinued operations -- -- (0.37) -- - --------------------------------------------------------------------------------------------------------------------- -- -- (0.46) -- - --------------------------------------------------------------------------------------------------------------------- Net Income (Loss) $ (0.69) $ 0.50 $ 2.56 $ 3.73 - --------------------------------------------------------------------------------------------------------------------- Cash dividends declared per share $ 1.40 $ 1.40 $ 1.37 1/2 $ 1.27 1/2 Average number of shares of common stock outstanding 39,459 39,392 39,521 39,521 Total Shareholders' Equity $ 736,301 $ 1,015,394 $1,047,151 $1,021,360 Total Assets $ 1,389,270 $ 1,509,846 $1,466,509 $1,350,072
(1) Includes Roadway Express and Roadway Global Air as described in Note B to the consolidated financial statements. (2) Changes in methods of accounting for income taxes and retiree medical benefits in 1993. (3) Earnings per share are computed on the average number of shares of common stock outstanding during each year. 42 45 ANNUAL REPORT 1995 HISTORICAL DATA, CONTINUED Caliber Systems, Inc.
Amounts in thousands, except per share data 1991 1990 1989 1988 1987 - --------------------------------------------------------------------------------------------------------------------------------- Revenue $ 1,114,179 $ 989,609 $ 818,803 $ 482,135 $ 310,965 Operating Expenses Salaries, wages and benefits 387,247 342,724 294,628 147,295 85,631 Purchased transportation 357,818 314,659 258,163 207,766 150,309 Operating supplies and expenses 164,727 151,136 131,883 83,330 64,548 Operating taxes and licenses 18,925 15,808 14,353 6,830 4,470 Insurance and claims 24,667 26,545 23,672 18,591 11,319 Provision for depreciation 57,712 47,132 37,720 21,095 15,694 - --------------------------------------------------------------------------------------------------------------------------------- Total Operating Expenses 1,011,096 898,004 760,419 484,907 331,971 - --------------------------------------------------------------------------------------------------------------------------------- Operating Income (Loss) 103,083 91,605 58,384 (2,772) (21,006) Other income, net 7,793 5,520 5,253 10,207 9,285 - --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes 110,876 97,125 63,637 7,435 (11,721) Income tax provision (benefit) 45,761 38,452 24,225 2,806 (5,262) - --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations 65,115 58,673 39,412 4,629 (6,459) Discontinued Operations (1) Income (loss) from discontinued operations, net of income taxes 62,208 60,407 56,109 75,610 56,967 Loss on discontinuance, net of income taxes -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Income (Loss) from Discontinued Operations 62,208 60,407 56,109 75,610 56,967 - --------------------------------------------------------------------------------------------------------------------------------- Income (loss) before cumulative effect of accounting changes 127,323 119,080 95,521 80,239 50,508 Cumulative effect of accounting changes (2) Continuing operations -- -- -- -- -- Discontinued operations -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net Income (Loss) $ 127,323 $ 119,080 $ 95,521 $ 80,239 $ 50,508 - --------------------------------------------------------------------------------------------------------------------------------- Earnings (Loss) Per Share (3) Income (loss) from continuing operations $ 1.67 $ 1.50 $ 1.01 $ 0.12 $ (0.16) Discontinued operations: Income (loss) from discontinued operations 1.60 1.55 1.43 1.88 1.42 Loss on discontinuance -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- 1.60 1.55 1.43 1.88 1.42 Cumulative effect of accounting changes Continuing operations -- -- -- -- -- Discontinued operations -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net Income (Loss) $ 3.27 $ 3.05 $ 2.44 $ 2.00 $ 1.26 - -------------------------------------------------------------------------------------------------------------------------------- Cash dividends declared per share $ 1.17 1/2 $ 1.10 $ 1.10 $ 1.10 $ 1.10 Average number of shares of common stock outstanding 38,906 39,023 39,154 40,120 40,217 Total Shareholders' Equity $ 890,256 $ 777,795 $ 718,292 $ 670,389 $ 661,661 Total Assets $ 1,200,434 $ 1,006,019 $ 908,065 $ 828,107 $ 600,302
HISTORICAL DATA, CONTINUED Caliber Systems, Inc. Amounts in thousands, except per share data 1986 1985 - ---------------------------------------------------------------------------------- Revenue $ 213,854 $ 147,922 Operating Expenses Salaries, wages and benefits 63,165 45,287 Purchased transportation 108,526 84,315 Operating supplies and expenses 47,004 23,551 Operating taxes and licenses 4,158 5,258 Insurance and claims 9,474 4,655 Provision for depreciation 12,124 8,169 - ---------------------------------------------------------------------------------- Total Operating Expenses 244,451 171,235 - ---------------------------------------------------------------------------------- Operating Income (Loss) (30,597) (23,313) Other income, net 10,477 4,878 - ----------------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes (20,120) (18,435) Income tax provision (benefit) (10,736) (10,305) - ---------------------------------------------------------------------------------- Income (loss) from continuing operations (9,384) (8,130) Discontinued Operations (1) Income (loss) from discontinued operations, net of income taxes 85,850 84,041 Loss on discontinuance, net of income taxes -- -- - ---------------------------------------------------------------------------------- Income (Loss) from Discontinued Operations 85,850 84,041 - ---------------------------------------------------------------------------------- Income (loss) before cumulative effect of accounting changes 76,466 75,911 Cumulative effect of accounting changes (2) Continuing operations -- -- Discontinued operations -- -- - ---------------------------------------------------------------------------------- -- -- - ---------------------------------------------------------------------------------- Net Income (Loss) $ 76,466 $ 75,911 - ---------------------------------------------------------------------------------- Earnings (Loss) Per Share (3) Income (Loss) from continuing operations $ (0.23) $ (0.20) Discontinued operations: Income (loss) from discontinued operations 2.14 2.10 Loss on discontinuance -- -- - ---------------------------------------------------------------------------------- 2.14 2.10 Cumulative effect of accounting changes Continuing operations -- -- Discontinued operations -- -- - ---------------------------------------------------------------------------------- -- -- - ---------------------------------------------------------------------------------- Net Income (Loss) $ 1.91 $ 1.90 - ---------------------------------------------------------------------------------- Cash dividends declared per share $ 1.10 $ 1.02 1/2 Average number of shares of common stock outstanding 40,114 39,931 Total Shareholders' Equity $ 654,235 $ 613,836 Total Assets $ 590,028 $ 586,494
Start-ups and Acquisitions March 1985 RPS operations commenced August 1988 Viking Freight acquired September 1989 Caliber Logistics operations commenced June 1992 Coles Express acquired April 1993 Central Freight Lines acquired 43 46 ANNUAL REPORT 1995 DIRECTORS & OFFICERS Caliber System, Inc. Board of Directors George B. Beitzel 1,3,4,5 Retired Senior Vice President and Director International Business Machines Corporation Armonk, New York R. A. Chenoweth 1,3 Principal Buckingham, Doolittle & Burroughs A Legal Professional Association Akron, Ohio Norman C. Harbert 2,5 Chairman and CEO The Hawk Group Cleveland, Ohio Harry L. Kavetas 1,4 Executive Vice President and CFO Eastman Kodak Company Rochester, New York Charles R. Longsworth 1,2,4 Chairman Emeritus The Colonial Williamsburg Foundation Williamsburg, Virginia G. James Roush 2,3,4 Private Investor Seattle, Washington Daniel J. Sullivan 4,5 Chairman, President and CEO of the company H. Mitchell Watson, Jr. 1,2,5 President Sigma Group of America Westport, Connecticut Officers Donald C. Brown Vice President -- Human Resources John P. Chandler Vice President and Treasurer Kathryn W. Dindo Vice President and Controller Douglas G. Duncan Vice President -- Corporate Marketing David B. Edmonds Vice President -- Corporate Sales Jonathan T. Pavloff Vice President -- Corporate Planning Daniel J. Sullivan Chairman, President and CEO Douglas A. Wilson Senior Vice President -- Finance and Planning, Secretary and CFO 1 Audit Committee -- Chairman, R. A. Chenoweth 2 Compensation Committee -- Chairman, Charles R. Longsworth 3 Director Affairs Committee -- Chairman, G. James Roush 4 Executive and Finance Committee -- Chairman, George B. Beitzel 5 Planning Committee -- Chairman, Daniel J. Sullivan 44 47 ANNUAL REPORT 1995 OFFICERS, CONTINUED Operating Companies RPS Gordon N. Bloom Vice President -- Information Technology Paul S. Callahan Vice President - Central Division Mary K. Coulter Vice President -- Customer Service Eric W. Damon Vice President -- Finance and Administration Edward S. DiSalvo Vice President -- Sales David L. Gerschultz Vice President -- Southern Division Stephen W. Handy Vice President -- Operations Planning and Engineering Ivan T. Hofmann President Leland E. Holly III Vice President -- Human Resources Bram B. Johnson Vice President -- Marketing Ronald E. Joseph Vice President -- Transportation, Safety and Maintenance J. Allan Tepper Vice President -- Western Division Thomas R. Warren Vice President -- Operations Robert T. Young Vice President -- Eastern Division Viking Freight Randolph C. Bangham Chairman Thomas G. Connard Vice President -- Midwest/Southern Division, Operations James A. D'Alessio Vice President -- Northeastern Division, Sales Robert T. Drake Vice President -- Northeastern Division, Operations Peter J. Foley Vice President -- Sales J. Bruce Gebhardt Vice President -- Marketing Tilton Gore Vice President -- Western Division, Operations Joseph E. Hall Vice President -- Southwestern Division, Operations David H. Hess, Jr. Senior Vice President -- Sales and Marketing John B. Keen Senior Vice President -- Finance and CFO Peter G. Kennon Vice President -- Line Operations William J. Mahan Executive Vice President -- Operations Michael T. Marcum Vice President -- Corporate Account Sales Raul Martinez Vice President -- Maintenance 45 48 ANNUAL REPORT 1995 OFFICERS, CONTINUED Operating Companies Viking Freight, continued Jim D. Matt Vice President -- Midwest/Southern Division, Sales Thomas K. Morehouse Vice President -- Southwestern Division, Sales Ronald G. Pelzel President Richard L. Scott Vice President -- Information Systems Philip W. Smith Vice President -- Corporate Planning Terry L. Stambaugh Senior Vice President -- Human Resources Caliber Logistics Wayne S. Chapman Vice President -- Logistics Operations Thomas I. Escott Vice President -- Sales and Marketing Bill F. Jones Vice President -- Transportation and Business Development David J. Krause Vice President -- Finance and Administration Rodger G. Marticke President Sheila P. Martin Vice President -- Information Technology Anthony R. Richmond President -- MediQuik Express, Inc. Roberts Express Joel N. Childs Vice President -- Marketing John P. Palma Vice President -- Sales John G. Pickard Vice President -- Service Robert J. Reitz Vice President -- Finance and Treasurer R. Bruce Simpson President James F. Snider II Vice President and General Manager White Glove Services Division Caliber Technology Gerald A. Long President 46 49 ANNUAL REPORT 1995 SHAREHOLDER INFORMATION Caliber System, Inc. is a value-added service provider of a broad range of transportation, logistics and related information services. Corporate Headquarters 3560 West Market Street P.O. Box 5459 Akron, Ohio 44334-0459 (330) 665-5646 Caliber System's operating units are: Caliber Logistics, Inc., a contract logistics provider, designs, implements and manages a wide scope of customized logistics solutions for businesses in North America and Europe. 5455 Darrow Road Hudson, Ohio 44236 (216) 342-3000 RPS, Inc., Caliber's largest operating company, is a business-to-business, small-package carrier, providing service to 98% of the U.S. as well as Mexico and Puerto Rico. It also serves 100% of Canada through its subsidiary, RPS, Ltd., and 27 European countries through a joint cooperation agreement with General Parcel Logistics GmbH. RPS presently has a terminal network of 340 facilities. 1000 RPS Drive Moon Township, Pennsylvania 15108 (412) 269-1000 Roberts Express, Inc., North America's largest surface expedited carrier, provides time-specific, non-stop delivery of critical shipments throughout the U.S and Canada. 2088 South Arlington Road P.O. Box 7162 Akron, Ohio 44306 (330) 773-3381 Viking Freight, Inc., a superregional freight carrier, provides regional and transcontinental service to 91% of the U.S. as well as Canada and Mexico through a network of 216 facilities. 411 East Plumeria Drive San Jose, California 95134 (408) 922-7200 Caliber Technology, Inc. provides computer-based solutions for customers as well as integrated information systems for each of Caliber's operating units. 1077 Gorge Boulevard Akron, Ohio 44310 (330) 384-8184 Annual Meeting The annual meeting of shareholders of Caliber System, Inc. will be held on Wednesday, May 8, 1996 at 9 a.m. Eastern Daylight Time at the Akron West Hilton, 3180 West Market Street, Akron, Ohio. Formal notice and proxy statement, with proxy, will be mailed on or about April 8, 1996, to each shareholder of record on March 22, 1996. Shareholders are requested to execute and return proxies. Transfer Agent and Registrar KeyCorp Shareholder Services, Inc. P.O. Box 6477 Cleveland, Ohio 44101-1477 (216) 813-5745 or (800) 542-7792 Dividend Reinvestment Plan Registered shareholders of Caliber System, Inc. are eligible to participate in a dividend reinvestment plan through KeyCorp Shareholder Services, Inc., the company's stock transfer agent. For information regarding the plan, contact the company's transfer agent. Annual report design by The Carson Group, Inc. Photography by Studio Martone 50 APPENDIX TO EHIBIT 13 ANNUAL REPORT TO SHAREHOLDERS Graphic No. Document Page - ----------- ------------- 1 Photograph of road 2 Photograph of vehicles from the four service channels 2 3 Photograph of the Chairman of the Board of Directors 4 4 Photograph of individuals reviewing work materials 7 5 Photograph of individual delivering packages 8 6 Photograph of Viking truck 8 7 Photograph of vehicle parts in a rack 9 8 Photograph of driver with computer inside truck 9 9 Photograph of slanted windows 10 10 Photograph of RPS package van 11 11 Photograph of Viking truck in front of the St. Louis Gateway Arch 12 12 Photograph of capitol building in St. Louis 13 13 Photograph of sidewalk with design of world 14 14 Photograph of individuals on sidewalk with design of world 15 15 Photograph of a mountain 16 16 Photograph of Roberts vehicle on road 17 17 Photograph of a road 18 51 Caliber System, Inc. 3560 West Market Street P.O. Box 5459 Akron, Ohio 44334-0459 52 APPENDIX TO EXHIBIT 13 ANNUAL REPORT TO SHAREHOLDERS
Graphic No. Document Page ---------- ------------- 1 Photograph of road 2 Pbotograph of vehicles from the four service channels 2 3 Photograph of the Chairman of the Board of Directors 4 4 Photograph of individuals reviewing work materials 7 5 Photograph of individual delivering parkages 8 6 Photograph of Viking truck 8 7 Photograph of vehicle parts in a rack 9 8 Photograph of driver with computer inside truck 9 9 Photograph of slanted windows 10 10 Photograph of RPS package van 11 11 Photograph of Viking truck in front of the St. Louis Gateway Arch 12 12 Photograph of capitol building in St. Louis 13 13 Photograph of sidewalk with design of would 14 14 Photograph of individuals on sidewalk with design of world 15 15 Photograph of a mountain 16 16 Photograph of Roberts vehicle on road 17 17 Photograph of a road 18
EX-21 5 EXHIBIT 21 1 Exhibit 21 SUBSIDIARIES OF THE REGISTRANT ------------------------------
State or Jurisdiction Subsidiary of Incorporation ---------- ---------------------- RPS, Inc. Delaware RPS, Ltd. Canada Roadway Package System S.A. de C.V. Mexico Roadway Telemarketing, Inc. Delaware Services Development Corporation Delaware Circle Investment Co. Delaware Caliber Customer Support, Inc. Delaware Viking Freight, Inc. California Spartan Express, Inc. South Carolina (d/b/a Viking Freight -- Midwest/Southern Division) Coles Express, Inc. Delaware (d/b/a Viking Freight -- Northeastern Division) Central Freight Lines, Inc. Texas (d/b/a Viking Freight -- Southwestern Division) Caliber Logistics, Inc. Ohio Caliber Dedicated Transportation, Inc. Delaware MediQuik Express, Inc. Ohio Pivot Systems, Inc. Delaware ROLS Marketing Services, Inc. Delaware Warehouse Services, Inc. Delaware Caliber Logistics (Canada), Inc. Ontario Caliber Intermodal, Inc. Delaware Roberts Transportation Services, Inc. Ohio Roberts Express, Inc. Ohio Roberts Express, B.V. Netherlands Roberts Express SARL France Roberts Express GmbH Germany North Coast Express, Inc. Ohio Roberts Air Freight, Inc. Ohio AutoQuik, Inc. Delaware Third Party Services, Inc. Delaware Caliber Technology, Inc. Ohio Roadway Tire Company Ohio Triangle Investment Co. Delaware Transport Financial Corporation Delaware Roadway Services (Canada), (1991) Ltd. Canada The Roadway Company (Europe), Inc. Delaware Transportation Research, Inc. Delaware
EX-23 6 EXHIBIT 23 1 EXHIBIT 23 Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Caliber System, Inc. of our report dated January 23, 1996, included in the 1995 Annual Report to Shareholders of Caliber System, Inc. Our audits also included the financial statement schedule of Caliber System, 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 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 of our report dated January 23, 1996, 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 Caliber System, Inc., in the following Registration Statements and related Prospectuses:
REGISTRATION NUMBER DESCRIPTION OF REGISTRATION STATEMENT FILING DATE - -------------------------------------------------------------------------------- 33-44502 Restricted Book Value Shares Plan for December 12, 1991 Roadway Services, Inc. and Certain Operating Companies - Form S-8 33-44757 Roadway Services, Inc. Nonemployee December 31, 1991 Directors' Stock Plan - Form S-8 33-52605 Roadway Services, Inc. Stock Savings and March 10, 1994 Retirement Income Plan and Trust - Form S-8 34-65449 Viking Financial Security Plan - Form S-8 December 28, 1995 34-65499 The Merrill Lynch, Pierce, Fenner & Smith December 29, 1995 Incorporated Special Prototype Profit Sharing Plan and Trust for Independent Contractors - Form S-3
ERNST & YOUNG LLP Akron, Ohio March 11, 1996 EX-27 7 EXHIBIT 27
5 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 34,908 0 273,124 12,586 0 402,224 1,474,934 617,587 1,389,270 555,359 0 39,898 0 0 696,403 1,389,270 0 2,448,172 0 2,292,444 0 0 0 162,135 69,726 92,409 (119,614) 0 0 (27,205) (.69) (.69)
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