-----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, TEGNaTMlHlwLrAcvROzfZfslaeatfjtTFsenrgcB+k1D5DBb4xlRfwaGJ4VqG3d9 HBYbbh5zosLGJ4wGgcL7Uw== 0000950152-00-003639.txt : 20000504 0000950152-00-003639.hdr.sgml : 20000504 ACCESSION NUMBER: 0000950152-00-003639 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000325 FILED AS OF DATE: 20000503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROADWAY EXPRESS INC CENTRAL INDEX KEY: 0000084271 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING & COURIER SERVICES (NO AIR) [4210] IRS NUMBER: 340492670 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00600 FILM NUMBER: 618192 BUSINESS ADDRESS: STREET 1: 1077 GORGE BOULEVARD STREET 2: PO BOX 471 CITY: AKRON STATE: OH ZIP: 44310 BUSINESS PHONE: 2163841717 MAIL ADDRESS: STREET 1: 1077 GEORGE BOULEVARD STREET 2: P O BOX 471 CITY: AKRON STATE: OH ZIP: 44310 10-Q 1 ROADWAY EXPRESS, INC. 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the Period ended March 25, 2000. OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from ______ to ______. Commission file number 0-600 ROADWAY EXPRESS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 34-0492670 - ------------------------------------ ---------------------- (State or other jurisdiction of (I.R.S. Employer Identification No) incorporation or organization) 1077 Gorge Boulevard Akron, OH 44310 - ------------------------------------ -------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (330) 384-1717 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . ----- ----- The number of shares of common stock ($.01 par value) outstanding as of April 22, 2000 was 19,371,203. 2 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ROADWAY EXPRESS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 25, 2000 December 31, 1999 --------------------------------- (in thousands, except share data) Assets Current assets: Cash and cash equivalents $ 69,706 $ 80,797 Accounts receivable, net 294,581 299,599 Other current assets 19,851 17,940 ---------------------------- Total current assets 384,138 398,336 Carrier operating property, at cost 1,368,416 1,356,533 Less allowance for depreciation 978,214 976,205 ---------------------------- Net carrier operating property 390,202 380,328 Goodwill, net 14,421 15,360 Deferred income taxes 41,118 37,384 ---------------------------- Total assets $ 829,879 $ 831,408 ============================ Liabilities and shareholders' equity Current liabilities Accounts payable $ 182,181 $ 190,499 Salaries and wages 126,262 120,695 Other current liabilities 53,106 52,165 ---------------------------- Total current liabilities 361,549 363,359 Long-term liabilities Casualty claims payable 45,890 49,077 Future equipment repairs 8,724 9,805 Accrued pension and retiree medical 117,854 118,212 ---------------------------- Total long-term liabilities 172,468 177,094 Shareholders' equity Common Stock - $.01 par value Authorized - 100,000,000 shares Issued - 20,556,714 shares 206 206 Other shareholders' equity 295,656 290,749 ---------------------------- Total shareholders' equity 295,862 290,955 ---------------------------- Total liabilities and shareholders' equity $ 829,879 $ 831,408 ============================
Note: The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements. 1 3 ROADWAY EXPRESS, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
Twelve Weeks Ended (First Quarter) March 25,2000 March 27, 1999 ------------------------------- (in thousands, except per share data) Revenue $ 677,319 $ 605,278 Operating expenses: Salaries, wages and benefits 422,115 395,330 Operating supplies and expenses 126,624 97,917 Purchased transportation 67,498 58,334 Operating taxes and licenses 19,047 18,138 Insurance and claims expense 12,769 13,102 Provision for depreciation 11,351 9,339 Net loss (gain) on disposal of operating property 569 (354) ------------------------- Total operating expenses 659,973 591,806 ------------------------- Operating income 17,346 13,472 Other income, net 756 455 ------------------------- Income before income taxes 18,102 13,927 Provision for income taxes 7,712 5,988 ------------------------- Net income $ 10,390 $ 7,939 ========================= Earnings per share - basic $ 0.56 $ 0.42 Earnings per share - diluted $ 0.55 $ 0.42 Average shares outstanding - basic 18,693 18,800 Average shares outstanding - diluted 18,973 18,985 Dividends declared per share $ 0.05 $ 0.05
See notes to condensed consolidated financial statements. 2 4 ROADWAY EXPRESS, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Twelve Weeks Ended (First Quarter) March 25, 2000 March 27, 1999 ------------------------------ (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 10,390 $ 7,939 Depreciation and amortization 11,335 9,283 Other operating adjustments (9,546) (84) ------------------------- Net cash provided by operating activities 12,179 17,138 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of carrier operating property (22,047) (12,005) Sales of carrier operating property 253 2,835 ------------------------- Net cash used by investing activities (21,794) (9,170) CASH FLOWS FROM FINANCING ACTIVITIES Treasury stock activity - net (508) 151 Dividends paid (968) (967) ------------------------- Net cash used by financing activities (1,476) (816) Net (decrease) increase in cash and cash equivalents (11,091) 7,152 Cash and cash equivalents at beginning of period 80,797 60,232 ------------------------- Cash and cash equivalents at end of period $ 69,706 $ 67,384 =========================
See notes to condensed consolidated financial statements. 3 5 Roadway Express, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements Note A--Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the twelve weeks ending March 25, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the registrant's annual report on Form 10-K for the year ended December 31, 1999. Note B--Accounting Period The registrant operates on 13 four-week accounting periods with 12 weeks in each of the first three quarters and 16 weeks in the fourth quarter. Note C--Earnings per Share The following table sets forth the computation of basic and diluted earnings per share:
Twelve Weeks Ended (First Quarter) March 25, 2000 March 27, 1999 ---------------------------------------- (in thousands, except per share data) Net income $ 10,390 $ 7,939 ======================================== Weighted-average shares for Basic earnings per share 18,693 18,800 Management incentive stock plans 280 185 ---------------------------------------- Weighted-average shares for Diluted earnings per share 18,973 18,985 ======================================== Earnings per share - basic $ 0.56 $ 0.42 Earnings per share - diluted $ 0.55 $ 0.42
4 6 Note D--Comprehensive Income Comprehensive income differs from net income due to foreign currency translation adjustments as shown below:
Twelve Weeks Ended (First Quarter) March 25, 2000 March 27, 1999 ---------------------------------------- (in thousands) Net income $ 10,390 $ 7,939 Foreign currency translation adjustments (85) 597 ---------------------------------------- Comprehensive income $ 10,305 $ 8,536 ========================================
Note E--Contingent Matter The Company's former parent is currently under examination by the Internal Revenue Service for tax years 1994 and 1995, years prior to the spin-off of the Company. The IRS has proposed substantial adjustments for these tax years for multiemployer pension plan deductions. The IRS is challenging the timing, not the validity of these deductions. The Company is unable to predict the ultimate outcome of this matter, however, its former parent intends to vigorously contest these proposed adjustments. Under a tax sharing agreement entered into by the Company and its former parent at the time of the spin-off, the Company is obligated to reimburse the former parent for any additional taxes and interest which relate to the Company's business prior to the spin-off. The amount and timing of such payments, if any, is dependent on the ultimate resolution of the former parent's disputes with the IRS and the determination of the nature and extent of the obligations under the tax sharing agreement. The Company has established certain reserves with respect to these proposed adjustments. There can be no assurance, however, that the amount or timing of any liability of the Company to the former parent will not have a material adverse effect on the Company's results of operations and financial position. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company had net income of $10.4 million or $0.55 per share (diluted), for the first quarter ended March 25, 2000, compared to net income of $7.9 million, or $0.42 per share (diluted) in the same quarter last year, an increase of 30.9%. Revenues were $677.3 million in the current quarter, up $72.0 million, or 11.9%, from first quarter 1999. The Company delivered 1.9 million tons of freight in the current quarter, up 6.9% compared to the prior year quarter. Less-than-truckload (LTL) tons were up 7.4% and truckload tons were up 4.9%. Net revenue per ton was $347.46, up 4.7% compared to the same quarter last year. The improvement in revenue per ton was driven by a general rate increase in the fourth quarter of 1999, and a variable rate fuel surcharge based on the national average price of diesel fuel. The improvement in revenue per ton was somewhat offset by an increase in the average shipment size (up 1.3% to 1,132 pounds) and a small decrease in the average length of haul (down 0.6% to 1,295 miles), both of which tend to put downward pressure on rate levels. These changes in the shipment characteristics reflect the strategic direction of the Company relative to freight mix and regional service offerings. Total operating expenses were up $68.2 million, or 4.3% per ton, compared to the first quarter of 1999. Salaries, wages, and benefits increased 6.8%, which was commensurate with the increased tonnage. Expense increases for direct labor in three key areas were: linehaul drivers up 8.4%, pickup and delivery drivers up 6.8%, and dock workers up 9.0%. Retirement and medical benefit costs increased 4.5%. Indirect salary and wages costs were flat. 5 7 Operating supplies and expenses were up $28.7 million, or 21.0% per ton, primarily due to the increase in fuel prices and higher fuel use, which together caused 40% of the increase. The remainder of the increase was driven by increases in equipment rental, maintenance, and other direct terminal and transportation expenses, as well as purchased services for information technology and outsourced administrative processes. Purchased transportation expenses were up $9.2 million, or 8.3% per ton. Increases in three types of purchased transportation services caused this growth: railroads in certain linehaul operations; the use of owner-operators by our subsidiaries; and purchased pickup and delivery (P&D) services for our seamless P&D offering. The portion of linehaul miles utilizing rail was 26.5% in the first quarter of 2000, versus 26.8% in the first quarter of 1999. Insurance and claims expense decreased 8.8% per ton, which reflects reductions in cargo loss and damage costs. Depreciation expense increased $2.0 million over the first quarter of 1999. This increase reflects recent capital expenditures, primarily for revenue equipment and data processing equipment and software. The tax rate for the first quarter of 2000 and 1999 differs from the Federal statutory rate due to the impact of state taxes, taxes on foreign operations, and non-deductible operating expenses. At the end of the quarter, cash and marketable securities amounted to $69.7 million, an $11.1 million decrease from year-end 1999. Cash flow from operations has been sufficient to meet working capital needs. The Company is taking actions to improve operating margins, such as cost controls, sales and marketing initiatives, working with specific customers to improve the yield on freight, and changing the freight mix as noted above. The portions of narrative set forth in this discussion that are not historical in nature are forward-looking statements. The Company's actual future performance and operating and financial results may differ from those described in the forward-looking statements as a result of a variety of factors that, besides those mentioned, include the condition of the industry and the economy, labor relations, and the success of the Company's operating plans. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company does not hold any market risk sensitive instruments for trading purposes. The Company's primary market risks include fluctuations in interest rates, currency exchange rates, and fuel prices. The Company's earnings are affected by changes in interest rates related to its trailer leases. During 1998, the Company entered into interest rate swap agreements with major commercial banks to fix the interest rate of its trailer leases from previous variable interest rates. The value of the leases upon which the payments are based was not changed. The agreements, which expire from 2002 to 2004, fix the Company's interest costs at rates varying from 6.07% to 7.12% on leases valued at $38.0 million. An interest rate variation of 1% would have no material impact on the Company. Roadway may incur economic losses due to adverse changes in foreign currency exchange rates, primarily with fluctuations in the Canadian dollar and Mexican peso. A 10% adverse change in foreign currency exchange rates would have less than $2 million impact on future cash flows of the Company. Increases in fuel prices are mitigated by a variable rate fuel surcharge which was in place during the first quarter of 2000. This fuel surcharge is applicable when the national average diesel fuel price exceeds $1.10 per gallon. During the current quarter fuel surcharges ranged from 1.5% to 4.0% of revenue on LTL shipments. 6 8 PART II -- OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Shareholders was held on March 22, 2000. Two matters were voted upon at this meeting: (i) the election of seven members to the Board of Directors, and (ii) ratification of the appointment of Ernst & Young LLP as the independent auditors. There were 17,300,783 shares voted of the 19,374,160 shares outstanding and entitled to vote. The following table shows the results of the vote.
PROPOSAL FOR AGAINST WITHHELD Election of Directors Frank P. Doyle 17,051,840 248,943 John F. Fiedler 17,076,808 223,975 Dale F. Frey 17,052,104 248,679 Phillip J. Meek 17,063,880 236,903 Carl W. Schafer 17,062,265 238,518 Sarah Roush Werner 17,076,169 224,614 Michael W. Wickham 16,958,978 341,805 Appointment of Ernst & Young LLP as independent auditors 17,117,414 114,968 68,401
ITEM 5. OTHER INFORMATION On February 1, 2000, the Board of Directors declared a cash dividend of $0.05 per share on the Company's common stock paid on March 1, 2000, to shareholders of record on February 15, 2000. On March 7, 2000, Roadway Express, Inc. and its subsidiary, Reimer Express Lines Ltd. of Canada, received system-wide ISO 9002 certification. This certification is a comprehensive, standardized, and highly respected measurement of an organization's commitment to the delivery of a quality product or service. It is the only internationally recognized certification of a company's quality standards. On April 13, 2000, the Board of Directors declared a cash dividend of $0.05 per share on the Company's common stock payable on June 1, 2000, to shareholders of record on May 12, 2000. Also on April 13, 2000, the Board of directors elected John J. Gasparovic, 42, to the position of Vice President and General Counsel, effective May 1, 2000. John M. Glenn, who has served as Roadway Express General Counsel since January 1996, will continue in his capacity as Corporate Secretary and as of-counsel for the Company. 7 9 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibit No. - ----------- 27 Financial Data Schedule. List of the Current Reports on Form 8-K which were filed during the current quarter--none. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ROADWAY EXPRESS, INC. Date: May 2, 2000 By: /s/ J. Dawson Cunningham ----------- --------------------------- J. Dawson Cunningham, Executive Vice President, Chief Financial Officer, and Treasurer Date: May 2, 2000 By: /s/ John G. Coleman ----------- ---------------------- John G. Coleman, Controller 8 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROADWAY EXPRESS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 25, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-25-2000 69,706 0 294,581 0 0 384,138 1,368,416 978,214 829,879 361,549 0 0 0 206 295,656 829,879 0 677,319 0 659,973 (756) 0 0 18,102 7,712 10,390 0 0 0 10,390 0.56 0.55
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