-----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, PeVd8IvUOX4LB/A8hiXCtcb/t9N5TeA8k6kpPCfiZ6V0T29p7/coAu+1mYMvoSRr kKo5XRXPZvi8AOXWSi0PAw== /in/edgar/work/20000727/0000950152-00-005524/0000950152-00-005524.txt : 20000921 0000950152-00-005524.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950152-00-005524 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000617 FILED AS OF DATE: 20000727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROADWAY EXPRESS INC CENTRAL INDEX KEY: 0000084271 STANDARD INDUSTRIAL CLASSIFICATION: [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: 680192 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 e10-q.txt 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 June 17, 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 incorporation or organization) Identification No) 1077 Gorge Boulevard, Akron, OH 44310 - ------------------------------------ -------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (330) 384-1717 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. The number of shares of common stock ($.01 par value) outstanding as of July 14, 2000 was 19,363,958. 2 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ROADWAY EXPRESS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 17, 2000 December 31, 1999 ----------------------------------------------------------------------- (in thousands, except share data) Assets Current assets: Cash and cash equivalents $ 61,032 $ 80,797 Accounts receivable, net 295,381 299,599 Prepaid expenses and supplies 18,478 17,940 ----------------------------------------------------------------------- Total current assets 374,891 398,336 Carrier operating property, at cost 1,399,631 1,356,533 Less allowance for depreciation 986,873 976,205 ----------------------------------------------------------------------- Net carrier operating property 412,758 380,328 Goodwill, net 14,084 15,360 Deferred income taxes 41,597 37,384 ----------------------------------------------------------------------- Total assets $ 843,330 $ 831,408 ======================================================================= Liabilities and shareholders' equity Current liabilities: Accounts payable $ 183,489 $ 190,499 Salaries and wages 129,047 120,695 Freight and casualty claims payable 54,606 52,165 ----------------------------------------------------------------------- Total current liabilities 367,142 363,359 Long-term liabilities: Casualty claims payable 47,485 49,077 Future equipment repairs 7,727 9,805 Accrued pension and retiree medical 116,504 118,212 ----------------------------------------------------------------------- Total long-term liabilities 171,716 177,094 Shareholders' equity: Common Stock - $.01 par value Authorized - 100,000,000 shares Issued - 20,556,714 shares 206 206 Other shareholders' equity 304,266 290,749 ----------------------------------------------------------------------- Total shareholders' equity 304,472 290,955 ----------------------------------------------------------------------- Total liabilities and shareholders' equity $ 843,330 $ 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 (Second Quarter) June 17, 2000 June 19, 1999 ---------------------------------------------------- (in thousands, except per share data) Revenue $ 707,359 $ 621,122 Operating expenses: Salaries, wages and benefits 446,376 400,524 Operating supplies and expenses 126,807 105,242 Purchased transportation 71,850 61,789 Operating taxes and licenses 18,169 17,483 Insurance and claims expense 15,155 12,843 Provision for depreciation 12,307 10,228 Net (gain) loss on disposal of operating property (55) 232 ---------------------------------------------------- Total operating expenses 690,609 608,341 ---------------------------------------------------- Operating income 16,750 12,781 Other income, net 449 594 ---------------------------------------------------- Income before income taxes 17,199 13,375 Provision for income taxes 7,327 5,751 ---------------------------------------------------- Net income $ 9,872 $ 7,624 ==================================================== Earnings per share - basic $ 0.53 $ 0.41 Earnings per share - diluted $ 0.52 $ 0.40 Average shares outstanding - basic 18,650 18,803 Average shares outstanding - diluted 18,977 19,072 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 INCOME (UNAUDITED)
Twenty-four Weeks Ended (Two Quarters) June 17, 2000 June 19, 1999 ---------------------------------------------------- (in thousands, except per share data) Revenue $ 1,384,678 $ 1,226,400 Operating expenses: Salaries, wages and benefits 868,491 795,854 Operating supplies and expenses 253,431 203,159 Purchased transportation 139,348 120,123 Operating taxes and licenses 37,216 35,621 Insurance and claims expense 27,924 25,945 Provision for depreciation 23,658 19,567 Net loss (gain) on disposal of operating property 514 (122) ---------------------------------------------------- Total operating expenses 1,350,582 1,200,147 ---------------------------------------------------- Operating income 34,096 26,253 Other income, net 1,205 1,049 ---------------------------------------------------- Income before income taxes 35,301 27,302 Provision for income taxes 15,039 11,739 ---------------------------------------------------- Net income $ 20,262 15,563 ==================================================== Net income per share - basic $ 1.09 $ 0.83 Net income per share - diluted $ 1.07 $ 0.82 Average shares outstanding - basic 18,672 18,801 Average shares outstanding - diluted 18,992 19,047 Dividends declared per share $ 0.10 $ 0.10
See notes to condensed consolidated financial statements. 3 5 ROADWAY EXPRESS, INC. AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Twenty-four Weeks Ended (Two Quarters) June 17, 2000 June 19, 1999 ---------------------------------------------------- (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 20,262 $ 15,563 Depreciation and amortization 23,979 19,443 Other operating adjustments (5,148) 11,090 ---------------------------------------------------- Net cash provided by operating activities 39,093 46,096 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of carrier operating property (58,791) (31,893) Sales of carrier operating property 2,188 3,959 ---------------------------------------------------- Net cash used by investing activities (56,603) (27,934) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (1,925) (1,926) Treasury stock activity, net (330) 27 ---------------------------------------------------- Net cash used by financing activities (2,255) (1,899) Net (decrease) increase in cash and cash equivalents (19,765) 16,263 Cash and cash equivalents at beginning of period 80,797 60,232 ---------------------------------------------------- Cash and cash equivalents at end of period $ 61,032 $ 76,495 ====================================================
See notes to condensed consolidated financial statements. 6 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 June 17, 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 Twenty-four Weeks Ended (Second Quarter) (Two Quarters) June 17, 2000 June 19, 1999 June 17, 2000 June 19, 1999 ------------------------------------------------------------------------------ (in thousands, except per share data) Net income $ 9,872 $ 7,624 $ 20,262 $ 15,563 ============================================================================== Weighted-average shares for Basic earnings per share 18,650 18,803 18,672 18,801 Management incentive stock plans 327 269 320 246 ------------------------------------------------------------------------------ Weighted-average shares for Diluted earnings per share 18,977 19,072 18,992 19,047 ============================================================================== Earnings per share - basic $ 0.53 $ 0.41 $ 1.09 $ 0.83 Earnings per share - diluted $ 0.52 $ 0.40 $ 1.07 $ 0.82
5 7 Note D--Comprehensive Income Comprehensive income differs from net income due to foreign currency translation adjustments as shown below:
Twelve Weeks Ended Twenty-four Weeks Ended (Second Quarter) (Two Quarters) June 17, 2000 June 19, 1999 June 17, 2000 June 19, 1999 ------------------ ----------------- ------------------ -------------------- (in thousands) Net income $ 9,872 $ 7,624 $ 20,262 $ 15,563 Foreign currency translation adjustments (624) 529 (709) 1,126 ----------------------------------------------------------------------------- Comprehensive income $ 9,248 $ 8,153 $ 19,553 $ 16,689 =============================================================================
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 $9.9 million or $0.52 per share (diluted), for the second quarter ended June 17, 2000, compared to income of $7.6 million, or $0.40 per share (diluted) in the same quarter last year, an increase of 29.5%. Revenues were $707 million in the current quarter, a 13.9% increase from second quarter 1999. The Company delivered 2.0 million tons of freight in the current quarter, up 6.9% compared to the prior year quarter. Less-than-truckload (LTL) tons were up 8.0% and truckload tons were up 2.1%. Net revenue per ton was $352.23, up 6.6% 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, a variable rate fuel surcharge that averaged 2.6% of revenue, and a changing freight mix. The improvement in revenue per ton was somewhat offset by an increase in the average shipment size (up 0.5% to 1,121 pounds) and a small decrease in the average length of haul (down 0.9% to 1,293 miles), both of which tend to put downward pressure on rate levels. These changes in the shipment characteristics also reflect the strategic direction of the Company relative to freight mix and regional service offerings. Total operating expenses were up $82.3 million, or 6.2% per ton, compared to the second quarter of 1999. Salaries, wages, and benefits were up $45.9 million, or 4.3% per ton, primarily due to the April 1, 2000 wage and benefit increases of 3.2% under our labor contract, and accounted for nearly 60% of the per-ton increase. Workers' compensation costs increased 47% primarily due to claims severity and increased business levels, and represent 21% of the increased cost per ton. 6 8 Operating supplies and expenses were up $21.6 million, or 12.7% per ton, primarily due to the increase in fuel prices and higher fuel use, which together caused 47% of the increased cost per ton. Higher equipment rental and other direct terminal operating expenses, which together accounted for 48% of the increased cost per ton, drove the remainder of the increase in operating supplies. The rental costs reflect the Company's replacement of older linehaul tractors with leased units and rental of equipment for use in city operations. Purchased transportation expenses were up $10.1 million, or 8.8% per ton. Cost 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. Insurance and claims expenses were up 10.4% per ton over the second quarter of 1999 due to increased cargo loss and damage costs. Depreciation expense increased $2.1 million over the second quarter of 1999. This increase reflects recent capital expenditures, primarily for revenue equipment and data processing equipment and software. The tax rate for the second 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 $61.0 million, an $19.8 million decrease from year-end 1999, primarily due to increased capital expenditures in 2000. 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 $36.2 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. An instantaneous 10% adverse change in foreign currency exchange rates would have no material impact on future cash flows of the Company. Fuel price increases are mitigated by a variable rate fuel surcharge when the national average diesel fuel price exceeds $1.10 per gallon. This surcharge was in place during the second quarter of 2000 as discussed above. 7 9 PART II -- OTHER INFORMATION ITEM 5. OTHER INFORMATION On July 10, 2000, the Board of Directors declared a cash dividend of $0.05 per share on the Company's common stock payable on September 1, 2000, to shareholders of record on August 18, 2000. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibit No. - ----------- 27 Financial Data Schedule. No Current Reports on Form 8-K were filed during the current quarter. SIGNATURES Pursuant to the requirements 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: July 27, 2000 By: /s/ J. Dawson Cunningham ------------- ----------------------------------------------- J. Dawson Cunningham, Executive Vice President, Chief Financial Officer, and Treasurer Date: July 27, 2000 By: /s/ John G. Coleman ------------- ----------------------------------------------- John G. Coleman, Controller 8 EX-27 2 ex27.txt EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROADWAY EXPRESS, INC. AND SUBSIDIARIES. CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 17, 2000 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-17-2000 61,032 0 295,381 0 0 374,891 1,399,631 986,873 843,330 367,142 0 0 0 206 304,266 843,330 0 1,384,678 0 1,350,582 (1,205) 0 0 35,301 15,039 20,262 0 0 0 20,262 1.09 1.07
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