As filed with the Securities and Exchange Commission on October 27, 2004
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
Washington, D.C. 20549
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FORM
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ROADWAY CORPORATION
(AND ITS SUBSIDIARIES IDENTIFIED ON THE FOLLOWING PAGE)
(Exact Name
Yellow Roadway Corporation
(Exact name of Registrantregistrant as Specifiedspecified in its Charter)
charter)
| Delaware | 4213 | 48-0948788 | ||
(State or incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification |
10990 Roe Avenue
Overland Park, Kansas 66211
(913) 696-6100
(Address, including zip code, and telephone number, including area code, of Registrant'sregistrant’s principal executive offices)
JOHN
Daniel J. GASPAROVIC
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ROADWAY CORPORATION
1077 GORGE BOULEVARD
AKRON, OHIO 44310
(330) 384-1717
(Name,Churay
Yellow Roadway Corporation
Senior Vice President, General Counsel and Secretary
10990 Roe Avenue
Overland Park, Kansas 66211
(913) 696-6100
(Name, address, including zip code, and telephone number, including area code, of agent for service)
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COPIES TO:
CHRISTOPHER M. KELLY, ESQ.
JONES, DAY, REAVIS & POGUE
901 LAKESIDE AVENUE
CLEVELAND, OHIO 44114
(216) 586-3939
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Copies to:
Charles L. Strauss Fulbright & Jaworski L.L.P. 1301 McKinney, Suite 5100 Houston, Texas 77010 (713) 651-5151 | Robert Evans III Shearman & Sterling LLP 599 Lexington Ave. New York, New York 10022 (212) 848-4000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable followingafter the effective date of this Registration Statement.
registration statement.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box. [ ]
¨
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
¨
CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities to be Registered | Amount to be Registered | Proposed Maximum Offering Price Per Unit(1) | Proposed Maximum Aggregate Offering Price(1) | Amount of Registration Fee | ||||
New 5.0% Contingent Convertible Senior Notes due 2023 | $250,000,000 | 100%(2) | $250,000,000(2) | $31,675.00 | ||||
Guarantees of the New 5.0% Contingent Convertible Senior Notes due 2023 (3) | N/A | N/A | N/A | N/A | ||||
New 3.375% Contingent Convertible Senior Notes due 2023 | $150,000,000 | 100%(2) | $150,000,000(2) | $19,005.00 | ||||
Guarantees of the New 3.375% Contingent Convertible Senior Notes due 2023 (3) | N/A | N/A | N/A | N/A | ||||
Common Stock, par value $1.00 per share (4) | (5) | N/A | N/A | N/A |
| (1) | Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f) under the Securities Act of 1933, as amended. |
| (2) | Exclusive of accrued interest, if any. |
| (3) | No separate consideration will be received for the subsidiaries’ guarantees. Pursuant to Rule 457(n), no registration fee is required with respect to the subsidiaries’ guarantees. |
| (4) | The registrants will receive no consideration upon conversion of the |
| (5) | Also includes such indeterminate number of shares of common stock as may be issued upon conversion of the New Notes |
The registrants hereby amend this registration statement on such date or dates as may be issuednecessary to delay its effective date until the registrants shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to the exchange offer described
in this registration statement.
(2) Pursuant to Rule 457(n) no fee is due with respect to the subsidiary
guarantees.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTIONSection 8(a), MAY DETERMINE.
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TABLE OF ADDITIONAL REGISTRANTS
Exact Name of Registrant as Specified in its Charter | State or Other of Incorporation or Organization | SIC | I.R.S. Identification No. | |||
Yellow Transportation, Inc. | Indiana | 4213 | 44-0594706 | |||
Yellow Roadway Technologies, Inc. | Delaware | 4213 | 48-1115792 | |||
Mission Supply Company | Kansas | 4213 | 48-0911571 | |||
Yellow Relocation Services, Inc. | Kansas | 4213 | 48-1067939 | |||
Meridian IQ, Inc. | Delaware | 4731 | 48-1233134 | |||
MIQ LLC | Delaware | 4731 | 48-1119865 | |||
Globe.com Lines, Inc. | Delaware | 4213 | 52-2068065 | |||
Roadway LLC | Delaware | 4213 | 34-1956254 | |||
Roadway Express, | Delaware | 4213 | 34-0492670 | |||
Roadway | Pennsylvania | 4213 | 23-2255947 |
The address, including zip code, and telephone number, including area code, of each registrant’s principal executive offices is shown on the cover page of this Registration Statement on Form S-4.
The information in this prospectus is not complete and may change. We may not complete the exchange offers and issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities, in any state where the offer is not permitted.
SUBJECT TO COMPLETION, DATED DECEMBER 14, 2001
PROSPECTUS
$225,000,000
OFFER TO EXCHANGE
ALL OUTSTANDING 8 1/4% SENIOR NOTES DUE DECEMBER 1, 2008
FOR 8 1/4% SENIOR NOTES DUE DECEMBER 1, 2008
OF
ROADWAY CORPORATION
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 2002, UNLESS EXTENDED.
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OCTOBER 27, 2004.
Yellow Roadway Corporation
Offer to Exchange
5.0% Contingent Convertible Senior Notes due 2023
and
Offer to Exchange
3.375% Contingent Convertible Senior Notes due 2023
The Exchange Notes
- - The termsexpiration time of the exchange notes to be issued are substantially identical to
the outstanding notes that Roadway Corporation issued on November 30, 2001,
except for transfer restrictions, registration rights and liquidated damages
provisions relating to the outstanding notes that will not apply to the
exchange notes.
- - Interest on the notes accrues at the rate of 8 1/4% per year, payable in cash
every six months on June 1 and December 1, with the first payment on June 1,
2002.
- - The exchange notes are senior obligations of Roadway and will rank equally
with Roadway's other senior indebtedness.
- - The exchange notes will be secured by liens on the capital stock of Roadway's
subsidiaries the capital stock of whichoffers is pledged under Roadway's credit
facility.
- - The exchange notes will be unconditionally guaranteed by each of our
subsidiaries that guarantees Roadway's other debt obligations for so long as
the subsidiary is a guarantor of Roadway's other debt obligations.
- - There is no existing market for the exchange notes, and we do not intend to
apply for their listing on any securities exchange or to seek approval for
quotation through any automated quotation system.
Material Terms of the Exchange Offer
- - Expires at 5:00 p.m., New York City time on , 2002,2004, unless extended.
- - The
Terms of the exchange offers:
The terms of the New Notes are identical to the Existing Notes, except for the following modifications:
See “Risk Factors” beginning on page 8 to read about factors you should consider before tendering your Existing Notes for exchange.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The dealer manager for the exchange offers is:
The date of this prospectus is , 2004.
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ABOUT THIS PROSPECTUS
You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.
This prospectus incorporates important business and financial information about Yellow Roadway willCorporation from other documents that are not receive any cash proceedsincluded in or delivered with this prospectus. This information is available to you without charge upon your request. You can obtain the documents incorporated by reference in this prospectus by requesting them in writing or by telephone from the company at the following address and telephone number:
Yellow Roadway Corporation
10990 Roe Avenue
Overland Park, Kansas 66211
(913) 696-6100
Attention: Investor Relations
Investors may also consult our website for more information concerning the exchange offer.
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PLEASE CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 11 OF THIS
PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVEDoffers described in this prospectus. Our website is www.yellowroadway.com. Information included on our website is not incorporated by reference in this prospectus.
IN ORDER FOR YOU TO RECEIVE TIMELY DELIVERY OF THE NOTES TO BE DISTRIBUTED INDOCUMENTS BEFORE THE EXPIRATION TIME OF THE EXCHANGE OFFER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Each broker-dealer that receives exchange notes for its own account in
accordance withOFFERS WE SHOULD RECEIVE YOUR REQUEST NO LATER THAN , 2004.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This prospectus, including the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of those exchange notes. The letter of
transmittal states thatdocuments incorporated by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter"reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act. This prospectus,Act of 1933, as it may be amended, or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for outstanding notes where
those original notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. We have agreed that, for a
period of 180 days after the expirationand Section 21E of the exchange offer, we will make this
prospectus availableSecurities Exchange Act of 1934, as amended. The words “expect”, “will”, “could”, “may”, “look forward to” and similar expressions are intended to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
identify forward-looking statements.
The Date of this Prospectus is , 2002.
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT US THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS. YOU MAY
OBTAIN DOCUMENTS THAT ARE FILED BY US WITH THE SECURITIES AND EXCHANGE
COMMISSION AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS BY REQUESTING THE
DOCUMENTS, IN WRITING OR BY TELEPHONE, FROM THE COMMISSION OR:
ROADWAY CORPORATION
P.O. BOX 471
AKRON, OHIO 44309-0471
(330) 384-1717
ATTENTION: OFFICE OF CORPORATE SECRETARY
IF YOU WOULD LIKE TO REQUEST COPIES OF THESE DOCUMENTS, PLEASE DO SO BY
, 2002 IN ORDER TO RECEIVE THEM BEFORE THE EXPIRATION OF THE EXCHANGE
OFFER. SEE "WHERE YOU CAN FIND MORE INFORMATION."
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TABLE OF CONTENTS
PAGE
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Forward-Looking Statements.................................. ii
Market Data................................................. ii
Prospectus Summary.......................................... 1
Risk Factors................................................ 11
Use of Proceeds............................................. 15
Capitalization.............................................. 15
Selected Historical Financial Data.......................... 16
Unaudited Condensed Combined Pro Forma Financial Data....... 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 27
Business.................................................... 39
Management.................................................. 43
Description of Other Indebtedness........................... 45
The Exchange Offer.......................................... 47
Description of Notes........................................ 56
Specific Federal Income Tax Consequences to U.S. and
Non-U.S. Holders.......................................... 70
Plan of Distribution........................................ 72
Legal Matters............................................... 73
Experts..................................................... 73
Incorporation by Reference.................................. 73
Where You Can Find More Information......................... 74
Index to Financial Statements............................... F-1
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS MAY ONLY BE USED WHERE IT IS
LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS PROSPECTUS MAY ONLY BE
ACCURATE ON THE DATE OF THIS PROSPECTUS.
DEALER PROSPECTUS DELIVERY OBLIGATION
Until , 2002, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
FORWARD-LOOKING STATEMENTS
While most of the information providedexpectations set forth in this prospectus and the documents incorporated by reference regarding, among other things, accretion, returns on invested capital, achievement of annual savings and synergies, achievement of strong cash flow, sufficiency of cash flow to fund capital expenditures and achievement of debt reduction targets are only our expectations regarding these matters. Actual results could differ materially from these expectations depending on factors such as:
A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. However, we caution you that assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this prospectus and the documents we have incorporated by reference. We will not update these statements unless the securities laws require us to do so.
ii
The following summary is historical, some of the comments
made are forward-looking statements intended to qualify for the safe harbor from
liability under the Private Securities Litigation Reform Act of 1995. All
statements that are not historical statements of fact are "forward-looking
statements" for purposes of these provisions and are subject to numerous risks
and uncertainties that could cause actual results to differ materially from
those expressedqualified in its entirety by information contained elsewhere or implied in the forward-looking statements. Forward-looking
statements include all comments relating to our beliefs and expectations as to
future events and trends affecting our business, results of operations and
financial condition. We intend for the words "believes," "anticipates,"
"expects," "intends," "plans," "continues," "projects" and similar expressions
to identify forward-looking statements. We have based these forward-looking
statements on management's analysis about future events only as of the date of
this prospectus. We undertake no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date of this prospectus. These forward-looking statements are subject to
risks, uncertainties and assumptions about us and our subsidiaries, including,
among other things, the factors discussed under the heading "Risk Factors"incorporated by reference in this prospectus. In addition to the disclosure contained in this document, you
should carefully review the risks and uncertainties contained in other documents
that we file from time to time with the Commission.
MARKET DATA
Market data used throughout this prospectus, including information relating
to our relative position in the trucking industry, is based on our good faith
estimates, which estimates we based upon our review of independent industry
publications and other publicly available information. Although we believe these
sources are reliable, we have not independently verified the information and
cannot guarantee its accuracy and completeness.
ii
PROSPECTUS SUMMARY
The following summary contains information about Roadway and this offering.
It doesmay not contain all of the information that may be important to you in
making a decision to exchange any outstanding notes. For a more complete
understanding of Roadway and this offering, we urge you toyou. You should read this entire prospectus, including the financial data and related notes and the documents incorporated by reference carefully, includingto which we have referred you, before making an investment decision. You should pay special attention to the "Risk Factors" section“Risk Factors” beginning on page8 of this prospectus to determine whether participation in the exchange offers and our consolidated financial statements and notes
thereto.
OVERVIEW
We provide seamless less-than-truckload,an investment in the New Notes, or LTL, general commodity freight
service between all 50 states, Canada, Mexico and Puerto Rico, and provide
export services to 66 additional countries. Wethe common stock into which the New Notes are convertible, is appropriate for you.
Our Company
Yellow Roadway Corporation is one of the largest LTL motor
carrierstransportation service providers in the United Statesworld. Through its subsidiaries, including Yellow Transportation, Roadway Express, New Penn Motor Express, Reimer Express, Meridian IQ and have the leading market share in long-haul LTL
service, serving over 165,000 individual customers.Yellow Roadway Technologies, Yellow Roadway provides a wide range of asset and non-asset-based transportation services integrated by technology. The trucking industry operates under two main divisions: truckload, or TL,
and LTL. TL carriers dedicate full trucks to one customer and make deliveriesYellow Roadway portfolio of goods from start to finish. LTL carriers take partial loads from multiple
customers onbrands provided through Yellow Roadway Corporation subsidiaries represents a single truck and then route the goods through a seriescomprehensive array of
terminals where freight is transferred to other trucks with similar
destinations.
We believe the next-day ground LTL market is the most attractive segment of
the trucking industry due to the growth in demand for expedited services for just in time, or JIT, inventory systems. Adopted by manythe shipment of our customers, JIT
inventory management has resulted in the need to ship smaller freight loads more
frequentlyindustrial, commercial and with expedited delivery, increasing the demand for the services
provided by usretail goods domestically and other LTL carriers.
The LTL industry is composed of the following three segments:
- the REGIONAL segment, which ships on routes, also known as lanes, shorter
than 500 miles and is primarily served by next-day ground and, to a
lesser extent, two-day service;
- the INTER-REGIONAL segment, which ships on lanes between 500 and 1,200
miles and is primarily served by two- and three-day service; and
- the LONG-HAUL segment, which ships on lanes generally over 1,200 miles
and is served primarily by three-day and beyond service.
ROADWAY CORPORATION
Our primary operating subsidiary,internationally.
Yellow Roadway Express, is a certified ISO 9002
carrier, and transports general commodity freight in two-day and beyond service.
General commodity freight includes apparel, appliances, automotive parts,
chemicals, food, furniture, glass, machinery, metal and metal products, non-
bulk petroleum products, rubber, textiles, wood and miscellaneous manufactured
products. During 2000, no single segment of the economy (e.g., general retail
merchandise, automotive, chemical) accounted for more than 18% of our total
revenue, no single customer accounted for more than 5% of our revenue,employs approximately 50,000 people and our ten largest customers accounted for approximately 16% of our revenue.
Through our extensive network of approximately 375 terminals located
throughout North America, we offer long-haul, inter-regional and regional LTL
freight service on two-day and beyond lanes throughout the United States, Mexico
and Canada. We also offer TL services to complement our LTL business, usually to
fill back hauls and maximize equipment utilization. In addition, we provide
higher margin, specialized services including guaranteed expedited services,
time-specific delivery, North American international, coast-to-coast delivery,
sealed trailers, product returns, cold-sensitive protection and government
material shipments.
For the twelve month period ended September 8, 2001, we reported revenue
and operating income of $2.9 billion and $78.1 million, respectively,
representing a ratio of total operating expenses to total
1
revenues for the period, or operating ratio, of 97.3%. Our principal and executive offices are located at 1077 Gorge Boulevard, Akron, Ohio 44310.
THE ACQUISITION
On November 30, 2001, we acquired Arnold Industries, Inc. for cash
consideration of an aggregate of approximately $553 million. 10990 Roe Avenue, Overland Park, Kansas 66211. Our telephone number is (913) 696-6100.
The Exchange Offers
We usedhave summarized the proceeds from the offering of the outstanding notes, together with borrowings
under a new credit facility and proceeds from an accounts receivable
securitization, to finance the acquisition. Arnold is now a wholly owned
subsidiary of Roadway.
On November 30, 2001, following our acquisition of Arnold, we sold Arnold's
logistics business, ARLO, to members of the ARLO management team and Mr. Edward
H. Arnold, the former Chairman, President and Chief Executive Officer of Arnold,
for $105 million in cash.
ARNOLD INDUSTRIES, INC.
Arnold's trucking activities are currently conducted by New Penn Motor
Express, Inc. and Arnold Transportation Services, Inc., or ATS. New Penn is a
leading regional next-day ground LTL carrier operating from terminals in 24
cities primarily in New England and the Middle Atlantic states. We believe that
for the 2000 fiscal year, New Penn was the most profitable publicly reporting
LTL carrier in the industry. ATS operates as both a regional and inter-regional
dedicated TL carrier, conducting operations east of the Mississippi and in the
southwestern United States.
For the twelve months ended September 30, 2001, Arnold reported revenue and
operating income of $450.7 million and $49.8 million, respectively, representing
an operating ratio of 88.9%. Arnold and New Penn maintain executive and general
offices at 625 South Fifth Avenue, Lebanon, Pennsylvania 17042. ATS maintains
its principal office at 9523 Florida Mining Boulevard, Jacksonville, Florida
32257.
OUR STRATEGY
Our strategy is to maintain and enhance our leadership position in the LTL
market by continually improving our two-day and beyond core service to our
extensive base of customers. At the same time, we intend to leverage the value
of our North American network and brand equity through the development and
marketing of higher yielding and faster growing specialty trucking services.
We believe the next-day ground market is the fastest growing segment in the
surface transportation industry. Our acquisition of Arnold enables us to enter
this market with a leading next-day carrier. We intend to use New Penn as our
platform for growth of next-day ground service into other geographic areas.
We intend to allocate a significant portion of our free cash flow to pay
down debt and increase our financial flexibility. We believe reducing our debt
level over the near term will increase our ability to pursue strategic
opportunities as they arise.
2
THE EXCHANGE OFFER
The exchange offer............ We are offering to exchange $225.0 million in
principal amount of our 8 1/4% senior notes due
December 1, 2008, which have been registered
under the federal securities laws, for $225.0
million principal amount of our outstanding
unregistered 8 1/4% senior notes due December
1, 2008, which we issued on November 30, 2001
in a private placement. You have the right to
exchange your outstanding notes for exchange
notes with substantially identical terms.
In order for your outstanding notes to be
exchanged, you must properly tender them prior
to the expirationterms of the exchange offer. All
outstanding notes that are validly tendered and
not validly withdrawn will be exchanged. We
will issueoffers in this section. Before you decide whether to tender your Existing Notes in these offers, you should read the exchange notes on or promptly
after the expirationdetailed description of the exchange offer.
Registration rights
agreement..................... We issued the outstanding notes on November 30,
2001 to a limited number of initial purchasers.
At that time, we signed a registration rights
agreement with those initial purchasers, which
requires us to conduct this exchange offer.
This exchange offer is intended to satisfy
those rights set forth in the registration
rights agreement. After the exchange offer is
complete, you will not have anyoffers under “The Exchange Offers” for further rights
under the registration rights agreement,
including any right to require us to register
any outstanding notes that you do not exchange
or to pay you liquidated damages.
Failure to exchange your
outstanding notes............. If you do not exchange your outstanding notes
for exchange notes in the exchange offer, you
will continue to be subject to the restrictions
on transfer provided in the outstanding notes
and the indenture governing those notes. In
general, you may not offer or sell your
outstanding notes unless they are registered
under the federal securities laws or are sold
in a transaction exempt from or not subject to
the registration requirements of the federal
securities laws and applicable state securities
laws.
Expiration date............... The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2002, unless
we decide to extend the expiration date.
Conditions to the exchange
offer......................... The exchange offer is subject to conditions
that we may waive. The exchange offer is not
conditioned upon any minimum amount of
outstanding notes being tendered for exchange.
We reserve the right, subject to applicable
law, at any time and from time to time:
-information.
Terms of the exchange offers | We are offering to exchange $1,000 principal amount of New 5.0% Notes for each $1,000 principal amount of Existing 5.0% Notes accepted for exchange. We are also offering to exchange $1,000 principal amount of New 3.375% Notes for each $1,000 principal amount of Existing 3.375% Notes accepted for exchange. You may tender all, some or none of your Existing Notes. |
Deciding whether to participate inthe exchange offers | Neither we nor our officers or directors make any recommendation as to whether you should tender or refrain from tendering all or any portion of your Existing Notes in the exchange offers. Further, no person has been authorized to give any information or make any representations other than those contained herein and, if given or made, such information or representations must not be relied upon as having been authorized. You must make your own decision whether to tender your Existing Notes in the exchange offers and, if so, the aggregate amount of Existing Notes to tender. You should read this prospectus and the letter of transmittal and consult with your advisers, if any, to make that decision based on your own financial position and requirements. |
Expiration date; extension; termination | The exchange offers and withdrawal rights will expire at 5:00 p.m., New York City time, on , 2004, or any subsequent time or date to which the exchange offers are extended. We may extend the expiration date or amend any of the terms or conditions of the exchange offers for any reason. In the case of an extension, we will issue a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. If we extend the expiration date, you must tender your Existing Notes prior to the date identified in the press release or public announcement if you wish to participate in the exchange offers. In the case of an amendment, we will issue a press release or other public announcement. We have the right to: |
Conditions to the exchange offers | The exchange offers are each subject to certain conditions, including that at least 50% of the aggregate principal amount of the Existing Notes subject to that exchange offer are validly tendered and not |
withdrawn and the registration statement and any post-effective amendment to the registration statement covering the New Notes be effective under the Securities Act. See “The Exchange Offers—Conditions for Completion of the Exchange Offers”. |
Withdrawal rights | You may withdraw a tender of your Existing Notes at any time before the exchange offers expire by delivering a written notice of withdrawal to Deutsche Bank Trust Company Americas, the exchange agent, before the expiration date. If you change your mind, you may retender your Existing Notes by again following the exchange offer procedures before the exchange offers expire. In addition, if we have not accepted your tendered Existing Notes for exchange, you may withdraw your Existing Notes at any time after , 2004. |
Procedures for tenderingoutstanding Existing Notes | If you hold Existing Notes through a broker, dealer, commercial bank, trust company or other nominee, you should contact that person promptly if you wish to tender your Existing Notes. Tenders of your Existing Notes will be effected by book-entry transfers through The Depository Trust Company. |
If you hold Existing Notes through a broker, dealer, commercial bank, trust company or other nominee, you may also comply with the procedures for guaranteed delivery. |
Please do not send letters of transmittal to us. You should send letters of transmittal to Deutsche Bank Trust Company Americas, the exchange agent, at one of its offices as indicated under “The Exchange Offers”, at the end of this prospectus or in the letter of transmittal. The exchange agent can answer your questions regarding how to tender your Existing Notes. |
Accrued interest on Existing5.0% Notes | Interest on the New 5.0% Notes will accrue from the last interest payment date on which interest was paid on the Existing 5.0% Notes. Holders whose Existing 5.0% Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Existing 5.0% Notes. |
Accrued interest on Existing 3.375% Notes | Interest on the New 3.375% Notes will accrue from the last interest payment date on which interest was paid on the Existing 3.375% Notes. Holders whose Existing 3.375% Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Existing 3.375% Notes. |
Trading | Our common stock is traded on the NASDAQ National Market under the symbol “YELL”. |
Information agent | Morrow & Co., Inc. |
Exchange agent | Deutsche Bank Trust Company Americas. |
Dealer manager | Credit Suisse First Boston LLC. |
Risk factors | You should carefully consider the matters described under “Risk Factors”, as well as other information set forth or incorporated by reference in this prospectus and in the letter of transmittal. |
Consequences of not exchangingExisting Notes | The liquidity and trading market for Existing Notes not tendered in the exchange offers could be adversely affected to the extent a significant number of the Existing Notes are tendered and accepted in the exchange offers. |
Tax consequences | See “Material U.S. Federal Income Tax Considerations” for a summary of certain U.S. federal income tax consequences or potential consequences that may result from the exchange of Existing Notes for New Notes and from the ownership and disposition of the New Notes and common stock received upon conversion of the New Notes. |
The U.S. federal income tax consequences of the exchange of Existing Notes for New Notes are unclear. We will take the position that the modifications to the Existing Notes resulting from the exchange of Existing Notes for New Notes will not constitute a significant modification of the terms of the Existing Notes for U.S. federal income tax purposes. If consistent with our position that the exchange of Existing Notes for New Notes does not constitute a significant modification of the terms of the Existing Notes for U.S. federal income tax purposes, the New Notes will be treated as a continuation of the Existing Notes and, there will be no U.S. federal income tax consequences to a holder who exchanges Existing Notes for New Notes pursuant to the exchange offers. By participating in the exchange offers, each holder will be deemed to have agreed pursuant to the indentures governing the New Notes to treat the exchange offers as not constituting a significant modification of the terms of the Existing Notes. If, contrary to our position, the exchange of the Existing Notes for the New Notes does constitute a significant modification to the terms of the Existing Notes, the U.S. federal income tax consequences to you could materially differ. |
Summary of Differences between the Existing Notes and the New Notes
A summary of the differences between the Existing 5.0% Notes and New 5.0% Notes and between the Existing 3.375% Notes and New 3.375% Notes is set forth in the table below. The table below is qualified in its entirety by the information contained in this prospectus and the documents governing the Existing 5.0% Notes, the New 5.0% Notes, the Existing 3.375% Notes, and the New 3.375% Notes, copies of which have been filed as exhibits to the registration statement of which this prospectus forms a part. For a more detailed description of the New 5.0% Notes, see “Description of the New 5.0% Notes.” For a more detailed description of the New 3.375% Notes, see “Description of the New 3.375% Notes.”
Existing 5.0% Notes | New 5.0% Notes | |||
Notes offered | $250,000,000 aggregate principal amount of Existing 5.0% Notes. | Up to $250,000,000 aggregate principal amount of New 5.0% Notes. | ||
Settlement upon conversion | Upon conversion of Existing 5.0% Notes, we will deliver a specified number of shares of our common stock (other than cash payments for fractional shares). | Each $1,000 principal amount New 5.0% Note is convertible into cash and shares of our common stock, if any, based on an amount (the “New 5.0% Notes Daily Conversion Value”) calculated for each of the five trading days immediately following the conversion date. The New 5.0% Notes Daily Conversion Value for each such day is equal to one-fifth of the product of the conversion rate for our New 5.0% Notes multiplied by the applicable market value of our common stock on that day. For each $1,000 principal amount New 5.0% Note surrendered for conversion, we will deliver to you for each of the five trading days following the conversion date: (1) if the New 5.0% Notes Daily Conversion Value exceeds $200, (a) a cash payment of $200 and (b) the remaining New 5.0% Notes Daily Conversion Value (the “New 5.0% Notes Daily Net Share Settlement Value”) in shares of our common stock (other than cash payments for fractional shares); or (2) if the New 5.0% Notes Daily Conversion Value is less than or equal to $200, a cash payment equal to the New 5.0% Notes Daily Conversion Value. The number of shares of common stock to be delivered under clause (1) above will be determined by dividing the New 5.0% Notes Daily Net Share Settlement Value by the applicable market value (as described herein) of our common stock for that day. | ||
Existing 5.0% Notes | New 5.0% Notes | |||
| Adjustment to conversion rate upon certain change in control events | None. | If and only to the extent you elect to convert your New 5.0% Notes in connection with a “Conversion Change in Control” (as defined herein) pursuant to which 10% or more of the consideration for our common stock (other than cash payments for fractional shares and cash payments made in respect of dissenters’ appraisal rights) in such Conversion Change in Control consists of consideration other than common stock that is traded or scheduled to be traded immediately following such transaction on a U.S. national securities exchange or the NASDAQ National Market, we will increase the conversion rate for the New 5.0% Notes surrendered for conversion by a number of additional shares (the “additional shares”) as described herein unless the acquirer is a public acquirer (as defined herein), in which case, at our option, the New 5.0% Notes may instead become contingently convertible into the common stock of the public acquirer, subject to the net share settlement provisions described herein. | ||
Existing 3.375% Notes | New 3.375% Notes | |||
Notes offered | $150,000,000 aggregate principal amount of Existing 3.375% Notes. | Up to $150,000,000 aggregate principal amount of New 3.375% Notes. | ||
Settlement upon conversion | Upon conversion of Existing 3.375% Notes, we will deliver a specified number of shares of our common stock (other than cash payments for fractional shares). | Each $1,000 principal amount New 3.375% Note is convertible into cash and shares of our common stock, if any, based on an amount (the “New 3.375% Notes Daily Conversion Value”) calculated for each of the five trading days immediately following the conversion date. The New 3.375% Notes Daily Conversion Value for each such day is equal to one-fifth of the product of the conversion rate for our New 3.375% Notes multiplied by the applicable market value of our common stock on that day. For each $1,000 principal amount New 3.375% Note surrendered for conversion, we will deliver to you for each of the five trading days following the conversion date: (1) if the New 3.375% Notes Daily Conversion Value exceeds $200, (a) a | ||
New 3.375% Notes (continued) | ||||
cash payment of $200 and (b) the remaining New 3.375% Notes Daily Conversion Value (the “New 3.375% Notes Daily Net Share Settlement Value”) in shares of our common stock (other than cash payments for fractional shares); or (2) if the New 3.375% Notes Daily Conversion Value is less than or equal to $200, a cash payment equal to the New 3.375% Notes Daily Conversion Value. The number of shares of common stock to be delivered under clause (1) above will be determined by dividing the New 3.375% Notes Daily Net Share Settlement Value by the applicable market value of our common stock for that day. | ||||
Existing 3.375% Notes | New 3.375% Notes | |||
| Adjustment to conversion rate upon certain change in control events | None. | If and only to the extent you elect to convert your New 3.375% Notes in connection with a “Conversion Change in Control” (as defined herein) pursuant to which 10% or more of the consideration for our common stock (other than cash payments for fractional shares and cash payments made in respect of dissenters’ appraisal rights) in such Conversion Change in Control consists of consideration other than common stock that is traded or scheduled to be traded immediately following such transaction on a U.S. national securities exchange or the NASDAQ National Market, we will increase the conversion rate for the New 3.375% Notes surrendered for conversion by a number of additional shares (the “additional shares”) as described herein unless the acquirer is a public acquirer (as defined herein), in which case, at our option, the New 3.375% Notes may instead become contingently convertible into the common stock of the public acquirer, subject to the net share settlement provisions described herein. | ||
Before you participate in the exchange offers, you should know that making an investment in either the New Notes or the Existing Notes involves some risks, including the risks described below. You should carefully consider the factors described below in addition to the remainder of this prospectus and the factors discussed in the documents and other information incorporated by reference before tendering your Existing Notes. The risk factors set forth below, other than those that discuss the consequences of failing to exchange your Existing Notes in the exchange offers or as otherwise noted, are applicable to both the Existing Notes and the New Notes issued in the exchange offers (collectively, the “Notes”). The risks that we have highlighted here are not the only ones that we face and additional risks, including those presently unknown to us, could also impair our operations. If any of the risks actually occur, our business, financial condition or results of operations could be negatively affected.
Risks Related to the Notes
Our debt service obligations could adversely affect our financial condition and prevent us from fulfilling our obligations to you under the Notes.
As of September 30, 2004, we had approximately $728 million of indebtedness (including $400 million of Existing Notes) outstanding. In addition, the indentures governing the Existing Notes do not, and the indentures governing the New Notes will not, prohibit or limit us or our subsidiaries from incurring additional indebtedness and other liabilities. We may not be able to generate cash sufficient to pay the principal of, interest on and other amounts due in respect of our indebtedness when due.
Our ability to pay principal and interest on the Notes and to satisfy our other debt obligations will depend upon our future operating performance and the availability of refinancing debt. If we are unable to service our debt and fund our business, we may be forced to reduce or delay capital expenditures, seek additional debt financing or equity capital, restructure or refinance our debt or sell assets. We cannot assure you that we would be able to obtain additional financing, refinance existing debt or sell assets on satisfactory terms or at all. In addition, large levels of indebtedness and debt service obligations could increase our vulnerability to general economic downturns, competition and industry conditions, increase our interest expense when interest rates rise because a portion of our borrowings is at variable interest rates and limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate.
The Existing Notes and guarantees are, and the New Notes and guarantees will be, unsecured and future secured indebtedness of us and our guarantor subsidiaries and indebtedness of our non-guarantor subsidiaries will rank effectively senior to the Notes and the guarantees.
The Existing Notes and guarantees are, and the New Notes and guarantees will be, unsecured and rank equal in right of payment with our existing and future unsecured and unsubordinated indebtedness. The Existing Notes and guarantees effectively are, and the New Notes and guarantees effectively will be, subordinated to our and our subsidiary guarantors’ secured debt to the extent of the value of the assets that secure that indebtedness. In the event of our or any subsidiary guarantor’s bankruptcy, liquidation or reorganization or upon acceleration of the Notes, payment on the Notes or guarantees could be less, ratably, than on any secured indebtedness. We may not have sufficient assets remaining to pay amounts due on any or all of the Notes then outstanding. As of September 30, 2004, we and our guarantor subsidiaries had approximately $7 million of secured indebtedness outstanding to which the Existing Notes effectively are, and the New Notes effectively will be, subordinated.
In the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. As of September 30, 2004, our non-guarantor subsidiaries had approximately $278 million of outstanding indebtedness and other liabilities (excluding intercompany liabilities) to which the Existing Notes effectively are, and the New Notes effectively will be, subordinated.
The indentures governing the Existing Notes do not, and the indentures governing the New Notes will not, prohibit or limit us or our subsidiaries from incurring additional indebtedness and other liabilities, or from pledging assets to secure such indebtedness and liabilities. The incurrence of additional indebtedness and, in particular, the granting of a security interest to secure the indebtedness, could adversely affect our ability to pay our obligations on the Notes.
We may not be able to repurchase the Notes when required or make the required cash payments upon conversion of the Notes.
On August 8, 2010, 2013 and 2018 for the Existing 5.0% Notes and the New 5.0% Notes and on November 25, 2012, 2015 and 2020 for the Existing 3.375% Notes and the New 3.375% Notes and upon the occurrence of a Repurchase Change in Control (as defined herein), holders of the Notes may require us to repurchase their Notes for cash. We may not have sufficient funds at the time of any such events to make the required repurchases.
In addition, the New Notes require that we pay cash for the lesser of the par value of the New Notes and their conversion value upon their conversion by the holders. The events leading to convertibility of the Notes may be out of our control. Furthermore, our stock price has increased significantly since we originally issued the Existing Notes, making it more likely that the Notes could become convertible in the near future. We may not have sufficient funds at the time of any such events to make the required cash payments.
The source of funds for any cash payment required as a result of any such events will be our available cash or cash generated from operating activities or other sources, including borrowings, sales of assets, sales of equity or funds provided by a new controlling entity. We cannot assure you, however, that sufficient funds will be available at the time of any such events to make any such required cash payments. Furthermore, the use of available cash to fund the required cash payments may impair our ability to obtain additional financing in the future.
We are subject to a new accounting rule that, when adopted will result in lower earnings per share, on a diluted basis.
At its September 2004 meeting, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a conclusion on EITF Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings Per Share”, that will require the contingent shares issuable under our Existing Notes to be included in our diluted earnings per share calculation retroactive to the date of issuance by applying the “if converted” method under FASB Statement No. 128, “Earnings per Share” (FAS 128). We have followed the existing interpretation of FAS 128, which requires inclusion of the impact of the conversion of our Existing Notes only when and if specified conditionsthe conversion thresholds are reached. As the conversion thresholds have not been satisfied;reached, we have not included the impact of the conversion of our Existing Notes in our computation for diluted earnings per share through the periods ended September 30, 2004.
The new rule, which has been approved by the FASB and -is awaiting resolution of another exposure draft, which will determine its effective date, will require us to amendrestate previously reported diluted earnings per share and will result in lower diluted earnings per share than previously reported for periods subsequent to the issuance of the Existing Notes. If the exchange offers are completed prior to the effective date of the new rule, the restated diluted earnings per share will be calculated under the terms of the New Notes and will result in lower diluted earnings per share once our stock price meets the conversion price. For the three month periods ended September 30, 2003, December 31, 2003, March 31, 2004 and June 30, 2004, assuming exchange offerof substantially all of the Existing Notes, our diluted earnings per share would not have been materially different than the reported amount. For the three months ended September 30, 2004, assuming exchange of substantially all of the Existing Notes, our diluted earnings per share would have been lower by approximately 2%. If the exchange offers are not completed prior to the effective date of the new rule, our restated diluted earnings per share will be calculated under the terms of the Existing Notes, which will result in lower diluted earnings per share of approximately 12% for the three months ended September 30, 2004.
You should consider the U.S. federal income tax consequences of owning the New Notes.
Under the indentures governing the Existing Notes, we agreed, and by acceptance of a beneficial interest in an Existing Note each holder of an Existing Note is deemed to have agreed, to treat the Existing Notes as indebtedness for U.S. federal income tax purposes that is subject to the Treasury regulations governing contingent payment debt instruments. Similar provisions will be included in the indentures governing the New Notes. Under the Treasury regulations governing contingent payment debt instruments, interest accrues on such an instrument for U.S. federal income tax purposes at the comparable yield (rather than any manner consistentstated interest rate), which is the yield the issuer could have issued a nonconvertible fixed-rate debt instrument with no contingent payments, but with terms and conditions otherwise similar to the issued contingent payment debt instrument. At the respective times the Existing 5.0% Notes and the Existing 3.375% Notes were issued, we determined their comparable yields to be 9.0% and 8.1%, respectively. Assuming that the exchange of the Existing Notes for the New Notes does not constitute a significant modification of the terms of the Existing Notes, and therefore, the New Notes will be treated as a continuation of the Existing Notes for U.S. federal income tax purposes, interest on the New 5.0% Notes and the New 3.375% Notes will accrue for U.S. federal income tax purposes at the respective comparable yields that we determined for the Existing 5.0% Notes and the Existing 3.375%, which are 9.0% and 8.1%, respectively. A U.S. holder will be required to accrue interest income on the New Notes on a constant yield to maturity basis at the applicable comparable yield as set forth above (subject to certain adjustments), with the registration
rights agreement.
3
Procedures for tendering
notes......................... If you wishresult that a U.S. holder generally will recognize taxable income significantly in excess of regular interest payments received while the New Notes are outstanding.
A U.S. holder will also recognize gain or loss on the sale, conversion, exchange, redemption or retirement of a New Note in an amount equal to tender your outstanding notes
forthe difference between the amount realized on the sale, conversion, exchange, you must:
- completeredemption or retirement of a New Note, including the amount of cash and signfair market value of our common stock received upon conversion thereof, and the enclosed letter of
transmittal by following the related
instructions; and
- send the letter of transmittal, as directedU.S. holder’s adjusted tax basis in the instructions, togetherNew Note. Any gain recognized on the sale, conversion, exchange, redemption or retirement of a New Note generally will be ordinary interest income; any loss will be ordinary loss to the extent of the interest previously included in income, and thereafter, capital loss. The material U.S. federal income tax consequences of the purchase, ownership and disposition of the New Notes are summarized in this prospectus under the heading “Material U.S. Federal Income Tax Considerations”.
We expect that the trading value of the Notes will be significantly affected by the price of our common stock and other factors.
The market price of the Notes is expected to be significantly affected by the market price of our common stock. This may result in greater volatility in the trading value of the Notes than would be expected for nonconvertible debt securities. In addition, the Notes have a number of features, including conditions to conversion, that could result in a holder receiving less than the value of our common stock into which a Note would otherwise be convertible. These features could adversely affect the value and the trading price for the Notes.
Because there is no current market for the New Notes, we cannot assure you that an active trading market will develop.
There is no established trading market for the New Notes. The Existing Notes are either currently traded on the over-the-counter markets or are available for trading on the PORTALSM Market. It is expected that the New Notes will be traded in the over-the-counter market, but there can be no assurance as to the liquidity of any market for the Notes, the ability of the holders to sell their Notes, or the prices at which holders of the Notes would be able to sell their Notes. The Notes could trade at prices higher or lower than their initial purchase prices depending on many factors. Accordingly, there can be no assurance that an active trading market for the Notes will develop. Furthermore, if an active trading market were to develop, the market price for the Notes may be adversely affected by changes in our financial performance, changes in the overall market for similar securities and changes in performance or prospects for companies in our industry.
You may only convert the Notes if certain conditions are met.
The Existing Notes are convertible into shares of our common stock, and the New Notes will be convertible into a combination of cash and stock, if any, by you only if specified conditions are met. If the specific conditions for conversion are not met, you will not be able to convert your Notes, and you may not be able to receive the value of the common stock into which the Notes would otherwise be convertible.
The Notes are not protected by restrictive covenants.
The indentures governing the Existing Notes do not, and the indentures governing the New Notes will not, contain any financial or operating covenants or restrictions on the payment of dividends, the incurrence of indebtedness or liens or the issuance or repurchase of securities by us or any of our subsidiaries. The indentures do not and will not contain covenants or other provisions to afford protection to holders of the Notes in the event of a fundamental change involving us, except to the extent described under “Description of the New 5.0% Notes—Change in Control” and “Description of the New 3.375% Notes—Change in Control”.
We are a holding company, and we are dependent on the ability of our subsidiaries to distribute funds to us.
We are a holding company and our subsidiaries conduct substantially all of our consolidated operations and own substantially all of our consolidated assets. Consequently, our cash flow and our ability to make payments on our indebtedness, including the Notes, substantially depends upon our subsidiaries’ cash flow and payments of funds to us by our subsidiaries. Our subsidiaries’ ability to make any advances, distributions or other payments to us may be restricted by, among other things, debt instruments, tax considerations and legal restrictions. If we are unable to obtain funds from our subsidiaries as a result of these restrictions, we may not be able to pay principal of, or interest (including contingent interest, if any) on, the Notes when due, and we cannot assure you that we will be able to obtain the necessary funds from other sources.
The subsidiary guarantees could be deemed fraudulent conveyances under certain circumstances and a court may try to subordinate or void the subsidiary guarantees.
Under various fraudulent conveyance or fraudulent transfer laws, a court could subordinate or void the subsidiary guarantees. Generally, to the extent that a court were to find that at the time one of our subsidiaries entered into a subsidiary guarantee either: (x) the subsidiary incurred the guarantee with the intent to hinder, delay or defraud any present or future creditor or contemplated insolvency with a design to favor one or more creditors to the exclusion of others or (y) the subsidiary did not receive fair consideration or reasonably equivalent value for issuing the subsidiary guarantee and, at the time it issued the subsidiary guarantee, the subsidiary (i) was insolvent or became insolvent as a result of issuing of the subsidiary guarantee, (ii) was engaged or about to engage in a business or transaction for which the remaining assets of the subsidiary constituted unreasonably small capital or (iii) intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they matured, the court could void or subordinate the subsidiary guarantee in favor of the subsidiary’s other obligations. Among other things, a legal challenge of a subsidiary guarantee on fraudulent conveyance grounds may focus on the benefits, if any, realized by the subsidiary as a result of the issuance of the Notes by us. To the extent a subsidiary guarantee is voided as a fraudulent conveyance or held unenforceable for any other required documents,reason, the holders of the Notes would not have any claim against that subsidiary and would be creditors solely of us and any other subsidiary guarantors whose guarantees are not held unenforceable.
Risks Relating to the exchange agent,
either (1) withExchange Offers
After the outstanding notes to be
tendered or (2) in compliance with the
specific procedures for guaranteed deliveryconsummation of the outstanding notes.
Brokers, dealers, commercial banks, trust
companiesexchange offers there will likely be a limited trading market for the Existing Notes which could affect the market price of the Existing Notes.
To the extent that Existing Notes are tendered and other nominees may also effect
tenders by book-entry transfer.
Please do not send your letter of transmittal
or certificates representing your outstanding
notes to us. Those documents should only be
sent theaccepted for exchange agent. Questions regarding
how to tender and requests for information
should be directed to the exchange agent.
Special procedures for
beneficial owners............. If your outstanding notes are registered in the
name of a broker, dealer, commercial bank,
trust company or other nominee, we urge you to
contact that person promptly if you wish to
tender your outstanding notes pursuant to the exchange offer.
Withdrawal rights............. Youoffers, the trading market for Existing Notes that are not tendered and remain outstanding after the exchange offers is likely to be significantly more limited than at present. A debt security with a smaller outstanding principal amount available for trading (a smaller “float”) may withdrawcommand a lower price than would a comparable debt security with a larger float. Therefore, the tender of your outstanding
notes at any time priormarket price for Existing Notes that are not tendered and accepted for exchange pursuant to the expiration dateexchange offers may be affected adversely to the extent that the principal amount of the Existing Notes exchanged pursuant to the exchange offers reduces the float. A reduced float may also make the trading price of Existing Notes that are not exchanged in the exchange offers more volatile.
The U.S. federal income tax consequences of the exchange offer by delivering a written
notice of your withdrawal tothe Existing Notes for the New Notes are unclear.
The U.S. federal income tax consequences of the exchange agent. You must also followoffers are unclear. We will take the withdrawal
procedures as described underposition that the heading "The
Exchange Offer -- Withdrawal of Tenders."
Federal income tax
considerations................ The exchange of outstanding notesExisting Notes for New Notes will not constitute a significant modification of the exchange notes interms of the exchange offer should not
be a taxable eventExisting Notes for U.S. federal income tax purposes. ResalesThe indentures governing the New Notes will contain provisions stating that by acceptance of exchange notes..... We believe that youa beneficial interest in a New Note each holder thereof will be abledeemed to offerhave agreed that the exchange of Existing Notes for resale, resellNew Notes does not constitute a significant modification of the terms of the Existing Notes for U.S. federal income tax purposes. That position, however, could be challenged by the IRS. Assuming the exchange of the Existing Notes for the New Notes does not result in a significant modification of the terms of the Existing Notes, the New Notes will be treated as a continuation of the Existing Notes and there will be no U.S. federal income tax consequences to a holder who exchanges Existing Notes for New Notes pursuant to the exchange offers. If, contrary to our position, the exchange of the Existing Notes for the New Notes does constitute a significant modification of the terms of the Existing Notes, the U.S. federal income tax consequences to you could materially differ. See “Material U.S. Federal Income Tax Consequences—Consequences of the Exchange Offers” for more information.
Our Board of Directors has not made a recommendation with regard to whether or otherwise transfer exchange
notes issuednot you should tender your Existing Notes in the exchange offer without
compliance withoffers and we have not obtained a third-party determination that the registration and prospectus
delivery requirementsexchange offers are fair to holders of the federal securities
laws, unless youExisting Notes.
We are not making a broker-dealer receiving
exchange notes for your own account, provided
that:
- you are acquiring the exchange notes in the
ordinary course of business;
- you do not have any arrangement or
understanding with any personrecommendation as to participate
in the distributionwhether holders of the outstanding notes
or theExisting Notes should exchange notes;
- you arethem. We have not engaged in,retained and do not intend to engage in, a distributionretain any unaffiliated representative to act solely on behalf of the exchange
notes;
- you are not one of our "affiliates." You are
an affiliate if you are a person that
"controls or is controlled by or is under
common control with" us.
4
Our belief is based on interpretations by the
staffholders of the Commission, as set forth in
no-action letters issued to third parties
unrelated to us. The staffExisting Notes for purposes of negotiating the Commission
has not considered this exchange offer in the
context of a no-action letter, and we cannot
assure you that the staff would make a similar
determination with respect to this exchange
offer.
If our belief is not accurate and you transfer
an exchange note without delivering a
prospectus meeting the requirements of the
federal securities laws or without an exemption
from these laws, you may incur liability under
the federal securities laws. We do not and will
not assume or indemnify you against this
liability.
Each broker-dealer that receives exchange notes
for its own account in exchange for outstanding
notes, where such outstanding notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of exchange notes.
Exchange Agent................ The exchange agent for the exchange offer is
SunTrust Bank. The address, telephone number
and facsimile number of the exchange agent are
set forth in "The Exchange Offer -- Exchange
Agent" and in the letter of transmittal.
5
THE EXCHANGE NOTES
The summary below describes the principal terms of the exchange notes. Someoffers or preparing a report concerning the fairness of the termsexchange offers. We cannot assure holders of the Existing Notes that the value of the New Notes received in the exchange offers will in the future equal or exceed the value of the Existing Notes tendered and conditions described belowwe do not take a position as to whether you ought to participate in the exchange offers.
Risks Related to Our Business
We are subject to important limitations
and exceptions. The "Description of Notes" section of this prospectus contains a
more detailed description of the terms and conditions of the exchange notes.
Issuer........................ Roadway Corporation
Exchange Notes................ $225,000,000 aggregate principal amount of
8 1/4% senior notes due December 1, 2008
Maturity...................... December 1, 2008
Interest payment dates........ June 1 and December 1, beginning June 1, 2002.
Interest will accrue from the issue date of the
outstanding notes, which was November 30, 2001.
Optional redemption........... We may redeem the exchange notes at any time
prior to maturity at the redemption price
described in the "Description of Notes" section
of this prospectus.
Guarantees.................... The exchange notes will be unconditionally
guaranteed by eachgeneral economic factors that are largely out of our subsidiaries that
guarantees our other debt obligations for so
long as such subsidiary is a guarantor of our
other debt obligations.
Ranking....................... The exchange notes will rank equally with our
other senior indebtedness. The notes will be
effectively subordinated to all secured debt of
our subsidiary guarantors and to all debt of
our non-guarantor subsidiaries.
As of September 8, 2001, after giving effect to
the offering of the outstanding notes, the
borrowings under our new credit facility,
receipt of the proceeds from the accounts
receivable securitization and our sale of ARLO
and the application of the net after-tax
proceeds therefrom to prepay a portion of the
borrowings under the new credit facility, we
would have had $325.0 million of total
indebtedness, allcontrol, any of which would have been
senior indebtedness,could significantly reduce our operating margins and our subsidiaries would
have had $5.5 million of total indebtedness,
all of which would have been effectively ranked
senior to the exchange notes.
Security...................... The exchange notes will be secured, equally and
ratably with debt under our new credit facility
and any successor or replacement thereof, by
liens on the capital stock of the subsidiaries,
the capital stock of whichincome.
Our business is pledged under our
new credit facility, and any successor or
replacement thereof.
The liens securing the exchange notes will be
automatically released if the liens securing
our obligations under our new credit facility
and any successor or replacement thereof are
released. Please read "Risk Factors -- The
guarantees may be terminated, and the liens
securing the exchange notes may be released,
without the consent of the note holders."
Certain covenants............. The indenture governing the exchange notes
limits our ability to:
- incur liens on our assets to secure debt;
6
- merge or consolidate with another company;
- engage in sale and leaseback transactions;
and
- transfer our assets substantially or in their
entirety.
These covenants are subject to a number of important qualificationsgeneral economic factors that may significantly reduce our operating margins and exceptions
describedincome, many of which are largely out of our control. These include recessionary economic cycles and downturns in customers’ business cycles and changes in their business practices, particularly in market segments and industries, such as retail and manufacturing, where we have a significant concentration of
customers. Economic conditions may adversely affect our customers’ business levels, the amount of transportation services they need and their ability to pay for our services. Customers encountering adverse economic conditions represent a greater potential for loss, and we may be required to increase our reserve for bad-debt losses.
The transportation industry is affected by business risks that are largely out of our control, any of which could significantly reduce our operating margins and income.
Businesses operating in the "Descriptiontransportation industry are affected by risks that are largely out of Notes" sectionour control, any of this prospectus.
Usewhich could significantly reduce our operating margins and income. These factors include weather, excess capacity in the transportation industry, interest rates, fuel prices and taxes, terrorist attacks, license and registration fees, and insurance premiums and self-insurance levels. Our results of proceeds............... operations may also be affected by seasonal factors.
We will not receive any cash proceeds from the
issuance of the exchange notes. See "Use of
Proceeds."
Risk factors.................. See "Risk Factors" foroperate in a discussion of the
factors you should carefully consider before
deciding to exchange any outstanding notes.
ABOUT ROADWAY CORPORATION
Our principal executive offices are located at 1077 Gorge Boulevard, Akron,
Ohio 44310highly competitive industry, and our telephone number is (330) 384-9000.
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ROADWAY SUMMARY HISTORICAL FINANCIAL DATA
We derived the following historical information from our audited
consolidated financial statements for the years ended December 31, 2000, 1999
and 1998 and from our unaudited consolidated financial statements for the
thirty-six week periods (three quarters) ended September 8, 2001 and September
9, 2000. The unaudited consolidated financial statements have been prepared by
us on a basis consistent with the audited financial statements and include, in
the opinion of management, all normal recurring adjustments necessary for a fair
presentation of the information. Operating results for the thirty-six week
period (three quarters) ended September 8, 2001business will suffer if we are not necessarily indicative
of the results that will be achieved for future periods.
THIRTY-SIX WEEKS
(THREE QUARTERS) ENDED
SEPTEMBER 9, YEAR ENDED DECEMBER 31,
--------------------------- ------------------------------------
2001 2000 2000 1999 1998
------------ ------------ ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS:
Revenue.................................. $1,924,251 $2,083,545 $3,039,560 $2,813,214 $2,654,094
Operating expenses:
Salaries, wages and benefits......... 1,229,033 1,306,220 1,889,928 1,793,594 1,724,970
Operating supplies and expenses...... 336,833 376,811 544,774 468,452 456,884
Purchased transportation............. 191,954 213,731 308,089 289,544 260,445
Operating taxes and licenses......... 49,829 54,861 78,271 76,113 74,604
Insurance and claims................. 34,044 40,994 64,442 62,700 53,948
Provision for depreciation........... 47,617 36,973 55,675 45,492 41,422
Net loss (gain) on sale of carrier
operating property................. 534 1,257 1,969 103 (2,239)
---------- ---------- ---------- ---------- ----------
Total operating expenses................. 1,889,844 2,030,847 2,943,148 2,735,998 2,610,034
---------- ---------- ---------- ---------- ----------
Operating income......................... 34,407 52,698 96,412 77,216 44,060
Net income............................... 17,186 31,107 56,542 45,773 26,034
OTHER OPERATING DATA:
EBITDA(1)................................ $ 79,152 $ 91,874 $ 155,503 $ 126,096 $ 88,790
Depreciation and amortization............ 48,497 37,440 56,878 45,635 42,440
Cash flows from operating activities..... 64,935 52,512 96,984 99,841 59,981
Cash flows used in investing
activities............................. (43,860) (79,041) (108,885) (75,731) (38,215)
Cash flows used in financing
activities............................. (3,615) (3,305) (3,854) (3,756) (19,733)
Ratio of earnings to fixed charges(2).... 12.7x 33.2x 32.6x 29.2x 20.1x
BALANCE SHEET DATA (AT PERIOD END):
Cash, cash equivalents and marketable
securities............................. $ 82,554 $ 50,963 $ 64,939 $ 80,797 $ 60,232
Total assets............................. 872,164 855,920 870,405 831,408 748,833
Total debt............................... -- -- -- -- --
Total liabilities........................ 522,298 540,577 530,534 540,453 499,224
Total stockholders' equity............... 349,866 315,343 339,871 290,955 249,609
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(1) EBITDA is defined as income before income tax expense, interest expense,
depreciation expense and amortization of costs in excess of net tangible
assets acquiredunable to adequately address potential downward pricing pressures and other intangible assets. Historically, we have had no
debtfactors that may adversely affect our operations and therefore, there are no deferred loan origination fees to be
amortized. While EBITDA should not be considered as a substitute forsignificantly reduce our operating income or a better indicator of liquidity than cash flows from
operating activities, which are determined in accordance with generally
accepted accounting principles, it is included in this prospectus to provide
additional information with respect tomargins and income.
Numerous competitive factors could impair our ability to meetmaintain our future debtcurrent profitability. These factors include the following:
If our relationship with our employees were to intense competitiondeteriorate, we may be faced with labor shortages, disruptions or stoppages, which could adversely affect our business and price discounting,
resulting in decreasedreduce our operating margins and income and place us at a significant numberdisadvantage relative to non-union competitors.
Our operations rely heavily on our employees, and any labor shortage, disruption or stoppage caused by poor relations with our employees or the renegotiation of business failures.
There can be no assurance that we will be successful in meeting the competitive
demands of the trucking industry.
MANY OF OUR EMPLOYEES ARE UNIONIZED, WHICH MAY RESULT IN WORK STOPPAGES AND
WHICH MAY DISADVANTAGE US RELATIVE TO NON-UNIONIZED COMPETITORS.
As of September 8, 2001, approximately 75%labor contracts could reduce our operating margins and income. Approximately 80 percent of our employees were
representedare organized by various labor unions, primarily the International Brotherhood of Teamsters Chauffeurs, Warehousemen, and Helpers of America. Most of New Penn's
2,000 employeestheir wages and benefits are also representedgoverned by the Teamsters. Both our and New Penn's
collective bargaininga common labor agreement expiresthat is renegotiated every three to five years. The current five-year labor agreement will expire on March 31, 2003. There can be no
assurance2008. It is possible that we will notcould become subject to additional work rules imposed by agreements with labor unions, or that work stoppages or other labor disturbances
will not
could occur in the future, any of which could have a material adverse effect
onreduce our operations.operating margins and income. Similarly, any failure to reach agreement onnegotiate a new labor agreementsagreement when required might result in a work stoppage that could reduce our operating margins and income and place us at a disadvantage relative to our non-union competitors.
Ongoing insurance and claims expenses could significantly reduce our income.
Our future insurance and claims expenses might exceed historical levels, which could significantly reduce our earnings. We currently self-insure for a portion of our claims exposure resulting from cargo loss, personal injury, property damage and workers’ compensation. If the number or severity of claims for which we are self-insured increases, our earnings could be significantly reduced. We also maintain insurance with licensed insurance companies above the amounts for which we self-insure.
We will have a
material adverse effect onsignificant ongoing capital requirements that could reduce our income if we are unable to generate sufficient cash from operations.
Deregulation of most of
The transportation industry is very capital intensive. If we are unable to generate sufficient cash from operations in the trucking industry, begun in 1980 and largely
completed by Congress in 1995, has given risefuture, we may have to intense competition. New
entrants, somelimit our growth, enter into additional financing arrangements, or operate our revenue equipment for longer periods, any of which have grown rapidlycould reduce our income. Our ability to incur additional indebtedness could be adversely affected by any increase in regional markets, include some
non-union carriers. It is generally believedrequirements that non-union carrierswe post letters of credit in support of our insurance policies. See “—Ongoing insurance and claims expenses could significantly reduce our income”. Lack of availability of surety bonds in the truckingfuture could result in our having to post additional letters of credit, which would in turn reduce borrowing availability under our credit agreement. If needed, additional indebtedness may not be available on terms acceptable to us.
We operate in a highly regulated industry, have advantages over unionized carriers like us, which include
less restrictive work rules and lower labor costs, particularly with respect to
benefit plan costs.
WE REMAIN SUBJECT TO GOVERNMENT REGULATION OF EQUIPMENT, SAFETY MEASURES AND
ENVIRONMENTAL MATTERS, WHICH COULD RESULT IN REQUIREMENTS THAT REDUCE OUR
REVENUES OR ARE COSTLY TO COMPLY WITH.
Our business is subject to regulation by various federal, state and foreign
governmental entities, and there can be no assurance that changes in applicable
laws and regulations, or costs of complyingcompliance with, currentor liability for violation of, existing or future laws and
regulations will not have a material adverse effect on us. could significantly increase our costs of doing business.
The U.S. Department of Transportation which retains limited oversight authorityand various state and federal agencies exercise broad powers over our business, generally governing such activities as authorization to engage in motor carriers, currently regulates ourcarrier operations in domestic interstate commerce.
Federal legislation prohibitsand safety. We may also become subject to new or more restrictive regulations imposed by the states from enacting or enforcing a law,
regulationDepartment of Transportation, the Occupational Safety and Health Administration or other provision relatedauthorities relating to a price, route or serviceengine exhaust emissions, security and other matters. Compliance with such regulations could substantially impair equipment productivity and increase our costs.
The Environmental Protection Agency has issued regulations that require progressive reductions in exhaust emissions from diesel engines through 2007. These reductions began with diesel engines manufactured late in 2002. The regulations currently include subsequent reductions in the sulfur content of any motor
carrierdiesel fuel in interstate commerce. 2006 and the introduction of emissions after-treatment devices on newly manufactured engines in 2007. These regulations could result in higher prices for tractors and increased fuel and maintenance costs.
We like other interstate motor carriers, are subject to safety requirements governing interstate operations prescribed by the
DOT. In addition, vehicle dimensions and driver hours of service remain subject
to both federal and state regulation. More restrictive limitations on vehicle
weight and size, trailer length and configuration, or driver hours of service
could have a material adverse affect on our operating results.
Our business is also subject to federal, state and localvarious environmental laws and regulations, relatingand costs of compliance with, or liabilities for violations of, existing or future regulations could significantly increase our costs of doing business.
Our operations are subject to environmental laws and regulations dealing with, among other things, the generation, storage,
handling use and transportation of hazardous materials, the emissionunderground fuel storage tanks and discharge and retention of stormwater. We operate in industrial areas, where truck terminals and other industrial activities are located, and where groundwater or other forms of environmental contamination may have occurred. Our operations involve the risks of fuel spillage or seepage, environmental damage, and hazardous materials into the atmosphere fromwaste disposal, among others. If we are involved in a spill or other accident involving hazardous substances, or if we are found to be in violation of applicable laws or regulations, it could significantly increase our properties and our
vehicles.cost of doing business. Under specific environmental laws, we could be held responsible for all of the costs relating to any contamination at our past or present facilities and at third party waste disposal sites. We cannot assure you
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that our costs of complyingIf we fail to comply with current and futureapplicable environmental laws, and our
liabilities arising from releases or disposal of hazardous substances will not
have a material adverse effect on our operating results, business or financial
condition.
THE COST OF THE ARNOLD ACQUISITION COULD INCREASE.
The cost of the Arnold acquisitionregulations, we could increase if there are substantial
undisclosed liabilities related to Arnold.
The cost of the Arnold acquisition could also increase if Arnold is unable
to obtain releases related to several leases to which ATS is party. The leases
relate to the logistics business of ARLO and are expected to be assigned to
ARLO's new owner. However, if releases of ATS's obligations under the leases are
not obtained, Arnold will remain liable for the rent, insurance and other
obligations under the leases.
BECAUSE OUR TRUCKS RUN ON DIESEL FUEL AND THERE ARE LIMITS ON ATS'S ABILITY TO
PASS ON INCREASES IN FUEL PRICES TO CUSTOMERS, CHANGES IN FUEL COSTS COULD
REDUCE THE PROFITABILITY OF ATS.
We depend on diesel fuel to run our trucks. In the TL market, where ATS
operates, most customer rates are subject to negotiated contractssubstantial fines or penalties and agreements, which minimizes our ability to pass fuel cost increases to these
customers. If the costcivil and criminal liability.
We are responsible for certain U.S. federal tax obligations of fuel increases, ATS's operating results will be
affected.
OUR FORMER PARENT IS UNDER EXAMINATION BY THE IRS AND, AS A RESULT, WE MAY BE
REQUIRED TO REIMBURSE OUR FORMER PARENT FOR ADDITIONAL TAXES AND INTEREST
RELATING TO OUR BUSINESS PRIOR TO OUR SPIN-OFF.
OurRoadway Corporation under a tax sharing agreement with its former parent corporation.
On December 11, 2003, we acquired Roadway Services,Corporation. Roadway’s former parent, Caliber System, Inc. (which subsequently was acquired by FDX Corporation, a wholly owned subsidiary of FedEx Corporation), is currently under examination
byinvolved in tax litigation with the Internal Revenue ServiceIRS for tax years 1994 and 1995 years priorrelated to the spin-offtiming of deductions for Roadway’s contributions to multi-employer union pension plans. Roadway Express. The IRSLLC, a wholly owned subsidiary of Yellow Roadway and successor in interest to Roadway, has proposed substantial adjustmentsliability for thesethose tax years for multiemployer pension plan deductions. The IRS is
challengingpursuant to the timing, not the validity,terms of these deductions. We are unable to
predict the ultimate outcome of this matter. Under a tax sharing agreement entered into by usbetween Roadway and Roadway Services at the time of our spin-off, we are
obligated to reimburse Roadway Services for any additional taxes and interest
that relate to our business prior to the spin-off. The amount and timing of
payments, if any, is dependent on the ultimate resolution of Roadway Services'
disputesits former parent. We have reached an oral preliminary agreement with the IRS to settle the pending litigation for tax years 1994 and 1995. We expect to resolve similar IRS adjustments which are pending for tax years 1996 through 2002 on terms similar to those of the settlement for tax years 1994 and 1995. In June 2004, in anticipation of the expected settlements for the above years, we deposited $41.4 million ($32.3 million net of tax benefit) with the IRS to halt any additional interest accrual on the expected tax liability. Additional state tax and interest payments of approximately $9.0 million ($7.4 million net of tax benefit) resulting from the federal adjustments are expected to be made during 2004. There can be no assurance, however, that a settlement will be finalized upon the expected terms.
We may be obligated to make additional contributions to multi-employer pension plans.
Yellow Transportation, Roadway Express and New Penn contribute to approximately 90 separate multi-employer health, welfare and pension plans for employees covered by collective bargaining agreements (approximately 77 percent of total employees). The largest of these plans, the Central States Southeast and Southwest Areas Pension Plan (the “Central States Plan”), provides retirement benefits to approximately 53 percent of our total employees. The amounts of these contributions are determined by contract and established in the agreements. The health and welfare plans provide health care and disability benefits to active employees and retirees. The pension plans provide defined benefits to retired participants. We recognize as net pension cost the required contribution for the period and recognize as a liability any contributions due and unpaid.
Yellow Transportation, Roadway Express and New Penn Motor Express each have collective bargaining agreements with their unions that stipulate the amount of contributions each company must make to union-sponsored, multi-employer pension plans. The Internal Revenue Code and related regulations establish minimum funding requirements for these plans. Under recent legislation, qualified multi-employer plans are permitted to exclude certain recent investment losses from the minimum funding formula through 2005. The Central States Plan, in particular, has informed the Company that its recent investment performance has adversely affected its funding levels and that the fund is seeking corrective measures to address its funding. During the benefit period of the recent legislation, the Central States Plan is expected to meet the minimum funding requirements. If any of these plans, including the Central States Plan, fails to meet minimum funding requirements and the determinationtrustees of such a plan are unable to obtain a waiver of the naturerequirements or certain changes in how the applicable plan calculates its funding level from the IRS or reduce pension benefits to a level where the requirements are met, the IRS could impose an excise tax on all employers participating in these plans and extentcontributions in excess of our contractually agreed upon rates could be required to correct the obligations underfunding deficiency. If an excise tax were imposed on the tax sharing agreement. We cannot assure you that the
amount or timing of any liability we may have to Roadway Services will notparticipating employers and additional contributions required, it could have a material adverse effectimpact on our operating results or financial condition.
OUR GROWTH DEPENDS IN PART ON THE SUCCESS OF THE ARNOLD ACQUISITION.
Our growth depends in part on our acquisition of Arnold. However, the
acquisition involves risks and uncertainties that could cause our actual growth
to differ from our expectations. For example, if Arnold's future financial results are not consistent with its historical results,of Yellow Roadway.
Our management team is an important part of our combined company may
be less profitable than we expect.
OUR MANAGEMENT TEAM IS AN IMPORTANT PART OF OUR BUSINESS AND LOSS OF KEY
PERSONNEL COULD IMPAIR OUR SUCCESS.
business and loss of key personnel could impair our success.
We benefit from the leadership and experience of our senior management team and we depend on their continued services in order to successfully implement our business strategy. WeOther than our Chief Executive Officer, William D. Zollars, and James D. Staley, President and Chief Executive Officer of Roadway LLC, we have not entered into employment agreements for a fixed period with members of our management members.current management. The loss of key personnel could have a material adverse effect on our operating results, business or financial condition.
OUR BUSINESS MAY BE HARMED BY ANTI-TERRORISM MEASURES.
Our business may be harmed by anti-terrorism measures.
In the aftermath of recentthe terrorist attacks on the United States, federal, state and municipal authorities have implemented and are implementing various security measures, including checkpoints and travel restrictions on large trucks. Although many companies will be adversely affected by any slowdown in
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have a material adverse effect onsignificantly increase our costs and reduce our operating results, our ability to make
payments on the exchange notesmargins and income.
Our stock price or the ability of our subsidiaries to make
payments under the guarantees.
BECAUSE OUR BUSINESS DEPENDS ON ECONOMIC ACTIVITY TO GENERATE FREIGHT TO HAUL,
ECONOMIC AND MARKET CONDITIONS COULD AFFECT THE RESULTS OF OUR OPERATIONS.
Fuel shortages, interest rate fluctuations, economic recession, changes in
currency exchange rates and changes in customers' business cycles and business
practices are among the factors over which we have no control, but which may
adversely effect our financial condition or results of operations. Our
operations are primarily conducted in the United States but are also conducted
in major foreign countries. As a result, we are subject to the foregoing factors
both domestically and internationally.
OUR BUSINESS IS CONDUCTED THROUGH OUR SUBSIDIARIES AND WE WILL DEPEND ON THE
BUSINESS OF OUR SUBSIDIARIES TO SATISFY OUR OBLIGATIONS UNDER THE EXCHANGE
NOTES.
We conduct operations through our subsidiaries. As a result, we depend on
dividends, loans or advances or payments from our subsidiaries to satisfy our
financial obligations and make payments to our investors. The ability of our
subsidiaries to pay dividends and make other payments to us is restricted by,
among other things, applicable corporate and other laws and regulations. This
ability may be further restricted in the future by agreements to which our
subsidiaries may be a party. Although the exchange notes are guaranteed by the
subsidiary guarantors, each guarantee is subordinated to all secured debt of the
relevant subsidiary guarantor.
UNDER SOME CIRCUMSTANCES, A COURT COULD VOID THE SUBSIDIARY GUARANTEES.
All of our material domestic subsidiaries will initially guarantee the
exchange notes. If, however, any subsidiary becomes a debtor in a case under the
United States Bankruptcy Code or encounters other financial difficulty, under
federal or state fraudulent transfer law a court might void its guarantee. The
court might do so if it found that when the subsidiary entered into its
guarantee (or, in some states, when payments become due thereunder), it (a)
received less than reasonably equivalent value or fair consideration for the
guarantee and (b) either (1) was or was rendered insolvent, (2) was left with
inadequate capital to conduct its business or (3) believed or should have
believed that it would incur debts beyond its ability to pay. The court might
also void a guarantee, without regard to those factors, if it found that the
subsidiary entered into its guarantee with actual intent to hinder, delay or
defraud its creditors.
A court would likely find that a subsidiary did not receive reasonably
equivalent value or fair consideration for its guarantee unless it benefited
directly or indirectly from the exchange notes' issuance. If a court voided a
guarantee, you would no longer have a claim against the guarantor. In addition,
the court might direct you to repay any amounts already received from the
guarantor. If the court were to void any subsidiary's guarantee, we cannot
assure you that funds would be available to pay the exchange notes from another
subsidiary guarantor or from any other source.
The test for determining solvency for purposes of the foregoing will depend
on the law of the jurisdiction being applied. In general, a court would consider
an entity insolvent either if the sum of its existing debts exceeded the fair
value of all of its property, or if the present fair saleable value of its
assets is less than the amount required to pay the probable liability on its
existing debts as they become due. For this analysis, "debts" includes
contingent and unliquidated debts.
The indenture states that the liability of each subsidiary on its guarantee
is limited to the maximum amount that the subsidiary can incur without risk that
the guarantee will be subject to avoidance as a fraudulent transfer. We cannot
assure you that this limitation will protect the guarantees from fraudulent
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transfer attack or, if it does, that the guarantees will be in amounts
sufficient, if necessary, to pay the exchange notes when due.
THE GUARANTEES MAY BE TERMINATED, AND THE LIENS SECURING THE EXCHANGE NOTES MAY
BE RELEASED, WITHOUT THE CONSENT OF THE NOTE HOLDERS.
If a guarantor subsidiary ceases to be a subsidiary guarantor of any of our
obligations, that guarantor subsidiary will be automatically and unconditionally
released from all of its obligations under the indenture and its guarantee of
the exchange notes, and that guarantee will terminate. Likewise, if the lien
securing our obligations under our credit facility, or any successor or
replacement thereof, on the capital stock of any subsidiary is released, the
corresponding lien securing our obligations under the exchange notes will be
automatically released. Because our current or future lenders may terminate the
guarantees under the new credit facility or our other obligations or release the
liens under the credit facility or any successor or replacement thereof, we
cannot assure you that the exchange notes will continue to be guaranteed or
secured as they will be upon issuance or at all.
THERE IS NO PUBLIC TRADING MARKET FOR THE EXCHANGE NOTES, WHICH COULD LIMIT
THEIR MARKET PRICE OR THE ABILITY TO SELL THEM FOR AN AMOUNT EQUAL TO OR HIGHER
THAN THEIR INITIAL OFFERING PRICE.
There is currently no public market for the exchange notes. An active
public market will likely never develop for the exchange notes and we will not
apply to list the notes on any exchange or Nasdaq. As a result, you may be
required to bear the financial risk of your investment in the exchange notes
indefinitely. If an active market does not develop or is not maintained, the
market price and liquidity of the exchange notes may be adversely affected.
Any exchange notes traded after they are initially issued may trade at a
discount from their initial offering price. The trading price of the exchange
notes depends on prevailing interest rates,Notes may be volatile in the future, which could cause you to lose a significant portion of your investment.
The market price of Yellow Roadway common stock and the trading price for the Notes could be subject to significant fluctuations in response to certain factors, such as variations in our anticipated or actual results of operations, the operating results of other companies in the transportation industry, changes in conditions affecting the economy generally, including incidents of terrorism, analyst reports, general trends in the industry, sales of common stock by insiders, as well as other factors unrelated to our operating results. Volatility in the market price of Yellow Roadway common stock may prevent you from being able to sell your Notes at or above the price you paid for similar securitiesthem and may result in you selling shares you receive upon conversion of your Notes for less than the conversion price.
We may face difficulties in achieving the expected benefits of the December 2003 acquisition of Roadway Corporation.
Prior to December 11, 2003, when we acquired Roadway Corporation through the merger of Roadway Corporation with and into one of our subsidiaries, Yellow Corporation and Roadway Corporation operated as separate companies. We may not be able to realize the operating efficiencies, synergies, cost savings or other factors,benefits that we expect from the merger. In addition, the costs we incur in implementing synergies, including economic conditionsour ability to terminate, amend or renegotiate prior contractual commitments of Yellow and Roadway, may be greater than expected.
The Existing Notes and the net share settlement and new change in control features of the New Notes may result in dilution to our financial condition,
performance and prospects.
IF YOU DO NOT EXCHANGE YOUR OUTSTANDING NOTES, YOU MAY HAVE DIFFICULTY IN
TRANSFERRING THEM AT A LATER TIME.
We will issue exchange notes in exchange for the outstanding notes after
the exchange agent receives your outstanding notes, the letter of transmittal
and all related documents. You should allow adequate time for delivery if you
choose to tender your outstanding notes for exchange. Outstanding notes that are
not exchanged will remain subject to restrictions on transfer and will not have
any rights to registration.
If you do participatecommon stockholders.
Dilution in the exchange offer forper share value of our common stock could result from the purposeconversion of participating in the distributionmost or all of the exchange notes, you must comply with
the registration and prospectus delivery requirements of the Securities Act for
any resale transaction. Each broker-dealer who holds outstanding notes for its
own account due to market-makingExisting Notes or other trading activities and who receives
exchange notes for its own account must acknowledge that it will deliver a
prospectus in connection with any resale of the exchange notes. If any
outstanding notes are not tendered in the exchange or are tendered but not
accepted, the trading market for such outstanding notes could be negatively
affected due to the limited amount expected to remain outstanding following the
completion of the exchange offer.
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USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. Because we are exchanging the exchange notes for the outstanding notes,
which have substantially identical terms, the issuance of the exchange notes
will not result in any increase in our indebtedness.
CAPITALIZATION
The following table sets forth our consolidated cash, cash equivalents and
marketable securities and capitalization as of September 8, 2001 on a historical
basis and on a pro forma basis. The pro forma presentation gives effect to the
sale of the outstanding notes and the use of the proceeds, along with borrowings
under the new credit facility and proceeds from the accounts receivable
securitization, which is off balance sheet, to acquire Arnold, as if the
acquisition had occurred on September 8, 2001. The pro forma presentation also
gives effect to our sale of ARLO, and the application of net after-tax proceeds,
which are estimated to be $75.0 million, therefrom to prepay a portion of the
borrowings under the new credit facility, as if the disposition had occurred on
September 8, 2001.
SEPTEMBER 8, 2001
----------------------
HISTORICAL PRO FORMA
---------- ---------
(DOLLARS IN THOUSANDS)
Cash, cash equivalents and marketable securities............ $ 82,554 $110,690
======== ========
Revolving credit facility(1)................................ -- --
Term loan borrowings(2)..................................... -- 100,000
Notes offered by this offering circular..................... -- 225,000
Stockholders' equity:
Common stock, par value $.01, authorized 100,000,000
shares;shares issued 20,556,714 shares....................... 206 206
Additional paid-in capital................................ 39,314 39,314
Retained earnings......................................... 349,437 349,437
Accumulated other comprehensive loss...................... (6,632) (6,632)
Less: cost of 1,178,139 shares of common stock held as
treasury stock......................................... (20,915) (20,915)
Less: cost of unearned portion of restricted stock
awards................................................. (11,544) (11,544)
-------- --------
Total stockholders' equity.................................. 349,866 349,866
-------- --------
Total capitalization........................................ $349,866 $674,866
======== ========
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(1) At the time of the acquisition, availability under the revolving credit
facility was reduced by $56.4 million as a result of the new net share settlement and change in control features of the New Notes. If none of the Existing Notes were tendered and accepted in the exchange offers, approximately 9.7 million shares of our common stock could be issued upon the conversion of the Existing Notes. In addition, a significant number of additional shares of our common stock could be issued as a result of the new net share settlement and change in control features of the New Notes. The issuance of letterssuch shares could cause holders of credit.
(2) Term loan borrowings is presented netour common stock to experience substantial dilution. Furthermore, the trading price of after-tax proceeds, whichour common stock could suffer from significant downward pressure as note holders convert these notes or these shares are estimatedissued pursuant to be $75.0 million, from our sale of ARLO applied to prepay a
portion of the borrowings under the new credit facility.
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SELECTED HISTORICAL FINANCIAL DATA
The following table presents selected consolidated financialfeatures and such holders sell such common shares, encouraging short sales by the holders of such notes or other data
of Roadway, which should be read in conjunction with our consolidated financial
statements and notes thereto included elsewhere in this prospectus and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The consolidated statements of operations forstockholders.
RATIO OF EARNINGS TO FIXED CHARGES
We have computed the thirty-six week
periods (three quarters) ended September 8, 2001 and September 9, 2000 and the
consolidated balance sheet data as of September 8, 2001 and September 9, 2000
are derived from unaudited condensed consolidated financial statements included
in this prospectus. The consolidated statements of operations for the years
ended December 31, 2000, 1999 and 1998, and the consolidated balance sheet data
as of December 31, 2000 and 1999 are derived from our audited consolidated
financial statements included in this prospectus. The consolidated statements of
operations for the years ended December 31, 1997 and 1996 and the consolidated
balance sheet data as of December 31, 1998, 1997 and 1996 are derived from our
audited consolidated financial statements, which are not included in this
prospectus. The unaudited consolidated financial statements have been prepared
by us on a basis consistent with the audited financial statements and include,
in the opinion of management, all normal recurring adjustments necessary for a
fair presentation of the information. Operating results for the thirty-six week
period (three quarters) ended September 8, 2001 are not necessarily indicative
of the results that will be achieved for future periods.
| Fiscal Year Ended December 31, | Six 2004 | |||||||||||||||||
| 1999 | 2000 | 2001 | 2002 | 2003 | ||||||||||||||
Ratio of earnings to fixed charges | 7.7 | x | 8.6 | x | 2.7 | x | 4.1 | x | 3.5 | x | 4.4 | x | ||||||
For purposes of computing the pro forma financial statements reflect certain balance sheetratio of earnings to fixed charges, “earnings” consist of pretax income from continuing operations plus fixed charges (excluding capitalized interest). “Fixed charges” represent interest incurred (whether expensed or capitalized), amortization of debt expense, and statementthat portion of income reclassifications made to conform Arnold's presentations to our
presentations. The unaudited pro forma financial statements should be read in
conjunction with:
- our historical audited consolidated financial statements for the year
ended December 31, 2000, and our unaudited condensed consolidated
financial statements as of September 8, 2001 and for the thirty-six week
period (three quarters) ended September 8, 2001, and
- the historical audited consolidated financial statements of Arnold for
the year ended December 31, 2000, and the unaudited condensed
consolidated financial statements as of September 30, 2001 and for the
nine month period ended September 30, 2001.
The pro forma balance sheet was prepared by combining our historical
unaudited consolidated balance sheet data as of September 8, 2001 and the
historical unaudited consolidated balance sheet data as of September 30, 2001
for Arnold, adjusted to reflect the use of proceeds from the outstanding notes,
the borrowings under our new credit facility, the proceeds from the accounts
receivable securitization and the sale of ARLO. Shortly after the acquisition of
Arnold, we sold substantially all of ARLO's assets for $105.0 million in cash.
The data has also been adjusted to reflect the application of net after-tax
proceeds, which are estimatedrental expense on operating leases deemed to be $75.0 million, to prepay a portionthe equivalent of interest.
Terms of the borrowings underExchange Offers; Period for Tendering Existing Notes
We are offering, upon the new credit facility. Historically, ARLO was reported as a
segment of Arnold, with 2000terms and nine month 2001 revenues of approximately $47.8
million and $42.8 million, respectively. The pro forma balance sheet reflects
the historical unaudited financial position of Roadway and Arnold, adjusted to
present the acquisition of Arnold and consummation of these related transactions
as if each had occurred at September 8, 2001.
The pro forma statements of income were prepared using the historical
consolidated statements of income data for both us and Arnold assuming the
acquisition and related transactions had each occurred on January 1, 2000. The
pro forma statement of income for the year ended December 31, 2000 was prepared
by combining the historical audited consolidated statements of income data of us
and the historical audited consolidated statements of income data of Arnold for
the year ended December 31, 2000. The pro forma statement of income for the
thirty-six week period (three quarters) ended September 8, 2001 was prepared by
combining the historical unaudited consolidated statement of income data of us
for the thirty-six week period (three quarters) ended September 8, 2001 and the
historical unaudited consolidated statement of income data of Arnold for the
nine month period ended September 30, 2001. The pro forma statements of income
give effect to the cost associated with financing the acquisition, including
interest expense and amortization of deferred loan origination fees.
The pro forma financial statements are prepared for illustrative purposes
only, and are not necessarily indicative of the operating results or financial
position that would have occurred if the acquisition and sale transaction
described above had been consummated at the beginning of the periods or the
dates indicated, nor are they necessarily indicative of any future operating
results or financial position. The pro forma
17
financial statements do not include any adjustments related to any restructuring
charges, profit improvements, potential costs savings or one-time charges which
may result from the acquisition of Arnold, the sale of ARLO or the result of
final valuations of supplies, carrier operating property, other equipment and
fixtures, investments in limited partnerships, intangible assets and employee
benefit obligations. Roadway and Arnold continue to operate independently under
their respective brand names and each company's management team and headquarters
location remain the same. Therefore, we expect no integration costs. The pro
forma financial statements include an adjustment related to our sale of ARLO. If
the final sales proceeds are different than that assumed in the pro forma
financial statements, "costs in excess of net tangible assets acquired and other
intangible assets," long term debt, interest expense and tax expense would
change.
Upon closing of the acquisition, we began a process to determine the fair
value at the date of acquisition of the tangible and intangible assets acquired
and liabilities assumed of Arnold. We expect that the process of determining the
fair value of most assets and liabilities will be substantially completed by
March 31, 2002, subject to the finalization of any contingencies which are
identified which may require future adjustment to arrive at a final purchase
price allocation. As a result of this process, we anticipate that a portion of
the amount initially classified as "costs in excess of net tangible assets
acquired and other intangible assets" in the pro forma financial statements,
which in accordance with Statement of Financial Accounting Standards No. 142
will not be amortized, will be reclassified to the tangible and identified
intangible assets acquired, based on their estimated fair values at the date of
acquisition. These tangible and identified intangible assets will be depreciated
and amortized over their estimated useful lives. The excess of the purchase
price over the fair value of the tangible and identified intangible assets
acquired will be classified as goodwill, which will not be amortized. As a
result, the actual amount of depreciation and amortization expense may be
materially different from that presented in the pro forma statements of income.
Costs associated with implementing profit improvement programs initiated
subsequent to the consummation of the acquisition will be charged to our
earnings.
The acquisition had not been consummated as of the preparation of these pro
forma financial statements.
18
CONDENSED COMBINED PRO FORMA BALANCE SHEET -- SEPTEMBER 8, 2001
(UNAUDITED)
ROADWAY PRO ROADWAY
ROADWAY ARNOLD FORMA COMBINED PRO
HISTORICAL ADJUSTED(26) ADJUSTMENTS FORMA(1)
---------- ------------ ----------- ------------
(DOLLARS IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents.......... $ 82,554 $ 51,036 $ (66,400)(2) $ 110,690
13,500(3)
105,000(4)
(75,000)(5)
Accounts receivable, net......... 283,319 42,319 (100,000)(6) 225,638
Prepaid expense and supplies..... 20,316 7,823 28,139
---------- -------- --------- ----------
Total current assets.................... 386,189 101,178 (122,900) 364,467
Carrier operating property, at cost..... 1,426,141 347,048 (155,275)(7) 1,627,503
9,589(8)
Less: allowance for depreciation...... 1,001,747 155,275 (155,275)(7) 1,001,747
---------- -------- --------- ----------
Net carrier operating property.......... 424,394 191,773 9,589 625,756
Costs in excess of net tangible assets
acquired and other intangible
assets................................ 15,206 7,459 247,494(9) 266,900
(7,459)(10)
4,200(11)
Deferred income taxes................... 46,375 1,765 (38,926)(12) 9,214
Other assets............................ 9,001 9,300(11) 18,301
---------- -------- --------- ----------
TOTAL ASSETS............................ $ 872,164 $311,176 $ 101,298 $1,284,638
========== ======== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 180,012 $ 17,385 $ 13,500(11) $ 248,147
7,250(13)
30,000(14)
Salaries and wages.................... 108,304 12,166 120,470
Current portion-long-term debt,
freight and casualty claims
payable............................ 51,680 3,147 54,827
---------- -------- --------- ----------
Total current liabilities............... 339,996 32,698 50,750 423,444
Long-term liabilities:
Casualty claims and other............. 62,685 4,026 66,711
Accrued pension and postretirement
health care........................ 119,617 119,617
Deferred income taxes................. 34,995 3,931(15)
(38,926)(12)
Long-term debt........................ 400,000(16) 325,000
(75,000)(5)
---------- -------- --------- ----------
Total long-term liabilities............. 182,302 39,021 290,005 511,328
Total stockholders' equity.............. 349,866 239,457 (239,457) 349,866
---------- -------- --------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................ $ 872,164 $311,176 $ 101,298 $1,284,638
========== ======== ========= ==========
19
CONDENSED COMBINED PRO FORMA INCOME STATEMENT
(UNAUDITED)
THIRTY-SIX WEEKS (THREE QUARTERS) ENDED SEPTEMBER 8, 2001
----------------------------------------------------------
ROADWAY ROADWAY
ROADWAY ARNOLD PRO FORMA COMBINED PRO
HISTORICAL ADJUSTED(27) ADJUSTMENTS FORMA(1)
---------- ------------ ----------- -------------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
Revenue.................................. $1,924,251 $292,996 $2,217,247
Operating expenses:
Salaries, wages and benefits........... 1,229,033 141,933 1,370,966
Operating supplies and expenses........ 336,833 46,109 $ (213)(17) 382,729
Purchased transportation............... 191,954 39,468 231,422
Operating taxes and licenses........... 49,829 7,761 57,590
Insurance and claims................... 34,044 7,869 41,913
Provision for depreciation............. 47,617 20,853 664(18) 69,134
Net loss (gain) on sale of carrier
operating property.................. 534 25 559
---------- -------- -------- ----------
Total operating expenses.......... 1,889,844 264,018 451 2,154,313
---------- -------- -------- ----------
Operating income......................... 34,407 28,978 (451) 62,934
Interest expense....................... (505) (63) (18,818)(19) (19,386)
Other income (expense), net............ (3,752) (700) (1,344)(20)
(854)(21)
1,286(22) (5,364)
---------- -------- -------- ----------
Total other income (expense)...... (4,257) (763) (19,730) (24,750)
---------- -------- -------- ----------
Income before income taxes............... 30,150 28,215 (20,181) 38,184
Provision for income taxes............... 12,964 10,262 (7,571)(23) 15,655
---------- -------- -------- ----------
Net income............................... $ 17,186 $ 17,953 $(12,610) $ 22,529
========== ======== ======== ==========
Earnings per share -- diluted............ $ 0.91 $ 0.95 $ (0.67) $ 1.19
========== ======== ======== ==========
Fully diluted shares outstanding......... 18,938 18,938 18,938 18,938
========== ======== ======== ==========
Operating ratio(24)...................... 98.2% 90.1% 97.2%
========== ======== ==========
CALCULATION OF EBITDA:
Income before income taxes............... $ 38,184
Interest expense......................... 19,386
Depreciation............................. 69,134
Amortization of costs in excess of net
tangible assets acquired and other
intangible assets...................... 833
Amortization of loan origination fees.... 1,344
----------
EBITDA(25)............................... $ 128,881
==========
20
CONDENSED COMBINED PRO FORMA INCOME STATEMENT
(UNAUDITED)
YEAR ENDED DECEMBER 31, 2000
----------------------------------------------------------
ROADWAY ROADWAY
ROADWAY ARNOLD PRO FORMA COMBINED PRO
HISTORICAL ADJUSTED(28) ADJUSTMENTS FORMA(1)
---------- ------------ ----------- -------------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
Revenue.................................. $3,039,560 $414,543 $3,454,103
Operating expense:
Salaries, wages and benefits........... 1,889,928 189,135 2,079,063
Operating supplies and expenses........ 544,774 62,501 $ (284)(17) 606,991
Purchased transportation............... 308,089 58,633 366,722
Operating taxes and licenses........... 78,271 10,392 88,663
Insurance and claims................... 64,442 9,858 74,300
Provision for depreciation............. 55,675 29,509 959(18) 86,143
Net loss (gain) on sale of carrier
operating property.................. 1,969 (1,977) (8)
---------- -------- -------- ----------
Total operating expenses.......... 2,943,148 358,051 675 3,301,874
---------- -------- -------- ----------
Operating income......................... 96,412 56,492 (675) 152,229
Interest expense....................... (341) (1,340) (28,002)(19) (29,683)
Other income (expense), net............ 2,213 1,622 (1,958)(20)
(1,243)(21) 634
---------- -------- -------- ----------
Total other income (expense)...... 1,872 282 (31,203) (29,049)
---------- -------- -------- ----------
Income before income taxes............... 98,284 56,774 (31,878) 123,180
Provision for income taxes............... 41,742 20,975 (12,213)(23) 50,504
---------- -------- -------- ----------
Net income............................... $ 56,542 $ 35,799 $(19,665) $ 72,676
========== ======== ======== ==========
Earnings per share -- diluted............ $ 2.98 $ 1.88 $ (1.03) $ 3.83
========== ======== ======== ==========
Fully diluted shares outstanding......... 18,992 18,992 18,992 18,992
========== ======== ======== ==========
Operating ratio(24)...................... 96.8% 86.4% 95.6%
========== ======== ==========
CALCULATION OF EBITDA:
Income before income taxes............... $ 123,180
Interest expense......................... 29,683
Depreciation............................. 86,161
Amortization of costs in excess of net
tangible assets acquired and other
intangible assets...................... 1,203
Amortization of loan origination fees.... 1,958
----------
EBITDA(25)............................... $ 242,185
==========
21
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS
(1) The unaudited pro forma financial statements do not give effect to any
potential cost savings or other profit improvements that could result from
the acquisition. Roadway has undertaken a study to determine the
allocation of the total purchase price to the various tangible and
intangible assets acquired and the liabilities assumed. These pro forma
financial statements reflect a preliminary allocation of purchase price
which is subject to change based on the finalization of the fair value of
the tangible and intangible assets acquired and liabilities assumed as of
the acquisition date. The preliminary estimated fair value of the assets
acquired and the liabilities assumed in the acquisition are as follows:
TOTAL ARLO NET
------ ------ ------
(DOLLARS IN MILLIONS)
Tangible assets acquired at fair value............... $376.3 $(53.7) $322.6
Costs in excess of the net tangible assets of the
acquired business.................................. 277.1 (25.4) 251.7
Acquisition costs.................................... (13.5) -- (13.5)
Liabilities assumed.................................. (87.0) 4.1 (82.9)
------ ------ ------
Total purchase price................................. $552.9 $(75.0) $477.9
====== ====== ======
These pro forma financial statements are not necessarily indicative of the
operating results or financial position that would have occurred had the
acquisition been consummated at the dates indicated, nor necessarily
indicative of future operating results.
(2) Reflects excess cash available at Roadway used in connection with
financing the acquisition.
(3) Reflects direct transaction related expenses of $4.2 million and loan
origination costs of $9.3 million which are accrued but unpaid in the pro
forma balance sheet.
(4) Represents the gross proceeds from the sale of ARLO.
(5) Represents the application of net after-tax proceeds, which are estimated
to be $75.0 million, from our sale of ARLO to prepay a portion of the
borrowings under the new credit facility.
(6) Reflects the sale of accounts receivable of $100.0 million in connection
with the receivables financing used to finance, in part, the acquisition
of Arnold.
(7) Represents elimination of historical accumulated depreciation due to the
application of purchase accounting.
(8) Represents the preliminary net adjustment to carrier operating property,
buildings and other equipment and fixtures based on estimated fair values
as required by purchase accounting.
(9) Reflects the preliminary estimated adjustment for the costs in excess of
the net tangible assets of the acquired business at estimated fair value.
Roadway has undertaken a study to determine the allocation of the total
purchase price to the various assets acquired and liabilities assumed in
order to allocate the total purchase price to the various intangible
assets, if any, acquired. Management believes, on a preliminary basis,
there may be intangible assets which will be evaluated. Any excess not
attributable to tangible and intangible assets will be reflected as costs
in excess of net tangible assets acquired and other intangible assets. The
sensitivity of the valuations regarding the above can be significant.
Accordingly, Roadway intends to continue to evaluate the assets acquired
and liabilities assumed and, as a result, the allocation of the purchase
price among the tangible and intangible assets is subject to change.
(10) Represents the elimination of the historical goodwill from Arnold.
(11) Represents the accrual of certain direct transaction expenses associated
with completing the acquisition and deferred financing costs related to
the financing associated with the acquisition, including banking, legal,
accounting and other.
22
(12) Reflects certain balance sheet and statement of income reclassifications
made to conform Arnold's presentation to Roadway's presentation.
(13) Represents the accrual on Arnold's opening balance sheet of certain direct
transaction expenses associated with completing the acquisition and
related transactions, including banking, legal, accounting and other.
(14) Represents the accrual of currently payable income taxes associated with
the taxable gain on the sale of ARLO.
(15) Represents deferred tax liabilities associated with the step-up in the
basis of carrier operating property, buildings, other equipment and
fixtures based on estimated fair values as required by purchase
accounting.
(16) Represents the issuance of $225.0 million of the outstanding notes and
$175.0 million of term loan borrowings under the new credit facility, used
to finance the acquisition of Arnold.
(17) Adjustment to remove Arnold's historical amortization of costs in excess
of net tangible assets acquired and other intangible assets.
(18) Adjustment to record incremental depreciation expense on the step-up of
Arnold's property and equipment.
(19) Adjustment to record additional interest expense on the new Roadway
financing arrangements.
(20) Adjustment to record amortization of deferred financing costs related to
the new Roadway financing arrangements.
(21) Adjustment to reflect the facility fee on the Roadway revolving line of
credit.
(22) Adjustment to reverse direct transaction costs recorded by Arnold related
to the acquisition including legal, accounting and other.
(23) Adjustment to record the income tax impact of the pro forma adjustments
assuming a combined pro forma effective income tax rate of 41%.
(24) The operating ratio is defined as the ratio of total operating expenses
for a period to total revenues for that period.
(25) EBITDA is defined as income before income tax expense, interest expense,
depreciation expense, amortization of costs in excess of net tangible
assets acquired and other intangible assets and amortization of deferred
loan origination fees. While EBITDA should not be considered a substitute
for operating income or a better indicator of liquidity than cash flows
from operating activities, which are determined in accordance with
generally accepted accounting principles, it is included in this
prospectus to provide additional information with respect to our ability
to meet our future debt service, capital expenditure and working capital
requirements. EBITDA is also included because management believes that
some investors find it to be a useful tool for measuring the ability to
service debt.
23
(26) This adjustment relates to the sale of ARLO. The balance sheet at
September 30, 2001 for Arnold was calculated as follows:
ARNOLD ARLO ARNOLD
HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- --------
(DOLLARS IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents................... $ 38,661 $ (928)(a) $ 51,036
13,303(b)
Marketable securities....................... 13,303 (13,303)(b)
Accounts receivable, net.................... 50,868 (8,549)(a) 42,319
Prepaid expenses and supplies............... 9,014 (1,191)(a) 7,823
Current deferred tax asset.................. 1,765 (1,765)(b)
-------- -------- --------
Total current assets...................... 113,611 (12,433) 101,178
Property plant and equipment................ 420,040 (72,992)(a) 347,048
Accumulated depreciation.................... 187,449 (32,174)(a) 155,275
-------- -------- --------
Net property, plant and equipment........... 232,591 (40,818) 191,773
Other assets:
Costs in excess of net tangible assets
acquired and other intangible assets...... 10,878 (3,419)(a) 7,459
Deferred income taxes....................... 1,765(b) 1,765
Other long-term assets...................... 9,142 (141)(a) 9,001
-------- -------- --------
Total assets.................................. $366,222 $(55,046) $311,176
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................ $ 15,712 $ (489)(a) $ 17,385
361(b)
705(b)
1,096(b)
Current notes payable....................... 237 (237)(a)
Salaries and wages.......................... 13,169 (642)(a) 12,166
(361)(b)
Income taxes payable........................ 705 (705)(b)
Freight and casualty claims payable......... 5,132 (889)(a) 3,147
(1,096)(b)
-------- -------- --------
Total current liabilities................. 34,955 (2,257) 32,698
Other liabilities:
Casualty claims payable and other........... 2,001 2,025(b) 4,026
Notes payable............................... 918 (918)(a)
Other long-term liabilities................. 2,050 (25)(a)
(2,025)(b)
Deferred income taxes....................... 34,995 34,995
======== ======== ========
Total stockholders' equity.................... 291,303 (51,846) 239,457
-------- -------- --------
Total liabilities and stockholders' equity.... $366,222 $(55,046) $311,176
======== ======== ========
----------------------
(a) Represents the historical cost of assets that were sold and the
liabilities that were not assumed in connection with the sale of
Arnold to Roadway due to the sale of ARLO, taken from the books and
records of ARLO.
(b) Represents reclassification adjustments necessary to conform Arnold's
financial statement presentation to Roadway's presentation.
24
(27) This adjustment relates to the sale of ARLO. For the nine months ended
September 30, 2001, the Arnold adjusted pro forma statement of income was
calculated as follows:
ARNOLD ARLO ARNOLD
HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- --------
(DOLLARS IN THOUSANDS)
Revenues................................... $335,789 $(42,793)(a) $292,996
Operating expenses:
Salaries, wages and benefits............. 164,045 (22,112)(a) 141,933
Operating supplies and expenses.......... 57,021 (10,912)(a) 46,109
Purchased transportation................. 39,468 39,468
Operating taxes and licenses............. 8,304 (543)(a) 7,761
Insurance and claims..................... 8,112 (243)(a) 7,869
Provision for depreciation............... 24,310 (3,457)(a) 20,853
Net loss (gain) on sale of carrier
operating property.................... 31 (6) 25
-------- -------- --------
Total operating expenses............ 301,291 (37,273) 264,018
Operating income........................... 34,498 (5,520) 28,978
Interest expense........................... (146) 83(a) (63)
Other income (expense), net................ (700) (700)
-------- -------- --------
Total other income (expense)............... (846) 83 (763)
-------- -------- --------
Income before income taxes................. 33,652 (5,437) 28,215
Provision for income taxes................. 12,420 (2,158)(a) 10,262
-------- -------- --------
Net income................................. $ 21,232 $ (3,279) $ 17,953
======== ======== ========
----------------------
(a) Represents the elimination of historical results taken from the books
and records of ARLO for the three quarters ended September 30, 2001.
ARLO, which historically was reported as Arnold's logistics and
warehousing segment, was sold in connection with the acquisition of
Arnold.
25
(28) This adjustment relates to the sale of ARLO. For the year ended December
31, 2000, the Arnold adjusted pro forma statement of income was calculated
as follows:
ARNOLD ARLO ARNOLD
HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- --------
(DOLLARS IN THOUSANDS)
Revenues................................... $462,365 $(47,822)(a) $414,543
Operating expenses:
Salaries, wages and benefits............. 212,403 (23,268)(a) 189,135
Operating supplies and expenses.......... 75,273 (12,772)(a) 62,501
Purchased transportation................. 58,633 58,633
Operating taxes and licenses............. 11,173 (781)(a) 10,392
Insurance and claims..................... 10,081 (223)(a) 9,858
Provision for depreciation............... 33,359 (3,850)(a) 29,509
Net loss (gain) on sale of carrier
operating property.................... (1,977) (1,977)
-------- -------- --------
Total operating expenses............ 398,945 (40,894) 358,051
Operating income........................... 63,420 (6,928) 56,492
Interest expense........................... (1,646) 306(a) (1,340)
Other income (expense), net................ 1,304 318(a) 1,622
-------- -------- --------
Total other income (expense)............... (342) 624 282
-------- -------- --------
Income before income taxes................. 63,078 (6,304) 56,774
Provision for income taxes................. 23,541 (2,566)(a) 20,975
-------- -------- --------
Net income................................. $ 39,537 $ (3,738) $ 35,799
======== ======== ========
----------------------
(a) Represents the elimination of historical results taken from the books
and records of ARLO for the year ended December 31, 2000. ARLO, which
historically was reported as Arnold's logistics and warehousing
segment, was sold in connection with the acquisition of Arnold.
26
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussions together with the financial
statements, including the related notes, the other financial informationconditions set forth in this prospectus and the risks describedaccompanying letter of transmittal, to exchange $1,000 principal amount of New 5.0% Notes for each $1,000 principal amount of validly tendered and accepted Existing 5.0% Notes. We are also offering, upon the terms and subject to the conditions set forth in this prospectus and the "Risk Factors" section.
OVERVIEW
Effective May 30, 2001, Roadway Express, Inc. reorganized its corporate
structure by forming a holding company. The nameaccompanying letter of transmittal, to exchange $1,000 principal amount of New 3.375% Notes for each $1,000 principal amount of validly tendered and accepted Existing 3.375% Notes. We are offering to exchange all of the new holding company is
Roadway Corporation, and as with Roadway Express, it is a Delaware corporation.
In connection withExisting Notes. However, the reorganization, holders of common stock of Roadway
Express became holders of an identical number of shares of common stock of
Roadway Corporation, and Roadway Express became a wholly owned direct subsidiary
of Roadway Corporation. The reorganization was effected by a merger pursuant to
Section 251(g) of the Delaware General Corporation Law, which provides for the
formation of a holding company structure without a vote of the stockholders of
the company. As a result of the reorganization, all the business and operations
previously conducted by Roadway Express are now conducted by Roadway Corporation
and its subsidiaries. The assets and liabilities of Roadway Corporation and its
subsidiaries on a consolidated basis are the same as the assets and liabilities
of Roadway Express immediately before the merger. The certificate of
incorporation and the bylaws of Roadway Corporation are identical to the
certificate of incorporation and bylaws of Roadway Express as in effect
immediately prior to the reorganization. The capital stock of Roadway
Corporation has the same designations, rights, and preferences as the capital
stock of Roadway Express prior to the reorganization. In addition, the persons
who were directors and executive officers of Roadway Express immediately prior
to the merger were the directors and executive officers of Roadway Corporation
immediately after the merger. The common stock of Roadway Corporation is listed
for trading on the Nasdaq National Market under the symbol "ROAD," as was the
common stock of Roadway Express. Certificates formerly representing shares of
common stock of Roadway Express are deemed to represent shares of common stock
of Roadway Corporation.
We provide less-than-truckload, or LTL, general commodity freight services
on routes, also known as lanes, in North America, and on international lanes to
and from North America. General commodity freight includes apparel, appliances,
automotive parts, chemicals, food, furniture, glass, machinery, metal and metal
products, non-bulk petroleum products, rubber, textiles, wood and miscellaneous
manufactured products. We provide seamless LTL general commodity freight service
between all 50 states, Canada, Mexico and Puerto Rico, and provide export
services to 66 additional countries. We are one of the largest LTL motor
carriers in the United States, serving over 165,000 individual customers.
RESULTS OF OPERATIONS
COMPARISON OF THREE QUARTERS ENDED SEPTEMBER 8, 2001 AND SEPTEMBER 9, 2000
We had net income of $17.2 million or $0.91 per share (diluted), for the
three quarters ended September 8, 2001, compared to net income of $31.1 million,
or $1.64 per share (diluted), for the same period last year, a decrease of
44.8%. A one-time, non-operating charge incurred in the first quarter of 2001
reduced net income by $3.5 million, or $0.18 per share (diluted). This one-time
charge against net income resulted from an adverse jury verdict, which we have
appealed. Revenues were $1,924.0 million in the current quarters, a 7.6%
decrease from the same period last year.
We delivered 5.2 million tons of freight in the first three quarters of
2001, down 12% compared to the prior period. LTL tons were down 12% and TL tons
were down 13%. The tonnage decline is primarily attributable to the national
economic slowdown. Net revenue per ton was $371.73, up 5.3% compared to the same
period last year. The industry's pricing environment continues to remain firm,
which mitigates some of the impact of the reduced tonnage. The improvement in
revenue per ton was primarily due to the general rate increase in the fourth
quarter of 2000, and adjustments in contract rates. The variable rate fuel
surcharge averaged 3.0% of revenue in the current year quarters compared to 2.7%
in the prior-year
27
period. Total operating expenses were down $141 million, but increased 6.1% on a
per-ton basis with the decline in tonnage. The operating ratio deteriorated to
98.2% of revenue, compared to 97.5% in the same period last year.
Salaries, wages and benefits increased to 63.9% of revenue, up from 62.7%
in the third quarter year-to-date of 2000 due to increases in the cost of health
care, pension benefits and driver wages. Reductions in variable pay related to
performance and workers compensation costs offset part of this increase. Due to
the reduced business levels, our work force has been reduced by 8% through
layoffs and hiring restrictions when compared to year-to-date 2000.
Operating supplies and expenses were down 11%, reflecting reduced business
levels. Purchased transportation expenses declined 10%, primarily due to a 19%
reduction of railroad miles in linehaul service.
Improved cargo handling performance, improvements in highway safety and the
reduction in tonnage led to the 17% decline in claims and insurance expense. The
decrease in operating taxes reflects lower fuel taxes associated with the
decline in business levels.
Depreciation expense increased $11 million and reflects recent capital
expenditures, primarily for revenue equipment and information technology.
The tax rate for the third quarter year-to-date 2001 differs from the
federal statutory rate due to the impact of state taxes, taxes on foreign
operations and non-deductible operating expenses.
COMPARISON OF YEARS ENDED DECEMBER 31, 2000, DECEMBER 31, 1999 AND DECEMBER 31,
1998
We had net income of $56.5 million or $2.98 per share (diluted) for the
year ended December 31, 2000, compared to net income of $45.8 million, or $2.39
per share (diluted) in 1999 and income of $26.0 million, or $1.31 per share
(diluted) in 1998. Revenue increased 8.0% to $3.0 billion in 2000 and 6.0% to
$2.8 billion in 1999. Operating expenses rose 7.6% in 2000 and 4.8% in 1999,
leading to the improvement in the operating ratio to 96.8%, down from 97.3% in
1999 and down from 98.3% in 1998. We delivered 8.4 million tons of freight in
2000, which is flat compared to 1999 and up 3.0% over 1998.
Underlying freight rates improved due to the general rate increases
effective in January and September of 1999, and September 2000, and contractual
rate modifications throughout the year. Net revenue per ton was $359.90 in 2000,
up 8.0% compared to 1999 and up 10.9% compared to 1998. A variable rate fuel
surcharge, which we assess when the national average price of diesel fuel
exceeds $1.10 per gallon, was reinstated in July of 1999 and was in effect
throughout 2000. It resulted in effective rate increases of 2.7% in 2000 and
0.4% in 1999.
Operating expenses increased $207 million in 2000 over 1999, or 7.5% per
ton, while increasing $126 million or 1.8% per ton from 1998 to 1999.
Salaries, wages and benefits were 62.2% of revenue in 2000, down from 63.8%
in 1999 and 65.0% in 1998, while the dollars of expense increased $96 million in
2000 over 1999, and $68 million in 1999 over 1998.
The primary component of this dollar increase in 2000 was the 3.2% increase
in wages and benefits on April 1, 2000, under our labor contract. Linehaul
driver wages increased 5.2%, reflecting the wage increase coupled with an
increase in driver miles. Pickup and delivery wages increased 3.2%. Dock wages
were up 4.3% due to the wage increase and additional LTL tonnage, which requires
more dock handling than truckload freight. Workers' compensation costs rose by
$8.7 million, or 20%, due to increased dock hours, driver miles and injury
severity. Health, welfare and pension expenses for all employees increased $18.1
million. The benefit costs were favorably impacted by the investment performance
of our company-sponsored non-union pension fund, which resulted in a credit to
pension expense of $3.3 million for the year. Indirect wage expenses increased
$11.6 million, or 8.4%. Two thirds of this increase relates to performance-based
variable pay that is directly linked to improved profits.
28
In 1999, salary, wage and benefit cost increases in key direct labor areas
were generally less than the corresponding growth in revenue. Linehaul driver
wages increased 2.4%. Pickup and delivery wages were up 3.1%. Dock wages
increased only 1.5%, reflecting improved productivity driven by the changing
freight mix. Indirect wage and benefit costs increased 16% over 1998. This
increase resulted primarily from performance-based compensation, which was 2.1%
of total salaries, wages, and benefits for the year compared to 1.0% in 1998.
Another component, amounting to a $6.0 million increase, was the impact of plan
amendments to our defined benefit pension plan late in 1998.
Operating supplies and expenses for 2000 were 16.3% above 1999, while 1999
was down slightly from 1998. Fuel costs in 2000 increased $41 million, as our
average fuel prices increased 67% over 1999. This dramatic rise in fuel prices
was offset by the fuel surcharge discussed above. Equipment lease and rental
expenses increased by $10.4 million, or 25% over 1999. This is primarily due to
our use of leases for linehaul tractor and trailer replacement. Terminal
operating supply and service costs rose $15.4 million, or 13.1%. These increases
relate to facility maintenance and security, communications, cargo packing
supplies and other miscellaneous items.
Purchased transportation expense increased $18.5 million during 2000,
compared to 1999 and by $47.6 million compared to 1998. The increase in 2000 was
primarily due to growth in our Canadian and Mexican operations which utilize
third-party providers in linehaul service. The costs of purchased transportation
services that we utilize, such as railroads, owner-operators and purchased P&D
service were also impacted by fuel price hikes. During 1999, rail costs
increased by $26.6 million over 1998, reflecting the increased use of railroads
in certain linehaul operations during the year. For 2000, the portion of
linehaul miles run on the railroads decreased slightly to 27.9% from 28.9% in
1999 and were 26.6% in 1998.
Operating taxes and licenses increased $2.2 million due to increased
vehicle licenses and fuel taxes in 2000 and by $1.5 million in 1998.
An increase of $1.7 million in insurance and claims expense in 2000 over
1999 reflects the impact of accident severity on public liability claims. In
1999 we experienced an increase of $8.8 million in insurance and claims expense,
principally due to costs associated with public liability claims related to
increased business levels and severity of claim losses, despite record highway
safety performances. Highway safety performance in 1999 exceeded the 1998
record-breaking results.
Depreciation expense increased primarily due to additional capital
expenditures for revenue equipment, data processing equipment and software. The
loss on the sale in 2000 of operating property arose from the disposal of old
linehaul tractors that were replaced with leased units.
The operating income of $96.4 million or 3.2% of revenue compares to an
operating income of $77.2 million or 2.7% of revenue in 1999 and operating
income of $44.1 million or 1.7% of revenue in 1998.
Our tax rate in 2000 differs from the federal statutory rate due to
non-deductible operating expenses, state income taxes and the impact of foreign
operations. The effective tax rate was 42.5% in 2000, compared to 42.6% in 1999
and 42.7% in 1998.
The impact of inflation on operating expenses has been moderate in recent
years.
LIQUIDITY AND CAPITAL RESOURCES
At the end of the third quarter 2001, cash and marketable securities
amounted to $82 million, an $18 million increase from year-end 2000. This
increase was due to a reduction of capital expenditures during the current year,
and an increase in cash flow from operations. Capital expenditures for the year
are expected to be $75 million, which has been reduced from second quarter
expectations of $80 million, and the original expectations of $90 million. The
capital expenditures are designated for revenue equipment, facilities and
information systems. We had a $60 million line of credit available at September
8, 2001.
29
Cash flow from operations and current and proposed financing sources will be
sufficient to meet existing working capital needs. We currently have no
long-term debt.
On November 30, 2001, we acquired Arnold for aggregate cash consideration
of approximately $553.0 million. We financed the acquisition with proceeds from
the offering of the outstanding notes, together with borrowings under a new
credit facility and proceeds from the accounts receivable securitization. The
new credit facility and accounts receivable securitization replaced our current
financing sources, other than the $10.0 million credit facility under which our
Canadian subsidiary, Reimer Express Lines Ltd., is the borrower, and will
provide for future working capital needs.
On November 30, 2001, following our acquisition of Arnold, we sold ARLO to
members of its management team for $105.0 million in cash. We applied the
estimated net after-tax proceeds of $75 million from the sale to prepay a
portion of the borrowings under the new credit facility. As of December 13,
2001, we had $325.0 million of outstanding indebtedness.
OTHER MATTERS
We continue to focus on existing and new cost control efforts, including
operational changes to reduce transportation costs and maintain high service
standards with technological enhancements that allow improved load planning and
scheduling, more effective use of road and rail capacity and equipment
enhancements such as deck trailers that allow greater cubic utilization. We are
making significant investments in our system infrastructure for new hubs and
service centers in several locations, the most significant of which are the Los
Angeles basin, the New York City metropolitan area and the Pacific Northwest.
Other cost control initiatives include continued emphasis on safety improvement,
particularly with our Prevention Improvement Process, or PIP, program, cargo
claims reductions and aggressive administrative cost controls tied to process
improvements and goal awareness. PIP is a comprehensive effort at each of our
over 400 facilities to mobilize the entire workforce to reduce injuries and
accidents, and improve safety. System-wide employee education in the
fundamentals of the business, including the financial impacts of individual job
responsibilities, has increased employee engagement and awareness of their
investment in the business. This education and engagement process is a long term
endeavor expected to yield significant benefits for our employees, customers and
stakeholders.
Under the terms of our contract with our principal union, the Teamsters,
which extends through March 31, 2003, wage and benefit increases approximating
2.6% became effective April 1, 2001.
On August 20, 2001, Roadway Express implemented a general freight rate
increase of approximately 5.85%, consistent with pricing actions in the
industry. We continue to take actions to increase operating margins and yield on
freight, such as working with specific customers to improve efficiencies and
reduce handling or process-related costs. Pricing adjustments are negotiated
with contract customers throughout the year under terms of the agreements.
On May 30, 2001, we announced our participation as a minority shareholder
of Integres Global Logistics, Inc. Integres is an integrated airfreight service
provider. Roadway Express will serve as Integres' primary North American ground
carrier. Other Integres partners include: United Airlines, American Airlines,
Unisys, G-Log, and UTi Worldwide. Integres is slated for a fourth quarter 2001
launch.
We receive notices from the EPA from time to time identifying us as a
potentially responsible party under the Comprehensive Environmental Response
Compensation and Liability Act for various Superfund sites. Based on our
investigations, we believe that our obligation with regard to these sites is not
significant, although there can be no assurances in this regard.
We do not hold any market risk sensitive instruments for trading purposes.
Our primary market risks include fluctuations in interest rates, currency
exchange rates and fuel prices.
We have interest rate swap agreements with major commercial banks to fix
the interest rate of our 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 our interest costs at rates
30
varying from 6.07% to 7.12% on leases valued at $27.5 million at September 8,
2001, and prevent our earnings from being directly affected by changes in
interest rates related to our trailer leases.
We may incur some 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
no material impact on our future cash flows and earnings.
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
has been in place at varying rates since the third quarter of 1999.
NEW ACCOUNTING PRONOUNCEMENTS
We adopted Statement of Financial Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities, effective January
1, 2001. The effect of adopting SFAS No. 133 was not material to our earnings,
financial position or cash flows.
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business Combinations, which is effective for business combinations completed
subsequent to June 30, 2001. This standard eliminates the pooling-of-interests
method of accounting for business combinations and requires the purchase method.
SFAS No. 141 also clarifies the criteria for recognition of intangible assets
separately from goodwill.
SFAS No. 142, Goodwill and Other Intangible Assets, which is effective for
us January 1, 2002, eliminates the amortization of goodwill and indefinite-lived
intangible assets. This statement also requires an initial goodwill impairment
assessment in the year of adoption and annual impairment tests thereafter. As of
September 8, 2001, we had net unamortized goodwill of $15.2 million and
amortization expense on an annual basis of approximately $1.0 million.
The acquisition of Arnold is being accounted for as a purchase business
combination and we have undertaken a process to determine the fair value at the
acquisition date of the tangible and intangible assets acquired and liabilities
assumed of Arnold. As a result of this process, we anticipate a portion of the
amount initially classified as costs in excess of net tangible assets acquired
and other intangible assets in the pro forma financial statements, will be
reclassified to the tangible and identifiable intangible assets acquired, based
on their estimated fair values at the date of acquisition.
ARNOLD INDUSTRIES, INC.
The following discussion was extracted from the Management's Discussion and
Analysis of Financial Condition and Results of Operations prepared by Arnold and
included in reports it files with the Commission. This discussion reflects
Arnold's historical operating results and financial condition, and includes the
results of ARLO, which we sold on November 30, 2001. Arnold's historical results
are not necessarily indicative of the results that will be achieved in the
future.
OVERVIEW
Arnold's trucking and warehousing business activities are currently
conducted by two operating subsidiaries, New Penn Motor Express, Inc. and Arnold
Transportation Services, Inc., a non-operating, investment management
subsidiary, MARIS, Inc., and an operating unit known as Arnold Logistics or
ARLO.
New Penn transports commodities by motor vehicle on a next-day ground LTL
basis, operating primarily in interstate commerce in New England and the Middle
Atlantic states. The southeastern United Sates, Indiana, Ohio, and Quebec and
Ontario, Canada, are serviced through correspondent arrangements with other
high-service carriers in each area. Some areas in Canada, including Montreal,
are now serviced directly by New Penn. Puerto Rico is serviced by correspondent
land service in conjunction with
31
correspondent ocean service. Commodities transported include paper products,
food products, textiles, building products, metal products, pharmaceuticals,
office equipment and supplies and wearing apparel.
ATS operates both as a regional and interregional carrier within the
irregular route and dedicated truckload, or TL, industry.
ARLO serves the distribution, order fulfillment, direct mail and printing,
call center management, reverse logistics and contract packaging needs of its
customers.
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
GENERAL
Operating Revenues on a consolidated basis for the third quarter of 2001
were $110,681,130, a decrease of $4,628,063 or 4% over Operating Revenues for
2000's third quarter. For the same period, Operating Expenses increased
$1,244,997, or 1%; Income Before Income Taxes decreased $6,926,399, a decrease
of 44%; and Net Income decreased $4,344,362, or 44%. Earnings Per Share-Basic
for the third quarter of 2001 decreased as compared to the third quarter of 2000
from $.40 per share to $.22 per share, a decrease of 45%. Basic earnings per
share for the third quarter of 2001 were $.25 before special pre-tax charges of
$1,124,797 related to the acquisition of Arnold by Roadway. Operating Income on
a consolidated basis decreased during the third quarter of 2001 relative to the
comparable period of 2000. Operating Income decreased by $5,873,060 from
$15,825,315 to $9,952,255, a decrease of 37%.
Arnold's combined Operating Revenues for the nine months ended September
30, 2001, were $335,789,117, a decrease of $11,692,682, or 3% over the
comparable nine-month period in 2000. For the same period, Operating Expenses
increased $1,900,407, or 1%. Operating Income decreased during the nine-month
period, from $48,091,300 in 2000 to $34,498,211 in 2001, or a 28% decrease.
Income Before Income Taxes decreased by $13,785,916, a decrease of 29%; and Net
Income also decreased by $8,490,755, a decrease of 29%. Earnings Per Share-Basic
decreased by $.35 a share from $1.21 for the first nine months of 2000 to $.86
for the first nine months of 2001. Basic earnings per share for the first nine
months of 2001 were $.89 before special pre-tax charges of $1,285,796 related to
the acquisition by Roadway.
On August 22, 2001, in a joint press statement with Roadway, Arnold
announced that its Board of Directors had authorized execution of a definitive
merger agreement with Roadway, subject, nevertheless, to the approval of
Arnold's shareholders. The net effect of the merger, if approved by
shareholders, is that all issued and outstanding shares of Arnold will be
exchanged for $21.75 per share in cash and Arnold Industries, Inc. will merge
with and into a wholly owned subsidiary of Roadway. A special meeting of
Arnold's shareholders is scheduled for November 20, 2001. It is anticipated that
the merger would be consummated on or about November 30, 2001, in the event of
shareholder approval. In addition, on October 17, 2001, Roadway announced that
it entered into an agreement with E. H. Arnold, Chief Executive Officer of
Arnold Industries, Inc., for the sale of Arnold's logistics operations to E. H.
Arnold and Arnold Logistics, Inc., for $105 million in cash. The transaction is
subject to regulatory approval and the completion of Roadway's acquisition of
Arnold.
The merger of Arnold with and into a subsidiary of Roadway, and the
subsequent sale of ARLO by Roadway, means that Arnold will cease to be
independently owned by its current group of shareholders. As the sole
shareholder of Arnold, Roadway has publicly stated that it intends to operate
New Penn and ATS independently under their own brand names and that each
company's management team and headquarters location will remain the same.
Accordingly, although current management can speak to the past and present with
respect to Arnold's operations, any analysis of future trends and prospects must
necessarily be viewed in light of the pending transaction and the inevitable
changes that a merger would entail. In the event that a merger is not
consummated for whatever reason, then current management's discussion and
analysis of future trends would again be relevant to investment decisions in
Arnold.
32
Management believes that the results of Arnold's operations during the
third quarter of 2001 reflect the softening of the U.S. economy as a whole, as
well as certain impediments to transportation resulting from the events of
September 11. The softening of the U.S. economy is well documented in recent
weeks and is evidenced by a marked decline in the manufacture, shipment and sale
of goods. All three segments of Arnold's operations, LTL, TL and
fulfillment/logistics, were impacted by the decline. The declines in revenues
experienced at both New Penn, Arnold's less-than-truckload carrier, and at ATS,
Arnold's truckload carrier, appear to be in line with the declines experienced
across the trucking industry. Management does not believe that market share has
been lost in the current downturn, but does believe that the overall market has
contracted due to current economic conditions. When and how that market will
expand again is beyond management's ability to predict.
NEW PENN MOTOR EXPRESS, INC.
New Penn experienced an 11% decline in revenues over the revenues generated
during the third quarter of 2000. Operating Income decreased 41% over the
comparable period of 2000, as the operating ratio deteriorated from 79.4 to
86.3.
A comparison of results for the first nine months of 2001 against the first
nine months of 2000 reflects that New Penn experienced an 8% decline in
Operating Revenues; Expenses decreased by 2% over the comparable period of 2000;
and Operating Income declined by 33% over the prior period.
Although the results were not up to the level that management has come to
expect from New Penn, New Penn's third quarter operations were as good as could
be expected under the circumstances. With fewer goods being produced and
shipped, overall tonnage at New Penn was down by 15%. At the same time, many
costs are at fixed levels and are not easily reduced. Terminal capacity is one
such cost. Employee expense, while remaining high, has been controlled through
attrition without the need for major lay-offs. Management is making every effort
to control costs, while at the same time spending the time and energy necessary
to make the company more efficient in today's competitive environment.
In addition to the softening of the U.S. economy generally, New Penn faced
the added difficulty of making pick-ups and deliveries in and around New York
City after the events of September 11. Traffic disruptions resulting from bridge
and tunnel closures, as well as heightened security checks, have increased the
costs of operations in the New York City metropolitan area, a prime market for
New Penn comprising roughly 10% of its business. Management anticipates that
bridge and tunnel closures will be discontinued in coming months, and that
security checks, while continuing, will become more efficient and less time-
consuming in the future. Accordingly, although carrier service in the New York
City area is unlikely to return to the ease of operation enjoyed before
September 11, management does not believe that the changes will materially
affect the on-going business prospects of New Penn.
Total shipments, tonnage and miles logged on all shipments completed by New
Penn during the third quarter of 2001 in comparison to the third quarter of 2000
are as follows:
THIRD QUARTER ENDED
SEPTEMBER 30,
-----------------------
2001 2000
---------- ----------
Total Shipments............................................. 466,193 528,318
Total Tonnage............................................... 242,926 285,153
Total Miles................................................. 12,472,536 13,364,845
ARNOLD TRANSPORTATION SERVICES, INC.
ATS experienced a 3% decline in Operating Revenues and Operating Income
decreased 49% during the third quarter of 2001 over the third quarter of 2000.
ATS experienced a 5% decline in Operating Revenues during the first nine
months of 2001 over the revenues generated during the first nine months of 2000;
Expenses declined by 3% over the comparable period of 2000; and Operating Income
declined 35% over the prior period.
33
As a truckload carrier, ATS enjoys a somewhat more stable shipping
environment than a typical LTL carrier is likely to enjoy, due to fixed
contracts and standardized delivery schedules. Nevertheless, ATS did experience
a decline in tonnage during the third quarter of 2001, reflecting a general
decline in output and sales at major national manufacturers and retailers.
Total shipments and miles logged on shipments completed by ATS during the
third quarter of 2001 in comparison to the third quarter of 2000 are as follows:
THIRD QUARTER
ENDED
SEPTEMBER 30,
---------------
2001 2000
------ ------
Total Shipments............................................. 89,831 81,527
Total Miles................................................. 31,708 31,996
ARLO
ARLO, a division of ATS that conducts a fulfillment and logistics business,
increased revenues 31% beyond the revenue gains of the prior year's third
quarter. Operating income increased 8% compared to the third quarter of 2000.
Margins deteriorated, however, as the quarter included substantial start-up
costs for new fulfillment projects. The acquisition of National Corporate
Marketing, or NCM, of Irving, TX, completed on October 2, 2000, favorably
impacted third quarter comparisons. NCM provides fulfillment, distribution,
direct mail and printing services. ARLO's management continues to focus on
consolidating new fulfillment business generated over the last year.
A comparison of results for the first nine months of 2001 against the first
nine months of 2000 reflects that ARLO experienced a 27% increase in Operating
Revenue; Expenses increased by 29% over the comparable period of 2000; and
Operating Income increased by 11% over the prior period.
WORKING CAPITAL; PROPERTY AND EQUIPMENT
Arnold's working capital at the end of the third quarter of 2001 was
$78,655,925. This represents an increase of $6,632,097 or 9% from the working
capital at the end of the previous quarter in 2001. The increase in working
capital reflects Arnold's continuing revenue and income streams while at the
same time winding down and/or completing capital expansion and acquisition
projects initiated in prior years, particularly at ATS and ARLO. ATS
significantly updated its fleet in recent years and has sufficient capacity with
its current fleet to meet anticipated demand. ARLO completed its Lancaster, PA,
warehouse project in the second and third quarters of 2000, and currently is not
building additional warehouse space.
Arnold's investment in Property and Equipment (Less Accumulated
Depreciation) as of the end of the third quarter of 2001 stood at $232,591,031.
This figure represents a decrease from June 30, 2001 of $4,689,314, or 2%,
reflecting depreciation and asset sales. Funding for future acquisitions of
Property and Equipment will likely be accomplished through the use of cash
generated from current operating and investment activities, supplemented, when
necessary, by short or long-term financing. Management continues to seek
opportunities for profitable expansion of Arnold.
Cash provided by Operating Activities decreased by $9,294,883 from
$56,830,679 in 2000 to $47,535,796 in 2001 principally related to the decline in
net income offset by a reduction in accounts receivable. Cash Used in Investing
Activities increased to $30,983,184 in 2001 related primarily to purchases of
investments and investment in property, plant, and equipment. Cash used in
Financing Activities decreased $11,210,246 principally related to a decrease in
short-term debt payments.
On October 30, 2001, Arnold announced its quarterly cash dividend of $.11
per share, payable November 29, 2001, to stockholders of record on November 15,
2001.
34
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 2000, 1999 AND DECEMBER 31, 1998
Arnold's 2000 operating revenues are from two operating subsidiaries:
New Penn Motor Express, Inc.
Arnold Transportation Services, Inc.
New Penn is a LTL transportation company. ATS is a TL carrier which
provides regional and interregional transportation services. In addition to LTL
and TL transportation services, Arnold provides order fulfillment and logistic
services and related transportation services under the name of ARLO, a division
of ATS.
Arnold operates in three segments. The results of operations are set forth
below for each of these three separate segments.
OPERATING REVENUES
TOTAL NEW PENN
------------------- -------------------
AMOUNT % INCREASE AMOUNT % INCREASE
------ ---------- ------ ----------
(DOLLARS IN MILLIONS)
2000........................................... $462.4 8% $236.0 9%
1999........................................... 428.2 6 215.6 6
1998........................................... 403.7 5 202.9 --
ATS ARLO
------------------- -------------------
AMOUNT % INCREASE AMOUNT % INCREASE
------ ---------- ------ ----------
2000........................................... $178.6 2% $47.8 29%
1999........................................... 175.6 2 37.0 26
1998........................................... 171.4 12 29.4 12
OPERATING INCOME
2000 1999 1998
------------ ------------ ------------
AMOUNT % AMOUNT % AMOUNT %
------ --- ------ --- ------ ---
(DOLLARS IN MILLIONS)
New Penn................................. $49.3 78% $44.8 80% $43.1 77%
ATS...................................... 7.2 11 5.9 10 7.1 13
ARLO..................................... 6.9 11 5.5 10 5.5 10
Unallocated Income (Loss)................ -- (.4) .5
----- --- ----- --- ----- ---
TOTAL.................................... $63.4 100% $55.8 100% $56.2 100%
===== === ===== === ===== ===
The percentage of revenue for the last three years is set forth below:
2000 1999 1998
------------ ------------ ------------
AMOUNT % AMOUNT % AMOUNT %
------ --- ------ --- ------ ---
(DOLLARS IN MILLIONS)
New Penn................................. $236.0 51% $215.6 50% $202.9 50%
ATS...................................... 178.6 39 175.6 41 171.4 43
ARLO..................................... 47.8 10 37.0 9 29.4 7
------ --- ------ --- ------ ---
TOTAL.................................... $462.4 100% $428.2 100% $403.7 100%
====== === ====== === ====== ===
The revenue at New Penn increased 9% for the year 2000 compared to 1999.
This compares to an increase of 6% for the year 1999 compared to 1998. Tonnage
increased 4% for 2000 to 1,117,026 compared to 1,075,455 for 1999 and 1,050,685
for 1998. ATS revenues increased for 2000 and 1999 by 2% each year compared to
an increase of 12% in 1998. In August 1999, New Penn instituted a fuel surcharge
to offset
35
rising fuel costs. This fuel surcharge continued through the year 2000. ATS also
instituted a fuel surcharge in 1999 to partially offset higher fuel costs. This
fuel surcharge was in effect through the year 2000.
ARLO's revenue increased by 29% for 2000 compared to an increase of 26% for
1999 and 12% for the year 1998 due to growth with new and existing customers and
the acquisition of National Corporate Marketing, or NCM.
The following tables set forth the percentage of operating expenses to
operating revenue for New Penn, ATS and ARLO.
NEW PENN ATS
--------------------- ---------------------
2000 1999 1998 2000 1999 1998
----- ----- ----- ----- ----- -----
Operating Revenues...................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating Expenses
Salaries, wages and related expenses.................. 58.3 58.6 58.2 28.8 31.1 33.3
Supplies and expenses................................. 9.8 8.6 8.7 17.9 16.0 18.9
Operating taxes and licenses.......................... 2.8 2.8 2.8 2.2 2.2 2.0
Insurance............................................. 1.3 1.8 1.5 3.7 4.1 3.5
Communication and utilities........................... 0.9 1.0 1.1 1.5 1.6 1.5
Purchased transportation.............................. 1.1 1.2 1.2 31.4 31.5 25.7
Rental of buildings, revenue equipment Etc., net...... (0.2) (0.2) (0.4) 0.2 0.3 0.3
Depreciation and amortization......................... 5.1 5.2 4.9 9.8 10.2 10.8
(Gain) on sale of equipment........................... (0.4) (0.2) (0.3) (0.5) (0.7) (0.9)
Miscellaneous......................................... 0.4 0.4 1.1 1.0 0.4 0.7
----- ----- ----- ----- ----- -----
Total Operating Expenses.......................... 79.1 79.2 78.8 96.0 96.7 95.8
----- ----- ----- ----- ----- -----
Operating Income........................................ 20.9% 20.8% 21.2% 4.0% 3.3% 4.2%
ARLO
---------------------
2000 1999 1998
----- ----- -----
Operating Revenues.......................................... 100.0% 100.0% 100.0%
Operating Expenses
Salaries, wages and related expenses...................... 56.4 54.6 52.3
Other operating expenses.................................. 20.3 21.3 17.2
Depreciation and amortization............................. 8.3 7.4 7.5
Miscellaneous............................................. 0.5 1.9 4.3
----- ----- -----
Total Operating Expenses............................... 85.5 85.2 81.3
----- ----- -----
Operating Income............................................ 14.5% 14.8% 18.7%
New Penn's operating expenses were 79.1% of revenue in 2000 compared to
79.2% for 1999 and 78.8% for 1998. Salaries, wages and related expenses
decreased to 58.3% for 2000 from 58.6% for 1999 and 58.2% for 1998. Supplies and
expenses increased to 9.8% for 2000 compared to 8.6% and 8.7% for 1999 and 1998,
respectively. The increase for the year 2000 was due to substantially increased
fuel costs. Insurance costs decreased to 1.3% for 2000 compared to 1.8% for 1999
and 1.5% for 1998. In July 1999, Arnold changed the majority of its deductibles
to $25,000 per claim from $1 million. This change together with constant
evaluation of safety and an in-house insurance department has improved insurance
costs. Miscellaneous expenses remained constant at .4% for 2000 and 1999
compared to 1.1% for 1998.
Total operating expenses of ATS decreased slightly to 96.0% for 2000
compared to 96.7% for 1999. This compared to 95.8% for the year 1998.
The salaries, wages and related expenses of ATS decreased to 28.8% in 2000
compared to 31.1% in 1999 and 33.3% in 1998. The reduction in 2000 was due to
better utilization of equipment and the increased use of owner-operators.
Supplies and expenses increased to 17.9% for 2000 compared to 16.0% in
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1999 and 18.9% in 1998. Higher fuel prices beginning in the latter part of 1999
and 2000 substantially affected the operating results and offset better
utilization of equipment. The expense for 1999 was lower compared to 1998 due to
increased use of owner-operators. Purchased transportation for 2000 of 31.4%
compared favorably with 31.5% for 1999. The increase from 1998 of 25.7% was the
result of increased use of owner-operators.
ARLO operating expenses were 85.5% of revenue for 2000 compared to 85.2%
for 1999. Operating expenses in 1998 were 81.3%, which were lower than 2000 and
1999 due to revenue growth in the areas of order fulfillment and contract
packaging which are more labor intensive. As a result, salaries, wages and
related expenses have been increasing each year to 56.4% for 2000 compared to
54.6% and 52.3% for 1999 and 1998, respectively. Other operating expenses
decreased in 2000 to 20.3% compared to 21.3% in 1999. These two years compare to
17.2% in 1998. The increase in 1999 was the result of an increased use of
operating supplies. Depreciation and amortization increased from 7.4% in 1999 to
8.3% in 2000 due to the new warehouse in Lancaster, Pennsylvania and the
depreciable assets associated with the acquisition of NCM. Miscellaneous
expenses have declined from 4.3% in 1998 to 1.9% in 1999 and .5% in 2000 due to
a reduction in the expenses being classified as miscellaneous.
Arnold's operating income for 2000 increased $7.6 million or 14% from 1999
compared to a decrease of $.4 million or .6% in 1999 compared to 1998. New
Penn's operating income increased $4.5 million compared to 1999. The operating
income for 1999 increased $1.7 million compared to 1998. In July 1999, a major
competitor of New Penn went out of business which had a positive effect on New
Penn's revenues for 1999 and for the year 2000.
Operating income of ATS for 2000 increased to $7.2 million, or 22% compared
to $5.9 million in 1999. This compares to a decrease of 17% for 1999 from 1998.
Changes in the relationship with a key agent, poor equipment utilization and the
continuing shortage of qualified drivers had a negative impact on operating
income in 1999.
ARLO's operating income for 2000 increased 25% to $6.9 million compared to
$5.5 million for both 1999 and 1998. Startup costs for both 2000 and 1999 with
new e-commerce and fulfillment services customers negatively impacted operating
income.
Other net non-operating expenses consist primarily of interest income,
other investment income and interest expense. Interest income increased $.9
million for 2000 over 1999 due to increased cash and investment securities
compared to a decrease of $.4 million for 1999 over 1998 primarily due to a
reduction in cash and investment securities. Interest expense for 2000 was $1.6
million compared to $1.4 million and $1.2 million for 1999 and 1998,
respectively. The increase for 2000 and 1999 was due to increasing borrowing
rates during the two years.
The effective income tax rates for 2000, 1999 and 1998 were 37.3%, 36.8%
and 37.1%, respectively.
Net income for 2000 increased to $39.5 million compared to $34.7 million
for 1999, an increase of 14%. This compared to a decrease of 1% for 1999 over
1998. Basic net income per share in 2000 was $1.61 per share compared to $1.40
per share in 1999, an increase of 15%. This compared to $1.37 per share or a 2%
increase in 1999 over 1998. Diluted net income per share was $1.59 in 2000
compared to $1.39 in 1999 and $1.36 in 1998.
CAPITAL EXPENDITURES
In 1998, Arnold purchased 182,400 shares of its outstanding common stock,
the remaining balance of a million-share buy-back authorized in 1997, together
with an additional 1,000,000 shares for a total cost of $15.0 million. On
December 28, 1998, Arnold authorized an additional share buy-back of one million
shares. During 1999, Arnold acquired 263,300 shares at a total cost of $3.2
million and 105,000 shares in 2000 at a total cost of $1.4 million.
The total capital expenditures for real estate and equipment (net of
dispositions) amounted to $18.5 million for 2000, compared to $56.3 million for
1999 and $45.6 million for 1998. Arnold is projecting the purchase of real
estate and equipment in 2001 at approximately $32 million.
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LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, and marketable securities totaled $37 million at
the end of 2000, compared to $18 million and $24 million at December 31, 1999
and 1998, respectively. The increase was due to the substantial reduction in
capital expenditures for the year 2000. Working capital increased to $67 million
at December 31, 2000, compared to $26 million and $35 million at December 31,
1999 and 1998, respectively. Net cash provided by operating activities increased
to $76 million for the year 2000 compared to $54 million and $61 million for
1999 and 1998 respectively. The substantial increase in cash during the year
enabled the company to completely eliminate all bank debt as of December 31,
2000.
Arnold's current cash position, together with funds invested in marketable
securities and cash flow generated from future operations, are expected to be
sufficient to finance anticipated capital expenditures. These funds may be
supplemented when necessary or desirable by short or long-term borrowing.
INFLATION
During 2000 and 1999, Arnold believes, with the exception of higher fuel
prices, that inflation had a minimal effect on operating results. However, most
of Arnold's expenses are subject to inflation, which would result in increased
costs in the event inflation began to increase.
SEASONALITY
In the trucking industry, results of operations show a seasonal pattern
because of customers' reduced shipments in the winter months. In addition,
operating expenses are usually higher during the winter months.
CURRENT TRENDS
In September 2000, New Penn announced a general rate increase of
approximately 5.9%. However, most customer rates are subject to negotiated
contracts and agreements.
Beginning in the fourth quarter of 2000, New Penn began to see the effects
of a slowing economy, which has continued into the first quarter of 2001. The
revenues at ATS were down in the fourth quarter of 2000 as a result of reducing
the interregional operation and a slowing economy. ATS is focusing on increasing
its more profitable regional operations and reducing expenses.
ARLO acquired a company in the Dallas, Texas area in October 2000 as a base
to grow substantially in the Southwestern USA market.
The three operating companies continue to invest in information technology
to reduce operating costs and provide better service to their customers.
MARKET RISK
The nature of Arnold's operations subject it to changing economic,
competitive, regulatory and technological conditions, risks, and uncertainties.
In accordance with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, Arnold provides the following cautionary remarks
regarding important factors which, among others, could cause future results to
differ materially from the forward-looking statements about our management
confidence and strategies for performance; expectations for new and existing
technologies and opportunities; and expectations for market segment and industry
growth.
These factors include, but are not limited to:
- changes in the business environment in which Arnold operates, including
licensing restrictions, interest rates and capital costs,
- changes in governmental laws and regulations, including taxes,
- market and competitive changes, including market demand and acceptance
for new services and technologies, and
- other risk factors listed from time to time in Arnold's Commission
reports.
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BUSINESS
GENERAL
We provide seamless LTL general commodity freight services between all 50
states, Canada, Mexico and Puerto Rico, and provide export services to 66
additional countries. We are one of the largest LTL motor carriers in the United
States and have the leading market share in long-haul LTL service, serving over
165,000 individual customers.
Our primary operating subsidiary, Roadway Express, is a certified ISO 9002
carrier, and transports general commodity freight in two-day and beyond service.
General commodity freight includes apparel, appliances, automotive parts,
chemicals, food, furniture, glass, machinery, metal and metal products, non-
bulk petroleum products, rubber, textiles, wood and miscellaneous manufactured
products. We are affected by the state of the overall economy, but during 2000,
no single segment of the economy (e.g., general retail merchandise, automotive,
chemical) accounted for more than 18% of our total revenue, no single customer
accounted for more than 5% of our revenue, and our ten largest customers
accounted for approximately 16% of our revenue. Seasonal fluctuations affect
tonnage, revenues and operating results. Normally, the fall of each year is our
busiest shipping period. The months of December and January of each year are the
slowest. Shipment levels, operating costs and operating results can also be
adversely affected by inclement weather.
Through our extensive network of approximately 375 terminals located
throughout North America, we offer long-haul, inter-regional and regional LTL
freight service on two-day and beyond lanes throughout the United States, Mexico
and Canada. We also offer TL services to complement our LTL business, usually to
fill back hauls and maximize equipment utilization. In addition, we provide
higher margin, specialized services including guaranteed expedited services,
time-specific delivery, North American international, coast-to-coast delivery,
sealed trailers, product returns, cold-sensitive protection and government
material shipments.
On January 2, 1996, we were spun-off from Roadway Services, Inc. under the
name Roadway Express, Inc. Effective May 30, 2001, Roadway Express reorganized
its corporate structure into a holding company structure, consisting of a
holding company, Roadway Corporation, and operating subsidiaries, including our
primary operating subsidiary, Roadway Express.
THE ACQUISITION
On November 30, 2001, we acquired Arnold Industries, Inc. for cash
consideration of an aggregate of approximately $553 million. We used the
proceeds from the offering of the outstanding notes, together with borrowings
under our new credit facility and proceeds from an accounts receivable
securitization, to finance the acquisition. Arnold is now a wholly owned
subsidiary of Roadway.
On November 30, 2001, following our acquisition of Arnold, we sold Arnold's
logistics business, ARLO, to members of the ARLO management team and Mr. Edward
H. Arnold, the former Chairman, President and Chief Executive Officer of Arnold,
for $105 million in cash.
ARNOLD INDUSTRIES, INC.
Arnold's trucking and warehousing business activities are currently
conducted by two operating subsidiaries, New Penn and ATS, and a non-operating,
investment management subsidiary, Maris, Inc.
New Penn transports commodities by motor vehicle on a regional next-day
ground LTL basis, operating primarily in interstate commerce in New England and
the Middle Atlantic states. The southeastern United States, Indiana, Ohio and
Quebec and Ontario, Canada, are serviced through correspondent arrangements with
other high-service carriers in each area. Some areas in Canada, including
Montreal, are now serviced directly by New Penn. Puerto Rico is serviced by
correspondent land service in conjunction with correspondent ocean service.
Commodities transported include paper products, food products, textiles,
building products, metal products, pharmaceuticals, office equipment and
supplies and
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wearing apparel. We believe that for the 2000 fiscal year, New Penn was the most
profitable publicly reporting LTL carrier in the industry.
ATS operates both as a regional and interregional carrier within the
irregular route and dedicated truckload industry. ATS's main operating location
for its trucking operation is in Jacksonville, Florida. It also conducts
operations from customers' locations in Ohio and New York.
OUR INDUSTRY
The trucking industry handled approximately 79% of general freight volume,
or 3,437.6 million tons in 1998. While airfreight and intermodal services are
expected to be the fastest growing modes of transportation over the next few
years, we believe that trucking will continue to dominate the market. Rail,
while generally less expensive, continues to be used mainly for bulk freight and
for longer-hauls.
The trucking industry operates under two main divisions: truckload and
less-than truckload. TL carriers dedicate full trucks to one customer and make
deliveries of goods from start to finish. LTL carriers take partial loads from
multiple customers on a single truck and then route the goods through a series
of terminals where freight is transferred to other trucks with similar
destinations.
We believe the next-day ground LTL market is the most attractive segment of
the trucking industry due to the growth in demand for expedited services for
just in time, or JIT, inventory systems. Adopted by many of our customers, JIT
inventory management has resulted in the need to ship smaller freight loads more
frequently and with expedited delivery, increasing the demand for the services
provided by us and other LTL carriers.
The LTL industry is composed of the following three segments:
- the REGIONAL segment, which ships on lanes shorter than 500 miles and is
primarily served by next-day ground and, to a lesser extent, two-day
service;
- the INTER-REGIONAL segment, which ships on lanes between 500 and 1,200
miles and is primarily served by two- and three-day service; and
- the LONG-HAUL segment, which ships on lanes generally over 1,200 miles
and is served primarily by three-day and beyond service.
The participants in the regional segment include a large number of non-union
regional and niche carriers as well as several unionized regional carriers. The
participants in the inter-regional segment are large regional carriers and
national unionized carriers. The long haul segment is served primarily by the
national unionized carriers. The LTL industry has been consolidating over the
last few years resulting in tightening capacity and increasing freight rates.
OUR COMPETITION
The trucking business is extremely competitive, resulting in narrow
margins. Due to Arnold's participation in a different segment of the trucking
market, we do not compete with Arnold for business. We compete for LTL freight
with other national and international LTL carriers as well as regional LTL motor
carriers, truckload carriers, small package carriers, private carriage, freight
forwarders, railroads and airlines. New Penn competes in the regional LTL market
with other motor common carriers, motor contract carriers, private
transportation and railroads. ATS's customers in the TL carriage market place
their proposed contracts out for bid, and ATS generally competes for the
business with at least one or two other qualified carriers. Once contracts are
secured, the contracts generally have a one or two year duration, after which
time they may again be opened to bidding.
Competition for freight is based primarily upon price and transit time, as
well as consistency and dependability of service. To maintain and improve market
share, Roadway offers and negotiates various discounts, and works directly with
customers on an account-by-account basis to find ways to improve efficiencies
and contain costs to improve both customer and carrier profitability.
Deregulation of most of
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the trucking industry, begun in 1980 and largely completed by Congress in 1995,
has given rise to intense competition.
OUR BUSINESS STRATEGY
Our strategy is to maintain and enhance our leadership position in the LTL
market by continually improving our two-day and beyond core service to our
extensive base of customers. At the same time, we intend to leverage the value
of our North American network and brand equity through the development and
marketing of higher yielding and faster growing specialty trucking services.
We believe the next-day ground market is the fastest growing segment in the
surface transportation industry. Our acquisition of Arnold enables us to enter
this market with a leading next-day carrier. We intend to use New Penn as our
platform for growth of next-day ground service into other geographic areas.
We intend to allocate a significant portion of our free cash flow to pay
down debt and increase our financial flexibility. We believe reducing our debt
level over the near term will increase our ability to pursue strategic
opportunities as they arise.
OUR EMPLOYEES
At September 8, 2001, we had over 26,000 employees. At September 30, 2001,
New Penn had approximately 2,200 employees and ATS had approximately 1,100
employees. Approximately 75% of our employees are represented by various labor
unions, primarily the Teamsters, as are most of New Penn's hourly employees. The
current National Master Freight Agreement with the Teamsters, which applies to
our employees and New Penn's, expires on March 31, 2003. The majority of our
competitors in the national LTL industry are subject to the same agreement with
the Teamsters. We believe that our current relations with the Teamsters are
satisfactory and New Penn anticipates stable labor relations with its unionized
employees during the next two years. Noneconditions described in this prospectus.
You may tender all, some or none of ATS's employees are organized into
a collective bargaining unit or are otherwise unionized.
GOVERNMENT REGULATION
The U.S. Department of Transportation, which retains limited oversight
authority over motor carriers, currently regulates our and ATS's operations in
interstate commerce. We are eachyour Existing Notes, subject to safety requirements governing
interstate operations prescribed by the DOT. In addition, vehicle dimensionsterms and driver hours of service remain subject to both federal and state regulation. We
have earned a "satisfactory" rating, which is the highest of three grading
categories, from the DOT.
Federal legislation prohibits the states from enacting or enforcing a law,
regulation or other provision related to a price, route or service of any motor
carrier in interstate commerce. Changes in rates and charges may be effected
without regulatory approval.
PROPERTIES
At September 8, 2001, we owned approximately 8,750 tractors and
approximately 23,500 trailers. We also operated approximately 1,750 tractors and
approximately 11,000 trailers under long term leases. The average age of our
intercity fleet was seven years for tractors and six years for trailers. We use
short-term leased equipment to meet peak demands. These tractors and trailers
operate through approximately 375 terminal facilities, of which approximately
250 were owned and approximately 125 were leased at September 8, 2001, generally
for terms of three years or less. The number of loading spaces, which is a
measure of our freight handling capacity, totaled approximately 14,300, of which
approximately 12,000 were at our owned facilities and approximately 2,300 were
at our leased facilities. Approximately thirty of the owned facilities are major
consolidation/distribution centers that are in strategic locations throughout
the continental United States. These 30 facilities contain approximately 5,515
loading spaces, ranging in size from approximately 71 to 426 loading spaces, and
average approximately 89,000 square feet, ranging
41
from 31,000 to 220,000 square feet. All significant leased and owned facilities
were being used as of September 8, 2001, and are adequate to meet current needs.
At September 30, 2001, New Penn maintained general commodities terminal
facilities in 24 cities situated in eight states and a province of Canada. At
September 30, 2001, terminals in 18 of these cities were owned by Arnold or its
subsidiaries and terminals in six of these cities were leased from unrelated
parties. The leases, which include one verbal lease, expire from time to time
over the next several years. Management believes the leases will be renewed or
replaced by other leases in the normal course of business. New Penn also
operates through a correspondent located in Cantano, Puerto Rico.
At September 30, 2001, ATS operated terminals and/or drop lots in 13 cities
situated in eight states. At September 30, 2001, eight of these facilities were
owned and five were leased from unrelated parties. Management believes the
leases will be renewed or replaced in the ordinary course of business. At
September 30, 2001, ATS also leased warehouse or storage space in five cities.
ATS assigned or sublet each of these leases to ARLO in connection with its sale.
We expect ATS to continue to sublet each of the leases to ARLO either until the
end of the respective sublease's term or until ATS obtains a release from the
respective landlord of its obligations under the leases. Upon receipt of any
release, we expect to assign the respective lease to ARLO.
We own our main headquarters offices of approximately 273,000 square feet,
situated on approximately 38.5 acres of which approximately 14.5 are owned, and
24 leased under a long-term contract expiring in 2009, but renewable to 2084. We
lease approximately 94,000 square feet of the office space for some headquarters
department functions at other locations.
Arnold and New Penn own their shared executive and general offices. ATS
owns its principal offices and two regional carrier locations.
LEGAL PROCEEDINGS
We have various legal proceedings arising from the normal conduct of
business pending but, in the opinion of our management, the ultimate disposition
of these matters will have no material effect on our financial condition or
results or operations. Arnold is not involved in any pending legal proceeding
other than various lawsuits arising in the ordinary course of business. In the
opinion of its management, the outcome of these matters will not have a material
adverse effect on its financial condition or results of operations.
We have received notices from the Environmental Protection Agency that we
have been identified as a potentially responsible party under the Comprehensive
Environmental Response Compensation and Liability Act at some hazardous waste
sites. These designations are made regardless of our limited involvement at each
site. The claims for remediation have been asserted against numerous other
entities that are believed to be financially solvent and are expected to fulfill
their proportionate share. We accrue for losses associated with the
environmental remediation obligations when the losses are probable and
reasonably estimable. Based on our investigations, we believe that our
obligation with regard to these sites is not significant, although there can be
no assurances in this regard.
Our former parent, Roadway Services, is currently under examination by the
IRS for tax years 1994 and 1995, years prior to our spin-off from Roadway
Services. 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. We are unable to predict the ultimate outcome
of this matters; however, our former parent intends to vigorously contest these
proposed adjustments.
Under a tax sharing agreement entered into by us and Roadway Services at
the time of our spin-off, we are obligated to reimburse Roadway Services for any
additional taxes and interest that relate to our business prior to the spin-off.
The amount and timing of payments, if any, is dependent on the ultimate
resolution of Roadway Services' disputes with the IRS and the determination of
the nature and extent of the obligations under the tax sharing agreement. We
have established reserves with respect to these proposed adjustments.
42
MANAGEMENT
Our directors and executive officers and their respective ages and
positions are set forth below.
NAME AGE POSITION
- ---- --- --------
Michael W. Wickham........................ 55 Chairman & Chief Executive Officer
James D. Staley........................... 52 President and Chief Operating Officer
J. Dawson Cunningham...................... 55 Executive Vice President and Chief
Financial Officer
John D. Bronneck.......................... 55 Vice President-Operations
Louis J. Esposito......................... 59 Vice President-Sales
John J. Gasparovic........................ 44 Vice President, General Counsel and
Secretary
Frank P. Doyle............................ 70 Director
John F. Fiedler........................... 63 Director
Dale F. Frey.............................. 69 Director
Phillip J. Meek........................... 63 Director
Carl W. Schafer........................... 65 Director
Sarah Roush Werner........................ 71 Director
Michael W. Wickham has been our Chairman since March 1998, and Chief
Executive Officer since January 1996. He served as President of Roadway from
July 1990 through March 1998 and Director of Roadway since 1989. He also served
as Vice President-Administration and Finance from January 1990 through June
1990.
James D. Staley has been our President and Chief Operating Officer since
March 1998. Prior to March 1998, he served as Vice President-Operations since
1993.
J. Dawson Cunningham has been our Executive Vice President and Chief
Financial Officer since March 1998. Prior to March 1998, he served as Vice
President-Finance and Administration from August 1990 to March 1998. He also
served as Treasurer from 1987 through 2000.
John D. Bronneck has been our Vice President-Operations since March 1998.
Prior to this, he served as Vice President-Northeastern Division from January
1993 to March 1998.
Louis J. Esposito has been our Vice President-Sales since September 1995.
Prior to this, he served as Vice President-Midwestern Division from December
1990 through September 1995.
John J. Gasparovic has been our Vice President, General Counsel and
Secretary since January 2001. Prior to January 2001, he served as Vice President
and General Counsel from May 2000. Prior to joining us, Mr. Gasparovic was Vice
President-Business Development and General Counsel for Guardian Automotive, a
supplier of automotive glass and exterior trim, from 1999 to April 2000. From
1990 to 1998, Mr. Gasparovic served as Assistant General Counsel of Guardian
Industries Corp., a manufacturer of glass products for the commercial and
residential construction industries.
Frank P. Doyle has been a director since January 1996. Now retired, he was
the Vice Chairman and Chief Executive Officer of Compaq Computer Corporation, a
computer manufacturing and services company, from April 1999 to July 1999. He
served as Executive Vice President of General Electric Company, a manufacturing,
services and technology company, from 1992 through 1995. Mr. Doyle is also a
director of TyCom Ltd.
John F. Fiedler has been a director since March 1999. He has been the
Chairman of Borg-Warner Automotive, Inc., a supplier of highly engineered
systems and components primarily for automotive powertrain applications, since
March 1996, and the Chief Executive Officer of Borg-Warner since January 1995,
President from June 1994 through March 1996 and Chief Operating Officer from
June 1994 through December 1994. He was Executive Vice President-North American
Tire Division of the Goodyear Tire &
43
Rubber Company, a manufacturer of tire & rubber products, from 1991 through
1994. Mr. Fiedler is also a director of Dal-Tile International Inc.
Dale F. Frey has been a director since January 1998. Now retired, he was
the Chairman and Chief Executive Officer of General Electric Investment
Corporation from 1984 through early 1997 and Vice President and Treasurer of
General Electric Company, a manufacturing, services and technology company, from
1980 through January 1994. He is also a director of Aftermarket Technology
Corp., Praxair, Inc., McLeodUSA Incorporated and The Yankee Candle Company, Inc.
Phillip J. Meek has been a director since January 1996. Now retired, he was
Senior Vice President of Capital Cities/ABC, Inc., a broadcasting, cable and
publishing company, and President of its publishing group from 1986 through
1997. He is a Trustee of Ohio Wesleyan University and vice-chair of its Board of
Trustees. He is also a director of Guideposts, a church organization.
Carl W. Schafer has been a director since January 1996. He has been the
President of the Atlantic Foundation, supporting oceanographic research, since
1990. He is also a director of Frontier Oil Corporation, Electronic Clearing
House, Inc., Nutraceutix, Inc., Labor Ready, Inc., the PaineWebber Group of
Mutual Funds, the Guardian Life Insurance Group of Mutual Funds, the Harding
Loevner Group of Mutual Funds, and the EII Realty Securities Trust.
Sarah Roush Werner has been a director since January 1996. She was a
director of Roadway Services, Inc. from 1970 through 1995. She is a private
investor.
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DESCRIPTION OF OTHER INDEBTEDNESS
NEW SENIOR CREDIT FACILITY
At September 8, 2001, we had $60.0 million available for borrowing through
unsecured credit facilities with various banks. In connection with our
acquisition of Arnold, we replaced our existing facilities, other than the $10.0
million credit facility under which Reimer Express Lines is the borrower, with a
new $325.0 million senior credit facility. The following is a summary of the
principal terms of the new credit facility.
Revolving Facility. The credit facility includes a five-year, $150.0
million senior revolving credit facility with a $100.0 million sublimit for
letters of credit. Pricing under the revolving credit facility is at a
fluctuating rate based on the alternate base rate as determined by Credit Suisse
First Boston, New York Branch or LIBOR, plus an additional margin of 0.50% and
1.50%, respectively. In addition, we are required to pay a commitment fee of
0.40% on undrawn amounts. The margin and commitment fee may readjust after the
last day of the second full fiscal quarter following November 30, 2001,
depending on the institutional ratings of our long-term debt. As of December 13,
2001, there were no amounts outstanding under the revolving credit facility, but
availability had been reduced by $56.4 million as a result of the issuance of
letters of credit.
Term Loan Facility. The credit facility also includes a five-year, $175.0
million senior term loan facility, which was drawn at closing of the acquisition
of Arnold to partially fund our acquisition of Arnold. Pricing under the term
loan is at a fluctuating rate based on the alternate base rate as determined by
Credit Suisse First Boston, New York Branch or LIBOR, plus an additional margin
of 0.50% and 1.50%, respectively. The margin may readjust after the last day of
the second full fiscal quarter following November 30, 2001, depending on the
institutional ratings of our long-term debt. As of December 13, 2001, we had
outstanding borrowings of $100.0 million under the term loan facility accruing
interest at a rate of LIBOR plus 1.50%. We are required to make quarterly
amortization payments beginning January 1, 2002 on the term loan of amounts
ranging from $4.375 million in 2002 to $13.125 million in 2006.
Security and Guarantees. The revolving credit facility and the term loan
are secured by a first-priority perfected lien on all of the capital stock of
our direct subsidiaries. However, we are not required to pledge as security more
than 65% of the equity interests or the property and assets of our direct
non-U.S. subsidiaries in the event that a pledge of a greater percentage would
result in material increased tax or similar liabilities for us on a consolidated
basis.
The credit facilities are also supported by guarantees provided by all of
our current material subsidiaries and all future material subsidiaries, provided
that our non-U.S. subsidiaries will only be required to deliver guarantees to
the extent it would not result in material increased tax or similar liabilities
to us and our subsidiaries.
Mandatory Prepayments. We are required to prepay our credit facility
borrowings under any of the following conditions.
- We were required to use 100% of the net after-tax proceeds from the sale
of ARLO to prepay our loans outstanding under our credit facility.
- We are required to use 50% of the net proceeds from the sale of assets
with a net book value of more than $50 million to prepay our loans
outstanding under our credit facility; however, at any time our long-term
unsecured debt obligations are rated lower than Baa3 by Moody's Investors
Service or BBB- by Standard & Poor's, we are required to use 100% of the
net proceeds from all asset sales, subject to certain exceptions, to
prepay our loans outstanding under our credit facility.
- At any time our long-term unsecured debt obligations are rated lower than
Baa3 by Moody's Investors Service or BBB- by Standard & Poor's we are
required to use 100% of the net proceeds from condemnations and the like
and net proceeds from loss or casualty (subject to a customary
reinvestment period) to prepay our loans outstanding under our credit
facility.
45
- We are required to use 100% of the net proceeds from the sale or issuance
of debt securities, other than the exchange notes, to the extent those
proceeds do not constitute indebtedness incurred and/or assumed in
connection with permitted acquisitions and other permitted indebtedness
to prepay our loans outstanding under our credit facility.
- At any time our long-term unsecured debt obligations are rated lower than
Baa3 by Moody's or BBB- by Standard & Poor's, we are required to use 50%
of the net proceeds from the issuance of equity securities to prepay our
loans outstanding under our credit facility.
- We are required to use 50% of our excess cash flow for any fiscal year to
prepay our loans outstanding under our credit facility, commencing with
the 2002 fiscal year, in any year in which our long-term unsecured debt
obligations are rated lower than Baa3 by Moody's or BBB- by Standard &
Poor's at the end of such fiscal year.
Financial Covenants. The credit facilities contain financial covenants,
which are computed quarterly on a rolling four-quarter basis, requiring us to
maintain a maximum leverage ratio, a minimum fixed charge coverage ratio and a
minimum tangible net worth.
ACCOUNTS RECEIVABLE SECURITIZATION
Also in connection with our acquisition of Arnold, we have entered into
arrangements to finance up to $200.0 million of our U.S. trade accounts
receivable. In connection with these arrangements, Roadway Express will sell all
of its trade receivables to Roadway Funding, Inc., a bankruptcy-remote, special
purpose subsidiary. As a result, these receivables will be beyond the reach of
our stockholders and creditors, including the holdersconditions of the exchange notes and
the outstanding notes. Roadway Funding will finance its acquisitionoffers. Holders of these
receivables through the asset-backed commercial paper market. We will continue
servicing the receivables.
We will treat these arrangements as sales for accounting purposes and
borrowings for tax purposes. The receivables will be replaced as assets on our
balance sheet by both the cash received and the value of our equity interestExisting Notes must tender their Existing Notes in
the receivables pool, no liabilities will be reflected, and we may report gains
to the extent such cash and equity value exceeds our basis in the receivables.
The cash advance rates to be received by us and investor yields payable under
the arrangement will be LIBOR plus 0.75%.
REIMER EXPRESS LINES FACILITY
At September 8, 2001, Reimer Express Lines Ltd., a Canadian subsidiary of
Roadway Express, had $10.0 million available for borrowing under a secured
revolving line of credit and bankers' acceptances. The line of credit and
bankers' acceptances bears interest, at Reimer Express Lines' option, at the
bank's prime lending rate or U.S. dollar base rate in Canada, or LIBOR plus
1.50% per annum for periods up to 180 days. The line of credit is payable on
demand.
Security and Guarantees. The line of credit is secured by all of the
receivables that are currently due to or that may become due in the future to
Reimer Express Lines or 3319415 Manitoba Ltd., a wholly owned subsidiary of
Reimer Express Lines. The line of credit is also secured by all present and
future personal property of these parties, including shares of stock and
intangible personal property, and the proceeds therefrom. 3319415 Manitoba has
also fully and unconditionally guaranteed the line of credit.
Financial Covenants. The line of credit contains financial covenants that
require Reimer Express Lines to maintain a minimum ratio of consolidated current
assets to consolidated current liabilities and a minimum ratio of consolidated
debt to total consolidated tangible net worth. The line of credit also requires
Reimer Express Lines to maintain a minimum ratio of operating loans and bankers'
acceptances to its "borrowing base," which is linked to the amount of good
quality Canadian trade accounts payable of Reimer Express Lines and 3319415
Manitoba.
Neither Reimer Express Lines nor 3319415 Manitoba issued a guarantee or
pledged any of its securities in connection with the offering of the original
notes.
46
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On November 30, 2001, we sold $225.0 million in$1,000 principal amount at
maturity of the outstanding notes in a private placement through initial
purchasers to a limited number of "qualified institutional buyers," as defined
in the Securities Act, and to a limited number of persons outside the United
States. In connection with the sale of the outstanding notes, we and the initial
purchasers entered into a registration rights agreement, dated as of November
30, 2001. Under that agreement, we must, among other things, file with the
Commission a registration statement under the Securities Act covering the
exchange offer and use our best efforts to cause that registration statement to
become effective under the Securities Act. Upon effectiveness of that
registration statement, we must also offer each holder of the outstanding notes
the opportunity to exchange its securities for an equal principal amount at
maturity of exchange notes. You are a holder with respect to the exchange offer
if you are a person in whose name any outstanding notes are registered on our
books or any other person who has obtained a properly completed assignment of
outstanding notes from the registered holder.
We are making the exchange offer to comply with our obligations under the
registration rights agreement. A copy of the registration rights agreement has
been filed as an exhibit to the registration statement of which this prospectus
is a part.
In order to participate in the exchange offer, you must represent to us,
among other things, that:
- the exchange notes being acquired pursuant to the exchange offer are
being obtained in the ordinary course of business of the person receiving
the exchange notes;
- you do not have any arrangement or understanding with any person to
participate in the distribution of the outstanding notes or the exchange
notes;
- you are not engaged in, and do not intend to engage in, a distribution of
the exchange notes; and
- you are not one of our "affiliates," as defined in Rule 405 of the
Securities Act, or, if you are one of our affiliates, you will comply
with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
multiples thereof.
The exchange offer isoffers are not being made to, norand we will wenot accept surrenderstenders for exchange from, holders of outstanding notesExisting Notes in any jurisdiction in which the exchange offeroffers or the acceptance thereofof the offers would not be in compliance with the securities or blue sky laws of that jurisdiction.
Our board of directors and officers do not make any recommendation to the particular jurisdiction.
Ifholders of Existing Notes as to whether or not to exchange all or any portion of their Existing Notes. Further, no person has been authorized to give any information or make any representations other than those contained herein and, if given or made, such information or representations must not be relied upon as having been authorized. You must make your own decision whether to tender your Existing Notes for exchange and, if so, the holderamount of outstanding notes is a broker-dealer participating inExisting Notes to tender.
Expiration Date
The expiration date for the exchange offer that will receive exchange notes for its own account in exchange
for outstanding notes that were acquired as a result of market-making activities
or other trading activities, that broker-dealer will be required to acknowledge
in the letter of transmittal that it will deliver a prospectus in connection
with any resale of the exchange notes and otherwise agree to comply with the
procedures described below under "-- Resale of the Exchange Notes." That
broker-dealer, however, by so acknowledging and delivering a prospectus, will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
RESALE OF THE EXCHANGE NOTES
Based on a previous interpretation by the staff of the Commission set forth
in no-action letters issued to third parties, including Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated
(available June 5, 1991), Mary Kay Cosmetics, Inc. (available June 5, 1991),
Warnaco, Inc. (available October 11, 1991), and K-III Communications Corp.
(available May 14, 1993), we believe that the exchange notes issued in the
exchange offer may be offered for resale, resold and otherwise transferred by
you, except if you are an affiliate of ours, without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the representations set forth in "-- Purpose and Effect of the Exchange
Offer" apply to you.
47
If you tender in the exchange offer with the intention of participating in
a distribution of the exchange notes, you cannot rely on the interpretation by
the staff of the Commission as set forth in the Morgan Stanley & Co.
Incorporated no-action letter and other similar letters and you must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. In the event that our belief
regarding resale is inaccurate, those who transfer exchange notes in violation
of the prospectus delivery provisions of the Securities Act and without an
exemption from registration under the federal securities laws may incur
liability under these laws. We do not assume or indemnify you against this
liability.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes, where such outstanding notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of exchange notes. See "Plan of Distribution." In order to
facilitate the disposition of exchange notes by broker-dealers participating in
the exchange offer, we have agreed, subject to specific conditions, to make this
prospectus, as it may be amended or supplemented from time to time, available
for delivery by those broker-dealers to satisfy their prospectus delivery
obligations under the Securities Act.
Any holder that is a broker-dealer participating in the exchange offer must
notify the exchange agent at the telephone number set forth in the enclosed
letter of transmittal and must comply with the procedures for brokers-dealers
participating in the exchange offer. Under the registration rights agreement, we
are not required to amend or supplement the prospectus for a period exceeding
180 days after the expiration date of the exchange offer, except in limited
circumstances where we suspend use of the registration statement. We may suspend
use of the registration statement if:
- the Commission requests amendments or supplements to the registration
statement or the prospectus included therein or for additional
information;
- the Commission issues a stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose;
- we receive notice of the suspension of the qualification of the exchange
notes for sale in any jurisdiction or the initiation of any proceeding
for that purpose;
- any event occurs that requires us to make changes in the registration
statement or the prospectus in order that the registration statement or
prospectus do not contain an untrue statement of a material fact nor omit
to state a material fact required to be stated therein or necessary to
make the statements therein (in case of the prospectus, in light of the
circumstances under which they were made) not misleading; or
- we determine, in good faith, that it is advisable to suspend use of the
registration statement or the prospectus for a period of time due to
pending material corporate developments or similar material events that
have not yet been publicly disclosed and as to which we reasonably
believe public disclosure would be prejudicial to us.
We have not entered into any arrangement or understanding with any person
to distribute the exchange notes to be received in the exchange offer. See "Plan
of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all outstanding notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the day the exchange offer expires.
As of the date of this prospectus, $225.0 million in principal amount at
maturity of the notes are outstanding. This prospectus, together with the letter
of transmittal, is being sent to all registered holders of the outstanding notes
on this date. There will be no fixed record date for determining registered
holders of the outstanding notes entitled to participate in the exchange offer.
However, holders of the outstanding notes must tender their certificates
therefor or cause their outstanding notes to be tendered by book-entry transfer
prior to the expiration date of the exchange offer to participate.
48
The form and terms of the exchange notes will be the same as the form and
terms of the outstanding notes, except that the exchange notes will be
registered under the Securities Act and therefore will not bear legends
restricting their transfer. Following consummation of the exchange offer, all
rights under the registration rights agreement accorded to holders of
outstanding notes, including the right to receive additional incremental
interest on the outstanding notes, to the extent and in the circumstances
specified in the registration rights agreement, will terminate.
We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement and applicable federal securities laws.
Outstanding notes that are not tendered for exchange under the exchange offer
will remain outstanding and will be entitled to the rights under the related
indenture. Any outstanding notes not tendered for exchange will not retain any
rights under the registration rights agreement and will remain subject to
transfer restrictions. See "-- Consequences of Failure to Exchange."
We will be deemed to have accepted validly tendered outstanding notes when,
as and if we will have given oral or written notice of their acceptance to the
exchange agent. The exchange agent will act as agent for the tendering holders
for the purposes of receiving the exchange notes from us. If any tendered
outstanding notes are not accepted for exchange because of an invalid tender,
the occurrence of other events set forth in this prospectus, or otherwise,
certificates for any unaccepted outstanding notes will be returned, or, in the
case of outstanding notes tendered by book-entry transfer, those unaccepted
outstanding notes will be credited to an account maintained with The Depository
Trust Company, without expense to the tendering holder of those outstanding
notes, as promptly as practicable after the expiration date of the exchange
offer. See "-- Procedures for Tendering."
Those who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange pursuant
to the exchange offer. We will pay all charges and expenses, other than
applicable taxes described below, in connection with the exchange offer. See
"-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration dateoffers is 5:00 p.m., New York City time, on , 2002,2004, unless we in our sole discretion, extend the exchange offer, in which case theoffers. We may extend this expiration date for any reason. The last date on which tenders will be the latestaccepted, whether on , 2004 or any later date and time to which the exchange offeroffers may be extended, is extended. referred to as the expiration date.
Extensions; Amendments
We may,expressly reserve the right, in our sole discretion, for any reason to:
If we consider an amendment to the exchange offers to be material, or if we waive a material condition of the exchange offers, we will promptly disclose the amendment or waiver in a prospectus supplement, and if required by law, we will extend the exchange offers for a period of five to twenty business days.
We will promptly give oral or written notice of any (1) extension, (2) amendment, (3) non-acceptance or (4) termination of the offers to the holders of the Existing Notes. In the case of any extension, we will issue a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date and make a public announcement of
the extension.
We reserve the right:
- to delay accepting any outstanding notes, to extend the exchange offer or
to terminate the exchange offer if any of the conditions set forth below
under "-- Conditions" are not satisfied by giving oral or written notice
of the delay, extension or termination to the exchange agent; or
- to amend the terms of the exchange offer in any manner consistent with
the registration rights agreement.
Any delay in acceptances, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice of the delay to
the registered holders of the outstanding notes. If we amend the exchange offer
in a manner that constitutes a material change, we will promptly disclose the
amendment by means of a prospectus supplement that will be distributed to the
registered holders of the outstanding notes, and we will extend the exchange
offer for a period of five to ten business days, depending upon the significance
of the amendment and the manner of disclosure to the registered holders of the
outstanding notes, if the exchange offer would otherwise expire during the five
to ten business day period.
49
Without limiting the manner in which we may choose to make a public
announcement of any delay, extension, amendment or termination of the exchange
offer, we will have no obligation to publish, advertise or otherwise communicate
that public announcement, other than by making a timely release to an
appropriate news agency.
Upon satisfaction or waiver of all the conditions to the exchange offer, we
will accept, promptly after the expiration date of the exchange offer, all
outstanding notes properly tendered and will issue the exchange notes promptly
after acceptance of the outstanding notes. See "-- Conditions" below. For
purposes of the exchange offer, we will be deemed to have accepted properly
tendered outstanding notes for exchange when, as and if we will have given oral
or written notice of its acceptance to the exchange agent.date. In all cases, issuance of the exchange notes for outstanding notes that are
accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of certificates for those outstanding notes
or a timely confirmation of book-entry transfer of the outstanding notes into
the exchange agent's account at The Depository Trust Company, a properly
completed and duly executed letter of transmittal, and all other required
documents; provided, however, that we reserve the absolute right to waive any
defects or irregularities in the tender of outstanding notes or in the
satisfaction of conditions of the exchange offer by holders of the outstanding
notes. If any tendered outstanding notes are not accepted for any reason set
forth in the terms and conditions of the exchange offer, if the holder withdraws
such previously tendered outstanding notes, or if outstanding notes are
submitted for a greater principal amount of outstanding notes than the holder
desires to exchange, then the unaccepted, withdrawn or portion of non-exchanged
outstanding notes, as appropriate, will be returned as promptly as practicable
after the expiration or termination of the exchange offer, or, in the case of outstanding notes tendered by book-entry transfer, those unaccepted, withdrawn
or portion of non-exchanged outstanding notes, as appropriate, will be credited
to an account maintained with The Depository Trust Company, without expense to
the tendering holder thereof.
CONDITIONS
Without regard to other terms of the exchange offer,amendment, we will not be
requiredissue a press release or other public announcement.
Procedures for Tendering Existing Notes
Your tender to exchange any exchange notes for any outstanding notesus of Existing Notes and may
terminate the exchange offer before theour acceptance of any outstanding notes for
exchange, if:
- any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
that, in our reasonable judgment, might materially impair our ability to
proceed with the exchange offer;
- the staff of the Commission proposes, adopts or enacts any law, statute,
rule or regulation or issues any interpretation of any existing law,
statute, rule or regulation, which, in our reasonable judgment, might
materially impair our ability to proceed with the exchange offer; or
- any governmental approval or approval by holders of the outstanding notes
has not been obtained, which approval weyour tender will in our reasonable
judgment, deem necessary for the consummation of the exchange offer.
If we determine that any of these conditions are not satisfied, we may:
- refuse to accept any outstanding notesconstitute a binding agreement between you and return all tendered
outstanding notes to the tendering holders, or, in the case of
outstanding notes tendered by book-entry transfer, credit those
outstanding notes to an account maintained with The Depository Trust
Company;
- extend the exchange offer and retain all outstanding notes tendered prior
to the expiration of the exchange offer, subject, however, to the rights
of holders who tendered the outstanding notes to withdraw their tendered
outstanding notes; or
- waive unsatisfied conditions with respect to the exchange offer and
accept all properly tendered outstanding notes that have not been
withdrawn. If the waiver constitutes a material change to the exchange
offer, we will promptly disclose the waiver by means of a prospectus
supplement that will
50
be distributed to the registered holders of the outstanding notes, and we
will extend the exchange offer for a period of five to ten business days,
dependingus upon the significance of the waiver and the manner of
disclosure to the registered holders of the outstanding notes, if the
exchange offer would otherwise expire during this period.
PROCEDURES FOR TENDERING
To tender in the exchange offer, you must complete, sign and date an
original or facsimile letter of transmittal, have the signatures thereon
guaranteed if required by the letter of transmittal, and mail or otherwise
deliver the letter of transmittal to the exchange agent prior to the expiration
date of the exchange offer. In addition, either:
- certificates for the outstanding notes must be received by the exchange
agent, along with the letter of transmittal; or
- a timely confirmation of transfer by book-entry of those outstanding
notes, if the book-entry procedure is available, into the exchange
agent's account at The Depository Trust Company, as set forth in the
procedure for book-entry transfer described below, which the exchange
agent must receive prior to the expiration date of the exchange offer; or
- you must comply with the guaranteed delivery procedures described below.
To be tendered effectively, the exchange agent must receive the letter of
transmittal and other required documents at the address set forth below under
"-- Exchange Agent" prior to the expiration of the exchange offer.
If you tender your outstanding notes and do not withdraw them prior to the
expiration date of the exchange offer, you will be deemed to have an agreement
with us in accordance with the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR RISK. INSTEAD
OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT YOU USE AN OVERNIGHT OR HAND
DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE OF
THE EXCHANGE OFFER. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT
TO ROADWAY. YOU MAY REQUEST YOUR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR YOU.
Any
Tender of Existing Notes Held Through a Custodian. If you are a beneficial owner whose outstanding notesholder of the Existing Notes that are registered in the nameheld of record by a custodian bank, depository institution, broker, dealer, commercial bank, trust company or other nominee, and who wishes
to tender its outstanding notes should contactyou must instruct the registered holder promptly
and instruct that registeredcustodian, or such other record holder, to tender the outstanding notesExisting Notes on your behalf. Your custodian will provide you with its instruction letter, which you must use to give these instructions.
Tender of Existing Notes Held Through DTC. Any beneficial owner of Existing Notes held of record by The Depository Trust Company, or DTC, or its nominee, through authority granted by DTC, may direct the DTC participant through which the beneficial owner's behalf. If the beneficial owner wishesowner’s Existing Notes are held in DTC, to tender on such beneficial owner’s behalf. To effectively tender Existing Notes that are held through DTC, DTC participants should transmit their acceptance through the Automated Tender Offer Program, or ATOP, for which the transaction will be eligible, and DTC will then edit and verify the acceptance and send an agent’s message to the exchange agent for its outstanding notes onacceptance. Delivery of tendered Existing Notes must be made to the owner's own behalf, that ownerexchange agent pursuant to the book-entry delivery procedures set forth below or the tendering DTC participant must prior to
completing and executingcomply with the letterguaranteed delivery procedures set forth below. No letters of transmittal will be required to tender Existing Notes through ATOP.
In addition, the exchange agent must receive:
Your Existing Notes must be returned as promptly as
practicable after the expiration or termination of the exchange offer, or, in
the case of outstanding notes tendered by book-entry transfer into the exchange
agent's account at The Depository Trust Company pursuant to the book-entry
transfer procedures described below, the unaccepted or portion of non-exchanged
outstanding notes will be credited to an
52
account maintained with The Depository Trust Company, without expense to the
tendering holder of outstanding notes.
BOOK-ENTRY TRANSFERtransfer. The exchange agent will make a request to establish an account with respect to the outstanding notesExisting 5.0% Notes and an account with respect to the Existing 3.375% Notes at The Depository Trust CompanyDTC for the purposes of the exchange offeroffers within two business days after the date of this prospectus, and
anyprospectus. Any financial institution that is a participant in The Depository Trust
Company's systems mayDTC must make book-entry delivery of outstanding notesExisting Notes by causing
The Depository Trust Company tohaving DTC transfer the outstanding notessuch Existing Notes into the exchange agent'sagent’s relevant account at The Depository Trust CompanyDTC in accordance with The
Depository Trust Company'sDTC’s procedures for transfer. However, although delivery
of outstanding notes mayAlthough your Existing Notes will be effectedtendered through book-entry transfer at The
Depository Trust Company,the DTC facility, the letter of transmittal, or facsimile, thereof,or an electronic confirmation pursuant to DTC’s ATOP system, with any required signature guarantees and any other required documents, must, inif any, case,must be transmitted to and received or confirmed by the exchange agent at theits address set forth below under "-- “—Exchange Agent" prior to the expiration date of the
exchange offer, unless the holder complies with the guaranteed delivery
procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their outstanding notes and (1) whose
outstanding notes are not immediately available or (2) who cannot deliver their
outstanding notes, the letter of transmittal, or any other required documents to
the exchange agent prior to the expiration date, may effect a tender if:
- the tender is made through an eligible institution;
- prior to the expiration date of the exchange offer, the exchange agent
receives from such eligible institution a properly completed and duly
executed notice of guaranteed delivery, by facsimile transmission, mail
or hand delivery, setting forth the name and address of the holder, the
certificate number(s) of the outstanding notes and the principal amount
of outstanding notes tendered and stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange
trading days after the expiration date of the exchange offer, the letter
of transmittal, together with the certificate(s) representing the
outstanding notes in proper form for transfer or a confirmation of
book-entry transfer, as the case may be, and any other documents required
by the letter of transmittal will be deposited by the eligible
institution with the exchange agent; and
- the exchange agent receives the properly completed and executed letter of
transmittal, as well as the certificate(s) representing all tendered
outstanding notes in proper form for transfer and other documents
required by the letter of transmittal within three New York Stock
Exchange trading days after the expiration date of the exchange offer.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided, tenders of outstanding notes may be withdrawn
at any timeAgent”, prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer.
To withdraw a tender of outstanding notes inoffers. You or your broker must ensure that the exchange offer,agent receives an agent’s message from DTC confirming the book-entry transfer of your Existing Notes. An agent’s message is a written
or facsimile transmission notice of withdrawal must bemessage transmitted by DTC and received by the exchange agent that forms a part of the book-entry confirmation which states that DTC has received an express acknowledgement from the participant in DTC tendering Existing Notes that such participant agrees to be bound by the terms of the letter of transmittal. Delivery of documents to DTC in accordance with its procedures does not constitute delivery to the exchange agent.
If you are an institution that is a participant in DTC’s book-entry transfer facility, you should follow the same procedures that are applicable to persons holding Existing Notes through a financial institution.
Do not send letters of transmittal or other exchange offer documents to us or to Credit Suisse First Boston LLC, the dealer manager.
It is your responsibility to ensure that all necessary materials get to Deutsche Bank Trust Company Americas, the exchange agent, before the expiration date. If the exchange agent does not receive all of the required materials before the expiration date, your Existing Notes will not be validly tendered.
Any Existing Notes not accepted for exchange for any reason will be promptly returned, without expense, to the tendering holder after the expiration or termination of the exchange offers.
We will have accepted the validity of tendered Existing Notes if and when we give oral or written notice to the exchange agent. The exchange agent will act as the tendering holders’ agent for purposes of receiving the New Notes from us. If we do not accept any tendered Existing Notes for exchange because of an invalid tender or the occurrence of any other event, the exchange agent will return those Existing Notes to you without expense, promptly after the expiration date via book-entry transfer through DTC.
Binding Interpretations
We will determine in our sole discretion, all questions as to the validity, form, eligibility and acceptance of Existing Notes tendered for exchange. Our determination will be final and binding. We reserve the absolute right to reject any and all tenders of any particular Existing Notes not properly tendered or to not accept any particular Existing Notes which acceptance might, in our reasonable judgment or our counsel’s judgment, be unlawful. We also reserve the absolute right to waive any defects or irregularities in the tender of Existing Notes. Unless waived, any defects or irregularities in connection with tenders of Existing Notes for exchange must be cured within such reasonable period of time as we shall determine. Neither we, the exchange agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of Existing Notes for exchange, nor shall any of them incur any liability for failure to give such notification.
Acceptance of Existing Notes for Exchange; Delivery of New Notes
Once all of the conditions to the exchange offers are satisfied or waived, we will accept, promptly after the expiration date, all Existing Notes properly tendered, and will issue the New Notes promptly after acceptance of the Existing Notes. The discussion under the heading “—Conditions for Completion of the Exchange Offers” provides further information regarding the conditions to the exchange offers. For purposes of the exchange offers, we shall be deemed to have accepted properly tendered Existing Notes for exchange when, as and if we have given oral or written notice to the exchange agent, with written confirmation of any oral notice to be given promptly after giving such notice.
The New Notes will be issued in denominations of $1,000 and any integral multiples of $1,000. Interest on the New 5.0% Notes will accrue from the last interest payment date on which interest was paid, or, if no interest has been paid, from the last interest payment date on which interest was paid on the Existing 5.0% Notes. Holders whose Existing 5.0% Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Existing 5.0% Notes. Interest on the New 3.375% Notes will accrue from the last interest payment date on which interest was paid, or, if no interest has been paid, from the last interest payment date on which interest was paid on the Existing 3.375% Notes. Holders whose Existing 3.375% Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Existing 3.375% Notes.
In all cases, issuance of New Notes for Existing Notes that are accepted for exchange in the exchange offers will be made only after timely receipt by the exchange agent of:
Return of Existing Notes Accepted for Exchange
If we do not accept any tendered Existing Notes for any reason set forth hereinin the terms and conditions of the exchange offers, or if Existing Notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged Existing Notes tendered by book-entry transfer into the exchange agent’s account at the book-entry transfer facility will be returned in accordance with the book-entry procedures described above, and the Existing Notes that are not to be exchanged will be credited to an account maintained with DTC, as promptly as practicable after the expiration or termination of the exchange offers.
Guaranteed Delivery Procedures
If you desire to tender your Existing Notes and you cannot complete the procedures for book-entry transfer set forth above on a timely basis, you may still tender your Existing Notes if:
(1) sets forth the name and address of the holder of the Existing Notes tendered;
(2) states that the tender is being made thereby; and
(3) guarantees that within three trading days after the expiration date a book-entry confirmation and any other documents required by the letter of transmittal, if any, will be deposited by the eligible institution with the exchange agent; and
Withdrawal Rights
You may withdraw your tender of Existing Notes at any time prior to 5:00 p.m., New York City time, on the expiration date ofdate. In addition, if we have not accepted your tendered Existing Notes for exchange, you may withdraw your Existing Notes after , 2004.
For a withdrawal to be effective, the exchange offer. Any suchagent must receive a written notice of withdrawal at the address or, in the case of eligible institutions, at the facsimile number, set forth below under the heading “—Exchange Agent” prior to 5:00 p.m., New York City time, on the expiration date. Any notice of withdrawal must:
-
Any outstanding notes so withdrawn will be deemed not to have been validly tendered
for purposes of the exchange offer, and no exchange notes will be issued with
respect to those outstanding notes unless the outstanding notes so withdrawn are
validly retendered.
Any outstanding notesExisting Notes that have been tendered for exchange, but thatwhich are not acceptedexchanged for payment will be returned to the holder of those outstanding notes, or in the
case of outstanding notes tendered by book-entry transfer,any reason, will be credited to an account maintained with The Depository Trust Company, without cost to the holderbook-entry transfer facility for the Existing Notes, as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer.offers. Properly withdrawn outstanding notesExisting Notes may be retendered by following one of the procedures described above under "-- the heading “—Procedures for Tendering"Tendering Existing Notes” above, at any time on or prior to 5:00 p.m., New York City time, on the expiration datedate.
Conditions for Completion of the Exchange Offers
Notwithstanding any other provisions of these exchange offers, we will not be required to accept for exchange any Existing Notes tendered, and we may terminate or amend these offers if any of the following conditions precedent to the exchange offers is not satisfied, or is reasonably determined by us not to be satisfied, and, in our reasonable judgment and regardless of the circumstances giving rise to the failure of the condition, the failure of the condition makes it inadvisable to proceed with the offers or with the acceptance for exchange or exchange and issuance of the New Notes:
All of the foregoing conditions are for the sole benefit of us and may be waived by us, in whole or in part, in our sole discretion. Any determination that we make concerning an event, development or circumstance described or referred to keep above shall be conclusive and binding.
In addition,
The two foregoing provisions are not waivable by us.
If any of the foregoing conditions are not satisfied, we may, at any time before the expiration of the exchange offer;offers:
Except for the requirements of the latest versionapplicable U.S. federal and state securities laws, we know of this prospectusno federal or state regulatory requirements to any
broker-dealer that requests copies of this prospectus for usebe complied with or approvals to be obtained by us in connection with any resale by that broker-dealer ofthe exchange notes
receivedoffers which, if not complied with or obtained, would have a material adverse effect on us.
Fees and Expenses
Credit Suisse First Boston LLC is acting as the dealer manager in connection with the exchange offers. Credit Suisse First Boston LLC will receive a fee in the manner described below for its own account pursuantservices as dealer manager.
Credit Suisse First Boston LLC’s fee will be calculated based on the principal amount of Existing Notes tendered. Based on the foregoing fee structure, if all of the Existing Notes are exchanged in the exchange offers, Credit Suisse First Boston LLC will receive an aggregate fee of approximately $1.6 million. Credit Suisse First Boston LLC will also be reimbursed for its reasonable out-of-pocket expenses incurred in connection with the exchange offers (including reasonable fees and disbursements of counsel) up to $50,000, whether or not the transactions close. Credit Suisse First Boston LLC’s fees will be payable upon expiration or termination of the exchange offers.
We have agreed to indemnify Credit Suisse First Boston LLC against specified liabilities relating to or arising out of the offer, including civil liabilities under the federal securities laws, and to contribute to payments which Credit Suisse First Boston LLC may be required to make in respect thereof. Credit Suisse First Boston LLC may from time to time hold Existing Notes and our common stock in its proprietary accounts, and to the
extent it owns Existing Notes in these accounts at the time of the exchange offers, Credit Suisse First Boston LLC may tender these Existing Notes. In addition, Credit Suisse First Boston LLC may hold and trade New Notes in its proprietary accounts following the exchange offers.
We have retained Morrow & Co., Inc. to act as information agent and Deutsche Bank Trust Company Americas to act as the exchange agent in connection with the exchange offers. The information agent may contact holders of Existing Notes by mail, telephone, facsimile transmission and personal interviews and may request brokers, dealers and other nominee existing note holders to forward materials relating to the exchange offeroffers to beneficial owners. The information agent and the exchange agent will receive an aggregate of approximately $50,000 in compensation for their respective services, will be reimbursed for reasonable out-of-pocket expenses and will be indemnified against liabilities in connection with their services, including liabilities under the federal securities laws.
Neither the information agent nor the exchange agent has been retained to make solicitations or recommendations. The fees they receive will not be based on the principal amount of Existing Notes tendered under the exchange offers.
We will not pay any fees or commissions to any broker or dealer, or any other person, other than Credit Suisse First Boston LLC for soliciting tenders of Existing Notes under the exchange offers. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by us for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers.
Legal Limitation
The above conditions are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any such condition, or may be waived by us in whole or in part at any time and from time to time in our sole discretion. Our failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time, and from time to time.
In addition, we will not accept for exchange any Existing Notes tendered, and no New Notes will be issued in exchange for outstanding notes acquired for its own account as a result of
market-makingany such Existing Notes, if at such time any stop order shall be threatened or other trading activities, subjectin effect with respect to the conditions
described above under "-- Resaleregistration statement of which this prospectus constitutes a part or the qualification of the indenture under the Trust Indenture Act of 1939, as amended.
Exchange Notes."
EXCHANGE AGENT
SunTrustAgent
Deutsche Bank Trust Company Americas has been appointed as the exchange agent for the exchange offer.offers. All executed letters of transmittal should be directed to the exchange agent at one of its addresses as set forth below. Questions about the tender of Existing Notes, requests for assistance, and requests for assistance, requests fornotices of guaranteed delivery should be directed to the exchange agent addressed as follows:
By Hand: Deutsche Bank Trust Company Americas c/o The Depository Trust Clearing Corporation 55 Water Street, 1st floor Jeanette Park Entrance New York, NY 10041 | By Mail: DB Services Tennessee, Inc. Reorganization Unit P.O. Box 292737 Nashville, TN 37229-2737 Attention: Shalini Kumar, Karl Shepherd | |
By Overnight Mail or Courier: DB Services Tennessee, Inc. Corporate Trust & Agency Services Reorganization Unit 648 Grassmere Park Road Nashville, TN 37211 Attention: Shalini Kumar, Karl Shepherd | By Facsimile: (615) 835-3701 (For Eligible Institutions Only) Confirm by Telephone: (615) 835-3572 | |
For information:
(800) 735-7777
If you deliver the letter of transmittal to an address other than as set forth above or transmit instructions via facsimile other than as set forth above, then such delivery or transmission does not constitute a valid delivery of such letter of transmittal. If you need additional copies of this prospectus or the letter of transmittal, and requests for copies ofplease contact the notice
of guaranteed delivery with respect to the outstanding notes should be addressed
to the exchangeinformation agent as follows:
DESCRIPTION OF THE NEW 5.0% NOTES
In this Description of Notes, "Roadway," "issuer," "we" and "our" refer
only to
Yellow Roadway Corporation and any successor obligor on the notes, and not to
any of our subsidiaries. You can find the definitions of certain terms used in
this description under " -- Certain Definitions." As used in this Description of
Notes, the terms "note" and "notes" refer to the exchange notes.
Roadway issued the outstanding notes and will issue the notesNew 5.0% Notes under an indenture by and among Yellow Roadway, thecertain subsidiary guarantors and SunTrustDeutsche Bank Trust Company Americas, as trustee. The following description is only a summary of the material provisions of the New 5.0% Notes and the related indenture. We urge you to read the indenture and the New 5.0% Notes in their entirety because they, and not this description, define your rights as holders of the New 5.0% Notes. You may request copies of these documents at our address shown under the caption “Where You Can Find More Information”. The terms of the notesNew 5.0% Notes will include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939.
1939, as amended. For purposes of this section, references to “we”, “us”, “our” and the “Company” include only Yellow Roadway Corporation and not its subsidiaries.
General
The following is a summary of the material provisions of the indenture.
Because this is a summary, it may not contain all the information that is
important to you. You should read the indenture in its entirety. Copies of the
proposed form of the indenture are available as described under "Available
Information."
BASIC TERMS OF NOTES
The notes:
- areNew 5.0% Notes will be our senior unsecured obligations, of Roadway;
- rankranking equal in right of payment with all of our existing and future senior obligations of Roadwayunsecured indebtedness and rank senior to any of our existing or future subordinated indebtedness. The New 5.0% Notes will be guaranteed by the majority of our domestic operating subsidiaries. The New 5.0% Notes will be effectively subordinated to all of our and our subsidiaries’ existing and future secured indebtedness to the extent of the assets securing such indebtedness and effectively will be subordinated debtto all liabilities of Roadway;
-our non-guarantor subsidiaries. As of September 30, 2004, (i) we and our subsidiary guarantors had approximately $7 million of secured indebtedness outstanding and (ii) our non-guarantor subsidiaries had approximately $278 million of outstanding indebtedness and other liabilities (excluding intercompany liabilities) to which the New 5.0% Notes effectively are issuedsubordinated.
We will issue up to $250,000,000 in an original aggregate principal amount of $225,000,000;
-New 5.0% Notes. The New 5.0% Notes will mature on December 1, 2008; and
- bear interest commencing the date of issueAugust 8, 2023, unless earlier redeemed at our option as described under “—Optional Redemption of the outstanding notesNew 5.0% Notes”, repurchased by us at 8 1/4%a holder’s option on certain dates as described under “—Repurchase of New 5.0% Notes at the Option of the Holder” or repurchased by us at a holder’s option upon a Repurchase Change in Control of the Company as described under “—Right to Require Purchase of New 5.0% Notes upon a Repurchase Change in Control”. The New 5.0% Notes are convertible into cash and shares, if any, of our common stock as described under “—Conversion Rights”.
In the indenture governing the New 5.0% Notes, we will agree and, by acceptance of a beneficial interest in a New 5.0% Note, each holder will be deemed to have agreed for U.S. federal income tax purposes: (i) to treat the New 5.0% Notes as indebtedness that is subject to the Treasury regulations governing contingent payment debt instruments; (ii) to be bound by our application of such Treasury regulations to the New 5.0% Notes (in the absence of an administrative determination or judicial ruling to the contrary); and (iii) to take the position that the exchange of the Existing 5.0% Notes for the New 5.0% Notes does not constitute a “significant modification” of the terms of the Existing 5.0% Notes.
Consistent with the position that the exchange of Existing 5.0% Notes for New 5.0% Notes does not constitute a “significant modification” of the terms of the Existing 5.0% Notes, such exchange will not be taxable for U.S. federal income tax purposes and the New 5.0% Notes will accrue interest for U.S. federal income tax purposes at 9.0%, payable semiannuallywhich is the comparable yield we determined for the Existing 5.0% Notes when they were issued. If, contrary to this position, the exchange of Existing 5.0% Notes for New 5.0% Notes does constitute a “significant modification” to the terms of the Existing 5.0% Notes, the U.S. federal income tax consequences to you could materially differ. See “Material U.S. Federal Income Tax Considerations—Consequences of the Exchange Offer” for more information.
The indenture will not contain any restriction on each June 1the payment of dividends, the incurrence of indebtedness or the repurchase of our securities and December 1, commencing
June 1, 2002,will not contain any financial covenants. Neither we nor our subsidiaries will be limited from incurring senior debt or additional debt under the indenture, including secured debt. If we incur
additional debt, our ability to pay our obligations on the New 5.0% Notes could be affected. We expect from time to time to incur additional debt, including secured debt, and other liabilities. Other than as described under “—Guarantees”, “—Right to Require Purchase of New 5.0% Notes upon a Repurchase Change in Control” and “—Adjustment to Conversion Rate upon Conversion Change in Control”, the indenture will contain no covenants or other provisions that afford protection to holders of New 5.0% Notes in the event of a highly leveraged transaction.
We are obligated to pay reasonable compensation to the trustee. We will indemnify the trustee against any losses, liabilities or expenses incurred by it in connection with its duties. These payments will be senior to the claims of the holders of the New 5.0% Notes.
Interest
We will pay interest on the New 5.0% Notes to holders of record on July 15 and January 15 of each year, whether or not such day is a business day, at an interest rate of 5.0% per annum payable semiannually in arrears on the May 15 or November 15
immediately precedingfollowing August 8 and February 8 of each year, commencing on February 8, 2005. Interest on the New 5.0% Notes will accrue from the last interest payment date.date on which interest was paid on the New 5.0% Notes, or, if no interest has been paid on the New 5.0% Notes, from the last interest payment date on which interest was paid on the Existing 5.0% Notes. Holders whose Existing 5.0% Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Existing 5.0% Notes. Interest payable upon redemption will be paid to the person to whom principal is payable. Interest on the New 5.0% Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months. The indenture does not contain any provisions that would limit our abilityWe will pay the principal of and interest (including contingent interest, if any) on, the New 5.0% Notes at the office or agency maintained by us in the Borough of Manhattan in New York City. Holders may register the transfer of their New 5.0% Notes at the same location. We reserve the right to incur indebtedness or require uspay interest to maintain financial ratios or specified
levels of net worth or liquidity, nor does it contain covenants or other
provisions designed to afford holders of the notes protectionNew 5.0% Notes by check mailed to the holders at their registered addresses. However, a holder of New 5.0% Notes with an aggregate principal amount in excess of $1,000,000 will be paid by wire transfer in immediately available funds. In general, we will not pay accrued interest on any New 5.0% Notes that are converted into cash and shares, if any, of our common stock. Except under the limited circumstances described below, the New 5.0% Notes will be issued only in fully registered book-entry form, without coupons, and will be represented by one or more global notes. The New 5.0% Notes shall be issued only in denominations of $1,000 of principal amount and any integral multiple of $1,000. There will be no service charge for any registration of transfer or exchange of New 5.0% Notes. We may, however, require holders to pay a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with any transfer or exchange.
Guarantees
The New 5.0% Notes will be guaranteed by the majority of our domestic operating subsidiaries. If, after the date of this prospectus, any debt securities of the Company (excluding bank credit facilities) have the benefit of guarantees (“other guarantees”) from any subsidiary of the Company that does not also guarantee the New 5.0% Notes, then (but only so long as such other guarantees continue in effect), the Company will cause such subsidiary to guarantee all obligations with respect to the New 5.0% Notes on a senior basis and otherwise on the same terms as such other guarantees. Any guarantees of such subsidiary so issued will be released or amended if (and to the full extent that) the other guarantees by such subsidiary are released or amended. In addition, in the event of a highly leveraged transaction, changesale of all or substantially all of the capital stock or assets of any guarantor, the guarantee of such guarantor will be released.
Contingent Interest
Beginning August 8, 2010, we will pay contingent interest during any six-month period beginning August 8 and ending February 7 or beginning February 8 and ending August 7 if the average trading price of the New 5.0% Notes per $1,000 principal amount for the five trading day period ending on the third trading day
immediately preceding the first day of the applicable six-month period equals $1,200 or more. The average trading price of the New 5.0% Notes shall be determined no later than the second trading day immediately preceding the first day of the applicable six-month period by the conversion agent acting as calculation agent in the manner set forth in the definition of “trading price” under “—Conversion Rights; Conversion Upon Satisfaction of Trading Price Condition”. During any period when contingent interest is payable, it will be payable at a rate equal to the greater of (i) 0.5% per annum of the principal amount of the New 5.0% Notes and (ii) 0.5% per annum of the average trading price of the New 5.0% Notes for the five trading day period immediately preceding such six-month period. We will pay contingent interest, if any, in the same manner as we will pay interest as described above under “—Interest”.
Conversion Rights
A holder may convert any outstanding New 5.0% Notes into cash and shares, if any, of our common stock at an initial conversion price per share of $39.24 upon the terms described in this section. The conversion price (and the conversion rate, as defined below under “—Conversion Upon Satisfaction of Trading Price Condition”) is, however, subject to adjustment as described below. A holder may convert New 5.0% Notes only in denominations of $1,000 and integral multiples of $1,000.
General
Holders may surrender New 5.0% Notes for conversion into cash and shares, if any, of our common stock prior to the maturity date in the following circumstances:
Conversion Upon Satisfaction of Market Price Condition
A holder may surrender any of its New 5.0% Notes for conversion into cash and shares, if any, of our common stock during any calendar quarter if the closing sale price of our common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the quarter preceding the quarter in which the conversion occurs exceeds 120% of the conversion price per share of our common stock on that 30th trading day. The conversion agent, which initially is the trustee, will determine on our behalf at the end of each quarter whether the New 5.0% Notes are convertible as a result of the market price of our common stock.
Conversion Upon Notice of Redemption
A holder may surrender for conversion any New 5.0% Note called for redemption at any time prior to the close of business on the day that is two business days prior to the redemption date, even if the New 5.0% Notes are not otherwise convertible at such time.
Conversion Upon Satisfaction of Trading Price Condition
A holder may surrender any of its New 5.0% Notes for conversion into cash and shares, if any, of our common stock during the five trading day period immediately following any ten consecutive trading day period in which the trading price per $1,000 principal amount of the New 5.0% Notes (as determined following a request by a holder of the New 5.0% Notes in accordance with the procedures described below) for each day of
such period was less than 95% of the product of the closing sale price per share of our common stock on that day multiplied by the conversion rate (initially 25.4842, subject to adjustment as described below).
The “trading price” of the New 5.0% Notes on any date of determination means the average of the secondary market bid quotations per $1,000 principal amount of New 5.0% Notes obtained by the conversion agent for $5,000,000 in principal amount of the New 5.0% Notes at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers we select, provided that if at least three such bids cannot reasonably be obtained by the conversion agent, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the conversion agent, this one bid shall be used. If the conversion agent cannot reasonably obtain at least one bid for $5,000,000 in principal amount of the New 5.0% Notes from a nationally recognized securities dealer or, in our reasonable judgment, the bid quotations are not indicative of the secondary market value of the New 5.0% Notes, then the trading price of the New 5.0% Notes will be determined in good faith by the conversion agent acting as calculation agent taking into account in such determination such factors as it, in its sole discretion after consultation with us, deems appropriate. Other than in connection with a determination of whether contingent interest shall be payable, the conversion agent shall have no obligation to determine the trading price of the New 5.0% Notes unless we have requested such determination; and we shall have no obligation to make such request unless a holder provides us with reasonable evidence that the trading price of the New 5.0% Notes was less than 95% of the product of the closing sale price per share of our common stock and the conversion rate; at which time, we shall instruct the conversion agent to determine the trading price of the New 5.0% Notes beginning on the next trading day and on each successive trading day until the trading price is greater than or equal to 95% of the product of the closing sale price of our common stock and the conversion rate.
Conversion Upon Credit Rating Event
A holder may surrender any of its New 5.0% Notes for conversion into cash and shares, if any, of our common stock during any period in which the credit ratings assigned to the New 5.0% Notes is lower than B2 by Moody’s or lower than B by Standard & Poor’s or the New 5.0% Notes are no longer rated by at least one of these rating services or their successors.
Conversion Upon Specified Corporate Transactions
If we elect to:
we must notify the holders of New 5.0% Notes at least 20 days prior to the ex-dividend date for such distribution. Once we have given such notice, holders may surrender their New 5.0% Notes for conversion until the earlier of the close of business on the business day prior to the ex-dividend date or our announcement that such distribution will not take place. This provision shall not apply if the holder of a New 5.0% Note otherwise participates in the distribution without conversion.
In addition, the indenture does will provide that upon conversion of the New 5.0% Notes, the holders of such New 5.0% Notes will receive, in addition to the cash and shares, if any, of our common stock issuable upon such conversion, the rights related to such common stock pursuant to any future shareholder rights plan, whether or
not containsuch rights have separated from the common stock at the time of such conversion. However, there shall not be any provisionsadjustment to the conversion privilege or conversion rate solely as a result of:
In addition, if we are a party to a consolidation, merger, share exchange, sale of all or substantially all of our assets or other similar transaction, in each case pursuant to which the shares of our common stock would be subject to conversion into cash, securities or other property (each, a “Conversion Change in Control”), a holder may surrender its New 5.0% Notes for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of such transaction until and including the date which is 15 days after the actual date of such transaction. If we are a party to a Conversion Change in Control, then at the effective time of such transaction, a holder’s right to convert its New 5.0% Notes into cash and shares, if any, of our common stock will be changed into a right to convert such New 5.0% Notes into the kind and amount of cash, securities and other property which such holder would have received if such holder had converted such New 5.0% Notes immediately prior to the transaction (taking into account any adjustments to the conversion rate, if applicable, as described under “—Adjustment to Conversion Rate Upon a Conversion Change in Control”). Solely for the purposes of calculating the “Daily Conversion Values” and “Daily Net Share Settlement Values” (defined below under “Payment”) upon a conversion in connection with a Conversion Change in Control, the “applicable market value” (defined below under “—Payment”) for the five trading days following the conversion date shall be deemed to equal the “stock price” (defined below under “Adjustment to Conversion Rate Upon a Conversion Change in Control”). If the transaction also constitutes a Repurchase Change in Control (as defined below under “—Right To Require Purchase of New 5.0% Notes upon a Repurchase Change in Control”), such holder can require us to repurchase all or redeema portion of its New 5.0% Notes as described under “—Right to Require Purchase of New 5.0% Notes upon a Repurchase Change in Control”.
If a holder of a New 5.0% Note has delivered notice of its election to have such New 5.0% Note repurchased at the option of such holder or otherwise modifyas a result of a Repurchase Change in Control, such New 5.0% Note may be converted only if the termsnotice of election is withdrawn as described, respectively, under “—Repurchase of New 5.0% Notes at the Option of the notesHolder” or “—Right to Require Purchase of New 5.0% Notes upon a changeRepurchase Change in control or other events that may adversely affect the
creditworthinessControl”.
Payment
Each $1,000 principal amount New 5.0% Note is convertible into cash and, if applicable, shares of our common stock based on an amount (the “New 5.0% Notes Daily Conversion Value”) calculated for each of the notes. However,five trading days immediately following the indenture:
(1) provides that, subjectconversion date. The New 5.0% Notes Daily Conversion Value for each such day is equal to significant exceptions, neither we nor anyone-fifth of the product of the then applicable conversion rate multiplied by the applicable market value of our subsidiaries may subject our or their property or assetscommon stock on that day.
For each $1,000 principal amount New 5.0% Note surrendered for conversion, we will deliver to any
mortgage or other encumbrance unlessyou for each of the notes are secured equallyfive trading days following the conversion date:
(1) if the New 5.0% Notes Daily Conversion Value for such day exceeds $200, (a) a cash payment of $200 and ratably with(b) the other indebtedness that is secured by that property or
those assets;
(2) contains limitations on our and our subsidiaries' ability to enter into
sale and leaseback arrangements; and
(3) contains limitations on our and our subsidiaries' ability to enter into
consolidations or mergers.
See " -- Certain Covenants."
The notes will rank equally with all existing and future senior debt of
Roadway and will rank senior to all subordinated debt of Roadway. Substantially
allremaining New 5.0% Notes Daily Conversion Value (the “New 5.0% Notes Daily Net Share Settlement Value”) in shares of our operations are conducted throughcommon stock; or
(2) if the New 5.0% Notes Daily Conversion Value for such day is less than or equal to $200, a cash payment equal to the New 5.0% Notes Daily Conversion Value.
The number of shares of our subsidiaries. Subsidiariescommon stock to be delivered under clause (1) above will be determined by dividing the New 5.0% Notes Daily Net Share Settlement Value by the applicable market value of our common stock for that are guarantors of any of Roadway's other debt obligationsday.
If a holder converts a $1,000 principal amount New 5.0% Note after the seventh trading day prior to the maturity date, the conversion date will guarantee payment
of amounts due underbe deemed to be the notes. All our material domestic subsidiaries, other
than Roadway Funding, Inc.,seventh trading day prior to the special purpose subsidiary newly formed for
purposesmaturity date. Upon such conversion, the holder will receive (i) the sum of the receivables securitization, are required to guarantee our
obligations under the Credit Agreement. These subsidiaries include Roadway
Express, Inc., Arnold Industries, Inc., New Penn Motor Express, Inc.5.0% Notes Daily Conversion Values in cash and Arnold
Transportation Services,
56
Inc. Each of these subsidiaries initially guarantee our obligations under the
outstanding notes and will initially guarantee our obligations under the
exchange notes. In addition, non-domestic subsidiaries are required to guarantee
our obligations under the Credit Agreement and the notes to the extent no
material tax liability would result from the guarantee. We do not expect any
non-domestic subsidiary to initially be a guarantor of the notes.
The notes will be effectively subordinated to all debt of Roadway secured
by assets of Roadway other than debt secured by the capital stock of our
first-tier domestic subsidiaries, including sale and leaseback transactions, to
the extent of the value of the assets securing that debt. The notes will also be
effectively subordinated to all debt of our subsidiaries secured by assets,
including sale and leaseback transactions, to the extent of the value of the
assets securing that debt. The notes will be effectively subordinated to all
debt of our non-guaranteeing subsidiaries. In the event of a default,
foreclosure or bankruptcy, such secured creditors would have priority and the
assets that serve as collateral would be available to satisfy their obligations
before any payments are made on the notes. As of September 8, 2001, the only
such debt is $5.5 million of debt of Reimer Express Lines Ltd. While the
indenture limits our ability to grant liens to secure debt, the limitations are
subject to significant exceptions. See "-- Certain Covenants -- Limitation on
Liens."
SUBSIDIARY GUARANTEES
Under the indenture, the due and punctual payment of the principal of,
premium,shares, if any, and interest on the notes, when and as the same become due and
payable, whether at maturity, upon redemption, upon declaration of acceleration
or otherwise, will be unconditionally guaranteed by each subsidiary that
guarantees any of Roadway's other debt obligations. Each of the guarantees is an
unsecured obligation of the guarantor providing such guarantee and will rank
equal in right of payment with the guarantee provided by such guarantor under
our other debt obligations, including the Credit Agreement. The indenture
requires Roadway to cause any other subsidiary that becomes a subsidiary
guarantor of any other debt of Roadway to enter into and deliver a guaranteecalculated with respect to the notes. This requirement extendsfive trading days following the seventh trading day prior to any subsidiarythe maturity date and (ii) accrued interest up to but excluding the maturity date; provided however that had
previously been a subsidiary guarantorif the applicable market value of our common stock on the seventh trading day prior to the maturity date exceeds the conversion price of the New 5.0% Note, the New 5.0% Notes Daily Conversion Value for each day of the five trading day period will be deemed not to be less than $200 with respect to such conversion. We will deliver to you the notes,cash and was
subsequently releasedthe sum of the number of shares determined by reference to such five trading days on the maturity date.
A holder may convert any outstanding New 5.0% Notes into shares of our common stock at an initial conversion price of $39.24 per share upon the terms described herein. This represents an initial conversion rate of approximately 25.4842 shares of our common stock per $1,000 principal amount of the New 5.0% Notes. The conversion price (and resulting conversion rate) is, however, subject to adjustment as described under “—Conversion Price Adjustments.” The terms “applicable market value” and “trading day” are defined as follows:
“applicable market value” of our common stock on a trading day means the volume-weighted average price per share of our common stock on such trading day. The volume-weighted average price means such price as displayed under the heading “Bloomberg VWAP” on Bloomberg (or any successor service) page YELL <equity> AQR (or any successor page) in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on that trading day; or, if such price is not available, the “applicable market value” means the market value per share of our common stock on that day as determined by a nationally recognized independent investment banking firm retained for this purpose by us.
“trading day” means a day on which our common stock (A) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and (B) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of our common stock.
We will not issue fractional shares of our common stock to a holder who converts a New 5.0% Note. With respect to the calculation of shares, a holder that would otherwise be entitled to a fractional share of our common stock will receive cash equal to such fraction multiplied by the applicable market value of our common stock on such trading day.
Our delivery to the holder of cash and, if any, shares of our common stock will be deemed:
As a result, accrued interest is deemed to be paid in full rather than cancelled, extinguished or forfeited.
If contingent interest is payable to holders of New 5.0% Notes during any particular six-month period, and such New 5.0% Notes are converted after the applicable record date and prior to the next succeeding interest payment date, holders of such New 5.0% Notes at the close of business on the record date will receive the contingent interest payable on such New 5.0% Notes on the corresponding interest payment date notwithstanding the conversion. Such New 5.0% Notes, upon surrender for conversion, must be accompanied by funds equal to the amount of contingent interest payable on the principal amount of New 5.0% Notes so converted, unless such New 5.0% Notes have been called for redemption, in which case no such payment shall be required. The conversion rate will not be adjusted for contingent interest.
Cash and any certificate for the number of full shares of our common stock into which any New 5.0% Notes are converted, together with any cash payment for fractional shares, will be delivered through the conversion agent as soon as practicable following the five trading day measurement period. For a discussion of the tax treatment of a holder receiving cash and shares, if any, of our common stock upon conversion, see “Material U.S. Federal Income Tax Considerations—Consequences to Exchanging U.S. Holder and Non-U.S. Holders—U.S. Holders—Sale, Conversion, Exchange, Redemption or Retirement of the New Notes”.
Holders may convert their New 5.0% Notes only in denominations of $1,000 principal amount and integral multiples thereof. The right of conversion attaching to any New 5.0% Note may be exercised (a) if such New 5.0% Note is represented by a global security, by book-entry transfer to the conversion agent (which will initially be the trustee) through the facilities of DTC, or (b) if such New 5.0% Note is represented by a certificated security, by delivery of such New 5.0% Note at the specified office of the conversion agent, accompanied, in either case, by a duly signed and completed notice of conversion and appropriate endorsements and transfer documents if required by the conversion agent. A holder surrendering a New 5.0% Note for conversion will be required to pay any taxes or duties payable in respect of the issue or delivery of our common stock upon conversion in a name other than that of the holder. In addition, if a holder surrenders New 5.0% Notes for conversion after a record date for an interest payment and prior to the corresponding interest payment date, the holder will be required to pay the interest payable on such New 5.0% Notes on such interest payment date, unless such New 5.0% Notes have been called for redemption, in which case no such payment shall be required. The conversion date shall be the business day on which the New 5.0% Note and all of the items required for conversion shall have been so delivered and the requirements for conversion have been met, if all requirements for conversion shall have been satisfied by 11:00 a.m. New York City time on such day, and, in all other cases, the conversion date shall be the next succeeding business day.
Conversion Price Adjustments
We will adjust the conversion price if (without duplication):
(1) we issue shares of our common stock or other capital stock as a guarantordividend or distribution on our common stock;
(2) we subdivide, combine or reclassify our common stock;
(3) we issue to all holders of our common stock rights, warrants or options entitling them to subscribe for or purchase shares of our common stock or securities convertible into shares of our common stock at a price per share less than the market price;
(4) we distribute to all holders of our common stock evidences of our indebtedness, shares of capital stock (other than shares of our common stock), securities, cash, other securities or assets, rights, warrants or options, excluding:
(5) we declare a dividend or distribution to all of the notes as described below. Allholders of our material domestic subsidiaries are required to guaranteecommon stock;
(6) we complete a repurchase (including by way of a tender offer) of shares of our obligations undercommon stock, and the Credit Agreement. These guarantor subsidiaries will initially include, among
others, Roadway Express, Inc., Arnold Industries, Inc., New Penn Motor Express,
Inc.fair market value of the sum of:
exceeds 5% of its obligations underour aggregate common stock market capitalization on the indenture and its guaranteedate of, the notes,
and such guarantee will terminate. The trustee will, at Roadway's expense,
execute and deliver such instruments as Roadway or such subsidiary guarantor may
reasonably request to evidence the termination of such guarantee.
The indenture provides that the obligations of each subsidiary guarantor
are limited to the maximum amount that would cause the obligations of such
subsidiary guarantor under its guarantee not to constitute a fraudulent
conveyance or fraudulent transfer under federal or state law, after giving
effect to all other contingent and fixed liabilities of such subsidiary
guarantor, including, without limitation, any guarantees under the Credit
Agreement, and after giving effect to, any collections fromsuch repurchase; or payments
(7) someone other than us or one of our subsidiaries makes a payment in respect of a tender offer or exchange offer in which, as of the closing date of the offer, our board of directors is not recommending rejection of the offer. The adjustment referred to in this clause will only be made if:
However, the adjustment referred to in this clause (7) will not be made if, as of the closing of the offer, the offering documents disclose a plan or an intention to cause us to engage in a consolidation or merger involving us or a sale of all or substantially all of our assets.
The conversion rate shall be determined by dividing $1,000 principal amount of the New 5.0% Notes by the conversion price, as adjusted.
For purposes of the foregoing, the term “common stock market capitalization” as of any date of calculation means the average closing sale price of our common stock on the ten trading days immediately prior to such date of calculation multiplied by the average aggregate number of shares of our common stock outstanding on the ten trading days immediately prior to such date of calculation.
To the extent that we adopt any future rights plan, upon conversion of the New 5.0% Notes into our common stock, you will receive, in addition to the cash and shares, if any, of our common stock issuable in connection therewith, the rights under the future rights plan whether or not the rights have separated from our common stock at the time of conversion and no adjustment to the conversion price will be made in accordance with clause (4) above.
The conversion price will not be adjusted until adjustments amount to 1% or more of the conversion price as last adjusted. We will carry forward any adjustment we do not make and will include it in any future adjustment.
Except as described in this paragraph and as described in “—Conversion Rights—Payment” with respect to conversions after the seventh trading day prior to maturity, no holder of New 5.0% Notes will be entitled, upon conversion of the New 5.0% Notes, to any actual payment or adjustment on account of accrued and unpaid interest, including contingent interest, if any, or on account of dividends on shares issued in connection with the conversion. If any holder surrenders a New 5.0% Note for conversion between the close of business on any record date for the payment of an installment of interest (including contingent interest, if any) and the opening of business on the related interest payment date, the holder must deliver payment to us of an amount equal to the interest payable on the interest payment date (including contingent interest, if any) on the principal amount to be converted together with the New 5.0% Note being surrendered. The foregoing sentence shall not apply to New 5.0% Notes called for redemption on a redemption date within the period between and including the record date and the interest payment date.
We may from time to time reduce the conversion price if our board of directors determines that this reduction would be in our best interests. Any such determination by our board of directors will be conclusive. Any such reduction in the conversion price must remain in effect for at least 20 trading days. In addition, we may from time to time reduce the conversion price if our board of directors deems it advisable to avoid or diminish any income tax to holders of our common stock resulting from any stock or rights distribution on our common stock.
Adjustment to Conversion Rate upon Conversion Change in Control
General
If and only to the extent you elect to convert your New 5.0% Notes in connection with a “Conversion Change in Control” as described above under “Conversion Rights—Conversion upon Specified Corporate Transactions”, on or after the effective date of such Conversion Change in Control pursuant to which 10% or more of the consideration for our common stock (other than cash payments for fractional shares and cash payments made in respect of dissenters’ appraisal rights) in such Conversion Change in Control consists of consideration other than common stock that is traded or scheduled to be traded immediately following such transaction on a U.S. national securities exchange or the obligationsNASDAQ National Market, we will increase the conversion rate for the New 5.0% Notes surrendered for conversion by a number of additional shares (the “additional shares”) as described below. The number of additional shares will be determined by reference to the table below, based on the date on which such Conversion Change in Control becomes effective (the “effective date”) and the price (the “stock price”) paid per share for our common stock in such Conversion Change in Control. If holders of our common stock receive only cash in such Conversion Change in Control, the stock price shall be the cash amount paid per share. Otherwise, the stock price shall be the average of the last reported sale prices of our common stock on the five trading days prior to but not including the effective date of such other subsidiary guarantorConversion Change in Control.
The stock prices set forth in the first column of the table below (i.e., row headers) will be adjusted as of any date on which the conversion price of the New 5.0% Notes is adjusted, as described above under its guarantee“—Conversion Price Adjustments”. The adjusted stock prices will equal the stock prices applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the conversion rate immediately prior to the adjustment giving rise to the stock price adjustment and the denominator of which is the conversion rate as so adjusted. The number of additional shares will be adjusted in the same manner as the conversion rate as set forth under “—Conversion Price Adjustments”.
The following table sets forth the hypothetical stock price, effective date and shares added to the conversion rate upon a Conversion Change in Control for each $1,000 principal amount of the New 5.0% Notes:
| 10/22/2004 | 08/08/2005 | 08/08/2006 | 08/08/2007 | 08/08/2008 | 08/08/2009 | 08/13/2010 | ||||||||
$ 15.00 | 41.1825 | 41.1825 | 41.1825 | 41.1825 | 41.1825 | 41.1825 | 41.1825 | |||||||
$ 20.00 | 27.8789 | 27.4783 | 26.9661 | 26.4070 | 25.7771 | 25.1647 | 24.4973 | |||||||
$ 25.00 | 19.4119 | 18.8160 | 18.0171 | 17.1244 | 16.1314 | 15.1744 | 14.5010 | |||||||
$ 30.00 | 14.3293 | 13.6397 | 12.6900 | 11.6049 | 10.3401 | 8.9346 | 7.8410 | |||||||
$ 35.00 | 11.0845 | 10.3685 | 9.3698 | 8.2139 | 6.8343 | 5.1533 | 3.0845 | |||||||
$ 40.00 | 8.9096 | 8.2059 | 7.2208 | 6.0795 | 4.7163 | 3.0201 | 0.0054 | |||||||
$ 45.00 | 7.3910 | 6.7199 | 5.7818 | 4.7026 | 3.4321 | 1.8928 | 0.0000 | |||||||
$ 50.00 | 6.2927 | 5.6628 | 4.7867 | 3.7897 | 2.6425 | 1.3181 | 0.0000 | |||||||
$ 55.00 | 5.4736 | 4.8877 | 4.0778 | 3.1658 | 2.1441 | 1.0228 | 0.0000 | |||||||
$ 60.00 | 4.8436 | 4.3000 | 3.5535 | 2.7265 | 1.8195 | 0.8615 | 0.0000 | |||||||
$ 65.00 | 4.3484 | 3.8443 | 3.1568 | 2.4031 | 1.5933 | 0.7646 | 0.0000 | |||||||
$ 70.00 | 3.9504 | 3.4828 | 2.8487 | 2.1593 | 1.4310 | 0.6957 | 0.0000 | |||||||
$ 90.00 | 2.9201 | 2.5634 | 2.0875 | 1.5823 | 1.0620 | 0.5337 | 0.0000 | |||||||
$110.00 | 2.3400 | 2.0541 | 1.6753 | 1.2760 | 0.8632 | 0.4364 | 0.0000 | |||||||
$130.00 | 1.9624 | 1.7240 | 1.4084 | 1.0751 | 0.7293 | 0.3693 | 0.0000 | |||||||
$150.00 | 1.6938 | 1.4890 | 1.2177 | 0.9307 | 0.6320 | 0.3200 | 0.0000 | |||||||
$170.00 | 1.4916 | 1.3118 | 1.0735 | 0.8209 | 0.5576 | 0.2824 | 0.0000 |
The exact stock price and effective dates may not be set forth on the table; in which case, if the stock price is:
Notwithstanding the foregoing, in no event will the total number of shares of our common stock issuable upon conversion pursuant to its
contribution obligationsa Conversion Change in Control exceed the conversion rate per $1,000 principal amount of the New 5.0% Notes, subject to adjustments in the same manner as the conversion rate as set forth under “—Conversion Price Adjustments” but not adjustments to the indenture.
SECURITY
Underconversion rate upon a Conversion Change in Control.
Conversion After a Public Acquirer Change in Control
Notwithstanding the indenture andforegoing, in the case of a pledge, security and intercreditor agreement madepublic acquirer change in control (as defined below), we may, in lieu of increasing the conversion rate by and among us, Credit Suisse First Boston,additional shares as collateral agent, Credit Suisse
First Boston, as administrative agent underdescribed in “—Adjustment to Conversion Rate upon a Conversion Change in Control—General” above, elect to adjust the new credit facilityconversion rate and the trustee,related conversion obligation such that from and after the noteseffective date of such public acquirer change in control, holders of the New 5.0% Notes will be secured by a lien equally and ratably with all debt
owing under the Credit Agreement. The liens granted under the pledge, security
and intercreditor
57
agreement will constitute first-priority perfected liens,entitled, subject to the exceptionsnet share settlement procedures described in “—Conversion Rights—Payment”, to convert their New 5.0% Notes into a number of shares of public acquirer common stock (as defined below) by multiplying the conversion rate in effect immediately before the public acquirer change in control by a fraction:
A “public acquirer change in control” means any event constituting a Conversion Change in Control that would otherwise obligate us to increase the conversion rate as described above under “—Adjustment to Conversion Rate upon Conversion Change in Control—General” and the acquirer has a class of common stock traded on a U.S. national securities exchange or quoted on the NASDAQ National Market or which will be so traded or quoted when issued or exchanged in connection with such fundamental change (the “public acquirer common stock”). If an acquirer does not itself have a class of common stock satisfying the foregoing requirement, it will be deemed to have “public acquirer common stock” if either (1) a direct or indirect majority owned subsidiary of acquirer or (2) a corporation that directly or indirectly owns at least a majority of the acquirer, has a class of common stock satisfying the foregoing requirement; in such case, all references to public acquirer common stock shall refer to such class of common stock. Majority owned for these purposes means having “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of all shares of the respective entity’s capital stock that are entitled to vote generally in the election of directors.
Upon a public acquirer change in control, if we so elect, holders may convert their New 5.0% Notes (subject to the satisfaction of the conditions to conversion described under “—Conversion Rights” above) at the adjusted conversion rate described in the second preceding paragraph but will not be entitled to the increased conversion rate described under “—Adjustment to Conversion Rate upon Conversion Change in Control—General”. We are required to notify holders of our direct subsidiaries, currently Roadway Express, Inc. and Arnold Industries, Inc.
The indentureelection in our notice to holders of such transaction. As described under “—Conversion Rights”, holders may convert their New 5.0% Notes upon a public acquirer change in control during the period specified therein. In addition, the holder can also, requires that note holders be grantedsubject to certain conditions, require us to repurchase all or a lien equally and
ratably with any other lien that may be grantedportion of its notes as described under “—Right to secure our or anyRequire Purchase of our
subsidiaries' obligations under the Credit Agreement.
Any or all liens for the benefitNew 5.0% Notes upon a Repurchase Change in Control”.
Optional Redemption of the note holders will be automatically
released withoutNew 5.0% Notes
Prior to August 13, 2010, we cannot redeem the consent of the holders upon a release of the corresponding
lien under the Credit Agreement.
The provisions of the covenant described below under "-- Certain
Covenants -- LimitationNew 5.0% Notes at our option. Beginning on Liens" will continue to apply irrespective of the
release of any or all liens under the pledge, security and intercreditor
agreement.
ADDITIONAL NOTES
The notes are initially being offered in the principal amount of
$225,000,000. We may, without the consent of the holders, increase such
principal amount in the future on the same terms and conditions and with the
same CUSIP number as the notes being offered hereby.
OPTIONAL REDEMPTION
WeAugust 13, 2010, we may redeem the notes as aNew 5.0% Notes, in whole at any time, or in part from time to time, at our option,for cash at a redemption price equal to the greater of (i) 100% of the principal amount of the notes or (ii) the sum of the present values of the
remaining scheduled payments of principalNew 5.0% Notes plus accrued and unpaid interest on the notes from the
redemption date(including contingent interest, if any) up to the maturity date of the notes being redeemed discounted, in
each case, to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points,
plus in either (i) or (ii), any interest accrued but not paid toincluding the date of redemption. "Treasury Rate" means, with respect to any redemption date for the notes,
(i) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after the maturity date for the notes being
redeemed, yields for the two published maturities most closely corresponding to
the Comparable Treasury Issue shall be determined and the Treasury Rate shall be
interpolated from such yields on a straight line basis, rounding to the nearest
month) or (ii) if such release (or any successor release) isWe will give not published
during the week preceding the calculation date or does not contain such yields,
the rate per year equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, expressed as a percentage of its principal amount,
calculated using a price for the Comparable Treasury Price for such redemption
date. The Treasury Rate shall be calculated by the Independent Investment Banker
on the third Business Day preceding the redemption date.
"Comparable Treasury Issue" mean the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the notes being redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the notes.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by Roadway.
"Comparable Treasury Price" means with respect to any redemption date for
the notes (i) the average of four Reference Treasury Dealer Quotations for such
redemption date, after excluding the
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highest and lowest such Reference Treasury Dealer Quotations, or (ii) if the
trustee obtains fewerless than four such Reference Treasury Dealer Quotations, the
average of all such quotations.
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation and any three of the other initial purchasers of the original notes
(each, a "Primary Treasury Dealer") appointed by Roadway; provided, however,
that if any of the foregoing shall cease to be a Primary Treasury Dealer,
Roadway shall substitute in its place another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
Notice of any redemption will be mailed by first-class mail at least 30 days but nodays’ nor more than 60 days beforedays’ notice of redemption by mail to holders of the redemption dateNew 5.0% Notes. If we opt to each holder of notes
to be redeemed. Ifredeem less than all of the notes are to be redeemed,New 5.0% Notes at any time, the trustee will select or cause to be selected the notesNew 5.0% Notes to be redeemed by such method ason a pro rata basis. In the event of a partial redemption, the trustee deems fair
and appropriate.
Unless Roadway defaults in its paymentmay provide for selection for redemption of portions of the redemption price,principal amount of any New 5.0% Note of a denomination larger than $1,000.
Repurchase of New 5.0% Notes at the Option of the Holder
A holder has the right to require us to repurchase all or a portion of the New 5.0% Notes held by the holder on August 8, 2010, 2013 and after2018. We will repurchase the redemption date interest will ceaseNew 5.0% Notes for an amount of cash equal to accrue100% of the principal amount of the New 5.0% Notes on the notes or portionsdate of purchase, plus accrued and unpaid interest (including contingent interest, if any) up to, but not including, the date of repurchase. To exercise the repurchase right, the holder of a New 5.0% Note must deliver, during the period beginning at any time from the opening of business on the date that is 20 business days prior to the repurchase date until the close of business on the business day before the repurchase date, a written notice to us and the trustee of such notes calledholder’s exercise of the repurchase right. This notice must be accompanied by certificates evidencing the New 5.0% Note or New 5.0% Notes with respect to which the right is being exercised, duly endorsed for redemption.
NO MANDATORY REDEMPTION OR SINKING FUND
There willtransfer. This notice of exercise may be nowithdrawn by the holder at any time on or before the close of business on the business day preceding the repurchase date.
Mandatory Redemption
Except as set forth under “—Right to Require Purchase of New 5.0% Notes upon a Repurchase Change in Control” and “—Repurchase of New 5.0% Notes at the Option of the Holder”, we are not required to make mandatory redemption of, or sinking fund payments forwith respect to, the notes.
CERTAIN COVENANTS
The indenture contains covenants including, among others,New 5.0% Notes.
Right to Require Purchase of New 5.0% Notes upon a Repurchase Change in Control
If a Repurchase Change in Control (as defined below) occurs, each holder of New 5.0% Notes may require that we repurchase the following:
LIMITATION ON LIENS
Roadway will not, nor will it permit any subsidiary to, incur, issue,
assume, guarantee or create any Secured Debt without effectively providing
concurrently with the incurrence, issuance, assumption, guarantee or creation of
the Secured Debt that the notes will be secured equally and ratably with, or
prior to, such Secured Debt unless, after giving effect thereto, the sum of:
- the aggregate amount of all outstanding Secured Debt of Roadway and its
subsidiaries; plus
- all Attributable Debt in respect of sale and leaseback transactions
relating to a Principal Property, other than Attributable Debt that is
excluded pursuant to clauses (1) to (4) described under "Limitation on
Sale and Leaseback Transactions" below,
would not exceed 15% of Roadway's Consolidated Net Tangible Assets.
This restriction will not apply to, and there will be excluded from Secured
Debt in any computation under this restriction, Debt secured by:
(1) Liens on property, shares of capital stock or debt of any person
existing at the time such person becomes a subsidiary; provided that
the Liens were not granted in contemplation of that person becoming a
subsidiary;
(2) Liens on property, shares of capital stock or debt existing at the time
of acquisition thereof by Roadway or any subsidiary; provided that the
Liens were not granted in contemplation of that acquisition;
(3) Liens on property, shares of capital stock or Debt to secure or provide
for the payment of all or any part of the purchase price thereof or the
cost of construction, alteration or improvement thereof; provided that
59
a) the amount secured does not exceed the purchase price or cost of
construction or improvement; and
b) the Lien is created at the time of, or within twelve months after
the acquisition or the completion of construction, alteration or
improvement of such property, whichever is later.
(4) Liens in favor of Roadway or any of its subsidiaries;
(5) Liens incurred or assumed in connection with the issuance of revenue
bonds the interest on which is exempt from Federal income taxation
pursuant to Section 103(b) of the Internal Revenue Code;
(6) Liens existingholder’s New 5.0% Notes on the date fixed by us that is not less than 45 days nor more than 60 days after we give notice of the indenture (other than Liens describedRepurchase Change in clause (4));
(7) Liens granted in connection withControl. We will repurchase the receivables securitization by
Roadway Express or Roadway Funding, the special purpose subsidiary of
Roadway newly-formedNew 5.0% Notes for purposes of the receivables securitization to
secure its obligations thereunder; or
(8) any extension, renewal, refunding or replacement of the foregoing
(other than Liens described in clause (4)); provided that the amount
secured by the Lien is not increased and the Lien does not extend to
any additional property or assets.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
Roadway will not, nor will it permit any subsidiary to, enter into any
arrangement with any person providing for the leasing by Roadway or any
subsidiary of any Principal Property of Roadway or any subsidiary, which
Principal Property has been or is to be sold or transferred by Roadway or such
subsidiary to such person (a "sale and leaseback transaction") unless:
(1) Roadway or a subsidiary would be entitled to create Debt secured by a
Lien on the Principal Property to be leased, in a principal amount
equal to the Attributable Debt with respect to such sale and leaseback
transaction under the covenant described under "-- Limitation on Liens"
above, without equally and ratably securing the notes pursuant to such
covenant;
(2) (a) the property leased pursuant to such arrangement is sold for a
price at least equal to such property's fair market value, as
determined by an executive officer of Roadway, and
(b) Roadway or a subsidiary, within 360 days after the sale or
transfer shall have been made by Roadway or a subsidiary, shall
apply an amount inof cash equal to the net proceeds100% of the sale or
transferprincipal amount of the Principal Property leased pursuantNew 5.0% Notes, plus accrued and unpaid interest, including contingent interest, if any, to such
arrangement to:
(i) the retirementdate of debtrepurchase.
“Repurchase Change in Control” means the occurrence of Roadwayone or more of the following events:
any subsidiary that is
ranked equally with the notes,sale, lease, exchange or other than debt owed to Roadwaytransfer (in one transaction or any subsidiary; provided, however,that no retirement
referred to in this clause (i) may be effected by payment at
maturity or pursuant to any mandatory sinking fund payment
provisiona series of debt; or
(ii) the purchase of additional Principal Property used or to be
used by Roadway or any of its subsidiaries;
(3) the sale and leaseback transaction is entered into between Roadway and
a subsidiary or between subsidiaries; or
(4) the applicable lease is for a period, including renewals, of not more
than three years.
60
LIMITATION ON MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS
Roadway shall not merge with, consolidate with or into, or sell, convey,
transfer, lease or otherwise disposerelated transactions) of all or substantially all of its property
andour assets to any person or permit group of related persons, as defined in Section 13 (d) of
the Securities Exchange Act of 1934, as amended (a “Group”) (whether or not otherwise in compliance with the provisions of the indenture); |
The definition of “Repurchase Change in Control” includes a phrase relating to mergethe sale, lease, transfer, conveyance or other disposition of “all or substantially all” of our assets. Although there is a developing body of case law interpreting the phrase “substantially all”, there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of New 5.0% Notes to require us to repurchase such New 5.0% Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of our assets to another person or Group may be uncertain.
“Continuing directors” means, as of any date of determination, any member of our board of directors who:
On or prior to the date of repurchase, we will deposit with a paying agent an amount of money sufficient to pay the aggregate repurchase price of the New 5.0% Notes which is to be paid on the date of repurchase.
On or before the 30th day after the Repurchase Change in Control, we must mail to the trustee and all holders of the New 5.0% Notes a notice of the occurrence of the Repurchase Change in Control, stating, among other things:
To exercise the repurchase right, the holder of a New 5.0% Note must deliver, on or before the third business day before the repurchase date, a written notice to us and the trustee of the holder’s exercise of the repurchase right. This notice must be accompanied by certificates evidencing the New 5.0% Note or New 5.0% Notes with respect to which the right is being exercised, duly endorsed for transfer. This notice of exercise may be withdrawn by the holder at any time on or before the close of business on the business day preceding the repurchase date.
The effect of these provisions granting the holders the right to require us to repurchase the New 5.0% Notes upon the occurrence of a Repurchase Change in Control may make it more difficult for any person or group to acquire control of us or to effect a business combination with us. Our ability to pay cash to holders of New 5.0% Notes following the occurrence of a Repurchase Change in Control may be limited by our then existing financial resources. We cannot assure you that sufficient funds will be available when necessary to make any required repurchases. See “Risk Factors—We may not be able to repurchase the New 5.0% Notes when required or make the required cash payments upon conversion of the Notes”.
Any obligation to repurchase a holder’s New 5.0% Notes if a Repurchase Change in Control occurs will be satisfied if a third party repurchases the holder’s New 5.0% Notes in the manner and at the times and otherwise in compliance in all material respects with the requirements applicable to a repurchase of the holder’s New 5.0% Notes made by us and purchases all New 5.0% Notes properly tendered and not withdrawn upon the exercise of repurchase rights.
If a Repurchase Change in Control occurs and the holders exercise their rights to require us to repurchase New 5.0% Notes, we intend to comply with applicable tender offer rules under the Exchange Act with respect to any repurchase.
The term “beneficial owner” will be determined in accordance with Rules 13d-3 and 13d-5 promulgated by the SEC under the Exchange Act or any successor provision, except that a person shall be deemed to have “beneficial ownership” of all shares of our common stock that the person has the right to acquire, whether exercisable immediately or only after the passage of time.
Consolidation, Merger and Sale of Assets
We may, without the consent of the holders of any of the New 5.0% Notes, consolidate with, or merge into, Roadway
unless:
(1) either
(a) Roadway shall be the continuingany other person or (b) (i)convey, transfer or lease our properties and assets substantially as an entirety to, any other person, if:
Under any consolidation, merger or any conveyance, transfer or lease of our properties and assets as described in the supplemental indenture
(if any) comply withpreceding paragraph, the indenture.
Upon the consummation of any transaction effected in accordance with these
provisions, if Roadway is not the continuing person, the resulting, surviving or
transferee personsuccessor company will be our successor and shall succeed to, and be substituted for, and may exercise every right and power of, Roadwaythe Company under the indenture withindenture. If the same effect as if
such successor person had been named as Roadwaypredecessor is still in existence after the indenture. Upon such
substitution unless the successor is one or more of Roadway's subsidiaries,
Roadwaytransaction, it will be released from its obligations and covenants under the indenture and the notes.
TheNew 5.0% Notes.
Modification and Waiver
We, the subsidiary guarantors and the trustee may enter into one or more supplemental indentures that add, change or eliminate provisions of the indenture does not restrict, or require Roadwaymodify the rights of the holders of the New 5.0% Notes with the consent of the holders of at least a majority in aggregate principal amount of the New 5.0% Notes then outstanding. However, without the consent of each holder of an outstanding New 5.0% Note, no supplemental indenture may, among other things:
The holders of a majority in principal amount of the outstanding New 5.0% Notes may, on behalf of the holders of all New 5.0% Notes:
Without the consent of any holders of New 5.0% Notes, we, the subsidiary guarantor
whose assets exceed 10% of our consolidated total assets (determined asguarantors and the trustee may enter into one or more supplemental indentures for any of the date of our most recent interimfollowing purposes:
Events of Default
Each of the following will beis an Event“event of Default underdefault”:
(1) a default in the indenture:
-payment of any interest (including contingent interest, if any) upon any of the New 5.0% Notes when due and payable and such default continues for a period of 30 days;
(2) a default in the payment of the principal of the New 5.0% Notes when due, including on a redemption or repurchase date;
(3) the failure to pay at final maturity (giving effect to any interest onapplicable grace periods and any note when due, continuedextensions thereof) the stated principal amount of any of our or our subsidiaries’ indebtedness, or the acceleration of
the final stated maturity of any such indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 20 days of receipt by us or such subsidiary of notice of any such acceleration) if the aggregate principal amount of such indebtedness, together with the principal amount of any other such indebtedness in default for 30 days;
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- failure to pay principal at final stated maturity or which has been accelerated (in each case with respect to which the 20-day period described above has elapsed), aggregates $20,000,000 or more at any time;
(4) failure by us or any of (or premium, ifour significant subsidiaries to pay final, non-appealable judgments (other than any on)judgment as to which a reputable insurance company has accepted full liability) aggregating in excess of $20,000,000, which judgments are not stayed, bonded or discharged within 60 days after their entry;
(5) a default by us in the performance, or breach, of any note when due;
-of our covenants in the indenture which are not remedied within 45 days;
(6) our failure to perform or complyissue common stock upon conversion of New 5.0% Notes by a holder in accordance with the provisions described under
"-- Subsidiary Guarantees,"set forth in the indenture;
(7) any guarantee by a significant subsidiary shall for any reason cease to be in full force and effect or be asserted by us or any such guarantor, as applicable, not to be in full force and effect (in each case, except pursuant to the extent they relate to the issuance of
guarantees by additional subsidiaries, and "-- Certain
Covenants -- Limitation on Merger, Consolidation and Disposition of
Assets";
- failure to perform any other covenant or warranty of Roadway in the
indenture, continued for 60 days after written notice as provided in the
indenture;
- failure to pay when due, subject to any applicable grace period, the
principal at Stated Maturity of, or acceleration prior to Stated Maturityrelease of any indebtedness for money borrowed by Roadwaysuch guarantee in accordance with the provisions of the indenture); or any subsidiary
having an aggregate principal amount outstanding of at least $10,000,000,
and such payment default shall not have been waived or such acceleration
shall not have been rescinded or such indebtedness shall not have been
discharged within 30 days following such payment default or acceleration;
and
- certain
(8) events of bankruptcy, insolvency or reorganization affecting
Roadwayinvolving us or any of our significant subsidiaries.
For purposes of items (4), (7) or (8) above, a “significant subsidiary” shall be, generally, a subsidiary guarantorthat accounts for more than 10% of Roadway.the Company and its consolidated subsidiaries’ assets or income for the most recently completed fiscal year.
If an event of default described above (other than an event of default specified in clause (8) above with respect to the Company) occurs and is continuing, either the trustee or the holders of at least 25% in principal amount of the outstanding New 5.0% Notes may declare the principal amount of and accrued and unpaid interest (including contingent interest, if any) on all New 5.0% Notes to be immediately due and payable. This declaration may be rescinded if the conditions described in the indenture are satisfied. If an event of default of the type referred to in clause (8) above with respect to the Company occurs, the principal amount of and accrued and unpaid interest (including contingent interest, if any) on the outstanding New 5.0% Notes will automatically become immediately due and payable.
Within 90 days following a default, the trustee must give to the registered holders of New 5.0% Notes notice of all uncured defaults known to it. The trustee will be protected in withholding the notice if it in good faith determines that the withholding of the notice is in the best interests of the registered holders, except in the case of a default in the payment of the principal of, or interest, including contingent interest, if any, on, any of the New 5.0% Notes when due or in the payment of any redemption or repurchase obligation.
The holders of not less than a majority in principal amount of the outstanding New 5.0% Notes may direct the time, method and place of conducting any proceedings for any remedy available to the trustee, or exercising any trust or power conferred on the trustee. Subject to the provisions of the indenture relating to the duties of the trustee, in caseif an event of default occurs and is continuing, the trustee will be under no obligation to exercise any of itsthe rights or powers under the indenture at the request or direction of any of the holders of the New 5.0% Notes unless suchthe holders have offered to the trustee reasonable indemnity reasonably satisfactoryor security against any loss, liability or expense. Except to it. Subject to
such provisions for the indemnification of the trustee, the holders of a
majority in aggregate principal amount of the outstanding notes will haveenforce the right to directreceive payment of principal, or interest, including contingent interest, if any, when due or the time, method and place of conducting anyright to convert a New 5.0% Note in accordance with the indenture, no holder may institute
a proceeding foror pursue any remedy availablewith respect to the trustee or exercising any trust or power conferred on
the trustee.
If an event of default occurs and is continuing, either the trusteeindenture or the New 5.0% Notes unless the conditions provided in the indenture have been satisfied, including:
We will beare required to furnishdeliver to the trustee annually a written statement
as to our performancecertificate indicating whether the officers signing the certificate know of some of our obligations containedany default by us in the indenture.
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AMENDMENT, MODIFICATION AND WAIVER
Modifications and amendmentsperformance or observance of any of the indenture may be made by Roadway, the
guarantors and the trustee with the consent of the holders of a majority in
aggregate principal amount of the outstanding notes, provided, however, that no
such modification or amendment may, without the consent of the holder of each
outstanding note affected by such modification or amendment:
- change the stated maturity of the principal of, or any installment of
interest on, any note;
- amend the provisions of the guarantees or the indenture relating to the
subsidiary guarantors in any way adverse to the interests of any holder,
other than to effect the release of a guarantor as described above under
"-- Subsidiary Guarantees";
- reduce the principal amount of, or the premium, if any, or interest on,
any note;
- change the place or currency of payment of principal of, or premium, if
any, or interest on, any note;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any note;
- reduce the above-stated percentage of the outstanding notes necessary to
modify or amend the indenture;
- reduce the percentage of the aggregate principal amount of outstanding
notes necessary for waiver of compliance with certain provisions of the
indenture or for waiver of certain defaults; or
- modify any provisions of the indenture relating to the modification and
amendment of the indenture or the waiver of past defaults or covenants,
except as otherwise specified.
The holders of a majority in aggregate principal amount of the outstanding
notes may waive compliance by Roadway with certain restrictive provisionsterms of the indenture. Subject toIf the preceding paragraph, the holdersofficers know of a majority in
aggregate principal amountdefault, the certificate must specify the status and nature of the outstanding notes may waive any past default
under the indenture, except a default in the payment of principal, or premium,
if any or interest.
Without the consent of any holder, we, the subsidiary guarantors and the
trustee may amend the indenture to:
- cure any ambiguity, defect or inconsistency;
- provide for the assumption by a successor of our or a subsidiary
guarantor's obligations under the indenture;
- reflect the release of any guarantor from its guarantee of the notes, or
the addition of any subsidiary as a guarantor, in the manner provided by
the indenture;
- reflect the release of any security from the notes, or the addition of
any security, in the manner provided by the indenture;
- add to our covenants for the benefit of the holders or surrender any
right or power conferred upon us or the subsidiary guarantors;
- make any change that does not adversely affect the rights of any holder;
or
- comply with any requirement of the Commission in connection with the
qualification of the indenture under the Trust Indenture Act of 1939.
DEFEASANCE AND DISCHARGE
all defaults.
Book-Entry System
The indenture provides that (a) if applicable, we and the guarantors will
be discharged from any and all obligations under the indenture or (b) if
applicable, we and the guarantors may omit to comply with certain restrictive
covenants, and that such omission will not be deemed to be an event of default
under
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the indenture, if in either case, we make an irrevocable deposit with the
trustee, in trust, of money and/or U.S. government obligations that will provide
money in an amount sufficient to pay the principal of, and premium, if any, and
each installment of interest, if any, on the notes. With respect to clause (b),
the obligations under the indenture other than with respect to such covenants
and the events of default, other than the event of default relating to such
covenants above, will remain in full force and effect.
The trust may only be established if, among other things:
- with respect to clause (a), we have received from, or there has been
published by, the Internal Revenue Service a ruling or there has been a
change in law, which in the opinion of counsel provides that holders of
the notes will not recognize gain or loss for federal income tax purposes
as a result of such deposit, defeasance and discharge and will be subject
to federal income tax on the same amount, in the same manner and at the
same times as would have been the case if such deposit, defeasance and
discharge had not occurred; or, with respect to clause (b), we have
delivered to the trustee such an opinion of counsel to the effect that
the holders of the notes will not recognize gain or loss for federal
income tax purposes as a result of such deposit and defeasance and will
be subject to federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and
defeasance had not occurred;
- no event of default, or event that with the passing of time or the giving
of notice, or both, will constitute an event of default shall have
occurred and be continuing;
- Roadway has delivered to the trustee an opinion of counsel to the effect
that such deposit shall not cause the trustee or the trust so created to
be subject to the Investment Company Act of 1940; and
- certain other customary conditions precedent are satisfied.
In the event Roadway is discharged by virtue of these defeasance provisions, the
subsidiary guarantors will also be discharged.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, STOCKHOLDERS AND
MEMBERS
None of our or our subsidiaries' directors, officers, employees,
incorporators, members or stockholders will have any liability for any
obligations under the notes, guarantees or the indenture or for any claim based
on, in respect of, or by reason of, such obligations. Each holder of notes by
accepting a note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the notes and guarantees. This
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that a waiver of liability under the
securities laws is against public policy.
BOOK-ENTRY, DELIVERY AND FORM
The notesNew 5.0% Notes will be issued in registered form, without interest coupons, in
denominations of $1,000 and integral multiples thereof, in the form of oneglobal notes held in book-entry form. DTC or more global notes.
The trusteeits nominee is not required (1) to issue, register the transfersole registered holder of or
exchange any notethe New 5.0% Notes for a periodall purposes under the indenture. Owners of 15 days before a selection of notes to be
redeemed, (2) to register the transfer of or exchange any note so selected for
redemption or purchase in whole or in part, except,beneficial interests in the case of a partial
redemption or purchase, that portion of any note not being redeemed or
purchased, or (3) if a redemption is to occur after a regular record date but on
or before the corresponding interest payment date, to register the transfer or
exchange of any note on or after the regular record date and before the date of
redemption. See " -- Global Note" and " -- Certificated Notes" for a description
of additional transfer restrictions applicable to the notes.
No service charge will be imposed in connection with any transfer or
exchange of any note, but Roadway may in general require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith.
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GLOBAL NOTE
The global notes will be deposited with a custodian for The Depository
Trust Company, or DTC, and registered in the name of a nominee of DTC.
Beneficial interests inNew 5.0% Notes represented by the global notes will hold their interests pursuant to the procedures and practices of DTC. As a result, beneficial interests in any such securities will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants,participants. Any such interests may not be exchanged for certificated securities, except in limited circumstances. Owners of beneficial interests must exercise any rights in respect of their interests, including Euroclearany right to convert or require repurchase of their interests in the New 5.0% Notes, in accordance with the procedures and Clearstream. So longpractices of DTC. Beneficial owners are not holders and are not entitled to any rights under the global notes or the indenture. We and the trustee, and any of our respective agents, may treat DTC as DTC or its nominee is the sole holder and registered owner or holder of the global notes, DTC or such nominee will be considered the sole owner or
holdernotes.
Exchange of the notesGlobal Notes
The New 5.0% Notes, represented by the global notes for all purposes under the
indenture and the notes. No owner of a beneficial interest in theone or more global notes, will be ableexchangeable for certificated notes with the same terms only if:
DTC has advised Roadway thatus as follows: DTC is a limited-purpose trust company created
to hold securitiesorganized under the New York Banking Law, a “banking organization” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” for its participating organizationsregistered participants, and to facilitateit facilitates the
clearance and settlement of transactions among its participants in those securities between
participants through electronic computerized book-entry changes in participants’ accounts, eliminating the need for physical movement of participants.
Thesecurities certificates. DTC’s participants include securities brokers and dealers, including agents, banks, trust companies, clearing corporations and certain other organizations.organizations, some of whom and/or their representatives own DTC. Access to DTC'sDTC’s book-entry system is also available to other entitiesothers, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the participants and indirect
participants.
CERTIFICATED NOTES
If (1) DTC notifies Roadway that it is unwilling or unable to continue as
depositary for the global note and a successor depositary is not appointed by
Roadway within 90 days of such notice, (2) an event of default has occurred and
the trustee has received a request from DTC, or (3) Roadway determines not to
have all of the notes represented by global notes, the trustee will exchange
each beneficial interest in the global note for one or more certificated notes
registered in the name of the owner of such beneficial interest, as identified
by DTC.
SAME DAY SETTLEMENT AND PAYMENT
The indenture requires that payments in respect of the notes represented by
the global notes be made by wire transfer of immediately available funds to the
accounts specified by holders of the global notes. With respect to notes in
certificated form, Roadway will make all payments of principal, premium, if any,
and interest by wire transfer of immediately available funds to the accounts
specified by the holders thereof or, if no such account is specified, by mailing
a check to each holder's registered address.
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The notes represented by the global notes are expected to be eligible to
trade in DTC's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in the notes will, therefore, be required by DTC to be
settled in immediately available funds. We expect that secondary trading in any
certificated notes will be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a global note from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day, which must be a business day for Euroclear and
Clearstream, immediately following the settlement date of DTC. DTC has advised
Roadway that cash received in Euroclear or Clearstream as a result of sales of
interests in a global note by or through a Euroclear or Clearstream participant
to a participant in DTC will be received with value on the settlement date of
DTC but will be available in the relevant Euroclear or Clearstream cash account
only as of the business day for Euroclear or Clearstream following DTC's
settlement date.
GOVERNING LAW
Governing Law
The indenture and the notes shallNew 5.0% Notes will be governed by and construed in accordance with the laws of the State of New York.
RELATIONSHIP WITHYork without regard to principles of conflict of laws.
Trustee
Deutsche Bank Trust Company Americas will act as trustee for the New 5.0% Notes. The trustee can be contacted at the address set forth below regarding transfer or conversion of the New 5.0% Notes.
Deutsche Bank Trust Company Americas
60 Wall Street, 27th Floor
New York, New York 10005
Attention: Corporate Trust and Agency Services
Facsimile No. (212) 797-8614
DESCRIPTION OF THE TRUSTEENEW 3.375% NOTES
Yellow Roadway maintains customary banking relationshipsCorporation will issue the New 3.375% Notes under an indenture by and among Yellow Roadway, certain subsidiary guarantors and Deutsche Bank Trust Company Americas, as trustee. The following description is only a summary of the material provisions of the New 3.375% Notes and the related indenture. We urge you to read the indenture and the New 3.375% Notes in their entirety because they, and not this description, define your rights as holders of the New 3.375% Notes. You may request copies of these documents at our address shown under the caption “Where You Can Find More Information”. The terms of the New 3.375% Notes will include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended. For purposes of this section, references to “we”, “us”, “our” and the “Company” include only Yellow Roadway Corporation and not its subsidiaries.
General
The New 3.375% Notes will be our senior unsecured obligations, ranking equal in right of payment with SunTrust Bank,all of our existing and future senior unsecured indebtedness and senior to any of our existing or future subordinated indebtedness. The New 3.375% Notes will be guaranteed by the majority of our domestic operating subsidiaries. The New 3.375% Notes will be effectively subordinated to all of our and our subsidiaries’ existing and future secured indebtedness to the extent of the assets securing such indebtedness and effectively will be subordinated to all liabilities of our non-guarantor subsidiaries. As of September 30, 2004, (i) we and our subsidiary guarantors had approximately $7 million of secured indebtedness outstanding and (ii) our non-guarantor subsidiaries had approximately $278 million of outstanding indebtedness and other liabilities (excluding intercompany liabilities) to which the New 3.375% Notes effectively are subordinated.
We will issue up to $150,000,000 in aggregate principal amount of New 3.375% Notes. The New 3.375% Notes will mature on November 25, 2023, unless earlier redeemed at our option as described under “—Optional Redemption of the New 3.375% Notes”, repurchased by us at a holder’s option on certain dates as described under “—Repurchase of New 3.375% Notes at the Option of the Holder” or repurchased by us at a holder’s option upon a Repurchase Change in Control of the Company as described under “—Right to Require Purchase of New 3.375% Notes upon a Repurchase Change in Control”. The New 3.375% Notes are convertible into cash and shares, if any, of our common stock as described under “—Conversion Rights”.
In the indenture governing the New 3.375% Notes, we will agree and, by acceptance of a beneficial interest in a New 3.375% Note, each holder will be deemed to have agreed for U.S. federal income tax purposes: (i) to treat the New 3.375% Notes as indebtedness that is subject to the Treasury regulations governing contingent payment debt instruments; (ii) to be bound by our application of such Treasury regulations to the New 3.375% Notes (in the absence of an administrative determination or judicial ruling to the contrary); and (iii) to take the position that the exchange of the Existing 3.375% Notes for the New 3.375% Notes does not constitute a “significant modification” of the terms of the Existing 3.375% Notes.
Consistent with the position that the exchange of Existing 3.375% Notes for New 3.375% Notes does not constitute a “significant modification” of the terms of the Existing 3.375% Notes, such exchange will not be taxable for U.S. federal income tax purposes and the New 3.375% Notes will accrue interest for U.S. federal income tax purposes at 8.1%, which is the comparable yield we determined for the Existing 3.375% Notes when they were issued. If, contrary to this position, the exchange of Existing 3.375% Notes for New 3.375% Notes does constitute a “significant modification” to the terms of the Existing 3.375% Notes, the U.S. federal income tax consequences to you could materially differ. See “Material U.S. Federal Income Tax Considerations—Consequences of the Exchange Offer” for more information.
The indenture will not contain any restriction on the payment of dividends, the incurrence of indebtedness or the repurchase of our securities and will not contain any financial covenants. Neither we nor our subsidiaries will be limited from incurring senior debt or additional debt under the indenture, including secured debt. If we incur additional debt, our ability to pay our obligations on the New 3.375% Notes could be affected. We expect from
time to time to incur additional debt, including secured debt, and other liabilities. Other than as described under “—Guarantees”, “—Right to Require Purchase of New 3.375% Notes upon a Repurchase Change in Control” and “—Adjustment to Conversion Rate upon Conversion Change in Control”, the indenture will contain no covenants or other provisions that afford protection to holders of New 3.375% Notes in the event of a highly leveraged transaction.
We are obligated to pay reasonable compensation to the trustee. TheWe will indemnify the trustee against any losses, liabilities or expenses incurred by it in connection with its duties. These payments will be senior to the claims of the holders of the New 3.375% Notes.
Interest
We will pay interest on the New 3.375% Notes to holders of record on November 1 and May 1 of each year, whether or not such day is a lenderbusiness day, at an interest rate of 3.375% per annum payable semiannually in arrears on the following November 25 and May 25 of each year, commencing on May 25, 2005. Interest on the New 3.375% Notes will accrue from the last interest payment date on which interest was paid on the New 3.375% Notes, or, if no interest has been paid on the New 3.375% Notes, from the last interest payment date on which interest was paid on the Existing 3.375% Notes. Holders whose Existing 3.375% Notes are accepted for exchange will be deemed to have waived the right to receive any interest accrued on the Existing 3.375% Notes. Interest payable upon redemption will be paid to the person to whom principal is payable. Interest on the New 3.375% Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months. We will pay the principal of and interest (including contingent interest, if any) on, the New 3.375% Notes at the office or agency maintained by us in the Borough of Manhattan in New York City. Holders may register the transfer of their New 3.375% Notes at the same location. We reserve the right to pay interest to holders of the New 3.375% Notes by check mailed to the holders at their registered addresses. However, a holder of New 3.375% Notes with an aggregate principal amount in excess of $1,000,000 will be paid by wire transfer in immediately available funds. In general, we will not pay accrued interest on any New 3.375% Notes that are converted into cash and shares, if any, of our common stock. Except under the new credit facility. An affiliatelimited circumstances described below, the New 3.375% Notes will be issued only in fully registered book-entry form, without coupons, and will be represented by one or more global notes. The New 3.375% Notes shall be issued only in denominations of the trustee was an initial purchaser$1,000 of the outstanding notes.
CERTAIN DEFINITIONS
"Attributable Debt" means,principal amount and any integral multiple of $1,000. There will be no service charge for any registration of transfer or exchange of New 3.375% Notes. We may, however, require holders to pay a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with any transfer or exchange.
Guarantees
The New 3.375% Notes will be guaranteed by the majority of our domestic operating subsidiaries. If, after the date of this prospectus, any debt securities of the Company (excluding bank credit facilities) have the benefit of guarantees (“other guarantees”) from any subsidiary of the Company that does not also guarantee the New 3.375% Notes, then (but only so long as such other guarantees continue in effect), the Company will cause such subsidiary to guarantee all obligations with respect to the New 3.375% Notes on a senior basis and otherwise on the same terms as such other guarantees. Any guarantees of such subsidiary so issued will be released or amended if (and to the full extent that) the other guarantees by such subsidiary are released or amended. In addition, in the event of a sale of all or substantially all of the capital stock or assets of any guarantor, the guarantee of such guarantor will be released.
Contingent Interest
Beginning November 30, 2012, we will pay contingent interest during any six-month period beginning November 30 and leaseback
transaction,ending May 29 or beginning May 30 and ending November 29 if the average trading price of the New 3.375% Notes per $1,000 principal amount for the five trading day period ending on the third trading day immediately preceding the first day of the applicable six-month period equals $1,200 or more. The average trading price of the New 3.375% Notes shall be determined no later than the second trading day immediately
preceding the first day of the applicable six-month period by the conversion agent acting as calculation agent in the manner set forth in the definition of “trading price” under “—Conversion Rights; Conversion Upon Satisfaction of Trading Price Condition”. During any period when contingent interest is payable, it will be payable at a rate equal to the greater of (i) 0.5% per annum of the principal amount of the New 3.375% Notes and (ii) 0.5% per annum of the average trading price of the New 3.375% Notes for the five trading day period immediately preceding such six-month period. We will pay contingent interest, if any, in the same manner as we will pay interest as described above under “—Interest”.
Conversion Rights
A holder may convert any outstanding New 3.375% Notes into cash and shares, if any, of our common stock at an initial conversion price per share of $46.00 upon the terms described in this section. The conversion price (and the conversion rate, as defined below under “—Conversion Upon Satisfaction of Trading Price Condition”) is, however, subject to adjustment as described below. A holder may convert New 3.375% Notes only in denominations of $1,000 and integral multiples of $1,000.
General
Holders may surrender New 3.375% Notes for conversion into cash and shares, if any, of our common stock prior to the maturity date in the following circumstances:
Conversion Upon Satisfaction of Market Price Condition
A holder may surrender any of its New 3.375% Notes for conversion into cash and shares, if any, of our common stock during any calendar quarter if the closing sale price of our common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the quarter preceding the quarter in which the conversion occurs exceeds 120% of the conversion price per share of our common stock on that 30th trading day. The conversion agent, which initially is the trustee, will determine on our behalf at the end of each quarter whether the New 3.375% Notes are convertible as a result of the market price of our common stock.
Conversion Upon Notice of Redemption
A holder may surrender for conversion any New 3.375% Note called for redemption at any time prior to the close of business on the day that is two business days prior to the redemption date, even if the New 3.375% Notes are not otherwise convertible at such time.
Conversion Upon Satisfaction of Trading Price Condition
A holder may surrender any of its New 3.375% Notes for conversion into cash and shares, if any, of our common stock during the five trading day period immediately following any ten consecutive trading day period in which the trading price per $1,000 principal amount of the New 3.375% Notes (as determined following a request by a holder of the New 3.375% Notes in accordance with the procedures described below) for each day of such period was less than 95% of the product of the closing sale price per share of our common stock on that day multiplied by the conversion rate (initially 21.7391, subject to adjustment as described above).
The “trading price” of the New 3.375% Notes on any date of determination means the average of the secondary market bid quotations per $1,000 principal amount of New 3.375% Notes obtained by the conversion
agent for $5,000,000 in principal amount of the New 3.375% Notes at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers we select, provided that if at least three such bids cannot reasonably be obtained by the conversion agent, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the conversion agent, this one bid shall be used. If the conversion agent cannot reasonably obtain at least one bid for $5,000,000 in principal amount of the New 3.375% Notes from a nationally recognized securities dealer or, in our reasonable judgment, the bid quotations are not indicative of the secondary market value of the New 3.375% Notes, then the trading price of the New 3.375% Notes will be determined in good faith by the conversion agent acting as calculation agent taking into account in such determination such factors as it, in its sole discretion after consultation with us, deems appropriate. Other than in connection with a determination of whether contingent interest shall be payable, the conversion agent shall have no obligation to determine the trading price of the New 3.375% Notes unless we have requested such determination; and we shall have no obligation to make such request unless a holder provides us with reasonable evidence that the trading price of the New 3.375% Notes was less than 95% of the product of the closing sale price per share of our common stock and the conversion rate; at which time, we shall instruct the conversion agent to determine the trading price of the New 3.375% Notes beginning on the next trading day and on each successive trading day until the trading price is greater than or equal to 95% of the product of the closing sale price of our common stock and the conversion rate.
Conversion Upon Credit Rating Event
A holder may surrender any of its New 3.375% Notes for conversion into cash and shares, if any, of our common stock during any period in which the credit ratings assigned to the New 3.375% Notes is lower than B2 by Moody’s or lower than B by Standard & Poor’s or the New 3.375% Notes are no longer rated by at least one of these rating services or their successors.
Conversion Upon Specified Corporate Transactions
If we elect to:
we must notify the holders of New 3.375% Notes at least 20 days prior to the ex-dividend date for such distribution. Once we have given such notice, holders may surrender their New 3.375% Notes for conversion until the earlier of the close of business on the business day prior to the ex-dividend date or our announcement that such distribution will not take place. This provision shall not apply if the holder of a New 3.375% Note otherwise participates in the distribution without conversion.
In addition, the indenture will provide that upon conversion of the New 3.375% Notes, the holders of such New 3.375% Notes will receive, in addition to the cash and shares, if any, of our common stock issuable upon such conversion, the rights related to such common stock pursuant to any future shareholder rights plan, whether or not such rights have separated from the common stock at the time of such conversion. However, there shall not be any adjustment to the conversion privilege or conversion rate solely as a result of:
In addition, if we are a party to a consolidation, merger, share exchange, sale of all or substantially all of our assets or other similar transaction, in each case pursuant to which the shares of our common stock would be subject to conversion into cash, securities or other property (each, a “Conversion Change in Control”), a holder may surrender its New 3.375% Notes for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of such transaction until and including the date which is 15 days after the actual date of such transaction. If we are a party to a Conversion Change in Control, then at the effective time of the transaction, a holder’s right to convert its New 3.375% Notes into cash and shares, if any, of our common stock will be changed into a right to convert such New 3.375% Notes into the kind and amount of cash, securities and other property which such holder would have received if such holder had converted such New 3.375% Notes immediately prior to the transaction (taking into account any adjustments to the conversion rate, if applicable, as described under “—Adjustment to Conversion Rate Upon Conversion Change in Control”). Solely for the purposes of calculating the “Daily Conversion Values” and “Daily Net Share Settlement Values” (defined below under “Payment”) upon a conversion in connection with a Conversion Change in Control, the “applicable market value” (defined below) for the five trading days following the conversion date shall be deemed to equal the “stock price” (defined below under “Adjustment to Conversion Rate Upon Conversion Change in Control”). If the transaction also constitutes a Repurchase Change in Control (as defined below), such holder can require us to repurchase all or a portion of its New 3.375% Notes as described under “—Right to Require Purchase of New 3.375% Notes upon a Repurchase Change in Control”.
If a holder of a New 3.375% Note has delivered notice of its election to have such New 3.375% Note repurchased at the option of such holder or as a result of a Repurchase Change in Control, such New 3.375% Note may be converted only if the notice of election is withdrawn as described, respectively, under “—Repurchase of New 3.375% Notes at the Option of the Holder” or “—Right to Require Purchase of New 3.375% Notes upon a Repurchase Change in Control”.
Payment
Each $1,000 principal amount New 3.375% Note is convertible into cash and, if applicable, shares of our common stock based on an amount (the “New 3.375% Notes Daily Conversion Value”) calculated for each of the five trading days immediately following the conversion date. The New 3.375% Notes Daily Conversion Value for each such day is equal to one-fifth of the product of the then applicable conversion rate multiplied by the applicable market value of our common stock on that day.
For each $1,000 principal amount New 3.375% Note surrendered for conversion, we will deliver to you for each of the five trading days following the conversion date:
(1) if the New 3.375% Notes Daily Conversion Value for such day exceeds $200, (a) a cash payment of $200 and (b) the remaining New 3.375% Notes Daily Conversion Value (the “New 3.375% Notes Daily Net Share Settlement Value”) in shares of our common stock; or
(2) if the New 3.375% Notes Daily Conversion Value for such day is less than or equal to $200, a cash payment equal to the New 3.375% Notes Daily Conversion Value.
The number of shares of our common stock to be delivered under clause (1) above will be determined by dividing the New 3.375% Notes Daily Net Share Settlement Value by the applicable market value of our common stock for that day.
If a holder converts a $1,000 principal amount New 3.375% Note after the seventh trading day prior to the maturity date, the conversion date will be deemed to be the seventh trading day prior to the maturity date. Upon such conversion, the holder will receive (i) the sum of the New 3.375% Notes Daily Conversion Values in cash and shares, if any, calculated with respect to the five trading days following the seventh trading day prior to the maturity date and (ii) accrued interest up to but excluding the maturity date; provided however that if the applicable market value of our common stock on the seventh trading day prior to the maturity date exceeds the conversion price of the New 3.375% Note, the New 3.375% Notes Daily Conversion Value for each day of the five trading day period will
be deemed not to be less than $200 with respect to such conversion. We will deliver to you the cash and the sum of the number of shares determined by reference to such five trading days on the maturity date.
A holder may convert any outstanding New 3.375% Notes into shares of our common stock at an initial conversion price of $46.00 per share upon the terms described herein. This represents an initial conversion rate of approximately 21.7391 shares of our common stock per $1,000 principal amount of the New 3.375% Notes. The conversion price (and resulting conversion rate) is, however, subject to adjustment as described under “—Conversion Price Adjustments.” The terms “applicable market value” and “trading day” are defined as follows:
“applicable market value” of our common stock on a trading day means the volume-weighted average price per share of our common stock on such trading day. The volume-weighted average price means such price as displayed under the heading “Bloomberg VWAP” on Bloomberg (or any successor service) page YELL <equity> AQR (or any successor page) in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on that trading day; or, if such price is not available, the “applicable market value” means the market value per share of our common stock on that day as determined by a nationally recognized independent investment banking firm retained for this purpose by us.
“trading day” means a day on which our common stock (A) is not suspended from trading on any national or regional securities exchange or association or over-the-counter market at the close of business and (B) has traded at least once on the national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of our common stock.
We will not issue fractional shares of our common stock to a holder who converts a New 3.375% Note. With respect to the calculation of shares, a holder that would otherwise be entitled to a fractional share of our common stock will receive cash equal to such fraction multiplied by the applicable market value of our common stock on such trading day.
Our delivery to the holder of cash and, if any, shares of our common stock will be deemed:
As a result, accrued interest is deemed to be paid in full rather than cancelled, extinguished or forfeited.
If contingent interest is payable to holders of New 3.375% Notes during any particular six-month period, and such New 3.375% Notes are converted after the applicable record date and prior to the next succeeding interest payment date, holders of such New 3.375% Notes at the close of business on the record date will receive the contingent interest payable on such New 3.375% Notes on the corresponding interest payment date notwithstanding the conversion. Such New 3.375% Notes, upon surrender for conversion, must be accompanied by funds equal to the amount of contingent interest payable on the principal amount of New 3.375% Notes so converted, unless such New 3.375% Notes have been called for redemption, in which case no such payment shall be required. The conversion rate will not be adjusted for contingent interest.
Cash and any certificate for the number of full shares of our common stock into which any New 3.375% Notes are converted, together with any cash payment for fractional shares, will be delivered through the conversion agent as soon as practicable following the five trading day measurement period. For a discussion of the tax treatment of a holder receiving cash and shares, if any, of our common stock upon conversion, see “Material U.S. Federal Income Tax Considerations—Consequences to Exchanging U.S. Holder and Non-U.S. Holders—U.S. Holders—Sale, Conversion, Exchange, Redemption or Retirement of the New Notes”.
Holders may convert their New 3.375% Notes only in denominations of $1,000 principal amount and integral multiples thereof. The right of conversion attaching to any New 3.375% Note may be exercised (a) if
such New 3.375% Note is represented by a global security, by book-entry transfer to the conversion agent (which will initially be the trustee) through the facilities of DTC, or (b) if such New 3.375% Note is represented by a certificated security, by delivery of such New 3.375% Note at the specified office of the conversion agent, accompanied, in either case, by a duly signed and completed notice of conversion and appropriate endorsements and transfer documents if required by the conversion agent. A holder surrendering a New 3.375% Note for conversion will be required to pay any taxes or duties payable in respect of the issue or delivery of our common stock upon conversion in a name other than that of the holder. In addition, if a holder surrenders New 3.375% Notes for conversion after a record date for an interest payment and prior to the corresponding interest payment date, the holder will be required to pay the interest payable on such New 3.375% Notes on such interest payment date, unless such New 3.375% Notes have been called for redemption, in which case no such payment shall be required The conversion date shall be the business day on which the New 3.375% Note and all of the items required for conversion shall have been so delivered and the requirements for conversion have been met, if all requirements for conversion shall have been satisfied by 11:00 a.m. New York City time on such day, and, in all other cases, the conversion date shall be the next succeeding business day.
Conversion Price Adjustments
We will adjust the conversion price if (without duplication):
(1) we issue shares of our common stock or other capital stock as a dividend or distribution on our common stock;
(2) we subdivide, combine or reclassify our common stock;
(3) we issue to all holders of our common stock rights, warrants or options entitling them to subscribe for or purchase shares of our common stock or securities convertible into shares of our common stock at a price per share less than the market price;
(4) we distribute to all holders of our common stock evidences of our indebtedness, shares of capital stock (other than shares of our common stock), securities, cash, other securities or assets, rights, warrants or options, excluding:
(5) we declare a dividend or distribution to all of the holders of our common stock;
(6) we complete a repurchase (including by way of a tender offer) of shares of our common stock, and the fair market value of the sum of:
exceeds 5% of our aggregate common stock market capitalization on the date of, and after giving effect to, such repurchase; or
(7) someone other than us or one of our subsidiaries makes a payment in respect of a tender offer or exchange offer in which, as of the closing date of the offer, our board of directors is not recommending rejection of the offer. The adjustment referred to in this clause will only be made if:
However, the adjustment referred to in this clause (7) will not be made if, as of the closing of the offer, the offering documents disclose a plan or an intention to cause us to engage in a consolidation or merger involving us or a sale of all or substantially all of our assets.
The conversion rate shall be determined by dividing $1,000 principal amount of the New 3.375% Notes by the conversion price, as adjusted.
For purposes of the foregoing, the term “common stock market capitalization” as of any date of calculation means the average closing sale price of our common stock on the ten trading days immediately prior to such date of calculation multiplied by the average aggregate number of shares of our common stock outstanding on the ten trading days immediately prior to such date of calculation.
To the extent that we adopt any future rights plan, upon conversion of the New 3.375% Notes into our common stock, you will receive, in addition to the cash and shares, if any, of our common stock issuable in connection therewith, the rights under the future rights plan whether or not the rights have separated from our common stock at the time of conversion and no adjustment to the conversion price will be made in accordance with clause (4) above.
The conversion price will not be adjusted until adjustments amount to 1% or more of the conversion price as last adjusted. We will carry forward any adjustment we do not make and will include it in any future adjustment.
Except as described in this paragraph and as described in “—Conversion Rights—Payment” with respect to conversions after the seventh trading day prior to maturity, no holder of New 3.375% Notes will be entitled, upon conversion of the New 3.375% Notes, to any actual payment or adjustment on account of accrued and unpaid interest, including contingent interest, if any, or on account of dividends on shares issued in connection with the conversion. If any holder surrenders a New 3.375% Note for conversion between the close of business on any record date for the payment of an installment of interest (including contingent interest, if any) and the opening of business on the related interest payment date, the holder must deliver payment to us of an amount equal to the interest payable on the interest payment date (including contingent interest, if any) on the principal amount to be converted together with the New 3.375% Note being surrendered. The foregoing sentence shall not apply to New 3.375% Notes called for redemption on a redemption date within the period between and including the record date and the interest payment date.
We may from time to time reduce the conversion price if our board of directors determines that this reduction would be in our best interests. Any such determination by our board of directors will be conclusive. Any such reduction in the conversion price must remain in effect for at least 20 trading days. In addition, we may from time to time reduce the conversion price if our board of directors deems it advisable to avoid or diminish any income tax to holders of our common stock resulting from any stock or rights distribution on our common stock.
Adjustment to Conversion Rate upon Conversion Change in Control
General
If and only to the extent you elect to convert your New 3.375% Notes in connection with a Conversion Change in Control as described above under “Conversion Rights—Conversion upon Specified Corporate Transactions” on or after the effective date of such Conversion Change in Control, pursuant to which 10% or
more of the consideration for our common stock (other than cash payments for fractional shares and cash payments made in respect of dissenters’ appraisal rights) in such Conversion Change in Control consists of consideration other than common stock that is traded or scheduled to be traded immediately following such transaction on a U.S. national securities exchange or the NASDAQ National Market, we will increase the conversion rate for the New 3.375% Notes surrendered for conversion by a number of additional shares (the “additional shares”) as described below. The number of additional shares will be determined by reference to the table below, based on the date on which such Conversion Change in Control becomes effective (the “effective date”) and the price (the “stock price”) paid per share for our common stock in such Conversion Change in Control. If holders of our common stock receive only cash in such Conversion Change in Control, the stock price shall be the cash amount paid per share. Otherwise, the stock price shall be the average of the last reported sale prices of our common stock on the five trading days prior to but not including the effective date of such Conversion Change in Control.
The stock prices set forth in the first column of the table below (i.e., row headers) will be adjusted as of any date on which the conversion price of the New 3.375% Notes is adjusted, as described above under “—Conversion Price Adjustments”. The adjusted stock prices will equal the stock prices applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the conversion rate immediately prior to the adjustment giving rise to the stock price adjustment and the denominator of which is the conversion rate as so adjusted. The number of additional shares will be adjusted in the same manner as the conversion rate as set forth under “—Conversion Price Adjustments”.
The following table sets forth the hypothetical stock price, effective date and shares added to the conversion rate upon a Conversion Change in Control for each $1,000 principal amount thereofof the New 3.375% Notes:
| 10/22/2004 | 11/25/2005 | 11/25/2006 | 11/25/2007 | 11/25/2008 | 11/25/2009 | 11/25/2010 | 11/25/2011 | 11/30/2012 | ||||||||||
| $ 25.00 | 18.2609 | 18.2609 | 18.2609 | 18.2609 | 18.2609 | 18.2609 | 18.2609 | 18.2609 | 18.2609 | |||||||||
| $ 30.00 | 13.4224 | 13.1881 | 12.9709 | 12.7570 | 12.5243 | 12.2410 | 11.8970 | 11.6055 | 11.5879 | |||||||||
| $ 35.00 | 10.4886 | 10.1506 | 9.8154 | 9.4555 | 9.0452 | 8.5503 | 7.9326 | 7.2360 | 6.8269 | |||||||||
| $ 40.00 | 8.4836 | 8.0921 | 7.6965 | 7.2606 | 6.7558 | 6.1437 | 5.3691 | 4.3816 | 3.2562 | |||||||||
| $ 45.00 | 7.0563 | 6.6434 | 6.2231 | 5.7553 | 5.2117 | 4.5545 | 3.7256 | 2.6319 | 0.4789 | |||||||||
| $ 50.00 | 6.0088 | 5.5912 | 5.1677 | 4.6949 | 4.1473 | 3.4913 | 2.6779 | 1.6239 | 0.0000 | |||||||||
| $ 55.00 | 5.2151 | 4.8046 | 4.3900 | 3.9279 | 3.3961 | 2.7678 | 2.0077 | 1.0694 | 0.0000 | |||||||||
| $ 60.00 | 4.5947 | 4.2022 | 3.8032 | 3.3600 | 2.8544 | 2.2660 | 1.5741 | 0.7673 | 0.0000 | |||||||||
| $ 65.00 | 4.1064 | 3.7319 | 3.3520 | 2.9302 | 2.4553 | 1.9109 | 1.2891 | 0.6022 | 0.0000 | |||||||||
| $ 70.00 | 3.7128 | 3.3544 | 2.9943 | 2.5987 | 2.1556 | 1.6540 | 1.0972 | 0.5092 | 0.0000 | |||||||||
| $ 90.00 | 2.6914 | 2.4029 | 2.1167 | 1.8077 | 1.4729 | 1.1114 | 0.7353 | 0.3618 | 0.0000 | |||||||||
| $110.00 | 2.1258 | 1.8903 | 1.6588 | 1.4125 | 1.1497 | 0.8707 | 0.5847 | 0.2945 | 0.0000 | |||||||||
| $130.00 | 1.7666 | 1.5690 | 1.3761 | 1.1718 | 0.9558 | 0.7277 | 0.4923 | 0.2491 | 0.0000 | |||||||||
| $150.00 | 1.5160 | 1.3464 | 1.1813 | 1.0069 | 0.8229 | 0.6281 | 0.4262 | 0.2159 | 0.0000 | |||||||||
| $170.00 | 1.3302 | 1.1817 | 1.0373 | 0.8850 | 0.7242 | 0.5536 | 0.3760 | 0.1905 | 0.0000 |
The exact stock price and effective dates may not be set forth on the table; in which case, if the stock price is:
Notwithstanding the foregoing, in no event will the total number of shares of our common stock issuable upon conversion pursuant to a Conversion Change in Control exceed the conversion rate per $1,000 principal amount of the New 3.375% Notes, subject to adjustments in the same manner as the conversion rate as set forth under “—Conversion Price Adjustments” but not adjustments to the conversion rate upon a Conversion Change in Control.
Conversion After a Public Acquirer Change in Control
Notwithstanding the foregoing, in the case of a public acquirer change in control (as defined below), we may, in lieu of increasing the conversion rate by additional shares as described in “—Adjustment to Conversion Rate upon a Conversion Change in Control—General” above, elect to adjust the conversion rate and the related conversion obligation such that from and after the effective date of such public acquirer change in control, holders of the New 3.375% Notes will be entitled, subject to the net share settlement procedures described in “—Conversion Rights—Payment”, to convert their New 3.375% Notes into a number of shares of public acquirer common stock (as defined below) by multiplying the conversion rate in effect immediately before the public acquirer change in control by a fraction:
A “public acquirer change in control” means any event constituting a Conversion Change in Control that would otherwise obligate us to increase the conversion rate as described above under “—Adjustment to Conversion Rate upon Conversion Change in Control—General” and the acquirer has a class of common stock traded on a U.S. national securities exchange or quoted on the NASDAQ National Market or which will be so traded or quoted when issued or exchanged in connection with such fundamental change (the “public acquirer common stock”). If an acquirer does not itself have a class of common stock satisfying the foregoing requirement, it will be deemed to have “public acquirer common stock” if either (1) a direct or indirect majority owned subsidiary of acquirer or (2) a corporation that directly or indirectly owns at least a majority of the acquirer, has a class of common stock satisfying the foregoing requirement; in such case, all references to public acquirer common stock shall refer to such class of common stock. Majority owned for these purposes means having “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of all shares of the respective entity’s capital stock that are entitled to vote generally in the election of directors.
Upon a public acquirer change in control, if we so elect, holders may convert their New 3.375% Notes (subject to the satisfaction of the conditions to conversion described under “—Conversion Rights” above) at the adjusted conversion rate described in the second preceding paragraph but will not be entitled to the increased conversion rate described under “—Adjustment to Conversion Rate upon a Conversion Change in Control—General”. We are required to notify holders of our election in our notice to holders of such transaction. As described under “—Conversion Rights”, holders may convert their New 3.375% Notes upon a public acquirer change in control during the period specified therein. In addition, the holder can also, subject to certain conditions, require us to repurchase all or a portion of its notes as described under “—Right to Require Purchase of New 3.375% Notes upon a Repurchase Change in Control”.
Optional Redemption of the New 3.375% Notes
Prior to November 30, 2012, we cannot redeem the New 3.375% Notes at our option. Beginning on November 30, 2012, we may redeem the New 3.375% Notes, in whole at any time, or in part from time to time, for cash at a price equal to 100% of the principal amount of the New 3.375% Notes plus accrued and unpaid interest (including contingent interest, if any) up to but not including the date of redemption. We will give not less than 30 days’ nor more than 60 days’ notice of redemption by mail to holders of the New 3.375% Notes. If we opt to redeem less than all of the New 3.375% Notes at any time, the trustee will select or cause to be selected the New 3.375% Notes to be redeemed on a pro rata basis. In the event of a partial redemption, the trustee may provide for selection for redemption of portions of the principal amount of any New 3.375% Note of a denomination larger than $1,000.
Repurchase of New 3.375% Notes at the Option of the Holder
A holder has the right to require us to repurchase all or a portion of the New 3.375% Notes held by the holder on November 25, 2012, 2015 and 2020. We will repurchase the New 3.375% Notes for an amount of cash equal to 100% of the principal amount of the New 3.375% Notes on the date of purchase, plus accrued and unpaid interest (including contingent interest, if any) up to, but not including, the date of repurchase. To exercise the repurchase right, the holder of a New 3.375% Note must deliver, during the period beginning at any time from the opening of business on the date that is 20 business days prior to the repurchase date until the close of business on the business day before the repurchase date, a written notice to us and the trustee of such holder’s exercise of the repurchase right. This notice must be accompanied by certificates evidencing the New 3.375% Note or New 3.375% Notes with respect to which the right is being exercised, duly endorsed for transfer. This notice of exercise may be withdrawn by the holder at any time on or before the close of business on the business day preceding the repurchase date.
Mandatory Redemption
Except as set forth under “—Right to Require Purchase of New 3.375% Notes upon a Repurchase Change in Control” and “—Repurchase of New 3.375% Notes at the Option of the Holder”, we are not required to make mandatory redemption of, or sinking fund payments with respect to, the New 3.375% Notes.
Right to Require Purchase of New 3.375% Notes upon a Repurchase Change in Control
If a Repurchase Change in Control (as defined below) occurs, each holder of New 3.375% Notes may require that we repurchase the holder’s New 3.375% Notes on the date fixed by us that is not less than 45 days nor more than 60 days after we give notice of the Repurchase Change in Control. We will repurchase the New 3.375% Notes for an amount of cash equal to 100% of the principal amount of the New 3.375% Notes, plus accrued and unpaid interest, including contingent interest, if any, to the date of repurchase.
“Repurchase Change in Control” means the occurrence of one or more of the following events:
The definition of “Repurchase Change in Control” includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of “all or substantially all” of our assets. Although there is a developing body of case law interpreting the phrase “substantially all”, there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of New 3.375% Notes to require us to repurchase such New 3.375% Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of our assets to another person or Group may be uncertain.
“Continuing directors” means, as of any date of determination, any member of our board of directors who:
On or prior to the date of repurchase, we will deposit with a paying agent an amount of money sufficient to pay the aggregate repurchase price of the New 3.375% Notes which is to be determined,paid on the total net obligationsdate of repurchase.
On or before the 30th day after the Repurchase Change in Control, we must mail to the trustee and all holders of the lessee for rental payments during the remaining
termNew 3.375% Notes a notice of the lease discounted fromoccurrence of the respective due dates thereofRepurchase Change in Control, stating, among other things:
To exercise the repurchase right, the holder of a New 3.375% Note must deliver, on or before the third business day before the repurchase date, a written notice to us and the trustee of the holder’s exercise of the repurchase right. This notice must be accompanied by certificates evidencing the New 3.375% Note or New 3.375% Notes with respect to which the right is being exercised, duly endorsed for transfer. This notice of exercise may be withdrawn by the holder at a rate per year equivalent toany time on or before the interest rateclose of business on the notes.
"Capital Lease Obligations" meansbusiness day preceding the repurchase date.
The effect of these provisions granting the holders the right to require us to repurchase the New 3.375% Notes upon the occurrence of a Repurchase Change in Control may make it more difficult for any person or group to acquire control of us or to effect a business combination with us. Our ability to pay cash to holders of New 3.375% Notes following the occurrence of a Repurchase Change in Control may be limited by our then existing financial resources. We cannot assure you that sufficient funds will be available when necessary to make any required repurchases. See “Risk Factors—We may not be able to repurchase the New 3.375% Notes when required or make the required cash payments upon conversion of the Notes”.
Any obligation to repurchase a holder’s New 3.375% Notes if a Repurchase Change in Control occurs will be satisfied if a third party repurchases the holder’s New 3.375% Notes in the manner and at the times and otherwise in compliance in all obligations requiredmaterial respects with the requirements applicable to be classifieda repurchase of the holder’s New 3.375% Notes made by us and accounted for aspurchases all New 3.375% Notes properly tendered and not withdrawn upon the exercise of repurchase rights.
If a capitalized lease under GAAP,Repurchase Change in Control occurs and the amount of Debt
represented by such obligationholders exercise their rights to require us to repurchase New 3.375% Notes, we intend to comply with applicable tender offer rules under the Exchange Act with respect to any repurchase.
The term “beneficial owner” will be the capitalized amount thereof determined in accordance with GAAP.
"Capital Stock" means, with respectRules 13d-3 and 13d-5 promulgated by the SEC under the Exchange Act or any successor provision, except that a person shall be deemed to any Person, any andhave “beneficial ownership” of all shares of our common stock that the person has the right to acquire, whether exercisable immediately or only after the passage of time.
Consolidation, Merger and Sale of Assets
We may, without the consent of the holders of any of the New 3.375% Notes, consolidate with, or merge into, any other person or convey, transfer or lease our properties and assets substantially as an entirety to, any other person, if:
Under any consolidation, merger or any conveyance, transfer or lease of Default.
"GAAP" means generally accepted accounting principlesour properties and assets as described in the United Statespreceding paragraph, the successor company will be our successor and shall succeed to, and be substituted for, and may exercise every right and power of, America from time to time.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt or other obligation of any other
Person; provided that the term "Guarantee" does not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor" means each subsidiary of Roadway that is a guarantorCompany under the Credit Agreement or any of Roadway's other debtindenture. If the predecessor is still in existence after the transaction, it will be released from its obligations that guarantees the
obligations of Roadwayand covenants under the indenture and the notes.
"Issue Date" meansNew 3.375% Notes.
Modification and Waiver
We, the firstsubsidiary guarantors and the trustee may enter into one or more supplemental indentures that add, change or eliminate provisions of the indenture or modify the rights of the holders of the New 3.375% Notes with the consent of the holders of at least a majority in aggregate principal amount of the New 3.375% Notes then outstanding. However, without the consent of each holder of an outstanding New 3.375% Note, no supplemental indenture may, among other things:
The holders of a majority in principal amount of the outstanding New 3.375% Notes may, on behalf of the holders of all obligations (whetherNew 3.375% Notes:
Without the consent of any holders of New 3.375% Notes, we, the subsidiary guarantors and the trustee may enter into one or more supplemental indentures for any of the following purposes:
Events of Default
Each of the following is an “event of default”:
(1) a default in the payment of any interest (including contingent interest, if any) upon any of the New 3.375% Notes when due and payable and such default continues for a period of 30 days;
(2) a default in the payment of the principal (whenof the New 3.375% Notes when due, upon acceleration,
uponincluding on a redemption upon mandatory repayment or repurchase pursuantdate;
(3) the failure to a mandatory
offerpay at final maturity (giving effect to purchase,any applicable grace periods and any extensions thereof) the stated principal amount of any of our or otherwise), premium, interest, penalties, fees,
indemnification, reimbursement andour subsidiaries’ indebtedness, or the acceleration of the final stated maturity of any such indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 20 days of receipt by us or such subsidiary of notice of any such acceleration) if the aggregate principal amount of such indebtedness, together with the principal amount of any other amounts payable and liabilitiessuch indebtedness in default for failure to pay principal at final stated maturity or which has been accelerated (in each case with respect to such Debt, including all interest accruedwhich the 20-day period described above has elapsed), aggregates $20,000,000 or accruingmore at any time;
(4) failure by us or any of our significant subsidiaries to pay final, non-appealable judgments (other than any judgment as to which a reputable insurance company has accepted full liability) aggregating in excess of $20,000,000, which judgments are not stayed, bonded or discharged within 60 days after their entry;
(5) a default by us in the commencementperformance, or breach, of any of our covenants in the indenture which are not remedied within 45 days;
(6) our failure to issue common stock upon conversion of New 3.375% Notes by a holder in accordance with the provisions set forth in the indenture;
(7) any guarantee by a significant subsidiary shall for any reason cease to be in full force and effect or be asserted by us or any such guarantor, as applicable, not to be in full force and effect (in each case, except pursuant to the release of any such guarantee in accordance with the provisions of the indenture); or
(8) events of bankruptcy, insolvency or reorganization involving us or similarany of our significant subsidiaries.
For purposes of items (4), (7) or (8) above, a “significant subsidiary” shall be, generally, a subsidiary that accounts for more than 10% of the Company and its consolidated subsidiaries’ assets or income for the most recently completed fiscal year.
If an event of default described above (other than an event of default specified in clause (8) above with respect to the Company) occurs and is continuing, either the trustee or the holders of at least 25% in principal amount of the outstanding New 3.375% Notes may declare the principal amount of and accrued and unpaid interest (including contingent interest, if any) on all New 3.375% Notes to be immediately due and payable. This declaration may be rescinded if the conditions described in the indenture are satisfied. If an event of default of the type referred to in clause (8) above with respect to the Company occurs, the principal amount of and accrued and unpaid interest (including contingent interest, if any) on the outstanding New 3.375% Notes will automatically become immediately due and payable.
Within 90 days following a default, the trustee must give to the registered holders of New 3.375% Notes notice of all uncured defaults known to it. The trustee will be protected in withholding the notice if it in good faith determines that the withholding of the notice is in the best interests of the registered holders, except in the case of a default in the payment of the principal of, or proceedinginterest, including contingent interest, if any, on, any of the New 3.375% Notes when due or in the payment of any redemption or repurchase obligation.
The holders of not less than a majority in principal amount of the outstanding New 3.375% Notes may direct the time, method and place of conducting any proceedings for any remedy available to the trustee, or exercising any trust or power conferred on the trustee. Subject to the provisions of the indenture relating to the duties of the trustee, if an event of default occurs and is continuing, the trustee will be under no obligation to exercise any of the rights or powers under the indenture at the contract rate (including, without limitation,request or direction of any contract
rate applicable upon default) specifiedof the holders of the New 3.375% Notes unless the holders have offered to the trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, or interest, including contingent interest, if any, when due or the right to convert a New 3.375% Note in accordance with the indenture, no holder may institute a proceeding or pursue any remedy with respect to the indenture or the New 3.375% Notes unless the conditions provided in the relevant documentation,indenture have been satisfied, including:
We are required to deliver to the trustee annually a certificate indicating whether the officers signing the certificate know of any default by us in the performance or observance of any of the terms of the indenture. If the officers know of a default, the certificate must specify the status and nature of all defaults.
Book-Entry System
The New 3.375% Notes will be issued in the form of global notes held in book-entry form. DTC or its nominee is the sole registered holder of the New 3.375% Notes for all purposes under the indenture. Owners of beneficial interests in the New 3.375% Notes represented by the global notes will hold their interests pursuant to
the procedures and practices of DTC. As a result, beneficial interests in any such securities will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants. Any such interests may not be exchanged for certificated securities, except in limited circumstances. Owners of beneficial interests must exercise any rights in respect of their interests, including any right to convert or require repurchase of their interests in the New 3.375% Notes, in accordance with the procedures and practices of DTC. Beneficial owners are not holders and are not entitled to any rights under the global notes or the indenture. We and the trustee, and any of our respective agents, may treat DTC as the sole holder and registered owner of the global notes.
Exchange of Global Notes
The New 3.375% Notes, represented by one or more global notes, will be exchangeable for certificated notes with the same terms only if:
DTC has advised us as follows: DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” for registered participants, and it facilitates the settlement of transactions among its participants in securities through electronic computerized book-entry changes in participants’ accounts, eliminating the need for physical movement of securities certificates. DTC’s participants include securities brokers and dealers, including agents, banks, trust companies, clearing corporations and other organizations, some of whom and/or their representatives own DTC. Access to DTC’s book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly.
Governing Law
The indenture and the New 3.375% Notes will be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflict of laws.
Trustee
Deutsche Bank Trust Company Americas will act as trustee for the New 3.375% Notes. The trustee can be contacted at the address set forth below regarding transfer or conversion of the New 3.375% Notes.
Deutsche Bank Trust Company Americas
60 Wall Street, 27th Floor
New York, New York 10005
Attention: Corporate Trust and Agency Services
Facsimile No. (212) 797-8614
This summary of the material features and rights of our capital stock does not purport to be exhaustive and is qualified in its entirety by reference to applicable Delaware law and our certificate of incorporation and by-laws. See “Where You Can Find More Information”.
Common Stock
Our certificate of incorporation authorizes the issuance of up to 120,000,000 common shares, par value $1.00 per share. As of September 30, 2004, there were 50,541,825 common shares issued, which included 48,397,724 outstanding shares and 2,144,101 treasury shares. Holders of our common shares are entitled to one vote per share with respect to each matter presented to our stockholders on which the holders of common shares are entitled to vote. Subject to the preferences applicable to any outstanding preferred stock, the holders of common shares are entitled to receive ratably any dividends declared by our board of directors out of funds legally available for that purpose. In the event of liquidation, holders of common shares will be entitled to receive any assets remaining after the payment of our debts and the expenses of the liquidation, subject to such preferences applicable to any outstanding preferred stock. The holders of our common shares have no pre-emptive, subscription or conversion rights. All issued and outstanding shares of common stock are validly issued, fully paid and nonassessable.
Preferred Stock
Our certificate of incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock, par value $1.00 per share. As of September 30, 2004, no shares of preferred stock were issued and outstanding. Our board of directors has the authority, without action by our stockholders, to designate and issue preferred stock in one or more series and to designate the rights, preferences and privileges of each series, which may be greater than the rights of our common shares. The issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of our company without further action by our stockholders and may adversely affect the market price, and the voting and other rights, of the holders of our common shares. The issuance of preferred stock with voting and conversion rights may adversely affect the voting power of the holders of common shares, including the loss of voting rights to others.
Delaware Anti-Takeover Law
We are a Delaware corporation subject to Section 203 of the Delaware General Corporation Law. Under Section 203, certain “business combinations” between a Delaware corporation and an “interested stockholder” are prohibited for a three-year period following the date that such stockholder became an interested stockholder, unless:
The three-year prohibition also does not apply to some business combinations proposed by an interested stockholder following the announcement or indirectly, by,notification of an extraordinary transaction involving the corporation and a person who had not been an interested stockholder during the previous three years or inwho became an interested stockholder with the caseapproval of a partnership,majority of the sole
general partnercorporation’s directors.
Under the Delaware General Corporation Law, the term “business combination” is defined generally to include mergers or consolidations between a Delaware corporation and an interested stockholder, transactions with an interested stockholder involving the managing partnerassets or stock of the only general partnerscorporation or its majority-owned subsidiaries, and transactions that increase an interested stockholder’s percentage ownership of which
are, such Person and onestock. The term “interested stockholder” is defined generally as those stockholders who become beneficial owners of 15% or more subsidiaries of such Person (or a combination
thereof). Unless otherwise specified, "subsidiary" means a subsidiaryDelaware corporation’s voting stock, together with the affiliates or associates of Roadway.
"U.S. Government Obligations" means obligations issued or directlythat stockholder.
Anti-Takeover Effects of Our Certificate of Incorporation and fully guaranteed or insured by the United StatesBylaws
In addition, our certificate of America or by any agent or
instrumentality thereof, providedincorporation provides that the full faith and creditcertain “business combinations” require an affirmative vote of holders of at least 80% of the United
Statesvoting power of America is pledged in support thereof.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the powerthen outstanding capital stock entitled to vote forgenerally in the election of directors.
Our certificate of incorporation also contains restrictions on such business combinations by requiring the approval of a majority of continuing directors, managers or other voting membersas well as by requiring that certain fair price provisions be satisfied. Continuing directors are directors (a) serving as directors prior to June 1, 1983, (b) serving as directors before the substantial stockholder acquired 10% of the governing bodythen outstanding voting shares or (c) designated as continuing directors by a majority of the then continuing directors prior to the directors’ election. Fair price provisions in our certificate of incorporation mandate that the amount of cash and the fair market value of other consideration to be received per share by holders of common stock not fall below certain ratios.
The term “business combination” is defined in our certificate of incorporation generally to include any merger or consolidation of our company or any subsidiary with or into any substantial stockholder or any other corporation, whether or not itself a substantial stockholder which, after such merger or consolidation, would be an affiliate of a substantial stockholder, transactions with a substantial stockholder involving assets or stock of our company or any majority-owned subsidiary with an aggregate fair market value of $5,000,000 or more, and transactions that increase a substantial stockholder’s percentage ownership of our capital stock. A “substantial stockholder” is defined generally as any person who is or becomes the beneficial owner of not less than 10% of the voting shares, together with any affiliate of such Person.
69
SPECIFICstockholder. An “affiliate” has the meaning set forth in the rules under the Securities Exchange Act of 1934, as amended.
Our certificate of incorporation also provides that stockholders may act only at an annual or special meeting of stockholders and not by written consent. Our bylaws provide that special meetings of the stockholders can be called only by the Chairman of the Board, the Chief Executive Officer or a majority of our board of directors. These provisions could have the effect of delaying until the next annual stockholders meeting stockholder actions that are favored by the holders of a majority of the outstanding voting securities. These provisions may also discourage another person or entity from making an offer to stockholders for the common stock. This is because the person or entity making the offer, even if it acquired a majority of our outstanding voting securities, would be unable to call a special meeting of the stockholders and would be unable to obtain unanimous written consent of the stockholders. As a result, any meeting as to matters they endorse, including the election of new directors or the appraisal of a merger, would have to wait for the next duly called stockholders meeting.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
TOCONSIDERATIONS
The following is a summary of certain U.S. AND NON-U.S. HOLDERSfederal income tax considerations relating to the exchange offers and the ownership and disposition of the New Notes and common stock into which the New Notes are convertible, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This section describessummary is based upon the principal United Statesprovisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly with retroactive effect, so as to result in U.S. federal income tax consequences different from those set forth below. We have not sought any ruling from the Internal Revenue Service (“IRS”) with respect to U.S. Holdersthe statements made and Non-U.S. Holders (both terms as defined below)
that acquire notesthe conclusions reached in the initial offering atfollowing summary, and there can be no assurance that the offering priceIRS will agree with such statements and conclusions.
This summary is limited to holders who receive the New Notes in exchange for Existing Notes pursuant to the exchange offers or, with respect to the discussion under “Consequences of the Exchange Offers—Non-Exchanging Holders,” holders who do not exchange their Existing Notes pursuant to the exchange offer, and, in each case, who hold the notesNew Notes and the common stock into which the New Notes are convertible as capital assets for United States federal income tax purposes. Not allwithin the meaning of the Code. This summary also does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction. In addition, this summary does not address tax considerations applicable to a holder’s particular circumstances or to a holder that may be subject to special tax rules, discussed in this section will apply to you if you are a member of
a class of including, without limitation:
If a holder is an entity treated as a partnership for U.S. federal income tax purposes, the tax treatment of each partner of such partnership generally will depend upon the status of the partner and court decisions, all as currentlyupon the activities of the partnership. A partner in effect.
These laws are subject to change, possibly on a retroactive basis.
This discussion is for general information and does not address any tax
consequences arising under the laws of any state, localpartnership that holds Existing Notes, New Notes or foreign taxing
jurisdiction. Prospective U.S. Holders and Non-U.S. Holderscommon stock should consult theirits tax advisors as to the particular consequences to themadvisors.
For purposes of acquiring, holding or
disposing of the notes.
NON-U.S. HOLDERS
As used in this offering circular, the term "Non-U.S. Holder"summary, a “U.S. holder” means a beneficial owner of Existing Notes or New Notes that is:
A non-U.S. holder is a beneficial owner of Existing Notes or New Notes that is neither a U.S. holder nor an entity treated as a partnership for U.S. federal income tax treatmentpurposes.
EACH HOLDER IS URGED TO CONSULT ITS TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO ITS PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES OF THE EXCHANGE OFFERS AND THE OWNERSHIP AND DISPOSITION OF THE NEW NOTES AND THE COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
Consequences of the Exchange Offers
Exchanging Holders
Characterization of the exchange.Generally, the modification of a partner in such a partnership will generally
depend on the statusdebt instrument, whether effected pursuant to an amendment of the partnerterms of a debt instrument or an actual exchange of an existing debt instrument for a new debt instrument, will be treated as an exchange of the existing debt instrument for a new debt instrument for tax purposes if there is deemed to be a “significant modification” of the terms of the existing debt instrument as determined for U.S. federal income tax purposes. It is not entirely clear whether the exchange of the Existing Notes for the New Notes will be treated as a significant modification of the terms of the Existing Notes for U.S. federal income tax purposes. The exchange will be a significant modification of the terms of the Existing Notes if, based on all facts and circumstances, the legal rights or obligations that are altered and the activitiesdegree to which they are altered are economically significant. We will take the position that the exchange of Existing Notes for New Notes will not constitute an exchange for U.S. federal income tax purposes because we believe that the differences between the terms of the partnership.
PartnersExisting Notes and the New Notes are not economically significant and, as a result, do not constitute a significant modification of the terms of the Existing Notes. By participating in such a partnership should consult their tax advisors asthe exchange offer, each holder will be deemed to have agreed pursuant to the particular United Statesindentures governing the New Notes to treat the exchange as not constituting a significant modification of the terms of the Existing Notes. There can be no assurance, however, that the IRS will agree that the exchange of Existing Notes for New Notes does not constitute a significant modification of the terms of the Existing Notes.
Treatment if exchange does not constitute a significant modification. If consistent with our position that the exchange of Existing Notes for New Notes does not constitute a significant modification of the terms of the Existing Notes, there will be no U.S. federal income tax consequences to a holder who exchanges Existing Notes for New Notes, and each holder will have the same tax basis and holding period in the New Notes as such holder had in the Existing Notes immediately prior to the exchange.
Treatment if exchange constitutes a significant modification. If, contrary to our position, the exchange of the Existing Notes for New Notes were treated as a significant modification of the terms of the Existing Notes, the results for holders are not entirely clear. The exchange might be treated as a recapitalization for U.S. federal income tax purposes, in which case holders would not recognize any gain or loss as a result of the exchange, and would have the same tax basis and holding period in the New Notes as such holder had in the Existing Notes prior to the exchange. Whether the exchange would constitute a recapitalization would depend, in part, on whether the Existing Notes and the New Notes were treated as “securities” for U.S. federal income tax purposes.If either the Existing Notes or the New Notes were not treated as securities, the exchange would be a taxable transaction for U.S. federal income tax purposes. In such case, each holder would recognize gain or loss, treating the issue price of the New Notes (generally the fair market value of the New Notes if they are considered to be traded on an established market) as the amount realized in the exchange. Any gain would generally be treated as interest income and any loss as ordinary loss to the extent of the excess of previous interest inclusions over the total negative adjustments previously taken into account as ordinary loss, and the balance as capital loss. The holding period in the New Notes would begin the day after the exchange, and each holder’s tax basis in the New Notes generally would equal the issue price of the New Notes (as described above). Holders are urged to consult
their tax advisors with respect to the U.S. federal income tax consequences if the exchange of the Existing Notes for New Notes is treated as a “significant modification” of the terms of the Existing Notes.
Non-Exchanging Holders
Holders of Existing Notes who do not exchange Existing Notes for New Notes in the exchange offers will not recognize any gain or loss for U.S. federal income tax purposes as a result of the exchange offers. Such holders will continue to have the same tax basis and holding period in their Existing Notes as such holders had immediately prior to the exchange offers.
Agreements Made Pursuant to the Indentures
Under the indentures governing the New Notes, we will agree, and by acceptance of a beneficial interest in the New Notes, each holder will be deemed to have agreed for U.S. federal income tax purposes: (i) to treat the New Notes as indebtedness that is subject to the Treasury regulations governing contingent payment debt instruments (the “contingent payment debt regulations”); (ii) to be bound by our determination of the applicable comparable yield and projected payment schedule (in the absence of an administrative determination or judicial ruling to the contrary); and (iii) to treat the exchange of Existing Notes for New Notes as not constituting a “significant modification” of the terms of the Existing Notes.
The remainder of this summary assumes that for U.S. federal income tax purposes the New Notes will be treated as indebtedness that is subject to the contingent payment debt regulations and that the exchange of the Existing Notes for New Notes will not be treated as a “significant modification” of the terms of the Existing Notes.
U.S. Holders
Interest Accruals on the New Notes
Under the contingent payment debt regulations, a U.S. holder, regardless of its method of accounting for U.S. federal income tax purposes, will be required to accrue interest income on the New Notes on a constant yield basis at an assumed yield (the “comparable yield”), which was determined at the time of issuance of the Existing Notes. Accordingly, U.S. holders generally will be required to include interest in income, in each year prior to maturity, in excess of the regular interest payments on the New Notes. The comparable yield for the Existing Notes was based on the yield at which we could have issued a nonconvertible fixed rate debt instrument with no contingent payments, but with terms and conditions otherwise similar to those of the Existing Notes. We determined the comparable yield to be 8.10% for the Existing 3.375% Notes and 9.0% for the Existing 5.0% Notes, and such comparable yields will continue to apply to the New 3.375% Notes and the New 5.0% Notes, respectively.
We prepared a “projected payment schedule” for each of the Existing 5.0% Notes and the Existing 3.375% Notes which represents a series of payments the amount and timing of which produce a yield to maturity equal to their respective comparable yield. The projected payment schedule we prepared for the Existing 5.0% Notes and the Existing 3.375% Notes will continue to apply to the New 5.0% Notes and the New 3.375% Notes, respectively. Holders that wish to obtain the applicable projected payment schedule for their Notes may do so by submitting a written request for such information to Yellow Roadway Corporation, 10990 Roe Avenue, Overland Park, Kansas 66211, Attention: Chief Financial Officer.
Neither the comparable yield nor the projected payment schedule that is applicable to them of
acquiring, holding or disposingany of the notes.
Under United StatesNotes constitutes a projection or representation by us regarding the actual amount that will be paid on such Notes, or the value at any time of the cash and common stock, if any, into which the Notes may be converted. Pursuant to the terms of the indentures applicable to the Notes, we and every holder have agreed (in the absence of an
administrative determination or judicial ruling to the contrary) to be bound by our determination of the applicable comparable yield and projected payment schedule.
Based on the comparable yield and the adjusted issue price of the New Notes, a U.S. holder of a New Note (regardless of its accounting method) will be required to accrue interest as the sum of the daily portions of interest on the New Note for each day in the taxable year on which the U.S. holder holds the New Note, adjusted upward or downward to reflect the difference, if any, between the actual and projected amount of any contingent payments on the New Note (as set forth below). The daily portions of interest in respect of a New Note are determined by allocating to each day in an accrual period the ratable portion of interest on the New Note that accrues in the accrual period. The amount of interest on a New Note that accrues in an accrual period is the product of the comparable yield for the New Note (adjusted to reflect the length of the accrual period) and the adjusted issue price of the New Note. The adjusted issue price of a New Note is equal to the initial issue price of the Existing Note for which it was exchanged (the first price at which a substantial amount of such Existing Notes were sold to the public, excluding bond houses, brokers or similar persons or organizations acting in the capacity as underwriters, placement agents or wholesalers) (x) increased by any interest previously accrued on such Existing Note or New Note (disregarding any positive or negative adjustments described below) and (y) decreased by the amount of any projected payments on such Existing Note or New Note for previous accrual periods.
In addition to the interest accrual discussed above, a U.S. holder will be required to recognize interest income equal to the amount of the excess of actual payments over projected payments (a “positive adjustment”) in respect of a New Note for a taxable year. For this purpose, the payments in a taxable year include the fair market value of property (including our common stock) received in that year. If a U.S. holder receives actual payments that are less than the projected payments in respect of a New Note for a taxable year, the U.S. holder will incur a “negative adjustment” equal to the amount of such difference. This negative adjustment will (i) first reduce the amount of interest in respect of the New Note that a U.S. holder would otherwise be required to include in income in the taxable year and (ii) to the extent of any excess, will give rise to an ordinary loss equal to that portion of such excess that does not exceed the excess of (A) the amount of all previous interest inclusions under the Existing Note or the New Note over (B) the total amount of the U.S. holder’s net negative adjustments treated as ordinary loss on the Existing Note or the New Note in prior taxable years. A net negative adjustment is not subject to the two percent floor limitation imposed on miscellaneous deductions under Section 67 of the Code. Any negative adjustment in excess of the amounts described in clauses (i) and (ii) of the preceding sentence will be carried forward to offset future interest income in respect of the New Notes or to reduce the amount realized on a sale, conversion, exchange, redemption or retirement of the New Notes.
Further, a U.S. holder whose tax basis in an Existing Note or a New Note differs from the adjusted issued price of such note at the time of acquisition must reasonably allocate the difference to (i) daily portions of interest or (ii) the projected payments over the remaining term of such note. An allocation to daily portions of interest should be reasonable to the extent that the difference is due to a change in the yield, at such acquisition date, at which we could issue a nonconvertible fixed rate debt instrument with no contingent payments, but with terms otherwise similar to those of the Existing Notes or the New Notes. An allocation to the projected payments should be reasonable to the extent that the anticipated value of our common stock over the remaining term of the Existing Note or the New Note, determined on the basis of the market conditions at the acquisition date, differs from the anticipated value of our common stock, as it had been determined on the basis of market conditions which prevailed at the time of original issuance.
If a U.S. holder’s tax basis in an Existing Note or a New Note is greater than the adjusted issue price of such note, the amount of the difference allocated to a daily portion of interest or a projected payment will be treated as a negative adjustment on the date the daily portion accrues or the payment is made. On the date of the adjustment, the U.S. holder’s adjusted tax basis in such note will be reduced by the amount the U.S. holder treats as a negative adjustment. In contrast, if a U.S. holder’s tax basis in an Existing Note or a New Note is less than the adjusted issue price of such note, the amount of the difference allocated to a daily portion of interest or to a projected payment will be treated as a positive adjustment on the date the daily portion accrues or the payment is
made. On the date of the adjustment, the U.S. holder’s adjusted tax basis in such note will be increased by the amount the U.S. holder treats as a positive adjustment. A U.S. holder who purchased Existing Notes or New Notes for an amount that is more or less than the adjusted issue price of such notes should consult its tax advisors regarding the adjustments described above.
Sale, Conversion, Exchange, Redemption or Retirement of the New Notes
Upon a sale, conversion, exchange, redemption or retirement of a New Note for cash or a combination of cash and our common stock, a U.S. holder will generally recognize gain or loss equal to the difference between the amount realized on the sale, conversion, exchange, redemption or retirement (including the fair market value of our common stock received, if any) and such U.S. holder’s adjusted tax basis in the New Note. A U.S. holder’s adjusted tax basis in a New Note will generally be equal to the U.S. holder’s purchase price for the exchanged Existing Note, increased by any interest income previously accrued by the U.S. holder (determined without regard to any positive or negative adjustments to interest accruals described above) and decreased by the amount of any projected payments previously made on the Existing Note or New Note to the U.S. holder. A U.S. holder generally will treat any gain as interest income and any loss as ordinary loss to the extent of the excess of previous interest inclusions over the total negative adjustments previously taken into account as ordinary loss, and the balance as capital loss. The deductibility of capital losses is subject to limitations.
A U.S. holder’s tax basis in our common stock received upon a conversion of a New Note will equal the then current fair market value of such common stock. The U.S. holder’s holding period for the common stock received upon the conversion of a New Note will commence on the day immediately following the date of conversion.
Constructive Dividends
If at any time we increase the conversion rate, either at our discretion or pursuant to the anti-dilution provisions of the New Notes, the increase may be deemed to be the payment of a taxable dividend to the U.S. holders of the New Notes. Generally, a reasonable increase in the conversion rate in the event of stock dividends or distributions of rights to subscribe for our common stock will not be a taxable dividend.
Distributions on Common Stock
Distributions paid on our common stock, other than certain pro rata distributions of common shares, will be treated as a dividend to the extent paid out of current or accumulated earnings and profits (as determined under U.S. federal income tax principles) and will be includible in income by the U.S. holder and taxable as ordinary income when received. If a distribution exceeds our current and accumulated earnings and profits, the excess will be first treated as a tax-free return of the U.S. holder’s investment, up to the U.S. holder’s tax basis in the common stock. Any remaining excess will be treated as a capital gain. Dividends received by a corporate U.S. holder may be eligible for a dividends received deduction, and under current rules, dividends received by a non-corporate U.S. holder generally will be subject to U.S. federal income tax at rates generally applicable to long-term capital gains, provided certain holding period requirements are satisfied.
Sale or Other Disposition of Common Stock
Gain or loss realized by a U.S. holder on the sale or other disposition of our common stock will be capital gain or loss for U.S. federal income tax purposes, and will be long-term capital gain or loss if the U.S. holder held the common stock for more than one year.The amount of the U.S. holder’s gain or loss will be equal to the difference between the U.S. holder’s tax basis in the common stock disposed of and the amount realized on the disposition.
Non-U.S. Holders
Payments on the New Notes
All payments on the New Notes made to a non-U.S. holder, including a payment in cash or a combination of cash and our common stock pursuant to a conversion, exchange, redemption or retirement and any gain realized on a sale of the New Notes, will be exempt from U.S. federal income and estate tax law, and subject to the
discussion of backup withholding below, if you are a Non-U.S. Holder of a note:
- The Company generally will not be required to deduct United States
withholding tax, from payments of interest (including original issue
discount, or de minimis original issue discount) to you if:
1. you doprovided that:
However, if a non-U.S. holder were deemed to have received a constructive dividend (see “—U.S. Holders—Constructive Dividends” above), the non-U.S. holder generally will be subject to U.S. payorwithholding tax at a 30% rate, subject to reduction by an Internal Revenue Serviceapplicable treaty, on the taxable amount of the dividend. A non-U.S. holder who is subject to withholding tax under such circumstances should consult its own tax advisors as to whether it can obtain a refund for all or a portion of the withholding tax.
The certification requirement referred to above will be fulfilled if the beneficial owner of a New Note certifies on IRS Form W-8BEN or an acceptable substitute form upon which you
certify,(or suitable successor form) under penalties of perjury that you areit is not a non-United
StatesU.S. person b.and provides its name and address.
If a non-U.S. holder of a New Note is engaged in the case of payments made outsidea trade or business in the United States, and if payments on the New Note are effectively connected with the conduct of this trade or business (and, if certain income tax treaties apply, are attributable to you at
an offshore account (generally, an account maintained by you at
a bank or other financial institution at any location outsideU.S. permanent establishment), the United States), you have furnished tonon-U.S. holder, although exempt from U.S. withholding tax, will generally be taxed in the U.S. payor
documentation that establishes your identity and your statussame manner as a non-United States person,
c.U.S. holder (see “—U.S. Holders” above), except that the U.S. payor has receivednon-U.S. holder will be required to provide a properly executed IRS Form W-8ECI (or suitable successor form) in order to claim an exemption from withholding certificate (furnished
on an appropriate Internal Revenue Service Form W-8 or an
acceptable substitute form or statement) from a person claiming
to be a withholding foreign partnership, qualified intermediary,
securities clearing organization, bank or other financial
institution, and such person is permitted to certify under U.S.
Treasury regulations, and does certify, either that it assumes
primary withholdingtax. These non-U.S. holders should consult their own tax responsibilityadvisors with respect to other tax consequences of the interest payment or has receivedownership of the New Notes, including the possible imposition of a 30% branch profits tax.
Distributions on Common Stock
Dividends paid to a non-U.S. holder of our common stock generally will be subject to U.S. withholding tax at a 30% rate, subject to reduction under an Internal Revenue Serviceapplicable treaty. In order to obtain a reduced rate of withholding, a non-U.S. holder will be required to provide a properly executed IRS Form W-8BEN (or acceptable substitutesuitable successor form) from youcertifying its entitlement to benefits under a treaty. A non-U.S. holder who is subject to withholding tax under such circumstances should consult its own tax advisors as to whether it can obtain a refund for all or a portion of the withholding tax.
If a non-U.S holder of our common stock is engaged in a trade or business in the United States, and from
other holdersif the dividends are effectively connected with the conduct of notes on whose behalf it is receiving payment,this trade or d. the U.S. payor otherwise possesses documentation upon which it
may rely to treat the payment as madebusiness (and, if certain income tax treaties apply, are attributable to a non-United States
person in accordance with U.S. Treasury regulations.
- No deduction for any United States federalpermanent establishment), the non-U.S. holder, although exempt from U.S. withholding tax, will generally be madetaxed in the same manner as a U.S. holder (see “—U.S. Holders” above),
except that the non-U.S. holder will be required to provide a properly executed IRS Form W-8ECI (or suitable successor form) in order to claim an exemption from any principal payments or from gain that you realize onU.S. withholding tax. These non-U.S. holders should consult their own tax advisors with respect to other U.S. federal income tax consequences of the sale,
exchange or other dispositionownership of your note. In addition, a Non-U.S.
Holderour common stock, including the possible imposition of a note30% branch profits tax.
Sale or Other Disposition of Common Stock
A non-U.S holder generally will not be subject to United StatesU.S. federal income and withholding tax on gain realized on thea sale exchange or other disposition of such note,
unless our common stock unless:
If a non-U.S. holder of our common stock is engaged in a trade or business in the exchange offerUnited States, and if the gain on the common stock is effectively connected with the conduct of this trade or business (and, if certain income tax treaties apply, is attributable to exchange privately
placed notes for publicly registered notes with substantially identical terms.a U.S. HOLDERS
As used in this section,permanent establishment), the term "U.S. Holder" means a beneficial owner of
a note that is not a Non-U.S. Holder.
Payments of interest on a notenon-U.S. holder will generally be taxable totaxed in the same manner as a U.S. Holder
as ordinary interest income when such interest is accrued or received, in
accordance with the holder (see “—U.S. Holder's regular method of tax accounting. If a U.S.
Holder holds notes with original issue discount ("OID") that have a maturity of
more than one year from their date of issue, the U.S. Holder will generally be
required recognize OID as
71
ordinary interest income on a constant yield method in advance of the receipt of
cash payments to which the income in attributable, regardless of the U.S.
Holder's method of tax accounting. However, a note is treated as having OID only
to the extent that the note's stated redemption price at maturity exceeds its
issue price by at least the "de minimis" amount (defined as 0.25% of the note's
stated redemption price at maturity multiplied by the number of complete years
to its maturity)Holders” above). If the excess of a note's stated redemption price at maturity
over its issue price is less than this de minimis amount, then such excess is
treated as "de minimis OID," and is not generally required to be recognized as
ordinary interest income on a constant yield method in advance of receipt of
cash payments to which the income is attributable.
A U.S. Holder is entitled to elect to treat all interest that accrues on a
debt instrument as OID. Interest for this purpose includes stated interest, OID
(including any de minimis OID), and certain amounts of market discount. Special
rules and limitations apply to taxpayers that make this election; U.S. HoldersThese non-U.S. holders should consult their own tax advisors regardingwith respect to other tax consequences of the decision whether to make this
election.
A U.S. Holder will generally recognize capital gain or loss upon the sale,
exchange, retirement or other disposition of the common stock, including the possible imposition of a note in an amount equal to the
difference between the amount realized upon such disposition (less amounts
attributable to accrued interest, which will be treated as such)30% branch profits tax.
Backup Withholding and the U.S.
Holder's tax basis in the note. Tax basis in a note will generally equal cost. A
U.S. Holder of notes will not recognize gain or loss for U.S. federal income tax
purposes by participating in the exchange offer to exchange privately placed
notes for publicly registered notes with substantially identical terms.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information Reporting
Information returns willmay be filed with the United States Internal Revenue
ServiceIRS in connection with payments on the notesNew Notes, the common stock and the proceeds from thea sale or other disposition of the notes. YouNew Notes or the common stock. A U.S. holder may be subject to U.S. backup withholding tax on these payments if it fails to provide its taxpayer identification number to the paying agent and comply with certification procedures or otherwise establish an exemption from backup withholding. A non-U.S. holder may be subject to U.S. backup withholding tax on these payments unless you complythe non-U.S. holder complies with certain certification procedures to establish either that you areit is not a United States person or are otherwise exempt
from backup withholding.U.S. person. The certification procedures required of non-U.S. holders to claim anthe exemption from withholding tax on interestcertain payments on the New Notes, described above, will generally satisfy the certification requirements of Non-U.S. Holders necessary to avoid the backup withholding tax as well; U.S. Holders may be required to provide the payor with an
Internal Revenue Service Form W-9, or otherwise establish their exempt status,
in order to avoid backup withholding.well. The amount of any backup withholding from a payment to you will be allowed as a credit against your United Statesthe holder’s U.S. federal income tax liability and may entitle youthe holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of exchange notes. This prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of exchange notes received in exchange
for outstanding notes where those outstanding notes were acquired as a result of
market-making activities or other trading activities. We have agreed that, for a
period of 180 days after the expiration dateIRS.
The validity of the exchange offer, weNotes and the shares of common stock issuable upon conversion of the Notes will make
this prospectus,be passed upon for us by Fulbright & Jaworski L.L.P., Houston, Texas.
The consolidated balance sheets of Yellow Roadway as amended or supplemented, available to any broker-dealerof December 31, 2003 and 2002, and the related consolidated statements of operations, cash flows, shareholders’ equity and comprehensive income for use in connection with any such resale. In addition, until , 2002, all
dealers effecting transactionseach of the years in the exchange offer may be required to deliver
a prospectus.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant tothree-year period ended December 31, 2003, and the exchange offer may be sold from time to timerelated financial schedule, have been incorporated in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its
72
own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of exchange notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement toRegistration Statement by reference from Yellow Roadway’s 2003 Annual Report on Form 10-K, as amended, in each case in reliance on the reports of KPMG LLP, independent registered public accounting firm, which are also incorporated by reference in this prospectus to any broker-dealerand Registration Statement, and upon the authority of said firm as experts in auditing and accounting. The audit report includes an explanatory paragraph that requests such documentsdescribes Yellow Roadway’s adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, discussed in the letter of
transmittal. We have agreednotes to pay all expenses incident to the exchange offer,
including the expenses of one counsel for the holders of the outstanding notes,
other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the exchange notes, including any broker-dealers,
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Jones, Day, Reavis & Pogue, Cleveland, Ohio, will pass upon the validity of
the exchange notes for us.
EXPERTS
Yellow Roadway’s financial statements.
The consolidated financial statements and schedules of Roadway Express, Inc.Corporation at December 11, 2003 and December 31, 20002002, and 1999,for the period from January 1, 2003 to December 11, 2003 and for each of the threetwo years in the period ended December 31, 2000, appearing2002, incorporated in this prospectus and Registration Statementby reference to Yellow Roadway’s Current Reports on Form 8-K filed on February 19, 2004 (as amended on March 4, 2004) have been audited by Ernst & Young LLP, independent auditors,registered public accounting firm, as set forth in their report thereon appearing elsewhereincluded therein and incorporated herein by reference. Such consolidated financial statements and schedules are includedincorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Yellow Roadway files annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy materials that Yellow Roadway has filed with the Securities and Exchange Commission at the following Securities and Exchange Commission public reference room:
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference room.
The financialYellow Roadway common stock is traded on the NASDAQ National Market under the symbol “YELL”, and Yellow Roadway’s Securities and Exchange Commission filings can also be read at the following address:
Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006
Our Securities and Exchange Commission filings are also available to the public on the Securities and Exchange Commission’s internet website at http://www.sec.gov, which contains reports, proxy and information statements of Arnold Industries, Inc. at December 31, 2000
and 1999,other information regarding companies that file electronically with the Securities and for each of Exchange Commission. In addition, Yellow Roadway’s Securities and Exchange Commission filings are also available to
the three years in the period ended December 31, 2000,
appearing inpublic on Yellow Roadway’s website, http://www.yellowroadway.com. Information contained on Yellow Roadway’s web site is not incorporated by reference into this prospectus, and Registration Statement have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on authority of said firm as experts in auditing and accounting.
INCORPORATION BY REFERENCE
The Commission allows us to "incorporate by reference" into this prospectus
the documents that we file with the Commission. This means that we can disclose
important information to you by referring you to those documents. Any
information that we incorporate in this manner is considered a part of this
prospectus except to the extent updated and superseded byshould not consider information contained in this prospectus. Informationon that we later file with the Commission prior to
the consummation of the offering under this prospectus will automatically
modify, update or supersede information in this prospectus, in an amendment or
supplement to this prospectus or in a document incorporated or deemed to be
incorporated by reference herein. Any statements so modified, updated or
superseded shall not be deemed, exceptweb site as modified, updated or superseded, to
constitute a part of this prospectus.
We incorporate by reference into this prospectus the documents listed below and any future filings we makemade with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, including any filings after the date of this prospectus and before the terminationuntil this offering is complete. The information incorporated by reference is an important part of this exchange offer:
- prospectus. Any statement in a document incorporated by reference into this prospectus will be deemed to be modified or superseded to the extent a statement contained in (1) this prospectus or (2) any other subsequently filed document that is incorporated by reference into this prospectus modifies or supersedes such statement. Any statement so modified or superseded will not be deemed, except as so modified or superceded, to constitute a part of this prospectus.
The documents incorporated by reference into this prospectus are available from us upon request. We will provide a copy of any and all information that is incorporated by reference into this prospectus (not including exhibits to the information unless those exhibits are specifically incorporated by reference into this prospectus) to any person without charge, upon written or oral request. You may request a copy of anythese documents by writing or alltelephoning us at Yellow Roadway Corporation, 10990 Roe Avenue, Overland Park, Kansas 66211, (913) 696-6100.
Yellow Roadway Corporation
Offer to Exchange
5.0% Contingent Convertible Senior Notes due 2023
and
Offer to Exchange
3.375% Contingent Convertible Senior Notes due 2023
The Exchange Agent for the Exchange Offers is:
DEUTSCHE BANK TRUST COMPANY AMERICAS
By Hand: Deutsche Bank Trust Company Americas c/o The Depository Trust Clearing Corporation 55 Water Street, 1st floor Jeanette Park Entrance New York, NY 10041 | By Mail: DB Services Tennessee, Inc. Reorganization Unit P.O. Box 292737 Nashville, TN 37229-2737 Attention: Shalini Kumar, Karl Shepherd | |
By Overnight Mail or Courier: DB Services Tennessee, Inc. Corporate Trust & Agency Services Reorganization Unit 648 Grassmere Park Road Nashville, TN 37211 Attention: Shalini Kumar, Karl Shepherd | By Facsimile: (615) 835-3701 (For Eligible Institutions Only) Confirm by Telephone: (615) 835-3572 | |
For information:
(800) 735-7777
Questions or requests for assistance or additional copies of our prospectus, the documents that are incorporated by reference into this prospectus
other than exhibitsLetter of Transmittal and the Notice of Guaranteed Delivery may be directed to the documents, unless such exhibits are specifically
incorporated by reference. Requests should be directed to:
Office of Corporate Secretary
Roadway Corporation
P.O. Box 471
Akron, Ohio 44309-0471
Telephone: 330-384-1717
Effective as of May 30, 2001, we changed our name from Roadway Express,
Inc. to Roadway Corporation. The reports and other information that we filed
with the Commission on or prior to May 30, 2001 will be under the Roadway
Express name.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the
Commission. These reports, proxy statements and other information can be read
and copied at the Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further
information on the Public Reference Room. The Commission maintains an Internet
site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission, including Roadway. In addition, our common stock is listed on
the Nasdaq National Market and any reports, proxy statements and other
information we file with the Commission may also be inspected and copied at the
offices of the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20001.
74
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ROADWAY EXPRESS, INC.
Consolidated Financial Statements as of December 31, 2000
and 1999 and for the fiscal years ended December 31, 2000,
1999 and 1998:
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets................................. F-3
Statements of Consolidated Income........................... F-4
Statements of Consolidated Stockholders' Equity............. F-5
Statements of Consolidated Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
Unaudited Condensed Consolidated Financial Statements as of
September 8, 2001 and for the Thirty-Six Weeks (Three
Quarters) ended September 8, 2001 and September 9, 2000:
Condensed Consolidated Balance Sheets....................... F-25
Condensed Statements of Consolidated Income................. F-26
Condensed Statements of Consolidated Cash Flows............. F-27
Notes to Condensed Consolidated Financial Statements........ F-28
ROADWAY CORPORATION
Unaudited Condensed Consolidated Financial Statements as of
September 8, 2001 and for the Thirty-Six Weeks (Three
Quarters) ended September 8, 2001 and September 9, 2000:
Condensed Consolidated Balance Sheets....................... F-31
Condensed Statements of Consolidated Income................. F-32
Condensed Statements of Consolidated Cash Flows............. F-33
Notes to Condensed Consolidated Financial Statements........ F-34
ARNOLD INDUSTRIES, INC.
Consolidated Financial Statements as of December 31, 2000
and 1999 and for the fiscal years ended December 31, 2000,
1999 and 1998:
Independent Accountants Report.............................. F-43
Consolidated Balance Sheets................................. F-44
Consolidated Statements of Income........................... F-45
Consolidated Statements of Shareholders' Equity............. F-46
Consolidated Statements of Cash Flows....................... F-47
Notes to Consolidated Financial Statements.................. F-48
Unaudited Condensed Consolidated Financial Statements as of
September 30, 2001 and for the Nine Months Ended September
30, 2001 and 2000:
Condensed Consolidated Balance Sheets....................... F-60
Condensed Consolidated Statements of Income................. F-61
Condensed Consolidated Statements of Cash Flows............. F-62
Notes to Condensed Consolidated Financial Statements........ F-63
F-1
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of Roadway Express, Inc.
We have audited the accompanying consolidated balance sheets of Roadway
Express, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related
statements of consolidated income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 2000. 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 auditing standards generally
accepted in the United States. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Roadway Express, Inc. and subsidiaries at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
Ernst & Young LLP
Akron, Ohio
January 19, 2001, except Note 13
as to which the date is
November 30, 2001
F-2
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
----------------------------------
2000 1999
-------------- --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
Assets
Current assets:
Cash and cash equivalents................................. $ 64,939 $ 80,797
Accounts receivable, net.................................. 299,179 299,599
Prepaid expenses and supplies............................. 16,760 17,940
---------- ----------
Total current assets........................................ 380,878 398,336
Carrier operating property, at cost......................... 1,430,074 1,356,533
Less allowance for depreciation........................... 1,001,389 976,205
---------- ----------
Net carrier operating property.............................. 428,685 380,328
Goodwill, net............................................... 16,086 15,360
Deferred income taxes....................................... 44,756 37,384
---------- ----------
Total assets................................................ $ 870,405 $ 831,408
========== ==========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable.......................................... $ 178,890 $ 190,499
Salaries and wages........................................ 122,280 120,695
Freight and casualty claims payable....................... 51,876 52,165
---------- ----------
Total current liabilities................................... 353,046 363,359
Long-term liabilities:
Casualty claims and other................................. 60,904 58,882
Accrued pension and postretirement health care............ 116,584 118,212
---------- ----------
Total long-term liabilities................................. 177,488 177,094
Stockholders' equity:
Preferred stock
Authorized--20,000,000 shares
Issued--none........................................... -- --
Common stock--$.01 par value
Authorized--100,000,000 shares
Issued--20,556,714 shares.............................. 206 206
Additional paid-in capital................................ 40,430 41,586
Retained earnings......................................... 335,157 282,490
Accumulated other comprehensive loss...................... (6,725) (5,591)
Unearned portion of restricted stock awards............... (8,990) (7,509)
Treasury shares (1,166,386 shares in 2000 and 1,166,579
shares in 1999)........................................ (20,207) (20,227)
---------- ----------
Total stockholders' equity.................................. 339,871 290,955
---------- ----------
Total liabilities and stockholders' equity.................. $ 870,405 $ 831,408
========== ==========
See accompanying notes.
F-3
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
YEAR ENDED DECEMBER 31
---------------------------------------
2000 1999 1998
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenue.................................................. $3,039,560 $2,813,214 $2,654,094
Operating expenses:
Salaries, wages and benefits........................... 1,889,928 1,793,594 1,724,970
Operating supplies and expenses........................ 544,774 468,452 456,884
Purchased transportation............................... 308,089 289,544 260,445
Operating taxes and licenses........................... 78,271 76,113 74,604
Insurance and claims................................... 64,442 62,700 53,948
Provision for depreciation............................. 55,675 45,492 41,422
Net loss (gain) on sale of carrier operating
property............................................ 1,969 103 (2,239)
---------- ---------- ----------
Total operating expenses................................. 2,943,148 2,735,998 2,610,034
---------- ---------- ----------
Operating income......................................... 96,412 77,216 44,060
Other income (expenses):
Interest expense....................................... (341) (716) (937)
Other, net............................................. 2,213 3,245 2,290
---------- ---------- ----------
1,872 2,529 1,353
---------- ---------- ----------
Income before income taxes............................... 98,284 79,745 45,413
Provision for income taxes............................... 41,742 33,972 19,379
---------- ---------- ----------
Net income............................................... $ 56,542 $ 45,773 $ 26,034
========== ========== ==========
Earnings per share -- basic.............................. $ 3.03 $ 2.43 $ 1.33
========== ========== ==========
Earnings per share -- diluted............................ $ 2.98 $ 2.39 $ 1.31
========== ========== ==========
Dividends declared per share............................. $ 0.20 $ 0.20 $ 0.20
========== ========== ==========
See accompanying notes.
F-4
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
ACCUMULATED UNEARNED
ADDITIONAL OTHER PORTION OF
COMMON PAID-IN RETAINED COMPREHENSIVE RESTRICTED TREASURY
TOTAL STOCK CAPITAL EARNINGS INCOME (LOSS) STOCK AWARDS SHARES
-------- ------ ---------- -------- ------------- ------------ --------
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1998
Balance at January 1,
1998..................... $249,436 $206 $43,523 $218,552 $(4,276) $(3,973) $ (4,596)
Net income................. 26,034 26,034
Foreign currency
translation
adjustments.............. (1,765) (1,765)
--------
Total comprehensive
income................... 24,269
Dividends declared......... (3,994) (3,994)
Treasury stock
activity -- net.......... (15,747) (15,747)
Restricted stock award
activity................. (4,355) (1,466) (2,889)
-------- ---- ------- -------- ------- ------- --------
BALANCE AT DECEMBER 31,
1998....................... 249,609 206 42,057 240,592 (6,041) (6,862) (20,343)
YEAR ENDED DECEMBER 31, 1999
Net income................. 45,773 45,773
Foreign currency
translation
adjustments.............. 450 450
--------
Total comprehensive
income................... 46,223
Dividends declared......... (3,875) (3,875)
Treasury stock
activity -- net.......... 116 116
Restricted stock award
activity................. (1,118) (471) (647)
-------- ---- ------- -------- ------- ------- --------
BALANCE AT DECEMBER 31,
1999....................... 290,955 206 41,586 282,490 (5,591) (7,509) (20,227)
YEAR ENDED DECEMBER 31, 2000
Net income................. 56,542 56,542
Foreign currency
translation
adjustments.............. (1,134) (1,134)
--------
Total comprehensive
income................... 55,408
Dividends declared......... (3,875) (3,875)
Treasury stock
activity -- net.......... 20 20
Restricted stock award
activity................. (2,637) (1,156) (1,481)
-------- ---- ------- -------- ------- ------- --------
BALANCE AT DECEMBER 31,
2000....................... $339,871 $206 $40,430 $335,157 $(6,725) $(8,990) $(20,207)
======== ==== ======= ======== ======= ======= ========
See accompanying notes.
F-5
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
YEAR ENDED DECEMBER 31
-------------------------------
2000 1999 1998
--------- -------- --------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 56,542 $ 45,773 $ 26,034
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 56,878 45,635 42,440
Loss (gain) on sale of carrier operating property......... 1,969 103 (2,239)
Changes in assets and liabilities:
Accounts receivable.................................... 420 (19,429) 7,880
Other assets........................................... (8,830) (13,509) (16,687)
Accounts payable and accrued items..................... (6,742) 34,785 3,690
Long-term liabilities.................................. (3,253) 6,483 (1,137)
--------- -------- --------
Net cash provided by operating activities................... 96,984 99,841 59,981
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property..................... (109,617) (76,063) (52,481)
Sales of carrier operating property......................... 3,617 7,256 14,266
Business acquisitions....................................... (2,885) (6,924) -
--------- -------- --------
Net cash used in investing activities....................... (108,885) (75,731) (38,215)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid.............................................. (3,874) (3,872) (3,986)
Treasury stock activity -- net.............................. 20 116 (15,747)
--------- -------- --------
Net cash used in financing activities....................... (3,854) (3,756) (19,733)
Effect of exchange rate changes on cash..................... (103) 211 (306)
--------- -------- --------
Net (decrease) increase in cash and cash equivalents........ (15,858) 20,565 1,727
Cash and cash equivalents at beginning of year.............. 80,797 60,232 58,505
--------- -------- --------
Cash and cash equivalents at end of year.................... $ 64,939 $ 80,797 $ 60,232
========= ======== ========
See accompanying notes.
F-6
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Roadway Express, Inc. (the Company) provides long haul, less-than-truck
load (LTL) freight services in North America and offers services to an
additional 66 countries worldwide in a single business segment. Approximately
75% of the Company's employees are represented by various labor unions,
primarily the International Brotherhood of Teamsters (IBT). The current
agreement with the IBT expires on March 31, 2003.
2. ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts and operations of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Cash Equivalents -- The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
Depreciation -- Depreciation of carrier operating property is computed by
the straight-line method based on the useful lives of the assets. The useful
life of structures ranges from 15 to 33 years, and equipment from 3 to 10 years.
Major maintenance expenditures that extend the useful life of carrier operating
equipment are capitalized and depreciated over 2 to 5 years.
Financial Instruments--The carrying value of cash and cash equivalents,
accounts receivable, accounts payable and short-term borrowings approximate
their fair value due to the short-term nature of these instruments. The primary
derivative financial instruments the Company uses are interest rate swaps on
certain trailer leases as part of its overall risk management policy. The
Company does not use derivative financial instruments for trading purposes (See
note 10).
Goodwill -- Goodwill represents costs in excess of net assets of acquired
businesses, which are amortized using the straight-line method primarily over a
period of 20 years. The Company evaluates the realizability of goodwill over the
remaining amortization period based on the undiscounted cash flows of the
businesses acquired. Should the review indicate that goodwill is not
recoverable, the Company's carrying value of goodwill would be reduced to its
fair value. No reduction of goodwill for impairment has been necessary to date.
Casualty Claims Payable -- These accruals represent management's estimates
of claims for property damage and public liability and workers' compensation.
Expenses resulting from workers' compensation claims are included in salaries,
wages, and benefits in the accompanying statements of consolidated income.
Revenue Recognition -- The Company recognizes revenue as earned on the date
of freight delivery to consignee. Related expenses are recognized as incurred.
Stock-Based Compensation -- The Company accounts for stock-based
compensation in accordance with Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees.
Foreign Currency Translation -- Income statement items are translated at
average currency exchange rates. Transaction gains and losses are included in
determining net income. All balance sheet accounts of foreign operations are
translated at the current exchange rate as of the end of the period. The
resulting translation adjustment is recorded as a separate component of
shareholders' equity.
Use of Estimates in the Financial Statements -- The preparation of the
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the period, the reported
F-7
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amount of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results could differ
from these estimates.
Impairment of Long-lived Assets -- In the event that facts and
circumstances indicate that the carrying value of intangibles and long-lived
assets or other assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation were required, the estimated future undiscounted
cash flow associated with the asset would be compared to the asset's carrying
amount to determine if a write-down is required.
Concentration of Credit Risks -- The Company sells services and extends
credit based on an evaluation of the customer's financial condition, without
requiring collateral. Exposure to losses on receivables is principally dependent
on each customer's financial condition. The Company monitors its exposure for
credit losses and maintains allowances for anticipated losses.
Reclassifications -- Certain items in the 1999 financial statements have
been reclassified to conform to the 2000 presentation.
3. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities, is required to be adopted in the
year 2001. SFAS No. 133 will require, among other things, the Company to
recognize all derivatives on the balance sheet at fair value. When adopted, SFAS
No. 133 will not have a material effect on earningsInformation Agent or the financial position of
the Company.
4. EARNINGS PER SHARE
The following table sets forth the computation of basicDealer Manager at their respective addresses and diluted
earnings per share:
2000 1999 1998
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
Net income.............................................. $56,542 $45,773 $26,034
======= ======= =======
Weighted-average shares for basic earnings per share.... 18,662 18,811 19,617
Incentive stock plans................................... 330 308 198
------- ------- -------
Weighted-average shares for diluted earnings per
share................................................. 18,992 19,119 19,815
======= ======= =======
Basic earnings per share................................ $ 3.03 $ 2.43 $ 1.33
======= ======= =======
Diluted earnings per share.............................. $ 2.98 $ 2.39 $ 1.31
======= ======= =======
F-8
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. CARRIER OPERATING PROPERTY
Carrier operating properties consist of the following:
2000 1999
---------- ----------
(IN THOUSANDS)
Land........................................................ $ 90,865 $ 74,120
Structures.................................................. 378,400 380,316
Revenue equipment........................................... 726,763 690,310
Other operating property.................................... 234,046 211,787
---------- ----------
Carrier operating property, at cost......................... 1,430,074 1,356,533
Less allowance for depreciation............................. 1,001,389 976,205
---------- ----------
Net carrier operating property.............................. $ 428,685 $ 380,328
========== ==========
6. ACCOUNTS PAYABLE
Items classified as accounts payable consist of the following:
2000 1999
-------- --------
(IN THOUSANDS)
Trade and other payables.................................... $ 64,542 $ 68,232
Drafts outstanding.......................................... 34,151 36,817
Income taxes payable........................................ 18,707 24,272
Taxes, other than income.................................... 32,950 31,795
Multi-employer health, welfare, and pension plans........... 28,540 29,383
-------- --------
$178,890 $190,499
======== ========
7. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
2000 1999 1998
------- ------- -------
(IN THOUSANDS)
Current taxes:
Federal............................................... $41,014 $40,489 $20,355
State................................................. 6,674 5,775 3,045
Foreign............................................... 1,426 1,137 (1,318)
------- ------- -------
49,114 47,401 22,082
Deferred taxes:
Federal............................................... (6,009) (10,874) (2,024)
State................................................. (580) (1,411) (360)
Foreign............................................... (783) (1,144) (319)
------- ------- -------
(7,372) (13,429) (2,703)
------- ------- -------
Provision for income taxes.............................. $41,742 $33,972 $19,379
======= ======= =======
In addition to the 2000 provision for income taxes of $41,742,000, deferred
income tax benefits of $165,000 were allocated directly to stockholders' equity.
Income tax payments amounted to $54,245,000 in 2000, $35,344,000 in 1999, and
$16,645,000 in 1998.
F-9
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income (loss) before income taxes consists of the following:
2000 1999 1998
-------- ------- -------
(IN THOUSANDS)
Domestic.............................................. $104,097 $83,572 $49,875
Foreign............................................... (5,813) (3,827) (4,462)
-------- ------- -------
$ 98,284 $79,745 $45,413
======== ======= =======
Significant components of the Company's deferred taxes are as follows:
2000 1999
-------- --------
(IN THOUSANDS)
Deferred tax assets:
Freight and casualty claims............................... $ 40,190 $ 36,946
Retirement benefit liabilities............................ 45,467 46,103
Other..................................................... 38,644 35,798
Valuation allowance....................................... (2,392) (700)
-------- --------
Total deferred tax assets................................... 121,909 118,147
Deferred tax liabilities:
Depreciation.............................................. 43,006 48,536
Multi-employer pension plans.............................. 34,147 32,227
-------- --------
Total deferred tax liabilities.............................. 77,153 80,763
-------- --------
Net deferred tax assets..................................... $ 44,756 $ 37,384
======== ========
At December 31, 2000, the Company had approximately $12,185,000 of foreign
operating loss carry forwards, which have expiration dates ranging from 2005 to
2010. For financial reporting purposes, a valuation allowance of $2,392,000 has
been recognized to offset the deferred tax asset relating to certain foreign
operating loss carry forwards.
The effective tax rate differs from the federal statutory rate astelephone numbers set forth in the following reconciliation:
2000 1999 1998
---- ---- ----
Federal statutory tax rate.................................. 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit.............. 4.0 3.6 3.8
Non-deductible operating costs.............................. 2.1 2.5 4.9
Impact of foreign operations................................ 1.6 1.2 (0.9)
Other, net.................................................. (0.2) 0.3 (0.1)
---- ---- ----
Effective tax rate.......................................... 42.5% 42.6% 42.7%
==== ==== ====
8. EMPLOYEE BENEFIT PLANS
MULTI-EMPLOYER PLANS
below.
The Company charged to operations $174,253,000 in 2000, $155,241,000 in
1999, and $149,608,000 in 1998 for contributions to multi-employer pension plans
for employees subject to labor contracts. The Company also charged to operations
$165,018,000 in 2000, $150,731,000 in 1999, and $153,166,000 in 1998 for
contributions to multi-employer plans that provide health and welfare benefits
to employees and certain retirees who are or were subject to labor contracts.
These amounts were determined in accordance
F-10
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with provisions of industry labor contracts. Under provisions of the
Multi-employer Pension Plan Act of 1980, total or partial withdrawal from a plan
would result in an obligation to fund a portion of the plan's unfunded vested
liability. Management has no intention of changing operations so as to subject
the Company to any material obligation.
RETIREMENT PLANS
The following tables set forth the change in benefit obligation, change in
plan assets, funded status and amounts recognized in the consolidated balance
sheets of the defined benefit pension and postretirement health care benefit
plans as of December 31, 2000 and 1999:
PENSION BENEFITS HEALTH CARE BENEFITS
------------------- ---------------------
2000 1999 2000 1999
-------- -------- --------- ---------
(IN THOUSANDS)
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year.............. $258,848 $243,435 $33,506 $32,461
Service cost......................................... 15,458 15,588 1,755 1,739
Interest cost........................................ 19,893 18,483 2,951 2,377
Actuarial losses (gains)............................. 12,402 5,930 6,800 (1,029)
Benefits paid........................................ (13,501) (24,588) (2,299) (2,042)
-------- -------- ------- -------
Benefit obligation at end of year.................... $293,100 $258,848 $42,713 $33,506
======== ======== ======= =======
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year....... $342,550 $251,439 $ -- $ --
Actual return on plan assets......................... 33,732 115,699 -- --
Benefits paid........................................ (13,501) (24,588) -- --
-------- -------- ------- -------
Fair value of plan assets at end of year............. $362,781 $342,550 $ -- $ --
======== ======== ======= =======
FUNDED STATUS
Plan assets (in excess) less than projected benefit
obligation......................................... $(69,681) $(83,702) $42,713 $33,506
Unamortized:
Net actuarial gain................................. 178,891 200,522 5,206 12,052
Net asset at transition............................ 11,163 12,558 -- --
Prior service (cost) benefit....................... (53,364) (58,549) 1,656 1,825
-------- -------- ------- -------
Accrued benefit cost................................. $ 67,009 $ 70,829 $49,575 $47,383
======== ======== ======= =======
Plan assets are primarily invested in listed stocks, bonds, and cash
equivalents.
F-11
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the assumptions used by the consulting
actuary, and the related benefit cost information:
PENSION BENEFITS HEALTH CARE BENEFITS
--------------------------- ------------------------
2000 1999 1998 2000 1999 1998
------- ------- ------- ------ ------ ------
(DOLLARS IN THOUSANDS)
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate.......................... 7.50% 7.50% 7.00% 7.50% 7.50% 7.00%
Future compensation.................... 3.25% 3.25% 3.25% -- -- --
Expected long-term return on plan
assets............................... 9.50% 8.50% 8.00% -- -- --
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost........................... $15,458 $15,588 $12,287 $1,755 $1,739 $1,365
Interest cost.......................... 19,893 18,483 14,712 2,951 2,377 2,206
Expected return on plan assets......... (32,404) (20,944) (17,406) -- -- --
Amortization of:
Prior service cost (benefit)......... 5,229 5,225 3,636 (169) (169) (169)
Net asset gain at transition......... (1,395) (1,395) (1,395) -- -- --
Unrecognized gain.................... (10,584) (4,238) (5,115) (46) (489) (709)
------- ------- ------- ------ ------ ------
Net periodic benefit (income) cost..... $(3,803) $12,719 $ 6,719 $4,491 $3,458 $2,693
======= ======= ======= ====== ====== ======
For measurement purposes, the Company assumed a weighted-average annual
rate of increase in the per capita cost of health care benefits (health care
cost trend rate) of 7.4% for 2001 declining gradually to 5.0% in 2006 and
thereafter.
The assumed health care cost trend rate has a significant effect on the
amounts reported. For example, a one percentage point increase in the assumed
health care cost trend rate would increase the accumulated post retirement
benefit obligation by $4,979,000 and the service and interest costs components
by $630,000 as of December 31, 2000. Conversely, a one percentage point decrease
in the assumed health care cost trend rate would decrease the accumulated post
retirement benefit obligation by $4,305,000 and the service and interest costs
components by $537,000.
The Company charged to operations $10,395,000 in 2000, $9,134,000 in 1999,
and $8,034,000 in 1998 relating to its defined contribution 401(k) plan. This
plan covers employees not subject to labor contracts. Annual contributions are
related to the level of voluntary employee participation.
9. STOCK PLANS
MANAGEMENT INCENTIVE STOCK PLAN
The Company's Management Incentive Stock Plan (the Stock Plan) authorizes
the granting of common stock at the discretion of the Board of Directors to
officers and certain key employees of the Company over a five-year period from
1996 through 2000. The Board approved grants of 845,000 shares, of which 189,000
were awarded in 2000, 181,000 were awarded in 1999, and 159,000 were awarded in
1998. These grants are recorded as the unearned portion of restricted stock
awards. The grants, originally recorded at market price, are amortized to
compensation expense over the period for which the stock is restricted.
Compensation expense relating to the Stock Plan amounted to $2,600,000 in 2000,
$1,820,000 in 1999, and $1,222,000 in 1998.
F-12
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EQUITY OWNERSHIP PLAN AND NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
Under the Equity Ownership Plan, the Board is authorized to award officers
and key employees with various types of stock-based compensation, including
stock options. Stock options vest over a period of four years from the date of
grant, are exercisable at the rate of 25% each year, and expire at the end of
ten years. The number of shares of common stock that may be issued or
transferred under the plan may not exceed 1,300,000. No awards were granted
under this plan in 2000. During 1999, the Board approved grants of 704,250 stock
options under this plan.
Under the Nonemployee Directors' Stock Option Plan, directors can elect to
invest all or a portion of their retainers in stock options. These stock options
vest one year from the date of grant and expire at the end of ten years. The
number of options issued under this plan may not exceed 100,000. During 2000,
1999 and 1998, 4,526, 10,329 and 6,599 options were issued under this plan.
The following table summarizes all stock option activity:
2000 1999 1998
-------------------- -------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AVERAGE NUMBER OF AVERAGE NUMBER AVERAGE
STOCK EXERCISE STOCK EXERCISE OF STOCK EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- -------- --------
Outstanding January 1............. 721,178 $20.45 6,599 $24.56 -- --
Exercised....................... -- -- -- -- -- --
Granted......................... 5,326 21.56 714,579 20.41 6,599 $24.56
Forfeited or expired............ (6,000) 20.50 -- -- -- --
Outstanding December 31........... 720,504 $20.46 721,178 $20.45 6,599 $24.56
======== ====== ======== ====== ====== ======
Exercisable at year-end........... 191,691 $20.31 6,599 $24.56 -- --
Weighted-average fair value of
options granted during the
year............................ $ 11.09 $ 8.86 $12.03
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model. The following table shows the
weighted-average valuation assumptions used:
2000 1999 1998
--------- --------- ---------
Expected life........................................ 7.0 years 5.0 years 8.0 years
Risk-free interest rate.............................. 6.4% 5.9% 5.7%
Volatility........................................... 45.8% 44.7% 38.2%
Dividend yield....................................... 1.1% 1.0% 0.8%
The following table summarizes information about stock options outstanding
as of December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- -------------------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED AVERAGE WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE NUMBER EXERCISABLE EXERCISE PRICE
--------------- ----------- ------------------- ---------------- ------------------ ----------------
$10-15......... 10,329 0.0 years $14.44 10,329 $14.44
20-25......... 710,175 2.8 years 20.55 181,362 20.65
------- --------- ------ ------- ------
720,504 2.8 years $20.46 191,691 $20.31
======= ========= ====== ======= ======
As permitted under SFAS No. 123, Accounting for Stock-Based Compensation,
the Company has elected to follow APB No. 25, Accounting for Stock Issued to
Employees, and related Interpretations in accounting for stock-based awards to
employees. Under APB No. 25, compensation expense is not
F-13
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recognized in the Company's financial statements because the exercise price of
the Company's employee stock options equals the market price of the underlying
stock on the date of grant.
Under SFAS No. 123, compensation cost is measured at the grant date based
on the value of the award and is recognized over the vesting period. Had
compensation cost been determined under SFAS No. 123, based on the Black-Scholes
value at the grant date, the Company's pro forma net income and earnings per
share would have been as follows:
2000 1999 1998
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net income -- as reported............................. $56,542 $45,773 $26,034
Net income -- pro forma............................... 55,615 45,590 26,000
Net income per share Basic:
As reported...................................... $ 3.03 $ 2.43 $ 1.33
Pro forma........................................ 2.98 2.42 1.33
Diluted:
As reported...................................... $ 2.98 $ 2.39 $ 1.31
Pro forma........................................ 2.93 2.38 1.31
OTHER STOCK PLANS
Under the Company's Employees' Stock Purchase Plan, all full-time eligible
employees may purchase shares of the Company's common stock up to 10% of their
respective compensation through payroll deductions. The purchase price under the
plan is 85% of the fair market value of the Company's common stock. Under this
plan, employees purchased 198,000 shares in 2000, 215,000 shares in 1999, and
240,000 shares in 1998.
The Company's Union Stock Plan provides stock awards to employees subject
to labor contracts who meet the eligibility and performance requirements of
providing a safe, reliably staffed, and injury-free work environment. The
Company allocated 100,000 shares in 2000, 50,000 shares in 1999, and 10,000
shares in 1998 for grant under this plan.
10. LEASES
The Company leases certain terminals and revenue equipment under
noncancellable operating leases requiring minimum future rentals aggregating
$158,344,000 payable as follows: 2001 -- $49,913,000; 2002 -- $36,835,000;
2003 -- $24,082,000; 2004 -- $14,408,000; 2005 -- $8,911,000; and thereafter
$24,195,000. Rental expense for operating leases was $45,445,000, $34,687,000,
and $23,557,000 for 2000, 1999, and 1998, respectively.
The Company has 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 $32.7
million.
11. CREDIT FACILITIES
At December 31, 2000, the Company had $60,000,000 available through
unsecured credit facilities with certain banks. The agreement provides that
loans may be made under Company-selected interest rate formulas including Prime
Rate, Federal Funds Effective Rate, and Eurodollar Base Rate, and include
covenants that require the Company to maintain certain financial ratios,
including a minimum level of consolidated net worth. Under these facilities,
interest expense, which approximates interest paid, amounted to $341,000 in
2000, $716,000 in 1999, and $937,000 in 1998.
12. CONTINGENCIES
Various legal proceedings arising from the normal conduct of business are
pending but, in the opinion of management, the ultimate disposition of these
matters will have no material effect on the financial condition or operations of
the Company.
F-14
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has received notices from the Environmental Protection Agency
(EPA) that it has been identified as a potentially responsible party (PRP) under
the Comprehensive Environmental Response Compensation and Liability Act
(Superfund) at certain hazardous waste sites. Such designations are made
regardless of the Company's limited involvement at each site. The claims for
remediation have been asserted against numerous other entities which are
believed to be financially solvent and are expected to fulfill their
proportionate share. The Company accrues for losses associated with
environmental remediation obligations when such losses are probable and
reasonably estimable. Based on its investigations, the Company believes that its
obligation with regard to these sites is not significant, although there can be
no assurances in this regard.
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
multi-employer 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 that 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.
13. SUBSEQUENT EVENTS -- GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
On May 29, 2001, Roadway Express, Inc., Roadway Corporation, and Roadway
Merger Corp. entered into a Plan of Merger to implement a holding company
organization structure under which Roadway Corporation became a holding company
and Roadway Express, Inc. became a wholly owned subsidiary of Roadway
Corporation.
On November 30, 2001, Roadway Corporation acquired Arnold Industries, Inc.
for cash consideration of an aggregate of approximately $553 million. Also on
November 30, 2001, Roadway Corporation sold Arnold's logistics business (ARLO)
to members of the ARLO management team and Mr. Edward H. Arnold, the former
Chairman, President and Chief Executive Officer of Arnold, for $105 million in
cash. The acquisition was financed with borrowings under a new credit facility,
proceeds from an accounts receivable securitization and the issuance of $225
million in senior notes. Each of the non-minor domestic subsidiaries of Roadway
Corporation will unconditionally guarantee debt obligations under the new credit
facility and the senior notes. Additionally, the senior notes will be secured
equally and ratably with debt under the new credit facility, by liens on the
capital stock of Roadway Corporation's wholly owned subsidiaries, Roadway
Express, Inc. and Arnold Industries, Inc.
The following schedules set forth the condensed consolidating balance sheet
schedules as of December 31, 2000 and 1999 and the condensed consolidating
statements of income schedules and condensed consolidating statements of cash
flows schedulesInformation Agent for the years ended December 31, 2000, 1999Exchange Offers is:
Morrow & Co., Inc.
445 Park Avenue, 5th Floor
New York, New York 10022
(212) 754-8000
Banks and 1998. In the
following schedules "Parent Company" refers to the balances of Roadway
Corporation, "Guarantor Subsidiaries" refers to non-minor domestic subsidiaries,
and "Non-guarantor subsidiaries" refers to foreign and minor domestic
subsidiaries and "Eliminations" represent the adjustments necessary to (a)
eliminate inter-company transactions and (b) eliminate the investments in our
subsidiaries.
F-15
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2000
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
Assets
Current Assets:
Cash and cash equivalents....... $ -- $ 61,244 $ 3,695 $ -- $ 64,939
Accounts receivable, net........ -- 325,912 17,571 (44,304) 299,179
Prepaid expenses and supplies... -- 16,343 417 -- 16,760
-------- ---------- ------- -------- ----------
Total current assets.............. -- 403,499 21,683 (44,304) 380,878
Carrier operating property, at
cost............................ -- 1,406,185 23,889 -- 1,430,074
Less allowance for depreciation... -- 991,296 10,093 -- 1,001,389
-------- ---------- ------- -------- ----------
Net carrier operating property.... -- 414,889 13,796 -- 428,685
Goodwill, net..................... -- -- 16,086 -- 16,086
Investment in Subsidiaries........ -- 12,742 -- (12,742) --
Deferred income taxes............. -- 42,856 1,383 517 44,756
-------- ---------- ------- -------- ----------
Total assets...................... $ -- $ 873,986 $52,948 $(56,529) $ 870,405
======== ========== ======= ======== ==========
Liabilities and stockholders'
equity
Current liabilities:
Accounts Payable................ $ -- $ 171,419 $47,024 $(39,553) $ 178,890
Salaries and Wages.............. -- 118,288 3,992 -- 122,280
Freight and casualty claims
payable...................... -- 50,772 1,104 -- 51,876
-------- ---------- ------- -------- ----------
Total current liabilities......... -- 340,479 52,120 (39,553) 353,046
Long-term liabilities:
Casualty claims and other....... -- 60,872 (485) 517 60,904
Accrued pension and retiree
medical...................... -- 116,584 -- -- 116,584
-------- ---------- ------- -------- ----------
Total long-term liabilities....... -- 117,456 (485) 517 177,488
-------- ---------- ------- -------- ----------
Total stockholders' equity........ -- 356,051 1,313 (17,493) 339,871
-------- ---------- ------- -------- ----------
Total liabilities and
stockholders' equity............ $ -- $ 873,986 $52,948 $(56,529) $ 870,405
======== ========== ======= ======== ==========
F-16
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
Assets
Current Assets:
Cash and cash equivalents....... $ -- $ 71,081 $ 9,716 $ -- $ 80,797
Accounts receivable, net........ -- 334,601 22,717 (57,719) 299,599
Prepaid expenses and supplies... -- 17,653 320 (33) 17,940
-------- ---------- ------- -------- ----------
Total current assets.............. -- 423,335 32,753 (57,752) 398,336
Carrier operating property, at
cost............................ -- 1,335,281 21,252 -- 1,356,533
Less allowance for depreciation... -- 968,892 7,313 -- 976,205
-------- ---------- ------- -------- ----------
Net carrier operating property.... -- 366,389 13,939 -- 380,328
Goodwill, net..................... -- -- 15,360 -- 15,360
Investment in Subsidiaries........ -- 12,742 -- (12,742) --
Deferred income taxes............. -- 36,204 3,065 (1,885) 37,384
-------- ---------- ------- -------- ----------
Total assets...................... $ -- $ 838,670 $65,117 $(72,379) $ 831,408
======== ========== ======= ======== ==========
Liabilities and stockholders'
equity
Current liabilities:
Accounts Payable................ $ -- $ 193,544 $50,911 $(53,956) $ 190,499
Salaries and Wages.............. -- 117,275 3,420 -- 120,695
Freight and casualty claims
payable...................... -- 51,240 925 -- 52,165
-------- ---------- ------- -------- ----------
Total current liabilities......... -- 362,059 55,256 (53,956) 363,359
Long-term liabilities:
Casualty claims and other....... -- 58,855 1,912 (1,885) 58,882
Accrued pension and retiree
medical...................... -- 118,212 -- -- 118,212
-------- ---------- ------- -------- ----------
Total long-term liabilities....... -- 177,067 1,912 (1,885) 177,094
Total stockholders' equity........ -- 299,544 7,949 (16,538) 290,955
-------- ---------- ------- -------- ----------
Total liabilities and
stockholders' equity............ $ -- $ 838,670 $65,117 $(72,379) $ 831,408
======== ========== ======= ======== ==========
F-17
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------- ------------ ------------
(IN THOUSANDS)
Revenue............................. $-- $2,921,509 $120,248 $(2,197) $3,039,560
Operating Expenses
Salaries, wages and benefits...... -- 1,847,976 41,952 -- 1,889,928
Operating supplies and expenses... -- 512,530 33,309 (1,065) 544,774
Purchased transportation.......... -- 272,165 37,056 (1,132) 308,089
Operating taxes and licenses...... -- 76,191 2,080 -- 78,271
Insurance and claims expenses..... -- 62,861 1,581 -- 64,442
Provision for depreciation........ -- 52,095 3,580 -- 55,675
Net loss (gain) on disposal of
operating property............. -- 2,154 (185) -- 1,969
-- ---------- -------- ------- ----------
Total operating expenses............ -- 2,825,972 119,373 (2,197) 2,943,148
-- ---------- -------- ------- ----------
Operating income.................... -- 95,537 875 -- 96,412
Other (expenses) income, net........ -- 8,560 (6,688) -- 1,872
-- ---------- -------- ------- ----------
Income before income taxes.......... -- 104,097 (5,813) -- 98,284
Provision for income taxes.......... -- 41,099 643 -- 41,742
-- ---------- -------- ------- ----------
Net income.......................... $-- $ 62,998 $ (6,456) $ -- $ 56,542
== ========== ======== ======= ==========
F-18
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------- ------------ ------------
(IN THOUSANDS)
Revenue............................. $-- $2,708,542 $106,766 $(2,094) $2,813,214
Operating Expenses
Salaries, wages and benefits...... -- 1,756,566 37,028 -- 1,793,594
Operating supplies and expenses... -- 439,513 29,862 (923) 468,452
Purchased transportation.......... -- 260,585 30,130 (1,171) 289,544
Operating taxes and licenses...... -- 73,678 2,435 -- 76,113
Insurance and claims expenses..... -- 61,535 1,165 -- 62,700
Provision for depreciation........ -- 41,980 3,512 -- 45,492
Net loss (gain) on disposal of
operating property............. -- 659 (556) -- 103
-- ---------- -------- ------- ----------
Total operating expenses............ -- 2,634,516 103,576 (2,094) 2,735,998
-- ---------- -------- ------- ----------
Operating income.................... -- 74,026 3,190 -- 77,216
Other (expenses) income, net........ -- 9,547 (7,018) -- 2,529
-- ---------- -------- ------- ----------
Income before income taxes.......... -- 83,573 (3,828) -- 79,745
Provision for income taxes.......... -- 33,979 (7) -- 33,972
-- ---------- -------- ------- ----------
Net income.......................... $-- $ 49,594 $ (3,821) $ -- $ 45,773
== ========== ======== ======= ==========
F-19
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------- ------------ ------------
(IN THOUSANDS)
Revenue............................. $-- $2,550,489 $105,867 $(2,262) $2,654,094
Operating Expenses
Salaries, wages and benefits...... -- 1,690,884 34,086 -- 1,724,970
Operating supplies and expenses... -- 423,335 34,426 (877) 456,884
Purchased transportation.......... -- 235,461 26,369 (1,385) 260,445
Operating taxes and licenses...... -- 72,633 1,971 -- 74,604
Insurance and claims expenses..... -- 52,420 1,528 -- 53,948
Provision for depreciation........ -- 38,031 3,391 -- 41,422
Net loss (gain) on disposal of
operating property............. -- (2,324) 85 -- (2,239)
-- ---------- -------- ------- ----------
Total operating expenses............ -- 2,510,440 101,856 (2,262) 2,610,034
-- ---------- -------- ------- ----------
Operating income.................... -- 40,049 4,011 -- 44,060
Other (expenses) income, net........ -- 9,826 (8,473) -- 1,353
-- ---------- -------- ------- ----------
Income before income taxes.......... -- 49,875 (4,462) -- 45,413
Provision for income taxes.......... -- 21,016 (1,637) -- 19,379
-- ---------- -------- ------- ----------
Net income.......................... $-- $ 28,859 $ (2,825) $ -- $ 26,034
== ========== ======== ======= ==========
F-20
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------- ------------ ------------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................... $-- $ 62,998 $(6,456) $ -- $ 56,542
Depreciation and amortization........ -- 52,095 4,783 -- 56,878
Other operating adjustments.......... -- (15,479) (957) -- (16,436)
-- -------- ------- ----- --------
Net cash provided by operating
activities......................... -- 99,614 (2,630) -- 96,984
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating
property........................... -- (105,537) (4,080) -- (109,617)
Sales of carrier operating
property........................... -- 2,825 792 -- 3,617
Business acquisitions................ -- (2,885) -- -- (2,885)
-- -------- ------- ----- --------
Net cash used in investing
activities......................... -- (105,597) (3,288) -- (108,885)
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid....................... -- (3,874) -- -- (3,874)
Treasury stock activity, net......... -- 20 -- -- 20
-- -------- ------- ----- --------
Net cash used in financing
activities......................... -- (3,854) -- -- (3,854)
Effect of exchange rates on cash..... -- -- (103) -- (103)
-- -------- ------- ----- --------
Net decrease in cash and cash
equivalents........................ -- (9,837) (6,021) -- (15,858)
Cash and cash equivalents at the
beginning of the year.............. -- 71,081 9,716 -- 80,797
-- -------- ------- ----- --------
Cash and cash equivalents at the end
of the year........................ $-- $ 61,244 $ 3,695 $ -- $ 64,939
== ======== ======= ===== ========
F-21
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income..................... $-- $49,594 $(3,821) $ -- $ 45,773
Depreciation and
amortization................. -- 41,980 3,655 -- 45,635
Other operating adjustments.... -- (3,347) 11,780 -- 8,433
-- ------- ------- ----- --------
Net cash provided by operating
activities................... -- 88,227 11,614 -- 99,841
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of carrier operating
property..................... -- (70,743) (5,320) -- (76,063)
Sales of carrier operating
property..................... -- 5,924 1,332 -- 7,256
Business acquisitions.......... -- -- (6,924) -- (6,924)
-- ------- ------- ----- --------
Net cash used in investing
activities................... -- (64,819) (10,912) -- (75,731)
CASH FLOW FROM FINANCING
ACTIVITIES
Dividends paid................. -- (3,872) -- -- (3,872)
Treasury stock activity, net... -- 116 -- -- 116
-- ------- ------- ----- --------
Net cash used in financing
activities................... -- (3,756) -- -- (3,756)
Effect of exchange rates on
cash......................... -- -- 211 -- 211
-- ------- ------- ----- --------
Net increase in cash and cash
equivalents.................. -- 19,652 913 -- 20,565
Cash and cash equivalents at
the beginning of the year.... -- 51,429 8,803 -- 60,232
-- ------- ------- ----- --------
Cash and cash equivalents at
the end of the year.......... $-- $71,081 $ 9,716 $ -- $ 80,797
== ======= ======= ===== ========
F-22
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------- ------------ ------------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................ $-- $28,859 $(2,825) $ -- $26,034
Depreciation and amortization......... -- 38,031 4,409 -- 42,440
Other operating adjustments........... -- (8,939) 446 -- (8,493)
-- ------- ------- ------- -------
Net cash provided by operating
activities.......................... -- 57,951 2,030 -- 59,981
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating
property............................ -- (48,462) (4,019) -- (52,481)
Sales of carrier operating property... -- 11,687 2,579 -- 14,266
-- ------- ------- ------- -------
Net cash used in investing
activities.......................... -- (36,775) (1,440) -- (38,215)
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid........................ -- (3,986) -- -- (3,986)
Treasury stock activity, net.......... -- (15,747) -- -- (15,747)
-- ------- ------- ------- -------
Net cash used in financing
activities.......................... -- (19,733) -- -- (19,733)
Effect of exchange rates on cash...... -- -- (306) -- (306)
-- ------- ------- ------- -------
Net increase in cash and cash
equivalents......................... -- 1,443 284 -- 1,727
Cash and cash equivalents at the
beginning of the year............... -- 49,986 8,519 -- 58,505
-- ------- ------- ------- -------
Cash and cash equivalents at the end
of the year......................... $-- $51,429 $ 8,803 $ -- $60,232
== ======= ======= ======= =======
F-23
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-24
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 8, DECEMBER 31,
2001 2000
-------------- --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
Assets
Current assets:
Cash and cash equivalents................................. $ 82,554 $ 64,939
Accounts receivable, net.................................. 283,319 299,179
Prepaid expenses and supplies............................. 18,286 16,760
---------- ----------
Total current assets........................................ 384,159 380,878
Carrier operating property, at cost......................... 1,426,141 1,430,074
Less allowance for depreciation............................. 1,001,747 1,001,389
---------- ----------
Net carrier operating property.............................. 424,394 428,685
Goodwill, net............................................... 15,206 16,086
Deferred income taxes....................................... 46,375 44,756
---------- ----------
Total assets................................................ $ 870,134 $ 870,405
========== ==========
Liabilities and net parent investment
Current liabilities:
Accounts payable.......................................... $ 168,799 $ 178,890
Salaries and wages........................................ 108,302 122,280
Freight and casualty claims payable....................... 51,680 51,876
---------- ----------
Total current liabilities................................... 328,781 353,046
Long-term liabilities:
Casualty claims and other................................. 62,685 60,904
Accrued pension and retiree medical....................... 119,617 116,584
---------- ----------
Total long-term liabilities................................. 182,302 177,488
Net parent investment....................................... 359,051 339,871
---------- ----------
Total liabilities and net parent investment................. $ 870,134 $ 870,405
========== ==========
Note: Brokerage Firms, Please Call: (800) 654-2468
Stockholders Call Toll Free: (800) 607-0088
E-mail: yell.info@morrowco.com
The condensed consolidated balance sheet at December 31, 2000 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.
F-25
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
THIRTY-SIX WEEKS
(THREE QUARTERS) ENDED
---------------------------
SEPTEMBER 8, SEPTEMBER 9,
2001 2000
------------ ------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(UNAUDITED)
Revenue..................................................... $1,924,251 $2,083,545
Operating expenses:
Salaries, wages and benefits.............................. 1,228,096 1,306,220
Operating supplies and expenses........................... 336,767 376,811
Purchased transportation.................................. 191,954 213,731
Operating taxes and licenses.............................. 49,829 54,861
Insurance and claims expense.............................. 34,044 40,994
Provision for depreciation................................ 47,617 36,973
Net loss on disposal of operating property................ 534 1,257
---------- ----------
Total operating expenses.................................... 1,889,841 2,030,847
---------- ----------
Operating income............................................ 35,410 52,698
Other (expense) income, net................................. (4,257) 1,495
---------- ----------
Income before income taxes.................................. 31,153 54,193
Provision for income taxes.................................. 13,200 23,086
---------- ----------
Net income $ 17,953 $ 31,107
========== ==========
See notes to condensed consolidated financial statements.
F-26
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
THIRTY-SIX WEEKS
(THREE QUARTERS) ENDED
---------------------------
SEPTEMBER 8, SEPTEMBER 9,
2001 2000
------------ ------------
(IN THOUSANDS)
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $17,953 $31,107
Depreciation and amortization............................... 48,497 37,440
Other operating adjustments................................. (1,515) (16,035)
------- -------
Net cash provided by operating activities................... 64,935 52,512
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property..................... (46,305) (81,936)
Sales of carrier operating property......................... 2,445 2,895
------- -------
Net cash used by investing activities....................... (43,860) (79,041)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid.............................................. (2,906) (2,894)
Treasury stock activity, net................................ (709) (411)
------- -------
Net cash used by financing activities....................... (3,615) (3,305)
Effect of exchange rates on cash............................ 155 --
------- -------
Net increase (decrease) in cash and cash equivalents........ 17,615 (29,834)
Cash and cash equivalents at beginning of period............ 64,936 80,797
------- -------
Cash and cash equivalents at end of period.................. $82,554 $50,963
======= =======
See notes to condensed consolidated financial statements.
F-27
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited 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 resultsDealer Manager for the thirty-six weeks (three quarters ended)
September 8, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Roadway Express, Inc. and Subsidiaries Annual Report on Form 10-K for the year
ended December 31, 2000.
On May 29, 2001, Roadway Express, Inc., Roadway Corporation, and Roadway
Merger Corp. ("Merger Sub") entered into an Agreement and Plan of Merger (the
"Agreement") with the purpose of entering into the Agreement being to implement
a holding company organizational structure under which Roadway Corporation will
be the new holding company and Roadway Express, Inc. will become a wholly-owned
subsidiary of Roadway Corporation. Formation of the new holding company will
also permit Roadway additional flexibility in structuring pending as well as
anticipated acquisition transactions. The nature of the transaction is such that
shares of common stock ($0.01 par value per share) of Roadway Express, Inc.
issued and outstanding or held in treasury immediately prior to the effective
date of the Agreement were effectively converted into one share of common stock
($0.01 par value per share) of Roadway Corporation. All of the newly converted
Roadway Corporation common shares have the same designations, rights, powers,
preferences, qualifications, limitations and restrictions as the original
Roadway Express, Inc. common shares. The Roadway Corporation shares are listed
and traded on the NASDAQ National Market under the symbol ROAD.
NOTE 2. ACCOUNTING PERIOD
The Company 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 3. COMPREHENSIVE INCOME
Comprehensive income differs from net income due to foreign currency
translation adjustments as shown below:
THIRTY-SIX WEEKS ENDED
(THREE QUARTERS)
---------------------------
SEPTEMBER 8, SEPTEMBER 9,
2001 2000
------------ ------------
(IN THOUSANDS)
Net income.................................................. $17,953 $31,107
Foreign currency translation adjustments.................... 93 (150)
------- -------
Comprehensive net income.................................... $18,046 $30,957
======= =======
NOTE 4. 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 to these tax years for
multiemployer pension plan deductions. The IRS is challenging the
F-28
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
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.
NOTE 5. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
133, Accounting for Derivative Instruments and Hedging Activities, effective
January 1, 2001. The effect of the adoption of SFAS No. 133 was not material to
the Company's earnings, financial position, or cash flows.
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business Combinations, which is effective for business combinations completed
subsequent to June 30, 2001. This standard eliminates the pooling-of-interests
method of accounting for business combinations and requires the purchase method.
SFAS No. 141 also clarifies the criteria for recognition of intangible assets
separately from goodwill.
SFAS No. 142, Goodwill and Other Intangible Assets, which is effective for
the Company on January 1, 2002, eliminates the amortization of goodwill and
indefinite-lived intangible assets. This statement also requires an initial
goodwill impairment assessment in the year of adoption and annual impairment
tests thereafter. As of September 8, 2001, the Company had net unamortized
goodwill of $15.2 million and amortization expense on an annual basis of
approximately $1.0 million.
NOTE 6. SUBSEQUENT EVENT
On November 30, 2001, Roadway Corporation acquired Arnold Industries, Inc.
for cash consideration of an aggregate of approximately $553 million. Also on
November 30, 2001, Roadway Corporation sold Arnold's logistics business (ARLO)
to members of the ARLO management team and Mr. Edward H. Arnold, the former
Chairman, President and Chief Executive Officer of Arnold, for $105 million in
cash. The acquisition was financed with borrowings under a new credit facility,
proceeds from an accounts receivable securitization and the issuance of $225
million in senior notes. Each of the non-minor domestic subsidiaries of Roadway
Corporation will unconditionally guarantee debt obligations under the new credit
facility and the senior notes. Additionally, the senior notes will be secured
equally and ratably with debt under the new credit facility, by liens on the
capital stock of Roadway Corporation's wholly owned subsidiaries, Roadway
Express, Inc. and Arnold Industries, Inc.
F-29
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-30
ROADWAY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 8, DECEMBER 31,
2001 2000
-------------- --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
Assets
Current assets:
Cash and cash equivalents................................. $ 82,554 $ 64,939
Accounts receivable, net.................................. 283,319 299,179
Prepaid expenses and supplies............................. 20,316 16,760
---------- ----------
Total current assets........................................ 386,189 380,878
Carrier operating property, at cost......................... 1,426,141 1,430,074
Less allowance for depreciation............................. 1,001,747 1,001,389
---------- ----------
Net carrier operating property.............................. 424,394 428,685
Goodwill, net............................................... 15,206 16,086
Deferred income taxes....................................... 46,375 44,756
---------- ----------
Total assets................................................ $ 872,164 $ 870,405
========== ==========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable.......................................... $ 180,012 $ 178,890
Salaries and wages........................................ 108,304 122,280
Freight and casualty claims payable....................... 51,680 51,876
---------- ----------
Total current liabilities................................... 339,996 353,046
Long-term liabilities:
Casualty claims and other................................. 62,685 60,904
Accrued pension and retiree medical....................... 119,617 116,584
---------- ----------
Total long-term liabilities................................. 182,302 177,488
Stockholders' equity:
Common Stock -- $.01 par value Authorized -- 100,000,000
shares Issued 20,556,714 shares........................ 206 206
Other stockholders' equity................................ 349,660 339,665
---------- ----------
Total stockholders' equity.................................. 349,866 339,871
---------- ----------
Total liabilities and stockholders' equity.................. $ 872,164 $ 870,405
========== ==========
Note: The condensed consolidated balance sheet at December 31, 2000 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.
F-31
ROADWAY CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
THIRTY-SIX WEEKS
(THREE QUARTERS) ENDED
---------------------------
SEPTEMBER 8, SEPTEMBER 9,
2001 2000
------------ ------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(UNAUDITED)
Revenue..................................................... $1,924,251 $2,083,545
Operating expenses:
Salaries, wages and benefits.............................. 1,229,033 1,306,220
Operating supplies and expenses........................... 336,833 376,811
Purchased transportation.................................. 191,954 213,731
Operating taxes and licenses.............................. 49,829 54,861
Insurance and claims expense.............................. 34,044 40,994
Provision for depreciation................................ 47,617 36,973
Net loss on disposal of operating property................ 534 1,257
---------- ----------
Total operating expenses.................................... 1,889,844 2,030,847
---------- ----------
Operating income............................................ 34,407 52,698
Other (expense) income, net................................. (4,257) 1,495
---------- ----------
Income before income taxes.................................. 30,150 54,193
Provision for income taxes.................................. 12,964 23,086
---------- ----------
Net income.................................................. $ 17,186 $ 31,107
========== ==========
Earnings per share -- basic................................. $ 0.93 $ 1.67
========== ==========
Earnings per share -- diluted............................... $ 0.91 $ 1.64
========== ==========
Average shares outstanding -- basic......................... 18,449 18,664
========== ==========
Average share outstanding -- diluted........................ 18,938 19,005
========== ==========
Dividends declared per share................................ $ 0.15 $ 0.15
========== ==========
See notes to condensed consolidated financial statements.
F-32
ROADWAY CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
THIRTY-SIX WEEKS (THREE
QUARTERS) ENDED
---------------------------
SEPTEMBER 8, SEPTEMBER 9,
2001 2000
------------ ------------
(IN THOUSANDS)
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $17,186 $31,107
Depreciation and amortization............................... 48,497 37,440
Other operating adjustments................................. (748) (16,035)
------- -------
Net cash provided by operating activities................... 64,935 52,512
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating property..................... (46,305) (81,936)
Sales of carrier operating property......................... 2,445 2,895
------- -------
Net cash used by investing activities....................... (43,860) (79,041)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid.............................................. (2,906) (2,894)
Treasury stock activity, net................................ (709) (411)
------- -------
Net cash used by financing activities....................... (3,615) (3,305)
Effect of exchange rates on cash............................ 155 --
------- -------
Net increase (decrease) in cash and cash equivalents........ 17,615 (29,834)
Cash and cash equivalents at beginning of period............ 64,939 80,797
------- -------
Cash and cash equivalents at end of period.................. $82,554 $50,963
======= =======
See notes to condensed consolidated financial statements.
F-33
ROADWAY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. 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 September 8, 2001
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2001. 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, 2000.
NOTE 2. 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 3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
THIRTY-SIX WEEKS
(THREE QUARTERS) ENDED
---------------------------
SEPTEMBER 8, SEPTEMBER 9,
2001 2000
------------ ------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
Net income.................................................. $17,186 $31,107
Weighted average shares for basic earnings per share........ 18,449 18,664
Management incentive stock plans............................ 489 341
------- -------
Weighted average shares for diluted earnings per share...... 18,938 19,005
Earnings per share -- basic................................. $ 0.93 $ 1.67
Earnings per share -- diluted............................... $ 0.91 $ 1.64
NOTE 4. COMPREHENSIVE INCOME
Comprehensive income differs from net income due to foreign currency
translation adjustments as shown below:
THIRTY-SIX WEEKS (THREE
QUARTERS) ENDED
---------------------------
SEPTEMBER 8, SEPTEMBER 9,
2001 2000
------------ ------------
(IN THOUSANDS)
Net income.................................................. $17,186 $31,107
Translation adjustments..................................... 93 (150)
------- -------
Comprehensive income........................................ $17,279 $30,957
======= =======
NOTE 5. 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.
F-34
ROADWAY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
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.
NOTE 6. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
133, Accounting for Derivative Instruments and Hedging Activities, effective
January 1, 2001. The effect of the adoption of SFAS No. 133 was not material to
the Company's earnings, financial position, or cash flows.
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business Combinations, which is effective for business combinations completed
subsequent to June 30, 2001. This standard eliminates the pooling-of-interests
method of accounting for business combinations and requires the purchase method.
SFAS No. 141 also clarifies the criteria for recognition of intangible assets
separately from goodwill.
SFAS No. 142, Goodwill and Other Tangible Assets, which is effective for
the Company on January 1, 2001, eliminates the amortization of goodwill and
indefinite-lived intangible assets. This statement also requires an initial
goodwill impairment assessment in the year of adoption and annual impairment
tests thereafter. As of September 8, 2001, the Company had net unamortized
goodwill of $15.2 million and amortization expense on an annual basis of
approximately $1.0 million.
NOTE 7. SUBSEQUENT EVENT -- GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
On November 30, 2001, Roadway Corporation acquired Arnold Industries, Inc.
for cash consideration of an aggregate of approximately $553 million. Also on
November 30, 2001, Roadway Corporation sold Arnold's logistics business (ARLO)
to members of the ARLO management team and Mr. Edward H. Arnold, the former
Chairman, President and Chief Executive Officer of Arnold, for $105 million in
cash. The acquisition was financed with borrowings under a new credit facility,
proceeds from an accounts receivable securitization and the issuance of $225
million in senior notes. Each of the non-minor domestic subsidiaries of Roadway
Corporation will unconditionally guarantee debt obligations under the new credit
facility and the senior notes. Additionally, the senior notes will be secured
equally and ratably with debt under the new credit facility, by liens on the
capital stock of Roadway Corporation's wholly owned subsidiaries, Roadway
Express, Inc. and Arnold Industries, Inc.
The following schedules set forth the condensed consolidating balance sheet
schedules as of September 8, 2001 and December 31, 2000 and the condensed
consolidating statements of income schedules and condensed consolidating
statements of cash flows schedules for the thirty-six weeks (three quarters)
ended September 8, 2001 and September 9, 2000. In the following schedules
"Parent Company" refers to the balances of Roadway Corporation, "Guarantor
Subsidiaries" refers to non-minor domestic subsidiaries, "Non-guarantor
subsidiaries" refers to foreign and minor domestic subsidiaries and
"Eliminations" represent the adjustments necessary to (a) eliminate
inter-company transactions and (b) eliminate the investments in subsidiaries.
F-35
ROADWAY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 8, 2001
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
Assets
Current assets:
Cash and cash equivalents...... $ -- $ 77,342 $ 5,212 $ -- $ 82,554
Accounts receivable, net....... -- 317,622 17,168 (51,471) 283,319
Prepaid expenses and
supplies.................... 2,030 17,817 469 -- 20,316
-------- ---------- ------- --------- ----------
Total current assets............. 2,030 412,781 22,849 (51,471) 386,189
Carrier operating property, at
cost........................... -- 1,400,734 25,407 -- 1,426,141
Less allowance for
depreciation................ -- 989,846 11,901 -- 1,001,747
-------- ---------- ------- --------- ----------
Net carrier operating property... -- 410,888 13,506 -- 424,394
Goodwill, net.................... -- -- 15,206 -- 15,206
Investment in subsidiaries....... 22,346 9,718 -- (32,064) --
Deferred income taxes............ -- 44,499 1,365 511 46,375
-------- ---------- ------- --------- ----------
Total assets..................... $ 24,376 $ 877,886 $52,926 $ (83,024) $ 872,164
======== ========== ======= ========= ==========
Liabilities and stockholders'
equity Current liabilities:
Accounts payable............ $ 11,214 $ 165,410 $50,741 $ (47,353) $ 180,012
Salaries and wages.......... -- 105,510 2,794 -- 108,304
Freight and casualty
claims.................... -- 50,542 1,138 -- 51,680
-------- ---------- ------- --------- ----------
Total current liabilities........ 11,214 321,462 54,673 (47,353) 339,996
Long-term liabilities:
Casualty claims and other... -- 62,653 (479) 511 62,685
Accrued pension and
postretirement health
care...................... -- 119,617 -- -- 119,617
-------- ---------- ------- --------- ----------
Total long-term liabilities...... -- 182,270 (479) 511 182,302
Total stockholders' equity....... 13,162 374,154 (1,268) (36,182) 349,866
-------- ---------- ------- --------- ----------
Total liabilities and
stockholders' equity........... $ 24,376 $ 877,886 $52,926 $ (83,024) $ 872,164
======== ========== ======= ========= ==========
F-36
ROADWAY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2000
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
Assets
Current Assets:
Cash and cash equivalents....... $ -- $ 61,244 $ 3,695 $ -- $ 64,939
Accounts receivable, net........ -- 325,912 17,571 (44,304) 299,179
Prepaid expenses and supplies... -- 16,343 417 -- 16,760
-------- ---------- ------- -------- ----------
Total current assets.............. -- 403,499 21,683 (44,304) 380,878
Carrier operating property, at
cost............................ -- 1,406,185 23,889 -- 1,430,074
Less allowance for depreciation... -- 991,296 10,093 -- 1,001,389
-------- ---------- ------- -------- ----------
Net carrier operating property.... -- 414,889 13,796 -- 428,685
Goodwill, net..................... -- -- 16,086 -- 16,086
Investment in subsidiaries........ -- 12,742 -- (12,742) --
Deferred income taxes............. -- 42,856 1,383 517 44,756
-------- ---------- ------- -------- ----------
Total assets...................... $ -- $ 873,986 $52,948 $(56,529) $ 870,405
======== ========== ======= ======== ==========
Liabilities and stockholders'
equity
Current liabilities:
Accounts Payable................ $ -- $ 171,419 $47,024 $(39,553) $ 178,890
Salaries and Wages.............. -- 118,288 3,992 -- 122,280
Freight and casualty claims
payable...................... -- 50,772 1,104 -- 51,876
-------- ---------- ------- -------- ----------
Total current liabilities......... -- 340,479 52,120 (39,553) 353,046
Long-term liabilities:
Casualty claims and other....... -- 60,872 (485) 517 60,904
Accrued pension and retiree
medical...................... -- 116,584 -- -- 116,584
-------- ---------- ------- -------- ----------
Total long-term liabilities....... -- 177,456 (485) 517 177,488
-------- ---------- ------- -------- ----------
Total stockholders' equity........ -- 356,051 1,313 (17,493) 339,871
-------- ---------- ------- -------- ----------
Total liabilities and
stockholders' equity............ $ -- $ 873,986 $52,948 $(56,529) $ 870,405
======== ========== ======= ======== ==========
F-37
ROADWAY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE THIRTY-SIX WEEKS (THREE QUARTERS) ENDED SEPTEMBER 8, 2001
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
Revenue........................... $ -- $1,844,206 $80,732 $(687) $1,924,251
Operating Expenses
Salaries, wages and benefits.... 937 1,199,992 28,104 -- 1,229,033
Operating supplies and
expenses..................... 66 316,567 20,887 (687) 336,833
Purchased transportation........ -- 164,282 27,672 -- 191,954
Operating taxes and licenses.... -- 48,559 1,270 -- 49,829
Insurance and claims expenses... -- 32,963 1,081 -- 34,044
Provision for depreciation...... -- 45,134 2,483 -- 47,617
Net loss (gain) on disposal of
operating property........... -- 833 (299) -- 534
------- ---------- ------- ----- ----------
Total operating expenses.......... 1,003 1,808,330 81,198 (687) 1,889,844
------- ---------- ------- ----- ----------
Operating income.................. (1,003) 35,876 (466) -- 34,407
Other (expenses) income, net...... -- (2,510) (1,747) -- (4,257)
------- ---------- ------- ----- ----------
Income before income taxes........ (1,003) 33,366 (2,213) -- 30,150
Provision for income taxes........ (236) 13,375 (175) -- 12,964
------- ---------- ------- ----- ----------
Net income........................ $ (767) $ 19,991 $(2,038) $ -- $ 17,186
======= ========== ======= ===== ==========
F-38
ROADWAY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE THIRTY-SIX WEEKS (THREE QUARTERS) ENDED SEPTEMBER 9, 2000
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
(IN THOUSANDS)
Revenue........................... $ -- $2,002,804 $82,141 $(1,400) $2,083,545
Operating Expenses
Salaries, wages and benefits.... -- 1,277,935 28,285 -- 1,306,220
Operating supplies and
expenses..................... -- 353,051 24,507 (747) 376,811
Purchased transportation........ -- 190,556 23,828 (653) 213,731
Operating taxes and licenses.... -- 53,593 1,268 -- 54,861
Insurance and claims expense.... -- 39,977 1,017 -- 40,994
Provision for depreciation...... -- 34,481 2,492 -- 36,973
Net loss (gain) on disposal of
operating property........... -- 1,419 (162) -- 1,257
-------- ---------- ------- ------- ----------
Total operating expenses.......... -- 1,951,012 81,235 (1,400) 2,030,847
-------- ---------- ------- ------- ----------
Operating income.................. -- 51,792 906 -- 52,698
Other (expense) income, net....... -- 6,044 (4,549) -- 1,495
-------- ---------- ------- ------- ----------
Income before income taxes........ -- 57,836 (3,643) -- 54,193
Provision for income taxes........ -- 24,101 (1,015) -- 23,086
-------- ---------- ------- ------- ----------
Net income........................ $ -- $ 33,735 $(2,628) $ -- $ 31,107
======== ========== ======= ======= ==========
F-39
ROADWAY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THIRTY-SIX WEEKS (THREE QUARTERS) ENDED SEPTEMBER 8, 2001
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------- ------------ ------------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................... $(767) $19,991 $(2,038) $ -- $17,186
Depreciation and amortization....... -- 46,025 2,472 -- 48,497
Other operating adjustments......... 767 (4,344) 2,829 -- (748)
----- ------- ------- ----- -------
Net cash provided by operating
activities........................ -- 61,672 3,263 -- 64,935
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating
property.......................... -- (43,963) (2,342) -- (46,305)
Sales of carrier operating
property.......................... -- 2,004 441 -- 2,445
----- ------- ------- ----- -------
Net cash used in investing
activities........................ -- (41,959) (1,901) -- (43,860)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid...................... -- (2,906) -- -- (2,906)
Treasury stock activity, net........ -- (709) -- -- (709)
----- ------- ------- ----- -------
Net cash used in financing
activities........................ -- (3,615) -- -- (3,615)
Effects of exchange rates on cash... -- -- 155 -- 155
----- ------- ------- ----- -------
Net increase in cash and cash
equivalents....................... -- 16,098 1,517 -- 17,615
Cash and cash equivalents at the
beginning of the year............. -- 61,244 3,695 -- 64,939
----- ------- ------- ----- -------
Cash and cash equivalents at the end
of the year....................... $ -- $77,342 $ 5,212 $ -- $82,554
===== ======= ======= ===== =======
F-40
ROADWAY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THIRTY-SIX WEEKS (THREE QUARTERS) ENDED SEPTEMBER 9, 2000
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------- ------------ ------------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................... $ -- $33,735 $(2,628) $ -- $ 31,107
Depreciation and amortization....... -- 34,482 2,958 -- 37,440
Other operating adjustments......... -- (12,575) (3,460) -- (16,035)
----- ------- ------- ----- --------
Net cash provided by (used in)
operating activities.............. -- 55,642 (3,130) -- 52,512
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of carrier operating
property.......................... -- (78,565) (3,371) -- (81,936)
Sales of carrier operating
property.......................... -- 2,755 140 -- 2,895
----- ------- ------- ----- --------
Net cash used in investing
activities........................ -- (75,810) (3,231) -- (79,041)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid...................... -- (2,894) -- -- (2,894)
Treasury stock activity, net........ -- (411) -- -- (411)
----- ------- ------- ----- --------
Net cash used in financing
activities........................ -- (3,305) -- -- (3,305)
Effects of exchange rates on cash... -- -- -- -- --
----- ------- ------- ----- --------
Net decrease in cash and cash
equivalents....................... -- (23,473) (6,361) -- (29,834)
Cash and cash equivalents at the
beginning of the year............. -- 71,081 9,716 -- 80,797
----- ------- ------- ----- --------
Cash and cash equivalents at the end
of the year....................... $ -- $47,608 $ 3,355 $ -- $ 50,963
===== ======= ======= ===== ========
F-41
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-42
INDEPENDENT ACCOUNTANTS REPORT
Report of Independent Accountants
To the Board of Directors and Shareholders
of Arnold Industries, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, shareholders' equity and cash flows,
present fairly, in all material respects, the financial position of Arnold
Industries, Inc. and its subsidiaries (the Company) at December 31, 2000 and
1999 and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America. 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 of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
One South Market Square
Harrisburg, Pennsylvania
March 2, 2001
F-43
ARNOLD INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
-------------------
2000 1999
-------- --------
(IN THOUSANDS)
Assets
Current assets:
Cash and cash equivalents................................. $ 31,213 $ 16,231
Marketable securities..................................... 6,121 2,105
Accounts receivable trade, less allowance for doubtful
accounts of $1,019 and $1,471........................... 53,978 49,607
Officers and employees.................................... 260 204
Notes receivable, current................................. 928 1,358
Deferred income taxes..................................... 3,315 4,258
Prepaid expenses and supplies............................. 7,468 7,464
-------- --------
Total current assets.................................... 103,283 81,227
Property and equipment, at cost:
Land...................................................... 19,347 20,443
Buildings................................................. 109,666 108,465
Revenue and service equipment............................. 226,219 224,500
Other equipment and fixtures.............................. 41,482 45,287
Construction in progress.................................. 6,189 3,106
-------- --------
402,903 401,801
Accumulated depreciation.................................. 170,987 157,028
Total property and equipment............................ 231,916 244,773
Other assets:
Goodwill, net of accumulated amortization of $3,222 and
$2,876.................................................. 11,272 8,018
Investments in limited partnerships....................... 8,073 8,595
Notes receivable, long-term............................... 869 1,755
Cash value of life insurance, net......................... 839 928
Other..................................................... 595 447
-------- --------
Total other assets...................................... 21,648 19,743
$356,847 $345,743
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable............................................. $ 3,188 $ 24,830
Accounts payable, trade................................... 11,163 10,789
Estimated liability for claims............................ 5,232 4,302
Salaries and wages........................................ 4,153 3,809
Accrued vacation.......................................... 6,830 6,039
Accrued expenses -- other................................. 3,705 4,059
Income taxes payable...................................... 2,183 1,297
-------- --------
Total current liabilities............................... 36,454 55,125
Other long-term liabilities:
Estimated liability for claims............................ 2,001 2,646
Deferred income taxes..................................... 39,072 37,710
Notes payable............................................. 1,176 192
Other..................................................... 1,986 1,888
-------- --------
Total other long-term liabilities....................... 44,235 42,436
Commitments and contingencies (Note 11)
Shareholders' equity:
Common stock, par value $1.00; authorized 100,000,000
shares 29,942,628 issued in 2000 and 1999............... 29,942 29,942
Paid-in capital........................................... 2,017 1,585
Retained earnings......................................... 284,862 256,161
316,821 287,688
Less treasury stock, at cost -- 5,294,652 and 5,277,302
shares in 2000 and 1999, respectively..................... (40,663) (39,506)
Total shareholders' equity.............................. 276,158 248,182
-------- --------
$356,847 $345,743
======== ========
The accompanying notes, here and following, are an integral part of these
consolidated financial statements.
F-44
ARNOLD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
Operating revenues.......................................... $462,365 $428,231 $403,721
Operating expenses:
Salaries, wages and related expenses...................... 212,403 198,079 190,629
Supplies and expenses..................................... 63,237 53,428 52,229
Operating taxes and licenses.............................. 11,173 10,683 9,793
Insurance................................................. 10,081 11,328 9,101
Communication and utilities............................... 6,453 6,263 5,615
Purchased transportation.................................. 58,633 57,856 46,406
Rental of buildings, revenue equipment, etc., net......... 2,378 2,032 1,145
Depreciation and amortization............................. 33,705 31,892 30,585
Miscellaneous............................................. 882 827 2,021
Total operating expenses............................... 398,945 372,388 347,524
-------- -------- --------
Operating income....................................... 63,420 55,843 56,197
Other expenses -- net, including interest income of $2,134,
$1,250 and $1,674......................................... (342) (1,000) (355)
Income before income taxes............................. 63,078 54,843 55,842
Income taxes................................................ 23,541 20,189 20,726
Net income................................................ $ 39,537 $ 34,654 $ 35,116
======== ======== ========
Per share amounts
Basic..................................................... $ 1.61 $ 1.40 $ 1.37
======== ======== ========
Diluted................................................... $ 1.59 $ 1.39 $ 1.36
======== ======== ========
The accompanying notes, here and following, are an integral part of these
consolidated financial statements.
F-45
ARNOLD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK
--------- --------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Balance -- December 31, 1997.......................... $29,942 $ 483 $208,617 $(21,789)
Net income.......................................... -- -- 35,116 --
Distribution of treasury stock due to exercise of
stock options.................................... -- 175 -- 213
Purchase of treasury stock.......................... -- -- -- (15,042)
Cash dividends paid ($.44 per share)................ -- -- (11,315) --
Balance -- December 31, 1998.......................... 29,942 658 232,418 (36,618)
Net income.......................................... -- -- 34,654 --
Distribution of treasury stock due to exercise of
stock options.................................... -- 927 -- 292
Purchase of treasury stock.......................... -- -- -- (3,180)
Cash dividends paid ($.44 per share)................ -- -- (10,911) --
Balance -- December 31, 1999.......................... 29,942 1,585 256,161 (39,506)
Net income.......................................... -- -- 39,537 --
Distribution of treasury stock due to exercise of
stock options.................................... -- 432 -- 234
Purchase of treasury stock.......................... -- -- -- (1,391)
Cash dividends paid ($.44 per share)................ -- -- (10,836) --
Balance -- December 31, 2000.......................... $29,942 $2,017 $284,862 $(40,663)
The accompanying notes are an integral part of the consolidated financial
statements.
F-46
ARNOLD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31,
2000 1999 1998
------- ------- -------
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $39,537 $34,654 $35,116
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization............................... 34,218 32,406 31,099
Gain on disposal of property and equipment................ (1,977) (1,723) (2,096)
Equity in earnings of limited partnerships................ (7) (7) (33)
Provision for deferred taxes.............................. 2,305 4,408 3,858
Net loss on investments................................... -- 1 5
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable............. (3,223) (9,652) 267
(Increase) decrease in prepaid expenses and supplies... 1,476 (6) (2,996)
Increase in accounts payable, trade.................... 373 437 197
Increase (decrease) in income taxes
payable/refundable................................... 886 2,004 (130)
Increase (decrease) in estimated liability for
claims............................................... 1,740 (8,845) (4,393)
Increase (decrease) in accrued expenses................ 663 590 (128)
Other, net................................................ 157 120 114
------- ------- -------
Net cash provided by operating activities................. 76,148 54,387 60,880
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment securities............... 609 4,376 5,604
Purchase of investment securities......................... (4,625) (1,633) (672)
Proceeds from disposition of property and equipment....... 10,197 12,148 8,655
Purchase of property and equipment........................ (28,739) (68,412) (54,240)
Capital contributions in limited partnerships............. (1,118) (1,073) (1,489)
Distributions from limited partnerships................... 14 18 16
Decrease (increase) in cash value of life insurance....... 89 (53) (71)
Repayment on notes receivable from owner-operators and
others................................................. 1,508 1,158 185
Acquisition of business net of cash acquired.............. (3,683) -- --
Other, net................................................ (147) (167) 29
------- ------- -------
Net cash used in investing activities..................... (25,895) (53,638) (41,983)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from employee stock options exercised............ 666 1,219 388
Cash dividends paid....................................... (10,836) (10,911) (11,315)
Proceeds from short-term debt............................. -- 8,934 --
Principal payments on short-term debt..................... (23,710) (13) --
Purchase of treasury stock................................ (1,391) (3,180) (15,042)
------- ------- -------
Net cash used in financing activities..................... (35,271) (3,951) (25,969)
------- ------- -------
Increase (decrease) in cash and cash equivalents.......... 14,982 (3,202) (7,072)
Cash and cash equivalents at beginning of year.............. 16,231 19,433 26,505
------- ------- -------
Cash and cash equivalents at end of year.................... $31,213 $16,231 $19,433
======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest.................................................. $ 1,661 $ 1,315 $ 1,173
Income taxes.............................................. $20,424 $14,162 $17,029
The accompanying notes, here and following, are an integral part of these
consolidated financial statements.
F-47
ARNOLD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company operates in the motor carrier industry, principally in the
Eastern United States. Revenues are mainly generated from less-than-truckload
hauling, truckload hauling, and warehouse/logistics services.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Arnold and all of its wholly-owned subsidiaries. All material intercompany
transactions and balances have been eliminated.
REVENUE RECOGNITION
Revenues from less-than-truckload hauling are allocated between reporting
periods based on relative transit time in each reporting period with expenses
recognized as incurred, and revenues from truckload hauling are recognized when
the shipment is completed with expenses recognized as incurred. Revenues for
warehouse/distribution services are recognized as the related services are
rendered and associated costs incurred.
CONSOLIDATED STATEMENT OF CASH FLOWS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. During 2000, the Company entered into a
financing arrangement with a third party for payment of various insurance
premiums. At December 31, 2000, the amount outstanding under this arrangement
was $2,910. This amount has been recorded in prepaid expenses and supplies and
notes payable in the accompanying 2000 consolidated balance sheet and as a
noncash transaction in the 2000 consolidated statement of cash flows.
MARKETABLE SECURITIES
At December 31, 2000 and 1999, marketable equity and debt securities have
been categorized as available for sale and as a result are recorded at fair
value. Realized gains and losses on the sale of securities are recognized using
the specific identification method and are included in other income in the
consolidated statements of income. Quoted market prices are used to determine
market value.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents,
marketable securities, and trade accounts receivable. The Company places its
cash and cash equivalents with high credit financial institutions, and limits
the amount of credit exposure to any one financial institution. The Company's
marketable securities consist principally of U.S. Government securities,
municipal bonds, and equity securities.
Concentrations with respect to trade receivables are limited due to the
large number of customers comprising the Company's customer base, and their
dispersion across many different industries and geographies.
F-48
ARNOLD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
The Company depreciates the cost, less estimated residual value, of revenue
equipment and other depreciable assets principally on the straight-line basis
over their estimated useful lives.
The estimated useful lives used in computing depreciation on the principal
classifications of property and equipment are as follows:
Buildings 15-31 years
Revenue equipment 3-10 years
Service equipment 3-6 years
Other equipment and fixtures 3-7 years
When buildings and equipment are retired or otherwise disposed of, the
property and accumulated depreciation accounts are relieved of the applicable
amounts and any resulting profit or loss is reflected in miscellaneous operating
expenses. In 2000 and 1999, certain revenue equipment was sold to owner-
operators for $936 and $2,164 in interest bearing notes with established
repayment terms.
Land was also sold in 1999 in return for a $142 mortgage loan. These
amounts have been treated as noncash transactions on the 2000 and 1999
consolidated statements of cash flows.
GOODWILL
The excess of the cost of investments in subsidiaries over the fair market
value of net assets acquired is shown as goodwill, which is being amortized on a
straight-line basis over a maximum period of 40 years.
IMPAIRMENTS
The Company's policy is to record an impairment loss against the net
unamortized cost of long lived assets in the period when it is determined that
the carrying amount of the asset may not be recoverable. At the end of each
quarter, management assesses whether there have been any significant events or
significant changes in the environment in which the business operates that would
indicate expected future net cash flows (undiscounted and without interest)
would become less than the carrying amount of the asset.
INVESTMENTS IN LIMITED PARTNERSHIPS
The Company's investments in low-income housing limited partnerships
reflect their cash investment plus the present value of required future
contributions net of amortization of any excess of cost over the estimated
residual value.
USE OF ESTIMATES
The preparation of the Company's financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
INCOME TAXES
In accordance with Financial Accounting Standards Board (FASB) Statement
No. 109, "Accounting for Income Taxes" (SFAS 109), deferred income taxes are
accounted for by the liability method, wherein deferred tax assets or
liabilities are calculated on the differences between the bases of assets and
liabilities for financial statement purposes versus tax purposes (temporary
differences) using enacted tax rates in
F-49
ARNOLD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
effect for the year in which the differences are expected to reverse. Tax
expense in the consolidated statements of income is equal to the sum of taxes
currently payable plus an amount necessary to adjust deferred tax assets and
liabilities to an amount equal to period-end temporary differences at prevailing
tax rates.
TREASURY STOCK
Treasury stock is carried at cost, determined by the first-in, first-out
method.
On March 22, 1997, the Board of Directors authorized management to
repurchase up to 1,000,000 shares of common stock through open market purchases.
The Board of Directors subsequently increased the authorization by 1,000,000
shares on February 27, 1998 and December 28, 1998, respectively. As of December
31, 2000, the Company has purchased a total of 2,368,300 shares of its stock
under the Board of Directors authorization with 105,000, 263,300 and 1,182,400
shares purchased during 2000, 1999 and 1998, at an aggregate cost of $1,391,
$3,180 and $15,042, respectively.
OPTIONS FOR COMMON STOCK
The Company uses the intrinsic value based method to account for options
granted for the purchase of common stock. No compensation expense is recognized
on the grant date since, at that date, the option price equals the market price
of the underlying common stock. The Company discloses the pro-forma effect of
accounting for stock options under the fair value method.
EARNINGS PER SHARE
Basic earnings per share is calculated using the average shares of common
stock outstanding while diluted earnings per share reflects the potential
dilution that could occur if stock options were exercised. The following is a
reconciliation of the average shares of common stock used to compute basic
earnings per share to the shares used to compute diluted earnings per share as
shown on the consolidated statements of income:
2000 1999 1998
----------- ----------- -----------
Net income.................................. $ 39,537 $ 34,654 $ 35,116
Basic weighted average shares outstanding... 24,614,159 24,801,592 25,668,457
Dilutive effect of stock options............ 202,368 200,694 133,352
Diluted weighted average shares
outstanding............................... 24,816,527 25,002,286 25,801,809
Basic earnings per share.................... $ 1.61 $ 1.40 $ 1.37
Diluted earnings per share.................. $ 1.59 $ 1.39 $ 1.36
During 2000, 1999 and 1998, stock options to purchase 175,000 shares,
175,000 shares and 200,000 shares respectively of common stock at $18.56 per
share were outstanding, but were not included in the computation of diluted
earnings per share because the stock options' exercise price was greater than
the average market price of the common stock.
COMPREHENSIVE INCOME
Comprehensive income is defined to include all changes in equity during a
period except those resulting from investments by owners and distributions to
owners. The Company has determined that net income is its only component of
comprehensive income.
F-50
ARNOLD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities on its balance sheet and measure those instruments at fair value.
SFAS No. 137, issued by the FASB in July 1999, establishes a new effective date
for SFAS No. 133. This statement, as amended by SFAS No. 137, is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000 and is
therefore effective for the Company beginning with its fiscal quarter ending
March 31, 2001. In June 2000, FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Hedging Activities -- an amendment of FASB Statement
No. 133." SFAS No. 138 addresses a limited number of issues causing
implementation difficulties for SFAS No. 133. SFAS No. 138 is required to be
adopted concurrently with SFAS No. 133 and is therefore effective for the
Company beginning with its fiscal quarter ending March 31, 2001. As the Company
does not utilize derivative instruments, these pronouncements will have no
effect on the Company's consolidated financial statements.
In March 2000, the FASB issued interpretation No. 44 or FIN 44 "Accounting
for Certain Transactions Involving Stock Compensation," which is an
interpretation of Accounting Principles Board Opinion No. 25, or APB Opinion 25.
This interpretation clarifies the definition of an employee noncompensatory
plan, accounting consequences of various modifications to previously fixed stock
options or awards and the exchange of stock compensation awards in a business
combination. The adoption of FIN 44 did not have an impact on the Company's
consolidated financial statements.
2. MARKETABLE SECURITIES
The cost and market value of investment securities at December 31, 2000 and
1999 follows:
2000 1999
--------------- ---------------
MARKET MARKET
COST VALUE COST VALUE
------ ------ ------ ------
U.S. treasury securities......................... $ 103 $ 103 $ 103 $ 103
Municipal bonds.................................. 5,000 5,000 1,000 1,000
Equity securities................................ 1,000 1,000 1,000 1,000
Accrued interest receivable...................... 18 18 2 2
Total.......................................... $6,121 $6,121 $2,105 $2,105
The net gain (loss) on marketable securities recorded during the years
ended 2000, 1999 and 1998 amounted to $0, $(1) and $(5), respectively.
The debt securities available for sale at December 31, 2000 all mature
within one year of the consolidated balance sheet date.
3. NOTES PAYABLE
In October 2000, the Company acquired virtually all assets of National
Corporate Marketing, Inc. (NCM) (Note 12). Under the purchase agreement, the
Company is required to make additional payments to the former owners of NCM if
specific targets are met with a minimum of $1,262, due in annual installments
plus interest at 7.5%, beginning in 2001 through 2005. The maximum amount of
contingent additional payments over the minimum accrued at December 31, 2000
should not exceed $1,500.
F-51
ARNOLD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 2000, the Company owed $2,910 for amounts outstanding under
its insurance premium financing arrangement with a third party (Note 1). The
amount is due in equal monthly installments through June 2001 including interest
at 7.25%.
The Company had unsecured working capital lines of credit with maximum
borrowings of $65,000 for 2000 and 1999 of which $0 and $23,711 was outstanding
at December 31, 2000 and 1999, respectively. Borrowings under these agreements
bear interest at a floating rate of LIBOR plus 50 basis points.
In connection with its investments in low income housing limited
partnerships, the Company is required as of December 31, 2000 to make additional
contributions over the next year of $200. The additional contributions of $200
were discounted to $192 using the Company's incremental borrowing rate of 6%.
Management anticipates that the cash flow from the tax credits generated by
these investments will approximate the additional contributions during this
period.
4. LEASES
During 2000, the Company leased certain property under non-cancelable
operating leases. Rental expense under such operating leases was $3,100 and
$2,629 in 2000 and 1999, respectively. Future minimum lease payments under
operating leases with noncancelable terms are:
2001........................................................ $4,070
2002........................................................ $4,081
2003........................................................ $4,108
2004........................................................ $4,194
2005........................................................ $2,921
After 2005.................................................. $4,070
5. STOCK OPTION AND STOCK PURCHASE PLANS
STOCK OPTION PLAN
The Company has a 1987 and 1997 stock option plan which provide for the
granting of options to purchase shares of the Company's stock to certain
executives, employees, consultants and directors. The 1987 stock option plan
expired on March 31, 1997 and was replaced by the 1997 stock option plan
effective April 1, 1997. No new options can be granted under the 1987 stock
option plan.
Under the 1997 stock option plan, options to acquire up to 2,000,000 shares
of the stock may be granted to executives, employees, consultants and directors
of the Company. Options under both plans carry various restrictions. Under the
plans, certain options granted to employees will be incentive stock options
within the meaning of Section 422A of the Internal Revenue Code and other
options will be considered nonqualified stock options. Both incentive stock
options and nonqualified stock options may be granted for no less than market
value at the date of grant. Options are exercisable three months from the date
of grant if the employee is age 55 or older; otherwise they are exercisable five
years from the date of grant. The options expire no later than ten years after
the date of grant. Also, no employee may participate in the incentive stock
option plans if immediately after the grant he or she would directly or
indirectly own more than 10% of the stock of the Company.
F-52
ARNOLD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Transactions and other information relating to the 1987 and 1997 stock
option plans for the three years ended December 31, 2000 are summarized below:
STOCK OPTION PLANS
-----------------------------------------------
WEIGHTED AVERAGE
FAIR VALUE OF
WEIGHTED AVERAGE OPTIONS GRANTED
SHARES EXERCISE PRICE DURING THE YEAR
--------- ---------------- ----------------
Balance, outstanding -
December 31, 1997................................ 1,431,366 $14.43
Options granted.................................. 642,500 $12.21 $3.20
Options exercised................................ (79,366) $ 4.89
Options expired.................................. (336,400) $18.20
Balance, outstanding -
December 31, 1998................................ 1,658,100 $13.27
Options granted.................................. 310,950 $11.19 $3.67
Options exercised................................ (109,472) $11.13
Options expired.................................. (63,078) $15.19
Balance, outstanding -
December 31, 1999................................ 1,796,500 $12.97
Options granted.................................. 16,000 $12.35 $4.69
Options exercised................................ (87,650) $ 7.60
Options expired.................................. (46,750) $12.57
Balance, outstanding -
December 31, 2000................................ 1,678,100 $13.25
Options exercisable -
December 31, 2000................................ 978,962 $14.25
Options exercisable at December 31, 1999 and 1998 were 1,006,821 and
864,300.
The following table summarizes information concerning outstanding and
exercisable options at December 31, 2000.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------- ----------------------------
WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE
OUTSTANDING EXERCISE PRICE EXERCISABLE EXERCISE PRICE
----------- -------------- ----------- --------------
$10.00................ 6,000 $10.00 -- $ --
$11.19-$15.03......... 1,497,100 $12.65 803,962 $13.31
$18.56................ 175,000 $18.56 175,000 $18.56
1,678,100 978,962
On October 15, 1998, 2,500 stock options granted in 1998 and 325,500 stock
options granted in 1997 for $15.00 per share to $21.75 per share were canceled
and reissued at $12.19 per share. The reissued stock options are considered
newly granted options under the provisions of the 1997 stock option plan.
The Company's net income and earnings per share would have been reduced to
the pro forma amounts indicated below if compensation cost for the Company's
stock option plan had been determined based on the fair value at the grant date
for awards in accordance with the provisions of SFAS No. 123.
F-53
ARNOLD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2000 1999 1998
------------------ ------------------ ------------------
AS PRO AS PRO AS PRO
REPORTED FORMA REPORTED FORMA REPORTED FORMA
-------- ------- -------- ------- -------- -------
Net income.......................... $39,537 $38,955 $34,654 $34,130 $35,116 $34,796
Basic earnings per share............ $ 1.61 $ 1.58 $ 1.40 $ 1.38 $ 1.37 $ 1.36
Diluted earnings per share.......... $ 1.59 $ 1.57 $ 1.39 $ 1.37 $ 1.35 $ 1.35
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2000, 1999 and 1998; dividend yield of 2.93%,
3.00% and 3.00%, respectively; expected volatility of 32.6%, 34.3% and 29.10%,
respectively; risk-free interest rate of 5.93%, 6.23% and 4.55%, respectively;
and expected life of 6 years.
STOCK PURCHASE PLAN
The Company maintains a stock purchase plan which is available to all
eligible employees. Under the plan, subscriptions of each subscribing employee
are remitted to a custodian for investment in the common stock of the Company.
Minimum and maximum contributions under the plan are five hundred twenty
dollars and five thousand two hundred dollars for each employee in any one year.
At least monthly the custodian purchases the stock in the over-the-counter
market and the Company allocates all purchased shares based on average price for
all purchases and individual payroll deduction amounts.
Under the plan the Company is responsible for all costs of stock purchases
and stock sales within the plan and any administrative costs related to issuance
of stock certificates. Employees are responsible for the expense of sale or
transfer on issued stock certificates.
6. INCOME TAXES
Consolidated income tax expense consists of the following:
2000 1999 1998
------- ------- -------
Currently payable:
Federal................................................... $17,447 $12,860 $13,670
State..................................................... 3,789 2,921 3,198
21,236 15,781 16,868
Deferred:
Federal................................................... 1,983 3,707 3,096
State..................................................... 322 701 762
2,305 4,408 3,858
Total income expense........................................ $23,541 $20,189 $20,726
The effective income tax rates of 37.3% in 2000, 36.8% in 1999 and 37.1% in
1998 differ from the federal statutory rates for the following reasons:
2000 1999 1998
---- ---- ----
Statutory federal income tax rate........................... 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit....... 4.2 4.3 4.6
Tax-free investment income and other........................ (1.9) (2.5) (2.5)
37.3% 36.8% 37.1%
F-54
ARNOLD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax liabilities (assets) are comprised of the following at
December 31:
2000 1999
------- -------
Property and equipment, principally due to differences in
depreciation.............................................. $40,076 $37,830
Limited partnership investments, principally due to
differences in tax basis.................................. 1,747 1,672
Other....................................................... 697 704
Gross deferred tax liabilities............................ 42,520 40,206
Estimated liabilities for claims, principally due to
differences in timing of recognition of expense........... (1,660) (1,555)
Vacation liability, principally due to differences in timing
of recognition of expense................................. (2,424) (2,145)
Allowance for bad debts, principally due to differences in
timing of recognition of expense.......................... (405) (587)
Deferred compensation, principally due to differences in
timing of recognition of expense.......................... (802) (762)
Other....................................................... (1,472) (1,705)
Gross deferred tax assets................................... (6,763) (6,754)
$33,757 $33,452
7. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company offers a supplemental defined benefit pension plan for certain
key officers and employees. The following summarizes the obligations,
assumptions, and activity of the defined benefit pension plan as of and for the
years ended December 31:
2000 1999
------ ------
Change in benefit obligation Benefit obligation at beginning
of year................................................... $1,888 $1,768
Service cost.............................................. 50 62
Interest cost............................................. 117 111
Amortization of unrecognized transition asset............. (6) (6)
Benefits paid............................................. (63) (47)
Benefit obligation at end of year......................... $1,986 $1,888
The supplemental defined benefit pension plan is unfunded. The Company has
recorded a liability for all benefit obligations.
2000 1999
---- ----
Discount rate............................................... 7.00% 6.50%
rate of compensation increase............................... 0.00% 0.00%
2000 1999 1998
---- ---- ----
Components of net periodic benefit cost Service cost........ $ 50 $ 62 $ 57
Interest cost............................................. $117 $111 $104
Amortization of unrecognized net transition asset......... $ (6) $ (6) $ (6)
Net periodic benefit cost................................. $161 $167 $155
In addition to the above defined benefit plan, the Company also has a
trusteed profit sharing plan, two 401(k) plans for employees meeting certain
eligibility requirements and participates in several multi-employer pension
plans. The Company contributed $1,627, $1,569 and $1,443 to the profit sharing
plan,
F-55
ARNOLD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$448, $329 and $568 to the 401(k) plans and $12,072, $10,781 and $9,841 to the
multi-employer pension plans for 2000, 1999 and 1998, respectively.
8. SEGMENT INFORMATION
The Company reports information about its operating segments according to
the "management approach." The management approach is based on the way
management organizes the segments within the enterprise for making operating
decisions and assessing performance. The Company's reportable segments are
identified based on differences in products and services.
The Company's reportable segments are: less-than-truckload hauling,
truckload hauling, and warehousing/logistics services. The less-than-truckload
hauling segment provides next day service in the Northeast region of the United
States. The truckload hauling segment provides irregular route and dedicated
services throughout the eastern, midwestern, and southwestern regions of the
United States. The warehousing/logistics services segment specializes in
integrated distribution services, order fulfillment, and contract packaging
services in Pennsylvania and Texas.
The measurement basis of segment profit or loss is operating income. No
single customer represented 10% or more of the Company's sales during 2000, 1999
and 1998.
The following tables present information about reported segments for the
years ending December 31:
LESS-THAN- WAREHOUSING SEGMENT
TRUCKLOAD TRUCKLOAD /LOGISTICS TOTAL
---------- --------- ----------- --------
2000
Operating revenues....................... $235,997 $178,546 $47,822 $462,365
Operating income......................... $ 49,305 $ 7,202 $ 6,928 $ 63,435
Total assets............................. $184,178 $133,116 $57,129 $374,423
Depreciation and amortization............ $ 11,789 $ 17,393 $ 3,913 $ 33,095
Purchase of property and equipment....... $ 19,694 $ 5,735 $ 2,809 $ 28,238
1999
Operating revenues....................... $215,609 $175,599 $37,023 $428,231
Operating income......................... $ 44,775 $ 5,851 $ 5,460 $ 56,086
Total assets............................. $161,511 $159,005 $50,541 $371,057
Depreciation and amortization............ $ 10,969 $ 17,822 $ 2,678 $ 31,469
Purchase of property and equipment....... $ 14,327 $ 37,712 $15,869 $ 67,908
1998
Operating revenues....................... $202,910 $171,366 $29,445 $403,721
Operating income......................... $ 43,098 $ 7,113 $ 5,532 $ 55,743
Total assets............................. $136,983 $157,563 $39,287 $333,833
Depreciation and amortization............ $ 9,952 $ 18,435 $ 2,198 $ 30,585
Purchase of property and equipment....... $ 14,590 $ 28,295 $11,355 $ 54,240
A reconciliation of total segment operating revenues to total consolidated
operating revenues, total segment operating income to consolidated net income
before taxes for the years ended December 31, 2000,
F-56
ARNOLD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1999 and 1998 and total segment assets to total consolidated assets for the
years ended December 31, 2000, 1999 and 1998 are as follows:
2000 1999 1998
-------- -------- --------
Total segment operating revenues..................... $462,365 $428,231 $403,721
Consolidated operating revenues...................... $462,365 $428,231 $404,721
Total segment operating income....................... $ 63,435 $ 56,086 $ 55,743
Unallocated corporate operating income (loss)...... (15) (242) 454
Interest income.................................... 2,134 1,250 1,673
Interest expense................................... (1,646) (1,353) (1,173)
Other.............................................. (830) (898) (855)
Consolidated net income before taxes................. $ 63,078 $ 54,843 $ 55,842
Total segment assets................................. $374,423 $371,057 $333,833
Unallocated corporate assets....................... 14,279 7,206 11,380
Elimination of intercompany balances............... (31,855) (32,520) (25,102)
Consolidated assets.................................. $356,847 $345,743 $320,111
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments include cash and cash equivalents, marketable
securities, investments in limited partnerships and notes payable. At December
31, 2000 and 1999, the carrying amount of cash equivalents approximates fair
value because of the short-term maturity of those instruments, and the carrying
value of marketable securities is fair market value. With respect to investments
in limited partnerships, management has determined that the resulting carrying
value approximates estimated fair market value. The fair value of the Company's
obligations for contributions to limited partnerships approximates its carrying
value.
The fair market value of the Company's notes payable approximates its
carrying value and was based on the borrowing rates currently available to the
Company for bank loans with similar terms and maturities.
10. TRANSACTIONS WITH AFFILIATES
Accounting and legal fees totaling approximately $909, $877 and $778 in
2000, 1999 and 1998, respectively, were paid or accrued to firms in which
certain directors have financial interests.
11. COMMITMENTS AND CONTINGENCIES
By agreement with its insurance carriers, the Company assumed liability for
worker's compensation, property damage and public liability claims for claim
years ending after June 30, 1998 up to $25 per occurrence, except for worker's
compensation in Exchange Offers is:
Credit Suisse First Boston LLC
Eleven Madison Avenue
New Jersey for the claim year ending June 30, 1999 only which
was $250 per occurrence. The liability for claim years ending June 30, 1998,
1997, and 1996 was transferred to an outside insurance carrier for approximately
$11,000 in 1999. The Company's liability for claim years ending June 30, 1995
and prior is up to $1,000 for the first occurrence and up to $500 for each
subsequent occurrence. The excess liability is assumed by the insurance carriers
up to $50,000. In conjunction with these agreements, the Company has issued
irrevocable letters of credit to guarantee future payments of claims to the
insurance carriers. At December 31, 2000 and 1999, the outstanding balance of
the letters of credit was $4,000.
F-57
ARNOLD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. ACQUISITION
In October 2000, the Company acquired virtually all assets of National
Corporate Marketing, Inc. (NCM), consisting primarily of accounts receivable and
property, plant and equipment for cash paid of $3,683. Liabilities assumed with
the acquisition consisted primarily of accrued vacation of $100. In addition,
under the purchase agreement the Company is required to make additional payments
to the former owners (Note 3) which has been recorded as a noncash transaction
in the accompanying 2000 statement of cash flows. The overall acquisition has
been accounted for under the purchase method and has been included in the
logistics segment of the Company in the accompanying consolidated financial
statements.
F-58
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F-59
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------- ------------
(UNAUDITED)
Assets
Current Assets
Cash and cash equivalents................................. $ 38,660,867 $ 31,213,063
Marketable securities..................................... 13,303,094 6,121,077
Accounts receivable, net.................................. 49,939,301 54,238,224
Notes receivable, current................................. 928,439 928,439
Deferred income taxes..................................... 1,764,677 3,315,097
Prepaid expenses and supplies............................. 7,710,010 7,467,198
Refundable Income Taxes................................... 1,295,425 --
------------ ------------
Total current assets................................... 113,610,822 103,283,098
Property and equipment, at cost........................... 420,040,413 402,903,394
Less: accumulated depreciation............................ 187,449,382 170,986,786
------------ ------------
Total property and equipment........................... 232,591,031 231,916,608
Other Assets
Goodwill, net............................................. 10,877,727 11,271,750
Investments in limited partnerships....................... 7,689,382 8,073,315
Notes receivable, long-term............................... 332,515 868,865
Other..................................................... 1,119,968 1,433,761
Total other assets..................................... 20,019,592 21,647,691
Total assets........................................... $366,221,445 $356,847,397
============ ============
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable............................................. $ 236,620 $ 3,188,431
Accounts payable.......................................... 11,647,770 11,163,008
Income taxes.............................................. 0 2,183,075
Estimated liability for claims............................ 5,131,748 5,232,026
Accrued expenses -- other................................. 17,938,759 14,687,836
------------ ------------
Total current liabilities.............................. 34,954,897 36,454,376
Long-term Liabilities
Estimated liability for claims............................ 2,001,000 2,001,000
Deferred income taxes..................................... 34,994,744 39,072,260
Notes payable............................................. 918,550 1,175,923
Other..................................................... 2,049,714 1,986,214
------------ ------------
Total long-term liabilities............................ 39,964,008 44,235,397
Stockholders' Equity
Common stock.............................................. 29,942,628 29,942,628
Paid-in capital........................................... 3,680,373 2,016,737
Retained earnings......................................... 297,920,570 284,861,907
Treasury stock, at cost................................... (40,241,031) (40,663,648)
------------ ------------
Total stockholders' equity............................. 291,302,540 276,157,624
------------ ------------
Total liabilities and stockholders' equity............. $366,221,445 $356,847,397
============ ============
The accompanying notes, here and following, are an integral part of these
condensed consolidated financial statements.
F-60
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30,
------------------------------- ---------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- --------------
(UNAUDITED)
Operating revenues................. $335,789,117 $347,481,799 $110,681,130 $115,309,193
Operating expenses................. 301,290,906 299,390,499 100,728,875 99,483,878
Operating income................... 34,498,211 48,091,300 9,952,255 15,825,315
Interest expense................... (146,122) (1,367,644) (32,847) (475,280)
Other income (deductions).......... (700,364) 713,985 (1,131,696) 364,076
Income before income taxes......... 33,651,725 47,437,641 8,787,712 15,714,111
Income taxes....................... 12,419,624 17,714,785 3,280,887 5,862,924
Net income.................... $ 21,232,101 $ 29,722,856 $ 5,506,825 $ 9,851,187
============ ============ ============ ============
Net income per common share:
Basic......................... $ 0.86 $ 1.21 $ 0.22 $ 0.40
Diluted....................... $ 0.84 $ 1.20 $ 0.22 $ 0.39
Average common shares outstanding:
Basic......................... 24,764,686 24,604,035 24,802,140 24,591,581
Effect of dilutive securities
Stock options................. 472,191 136,858 513,154 261,696
Diluted....................... 25,236,877 24,740,893 25,315,294 24,853,277
Dividends per common share......... $ 0.33 $ 0.33 $ 0.11 $ 0.11
The accompanying notes, here and following, are an integral part of these
condensed consolidated financial statements.
F-61
ARNOLD INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2001 2000
----------- -----------
(UNAUDITED)
Operating Activities Net income............................. $21,232,101 $29,722,856
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.......................... 24,695,678 25,603,676
Provision for deferred taxes........................... (2,527,096) 2,492,031
Other.................................................. (132,396) (1,601,154)
Changes in operating assets and liabilities:
(Increase) in accounts receivable...................... 4,298,914 (3,157,831)
(Increase) decrease in prepaid expenses and supplies... (251,812) 2,245,060
Increase in accounts payable........................... 484,762 1,066,407
Increase (decrease) in estimated liability for
claims................................................ (100,278) 1,030,866
Increase in other accrued expenses..................... (227,577) (633,832)
Other.................................................. 63,500 62,600
----------- -----------
Net cash provided by operating activities............ 47,535,796 56,830,679
Proceeds from sales of investment securities................ 2,025,622 506,610
Purchase of investment securities........................... (9,055,622) (808,217)
Proceeds from disposition of property and equipment......... 3,691,399 9,197,506
Purchase of property and equipment.......................... (28,312,942) (21,447,683)
Capital contributions to limited partnerships............... (191,557) (1,136,102)
Other....................................................... 859,743 946,308
----------- -----------
Net cash used in investing activities................ (30,983,184) (12,741,578)
Cash dividends paid......................................... (8,173,434) (8,124,092)
Purchase of treasury stock.................................. -- (1,391,250)
Proceeds from employee stock options exercised.............. 2,086,253 386,308
Proceeds from short-term debt principal payments on debt.... (3,017,627) (11,186,334)
----------- -----------
Net cash (used in) financing activities................ (9,104,808) (20,315,054)
Increase in cash and cash equivalents....................... 7,447,804 23,774,047
Cash and cash equivalents -- beginning of year.............. 31,213,063 16,231,274
----------- -----------
Cash and cash equivalents -- end of period.................. $38,660,867 $40,005,321
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................. 116,169 1,414,944
Income taxes......................................... 18,422,455 18,512,149
The Company had non-cash investing and financing transactions in the nine
months ended September 30, 2000 relating to the following:
Financing of insurance premiums on installment
note................................................ 5,734,783
The accompanying notes, here and following, are an integral part of these
condensed consolidated financial statements.
F-62
ARNOLD INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal adjustments)
which are, in the opinion of management, necessary for a fair statement of
results for the interim period. This financial information should be read in
conjunction with the Financial Statements, Notes thereto and information
included in the Company's latest annual report on Form 10-K and any intervening
reports.
The results of operations for the three and nine-month periods ending
September 30, 2001, and September 30, 2000, are not necessarily indicative of
the results to be expected for the full year.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities on its balance sheet and measure
those instruments at fair value. These requirements were effective for the
Company with the fiscal quarter ended March 31, 2001. Because the Company does
not currently utilize derivative instruments or hedging activities, SFAS No.
133, as amended, has no effect on the Company's consolidated financial
statements as presented.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 141
"Business Combinations" (SFAS 141) and SFAS No. 142 "Goodwill and Other
Intangible Assets" (SFAS 142), which are effective July 1, 2001 and January 1,
2002, respectively. SFAS 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. Under SFAS
142, amortization of goodwill, including goodwill recorded in past business
combinations, will discontinue upon adoption of this standard. In addition,
goodwill recorded as a result of business combinations completed during the
six-month period ending December 31, 2001 will not be amortized. All goodwill
and intangible assets will be tested for impairment in accordance with the
provisions of the Statement. The Company is currently reviewing the provisions
of SFAS 141 and SFAS 142 and assessing the impact of adoption.
In October 2001, the Financial Accounting Standards Board approved SFAS No.
144 (SFAS 144) "Accounting for the Impairment or Disposal of Long-Lived Assets"
which is effective for the financial statements issued for fiscal years
beginning after December 15, 2001. SFAS 144 supersedes the accounting provisions
of APB 30 that address the disposal of a segment of a business and requires that
such long-lived assets be reported at fair value less cost to sell. It requires
that long lived assets to be abandoned, exchanged for similar productive assets
or distributed to owners in a spin-off be considered held for use until they are
abandoned, exchanged or distributed. It also eliminates the exception to
consolidation for a subsidiary when control is expected to be temporary. The
Company is currently evaluating the impact of SFAS on the consolidated financial
statements.
F-63
ARNOLD INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)
NOTE 2: SEGMENT INFORMATION
Set forth below is a schedule of the Unaudited Operating Revenues, Expenses
and Operating Income of the LTL, TL and Fulfillment/Logistics segments:
THIRD QUARTER ENDED SEPTEMBER 30,
-----------------------------------
2001 2000
---------------- ----------------
AMOUNT % AMOUNT %
------- ------ ------- ------
(DOLLARS IN THOUSANDS)
LESS-THAN-TRUCKLOAD
Operating Revenues........................................ 53,600 100.0 60,318 100.0
Operating Expenses........................................ 46,245 86.3 47,918 79.4
Operating Income....................................... 7,355 13.7 12,400 20.6
TRUCKLOAD
Operating Revenues........................................ 43,001 100.0 44,204 100.0
Operating Expenses........................................ 42,022 97.7 42,279 95.6
Operating Income....................................... 979 2.3 1,925 4.4
FULFILLMENT/LOGISTICS
Operating Revenues........................................ 14,080 100.0 10,788 100.0
Operating Expenses........................................ 12,456 88.5 9,286 86.1
Operating Income....................................... 1,624 11.5 1,502 13.9
Unallocated corporate operating income (loss)............... (6) (2)
Consolidated operating income............................... 9,952 15,825
NINE-MONTH PERIOD ENDED SEPTEMBER 30,
-------------------------------------
2001 2000
----------------- -----------------
AMOUNT % AMOUNT %
-------- ------ -------- ------
(DOLLARS IN THOUSANDS)
LESS-THAN-TRUCKLOAD
Operating Revenues....................................... 163,962 100.0 178,462 100.0
Operating Expenses....................................... 138,675 84.6 140,987 79.0
Operating Income...................................... 25,287 15.4 37,475 21.0
TRUCKLOAD
Operating Revenues....................................... 129,033 100.0 135,276 100.0
Operating Expenses....................................... 125,330 97.1 129,593 95.8
Operating Income...................................... 3,703 2.9 5,683 4.2
FULFILLMENT/LOGISTICS
Operating Revenues....................................... 42,794 100.0 33,743 100.0
Operating Expenses....................................... 37,273 87.1 28,785 85.3
Operating Income...................................... 5,521 12.9 4,958 14.7
Unallocated corporate operating income (loss).............. (13) (25)
Consolidated operating income.............................. 34,498 48,091
NOTE 3: COMMITMENTS AND CONTINGENCIES
By agreement with its insurance carriers, the Company has assumed liability
for certain worker's compensation, property damage and public liability claims.
As reported in Note No. 11 to the
F-64
ARNOLD INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)
Consolidated Financial Statements contained in the Company's Annual Report for
the calendar year ended December 31, 2000 (incorporated by reference into the
Company's 10-K filed with the SEC on March 28, 2001), the outstanding balance on
letters of credit posted to secure the Company's contingent liability under such
claims was $4,000,000 on December 31, 2000. During the second quarter of 2001,
there was no material adverse change in the Company's contingent liability for
these claims from the information reported in the Company's 2000 Annual Report.
NOTE 4: MERGER AGREEMENT
On August 22, 2001, in a joint press statement with Roadway, the Company
announced that the Board had authorized execution of a definitive Merger
Agreement with Roadway, subject, nevertheless, to the approval of the Company's
shareholders. The net effect of the merger, if approved by shareholders, is that
all issued and outstanding shares of the Company will be exchanged for $21.75
per share in cash and Arnold Industries, Inc. will merger with and into a
wholly-owned subsidiary of Roadway. A special meeting of Company shareholders is
scheduled for November 20, 2001. It is anticipated that the merger would be
consummated on or about November 30, 2001, in the event of shareholder approval.
In addition, on October 17, 2001, Roadway announced that it entered into an
agreement with E. H. Arnold, Chief Executive Officer of Arnold Industries, Inc.,
for the sale of Arnold Industries' logistics operations to E. H. Arnold and
Arnold Logistics, Inc., for $105 million in cash. The transaction is subject to
regulatory approval and the completion of Roadway's acquisition of Arnold
Industries.
F-65
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM
Item 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.Indemnification Of Officers And Directors.
The Certificate of Incorporation and Bylaws of Yellow Roadway Corporation Roadway Express, Inc. and Roadway Express International,
Inc.:
Under Delaware law, a corporation may include in its certificate of
incorporation ("Certificate") a provisiontogether provide that eliminates or limits the personal
liability of a directorYellow Roadway’s directors shall not be personally liable to the corporationYellow Roadway or its stockholders for monetary damages for breach of fiduciary dutiesduty as a director, but no such provision may
eliminate or limit theexcept for liability of a directorfor (i) for any breach of histhe director’s duty of loyalty to Yellow Roadway or its stockholders, (ii) for acts or omissions not in good faith or thatwhich involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law (the "DGCL"“DGCL”) (dealing with illegal
redemptions and stock repurchases), or (iv) for any transaction from which the director derived an improper personal benefit. The Certificate of Incorporation and Bylaws of Yellow Roadway and Roadway Express'
Certificates limitalso provide that if the DGCL is amended to permit further elimination of limitation of the personal liability of the directors, then the liability of Yellow Roadway’s directors shall be eliminated or limited to the fullest extent permitted by Delaware lawthe DGCL, as so amended.
Yellow Roadway maintains directors’ and Roadway Express International's Bylaws provide for
the mandatory indemnificationofficers’ liability insurance against any actual or alleged error misstatement, misleading statement, act, omission, neglect or breach of directors and officers.
Delaware law alsoduty by any director or officer, excluding certain maters including fraudulent, dishonest or criminal acts or self-dealing.
DGCL Section 102(b)(7) provides that Yellow Roadway may indemnify a corporation (a) mustpresent or former director if such director conducted himself or herself in good faith and reasonably believed, in the case of conduct in his or her official capacity, that his or her conduct was in Yellow Roadway’s best interests.
DGCL Section 145 provides that Yellow Roadway may indemnify its directors and officers, as well as other employees and agents for allindividuals (each an “Indemnified Party”, and collectively, “Indemnified Parties”), against expenses of litigation when
they are successful on the merits or otherwise; (b) may indemnify such persons
for the expenses,(including attorneys’ fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative, other than in connection with actions by or in the right of litigation
(other than a derivative suit) evenYellow Roadway (a “derivative action”), if they are not successful on the merits, if
theyan Indemnified Party acted in good faith and in a manner theysuch Indemnified Party reasonably believed to be in or not opposed to theYellow Roadway’s best interests of the corporation (and, in the case ofand, with respect to any criminal proceedings, have no reason to believe that their conduct was
unlawful); and (c) may indemnify such persons for the expenses of a derivative
suit even if they are not successful on the merits if they acted in good faith
and in a manner they reasonably believed to be inaction or not opposed to the best
interests of the corporation, provided that no such indemnification may be made
on behalf of a person adjudged to be liable in a derivative suit, unless the
Delaware Chancery Court determines that, despite such adjudication but in view
of all of the circumstances, such person is entitled to indemnification. In any
such case, indemnification may be made only upon determination by (i) a majority
of the disinterested directors, (ii) independent legal counsel or (iii) the
stockholders that indemnification is proper because the applicable standard of
conduct was met. The advancement of litigation expenses to a director or officer
is also authorized upon receipt by the board of directors of an undertaking to
repay such amounts if it is ultimately determined that such person is not
entitled to be indemnified for them.
Roadway and Roadway Express' Certificates authorize mandatory
indemnification to the full extent permitted by Delaware law, and they authorize
the Registrants to enter into indemnification agreements with directors,
officers and other persons entitled to indemnification thereunder. Roadway and
Roadway Express' Certificate further authorize Roadway and Roadway Express to
provide by agreement for indemnification greater or different than set forth in
Roadway and Roadway Express' Certificates. Roadway has entered into
indemnification agreements with its directors and certain officers that
indemnify such persons to the maximum extent permitted by applicable law.
Roadway Express has in place a directors' and officers' liability insurance
policy, pursuant to which the directors and officers of Roadway Express will be
insured against certain liabilities, including certain liabilities under the
Securities Act and the Exchange Act.
Roadway Reverse Logistics, Inc.:
In general, a director of an Ohio corporation will not be found to have
violated his fiduciary duties unless there is proof by clear and convincing
evidence that the director (1) has not acted in good faith, (2) has not acted in
a manner he reasonably believes to be in or not opposed to the best interests of
the corporation or (3) has not acted with the care that an ordinarily prudent
person in a like position would use under similar circumstances. Monetary
damages for any act taken or omission made as a director are generally awarded
only if it is proved by clear and convincing evidence that the director
undertook such
II-1
act or omission either with deliberate intent to cause injury to the corporation
or with reckless disregard for the best interests of the corporation.
Under Ohio law, a corporation must indemnify its directors, officers,
employees and agents against expenses reasonably incurred in connection with the
successful defense (on the merits or otherwise) of an action, suit or
proceeding. A corporation may indemnify such persons in actions, suits and
proceedings (including certain derivative suits) if the individual has acted in
good faith and in a manner that he believes to be in or not opposed to the best
interests of the corporation. In the case of a criminal proceeding, the
individual must also havehad no reasonable cause to believe that his or her conduct was unlawful. IndemnificationA similar standard is applicable in the case of derivative actions, except that Yellow Roadway may be made only if ordered byindemnify an Indemnified Party for expenses (including attorneys’ fees) incurred in connection with the defense or settlement of such derivative action. Additionally, in the context of a derivative action, DGCL Section 145 requires a court or if authorized in
a specific case upon a determination that the applicable standard of conductapproval before there can be any indemnification where an Indemnified Party has been met. Such a determination may be made by a majority of the disinterested
directors, by independent legal counsel or by the shareholders.
Under Ohio law, a corporation may pay the expenses of any indemnified
individual as they are incurred, in advance of the final disposition of the
matter, if the individualfound liable to Yellow Roadway. The statute provides an undertaking to repay the amount if it is
ultimately determined that he is not entitled to be indemnified. Ohio law
generally requires all expenses, including attorneys' fees, incurred by a
director in defending any action, suit or proceeding to be paid by the
corporation as they are incurred if the director agrees (i) to repay such
amounts in the event that it is proved by clearnot exclusive of other indemnification arrangements that may be granted pursuant to a corporation’s charter, bylaws, disinterested director vote, stockholder vote, agreement or otherwise.
In the Agreement and convincing evidence that his
action or omissionPlan of Merger among Yellow Corporation, Yankee LLC, a wholly owned subsidiary of Yellow Corporation (“Sub”), and Roadway Corporation (“Roadway”), dated as of July 8, 2003, pursuant to which Roadway was undertakenmerged with deliberate intentand into Sub, with Sub as the surviving company (the “Roadway Merger”), Yellow Roadway agreed to cause injury toindemnify the corporation or with reckless disregard for the best interests of the corporation
and (ii) to reasonably cooperate with the corporation concerning the action,
suit or proceeding.
Arnold Industries, Inc., Arnold Transportation Services, Inc. and New Penn Motor
Express, Inc.:
In general, Pennsylvania corporation law allows for indemnification offormer officers and directors actingof Roadway from liabilities arising out of actions or omissions in their capacity as such absent a showing the
act or omission alleged constitutes self-dealing, willful misconduct or
recklessness. Arnold Industries, ATS and New Penn's Bylaws provide for
indemnificationprior to the fullesteffective time of the Roadway Merger, and advance reasonable litigation expenses incurred in connection with such actions or omissions, to the full extent permitted by law.
In addition tounder Roadway’s certificate of incorporation and bylaws. Further, for a period of six years after the bylaws, Sections 511 through 518 and 1741 through 1750effective time of the Pennsylvania Business Corporation LawRoadway Merger, Yellow Roadway will provide Roadway’s officers and directors with an insurance and indemnification policy that provides coverage for acts or omissions through the effective time of 1988 (as amended),the Roadway Merger; provided that the maximum aggregate amount of premiums that Yellow Roadway will be required to pay to provide and maintain this coverage does not exceed $3,944,400 per year.
The directors, officers and managers of each additional registrant listed in this registration statement under the Table of Additional Registrants may be insured or indemnified against liability incurred in their capacities as
II-1
directors, officers or managers pursuant to certain provisions in the charter, bylaws or similar organizational documents of such additional registrant or state law statutory provisions regarding indemnification or limitations of liability in the state of incorporation or organization of such additional registrant. The charter, bylaws and similar organizational documents of each such additional registrant are set forth indemnification rights and restrictions availablein the exhibits to the Company's directors and
are located at 15 Pa.C.S.A. Sections 511-518 and 1741-1750.
ITEMthis registration statement.
Item 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following exhibits are part of this Registration
Statement:
Exhibits
| Exhibit No. | Description | ||
| 1.1 | * | —Form of | |
| 3.1 | —Certificate of | ||
| 3.2 | —Certificate of | ||
| 3.3 | —Bylaws of Yellow Roadway Corporation, as amended (incorporated herein by reference to Exhibit 3.1 to Yellow Roadway’s Quarterly Report on Form | ||
| 3.4 | —Certificate of Incorporation of Meridian IQ, Inc., formerly known as Yellow Dot Com Subsidiary, Inc., as amended (incorporated herein by reference to Exhibit 3.4 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | ||
| 3.5 | —Amended and Restated Bylaws of Meridian IQ, Inc., formerly known as Yellow Dot Com Subsidiary, Inc. (incorporated herein by reference to Exhibit 3.5 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | ||
| 3.6 | —Certificate of Incorporation of Yellow Roadway Technologies, Inc., formerly known as Yellow Technologies Inc., as amended (incorporated herein by reference to Exhibit 3.7 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | ||
| 3.7 | —Certificate of Amendment of Certificate of Incorporation of Yellow Roadway Technologies, Inc., formerly known as Yellow Technologies, Inc. (incorporated herein by reference to Exhibit 3.7 to Post-Effective Amendment No. 8 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed August 16, 2004, Reg. No. 333-109896). | ||
| 3.8 | —Amended and Restated Bylaws of Yellow Roadway Technologies, Inc., formerly known as Yellow Technologies Inc., (incorporated herein by reference to Exhibit 3.7 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | ||
II-2
| Exhibit No. | Description | |
| 3.9 | —Certificate of Incorporation of Globe.com Lines, Inc., as amended (incorporated herein by reference to Exhibit 3.9 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | |
| 3.10 | —Amended and Restated Bylaws of Globe.com Lines, Inc. (incorporated herein by reference to Exhibit 3.9 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.11 | —Articles of Incorporation of Yellow Relocation Services, Inc. (incorporated herein by reference to Exhibit 3.11 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | |
| 3.12 | —Amended and Restated Bylaws of Yellow Relocation Services, Inc. (incorporated herein by reference to Exhibit 3.11 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.13 | —Articles of Incorporation of Mission Supply Company, as amended (incorporated herein by reference to Exhibit 3.15 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | |
| 3.14 | —Amended and Restated Bylaws of Mission Supply Company (incorporated herein by reference to Exhibit 3.13 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.15 | —Articles of Incorporation of Yellow Transportation, Inc., as amended (incorporated herein by reference to Exhibit 3.14 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.16 | —Amended and Restated Bylaws of Yellow Transportation, Inc. (incorporated herein by reference to Exhibit 3.15 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.17 | —Certificate of Formation of Yellow GPS, LLC, as amended (incorporated herein by reference to Exhibit 3.21 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | |
| 3.18 | —Certificate of Amendment to the Certificate of Formation of Yellow GPS, LLC changing its name to MIQ LLC (incorporated herein by reference to Exhibit 3.17 to Post-Effective Amendment No. 7 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed August 3, 2004, Reg. No. 333-109896). | |
| 3.19 | —Amended and Restated Limited Liability Company Agreement of MIQ LLC, formerly known as Yellow GPS, LLC, and before that formerly known as Yellow Global, LLC (incorporated herein by reference to Exhibit 3.22 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | |
| 3.20 | —Certificate of Formation of Roadway LLC, as amended (incorporated herein by reference to Exhibit 3.18 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.21 | —Limited Liability Company Agreement of Roadway LLC, formerly known as Yankee LLC (incorporated herein by reference to Exhibit 3.19 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.22 | —Amended and Restated Certificate of Incorporation of Roadway Express, Inc. (incorporated herein by reference to Exhibit 3.20 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.23 | —Amended and Restated By-Laws of Roadway Express, Inc. (incorporated herein by reference to Exhibit 3.21 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
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| Exhibit No. | Description | |
| 3.24 | —Certificate of Incorporation of Roadway Next Day Corporation, as amended (incorporated herein by reference to Exhibit 3.22 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.25 | —By-Laws of Roadway Next Day Corporation, formerly known as Lion Corp., (incorporated herein by reference to Exhibit 3.23 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 4.1 | —Paying Agency Agreement dated April 26, 1993 between Yellow Corporation and Citibank, N.A. (incorporated herein by reference to Exhibit 4.4 to Yellow Corporation’s Annual Report on Form 10-K for the year ended December | |
| 4.2 | —Indenture (including form of note) dated August 8, 2003 among Yellow Corporation, certain subsidiary guarantors and Deutsche Bank Trust Company Americas, as trustee, relating to Yellow Roadway Corporation’s 5.0% Contingent Convertible Senior Notes due 2023 (incorporated herein by reference to Exhibit 4.5 to Yellow Corporation’s Registration Statement on Form S-4, filed August 19, 2003, Reg. No. 333-108081). | |
| 4.3 | —Registration Rights Agreement dated August 8, 2003 among Yellow Corporation, certain subsidiary guarantors and Deutsche Bank Securities Inc., as representative of the initial purchasers (incorporated herein by reference to Exhibit 4.6 to Yellow Corporation’s Registration Statement on Form S-4, filed August 18, 2003, Reg. No. 333-108081). | |
| 4.4 | —Indenture (including form of note) dated November 25, 2003 among Yellow Corporation, certain subsidiary guarantors and Deutsche Bank Trust Company Americas, as trustee, relating to Yellow Roadway Corporation’s 3.375% Contingent Convertible Senior Notes due 2023 (incorporated herein by reference to Exhibit 4.7 to Yellow Roadway Corporation’s Registration Statement on Form S-8, filed December 23, 2003, Reg. No. 333-11499). | |
| 4.5 | —Registration Rights Agreement dated November 25, 2003 among Yellow Corporation, certain subsidiary guarantors and Deutsche Bank Securities Inc., as representative of the initial purchasers (incorporated herein by reference to Exhibit 4.8 to Yellow Roadway Corporation’s Registration Statement on Form S-8, filed December 23, 2003, Reg. No. 333-11499). | |
| 4.6 | —Indenture (including form of note) dated November 30, 2001 among Roadway Corporation | |
| 4.7** | —Form of Indenture (including form of note) among Yellow Corporation, certain subsidiary guarantors and Deutsche Bank Trust Company Americas, as trustee, relating to the | |
| 4.8** | —Form | |
| 5.1** | —Opinion of | |
| 8.1** | —Opinion of Fulbright & Jaworski L.L.P. regarding tax matters. | |
| 12.1 | —Statement of Computation of Ratios (incorporated herein by reference to Exhibit | |
| 21.1 | —Subsidiaries of Yellow Roadway Corporation (incorporated herein by reference to Exhibit 21.1 to Yellow Roadway Corporation’s Annual Report on Form | |
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| Exhibit No. | Description | ||
| 23.1 | * | —Consent of KPMG LLP, independent auditors for Yellow Roadway | |
| 23.2 | * | —Consent of Ernst & Young | |
| 23.3 | ** | —Consent of | |
| 24.1 | * | —Powers of | |
| 25.1 | ** | —Statement of Eligibility and Qualification of Trustee under the Trust Indenture Act of 1939, as amended, on Form T-1. | |
| 99.1 | * | —Form of Letter of Transmittal. | |
| 99.2 | * | —Form of Notice of Guaranteed Delivery. | |
| 99.3 | * | —Form of Letter to | |
| 99.4 | * | —Form of Letter to Clients. | |
| 99.5 | * | —Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. | |
| * | Filed herewith |
| ** | To be filed by Amendment or as an exhibit to our Current Report on Form 8-K or other SEC filing to be incorporated by reference in this Registration Statement on Form S-4. |
Item 22. UNDERTAKINGS.Undertakings
(a) The undersigned registrantsregistrant hereby undertake:
(a)(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceedundertakes that, which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission (the "Commission") pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in the periodic reports filed
II-3
with or furnished to the Commission by the registrant pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant'sregistrant’s annual report pursuant to Sectionsection 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan'splan’s annual report pursuant to Sectionsection 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form.
(c) The undersigned registrant undertakes that every prospectus (i) that is filed pursuant to the paragraph immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers andor controlling persons of the registrantsregistrant pursuant to the foregoing provisions, or otherwise, the registrants haveregistrant has been advisedinformed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrantsregistrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
(d) To respond the requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
this registration statement through the date of responding to the request.
(e) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
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II-6
SIGNATURES
Pursuant to the requirements of the Securities Act Roadway Corporationof 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the cityCity of Akron, stateOverland Park, State of Ohio,Kansas, on December 14, 2001.
ROADWAY CORPORATION
By: /s/ JOHNthe 26th day of October, 2004.
| YELLOW ROADWAY CORPORATION | ||
By: | /s/ DONALD G. BARGER, JR. | |
Donald G. Barger, Jr. Senior Vice President and Chief Financial Officer | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Donald G. Barger, Todd M. Hacker and Daniel J. GASPAROVIC
------------------------------------
Name: John J. Gasparovic
Title: Vice President, General
CounselChuray, or any of them, severally, as his/her attorney-in-fact and Secretary
agent, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Commission, granting unto said attorney-in-fact and agent, and either of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities andindicated on the dates indicated.
26th day of October, 2004.
Signature | Title | |
/s/ WILLIAM D. ZOLLARS William D. Zollars | Chairman of the Board of Directors, President and (principal executive officer) | |
/s/ DONALD G. BARGER, JR. Donald G. Barger, Jr. | Senior Vice President and Officer (principal financial officer) | |
/s/ BHADRESH SUTARIA Bhadresh Sutaria | Vice President—Controller and Chief Accounting Officer (principal accounting officer) | |
/s/ CASSANDRA C. CARR Cassandra C. Carr | Director | |
/s/ HOWARD M. DEAN Howard M. Dean | Director | |
/s/ DENNIS E. FOSTER Dennis E. Foster | Director | |
/s/ JOHN C. MCKELVEY John C. McKelvey | Director | |
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Signature | Title | |
/s/ WILLIAM L. TRUBECK William L. Trubeck | Director | |
/s/ CARL W. VOGT Carl W. Vogt | Director | |
/s/ FRANK P. DOYLE Frank P. Doyle | Director | |
/s/ JOHN F. FIEDLER John F. Fiedler | Director | |
/s/ PHILLIPJ. Phillip J. Meek | Director | |
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act Roadway Express, Inc.of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the cityCity of Akron, stateOverland Park, State of Ohio,Kansas, on December 14, 2001.
ROADWAY EXPRESS, INC.
By: /s/ JOSEPH R. BONI III
------------------------------------
Name: Joseph R. Boni III
Title: Treasurer
the 26th day of October, 2004.
| YELLOW TRANSPORTATION, INC. | ||
By: | /s/ JAMES L. WELCH | |
James L. Welch President, Chief Executive Officer and Director | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Donald G. Barger, Todd M. Hacker and Daniel J. Churay, or any of them, severally, as his/her attorney-in-fact and agent, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Commission, granting unto said attorney-in-fact and agent, and either of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities andindicated on the dates indicated.
26th day of October, 2004.
Signature | Title | |
/s/ JAMES L. WELCH James L. Welch | President, Chief Executive Officer and Director (principal executive officer) | |
/s/ PHILLIP J. GAINES Phillip J. Gaines | Senior Vice President—Finance and Administration and financial officer and principal accounting officer) | |
/s/ JERRY C. BOWLIN Jerry C. Bowlin | Director | |
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act Roadway Express
International, Inc.of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the cityCity of Akron,
stateOverland Park, State of Ohio,Kansas, on December 14, 2001.
ROADWAY EXPRESS INTERNATIONAL, INC.
By: /s/ JOSEPH R. BONI III
------------------------------------
Name: Joseph R. Boni III
Title: Treasurer
the 26th day of October, 2004.
| YELLOW ROADWAY TECHNOLOGIES, INC. | ||
By: | /s/ MICHAEL J. SMID | |
Michael J. Smid President | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Donald G. Barger, Todd M. Hacker and Daniel J. Churay, or any of them, severally, as his/her attorney-in-fact and agent, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Commission, granting unto said attorney-in-fact and agent, and either of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities andindicated on the dates indicated.
26th day of October, 2004.
Signature | Title | |
/s/ MICHAEL J. SMID Michael J. Smid | President (principal executive officer) | |
/s/ MARTIN KRAUS Martin Kraus | Vice President—Finance (principal financial officer and | |
/s/ JERRY C. BOWLIN Jerry C. Bowlin | Director | |
/s/ PHILLIP J. GAINES Phillip J. Gaines | Director | |
/s/ JAMES L. WELCH James | Director | |
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act Roadway Reverse
Logistics, Inc.of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the cityCity of Akron,
stateOverland Park, State of Ohio,Kansas, on December 14, 2001.
ROADWAY REVERSE LOGISTICS, INC.
By: /s/ JOSEPH R. BONI III
------------------------------------
Name: Joseph R. Boni III
Title: Treasurer
the 26th day of October, 2004.
| MISSION SUPPLY COMPANY | ||
By: | /s/ JAMES L. WELCH | |
James L. Welch President and Director | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Donald G. Barger, Todd M. Hacker and Daniel J. Churay, or any of them, severally, as his/her attorney-in-fact and agent, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Commission, granting unto said attorney-in-fact and agent, and either of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities andindicated on the dates indicated.
26th day of October, 2004.
Signature | Title | |
/s/ JAMES L. James L. Welch | President and Director officer) | |
/s/ D. BRUCE GRESS D. Bruce Gress | Vice President—Finance (principal financial officer and | |
/s/ JERRY C. BOWLIN Jerry C. Bowlin | Director | |
/s/ PHILLIP J. Phillip J. Gaines | Director | |
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act Arnold Industries, Inc.of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the cityCity of Akron, stateOverland Park, State of Ohio,Kansas, on December 14, 2001.
ARNOLD INDUSTRIES, INC.
By: /s/ JOSEPH R. BONI III
------------------------------------
Name: Joseph R. Boni III
Title: Treasurerthe 26th day of October, 2004.
| YELLOW RELOCATION SERVICES, INC. | ||
By: | /s/ DONALD E. EMERY | |
Donald E. Emery President | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and Vice
President
appoints Donald G. Barger, Todd M. Hacker and Daniel J. Churay, or any of them, severally, as his/her attorney-in-fact and agent, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Commission, granting unto said attorney-in-fact and agent, and either of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities andindicated on the dates indicated.
26th day of October, 2004.
Signature | Title | |
/s/ DONALD E. EMERY Donald E. Emery | President (principal executive officer) | |
/s/ D. BRUCE GRESS D. Bruce Gress | Vice President—Finance (principal financial officer and principal accounting officer) | |
/s/ JERRY C. BOWLIN Jerry C. Bowlin | Director | |
/s/ PHILLIP J. Phillip J. | Director | |
/s/ JAMES L. WELCH James L. Welch | Director | |
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act Arnold Transportation
Services, Inc.of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the cityCity of Akron,
stateOverland Park, State of Ohio,Kansas, on December 14, 2001.
ARNOLD TRANSPORTATION SERVICES, INC.
By: /s/ JOSEPH R. BONI III
------------------------------------
Name: Joseph R. Boni III
Title: Treasurer
the 26th day of October, 2004.
| MERIDIAN IQ, INC. | ||
By: | /s/ JAMES RITCHIE | |
James Ritchie President and Chief Executive Officer | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Donald G. Barger, Todd M. Hacker and Daniel J. Churay, or any of them, severally, as his/her attorney-in-fact and agent, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Commission, granting unto said attorney-in-fact and agent, and either of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities andindicated on the dates indicated.
26th day of October, 2004.
Signature | Title | |
/s/ JAMES RITCHIE James Ritchie | President (principal executive officer) | |
/s/ ERIC FRIEDLANDER Eric Friedlander | Vice President—Finance and (principal financial officer and principal accounting officer) | |
/s/ TODD M. HACKER Todd M. Hacker | Director | |
/s/ BHADRESH A. SUTARIA Bhadresh A. Sutaria | Director | |
/s/ JAMES MCMULLEN James McMullen | Director | |
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act New Penn Motor Express,
Inc.of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the cityCity of Akron, stateOverland Park, State of Ohio,Kansas, on December 14, 2001.
NEW PENN MOTOR EXPRESS, INC.
By: /s/ JOSEPH R. BONI III
------------------------------------
Name: Joseph R. Boni III
Title: Treasurer
the 26th day of October, 2004.
| MIQ LLC | ||
By: | /s/ JAMES RITCHIE | |
James Ritchie President, Chief Executive Officer and Manager | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Donald G. Barger, Todd M. Hacker and Daniel J. Churay, or any of them, severally, as his/her attorney-in-fact and agent, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Commission, granting unto said attorney-in-fact and agent, and either of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities andindicated on the dates indicated.
26th day of October, 2004.
Signature | Title | |
/s/ JAMES RITCHIE James Ritchie | President, Chief Executive Officer (principal executive officer) | |
/s/ ERIC FRIEDLANDER Eric Friedlander | Vice President—Finance and Controller (principal financial officer and principal accounting officer) | |
/s/ JAMES MCMULLEN James McMullen | Manager | |
II-14
SIGNATURES
Pursuant to a Power of Attorney executed on
behalfthe requirements of the above-indicated officersSecurities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Overland Park, State of Kansas, on the 26th day of October, 2004.
| GLOBE.COM LINES, INC. | ||
By: | /s/ JAMES RITCHIE | |
James Ritchie President and Chief Executive Officer | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and directorsappoints Donald G. Barger, Todd M. Hacker and Daniel J. Churay, or any of New Penn Motor
Express, Inc.them, severally, as his/her attorney-in-fact and filedagent, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Commission, granting unto said attorney-in-fact and agent, and either of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as Exhibit 24fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 26th day of October, 2004.
Signature | Title | |
/s/ JAMES RITCHIE James Ritchie | President and Chief Executive Officer (principal executive officer) | |
/s/ ERIC FRIEDLANDER Eric Friedlander | Vice President—Finance and Controller (principal financial officer and principal accounting officer) | |
/s/ TODD M. HACKER Todd M. Hacker | Director | |
/s/ BHADRESH A. SUTARIA Bhadresh A. Sutaria | Director | |
/s/ JAMES MCMULLEN James McMullen | Director | |
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of New Penn Motor
Express, Inc.Overland Park, State of Kansas, on the 26th day of October, 2004.
| ROADWAY LLC | ||
By: | /s/ JAMES D. STALEY | |
James D. Staley President and Chief Executive Officer | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Donald G. Barger, Todd M. Hacker and Daniel J. Churay, or any of them, severally, as his/her attorney-in-fact and agent, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Commission, granting unto said attorney-in-fact and agent, and either of them, full power and authority to do and perform each such person.
By: /s/ JOSEPH R. BONI III
------------------------------------
Joseph R. Boni III,
Attorney-in-fact
II-11
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 26th day of October, 2004.
Signature | Title | |
/s/ JAMES D. STALEY James D. Staley | President and Chief Executive Officer (principal executive officer) | |
/s/ JOHN G. COLEMAN John G. Coleman | Vice President—Finance and Manager (principal financial officer and principal accounting officer) | |
/s/ JACK E. PEAK Jack E. Peak | Manager | |
/s/ ROBERT L. STULL Robert L. Stull | Manager | |
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Overland Park, State of Kansas, on the 26th day of October, 2004.
| ROADWAY EXPRESS, INC. | ||
By: | /s/ ROBERT L. STULL | |
Robert L. Stull President, Chief Executive Officer and Director | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Donald G. Barger, Todd M. Hacker and Daniel J. Churay, or any of them, severally, as his/her attorney-in-fact and agent, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Commission, granting unto said attorney-in-fact and agent, and either of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 26th day of October, 2004.
Signature | Title | |
/s/ ROBERT L. STULL Robert L. Stull | President, Chief Executive Officer and Director (principal executive officer) | |
/s/ JOHN G. COLEMAN John G. Coleman | Senior Vice President—Finance and Administration and Director (principal financial officer and principal accounting officer) | |
/s/ JACK E. PEAK Jack E. Peak | Director | |
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Overland Park, State of Kansas, on the 26th day of October, 2004.
| ROADWAY NEXT DAY CORPORATION | ||
By: | /s/ JAMES D. STALEY | |
James D. Staley President | ||
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Donald G. Barger, Todd M. Hacker and Daniel J. Churay, or any of them, severally, as his/her attorney-in-fact and agent, with full power of substitution and resubstitution, for him/her and in his/her name, place, and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Commission, granting unto said attorney-in-fact and agent, and either of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 26th day of October, 2004.
Signature | Title | |
/s/ JAMES D. STALEY James D. Staley | President (principal executive officer) | |
/s/ JOHN G. COLEMAN John G. Coleman | Vice President—Finance and Director (principal financial officer and principal accounting officer) | |
/s/ JACK E. PEAK Jack E. Peak | Director | |
/s/ ROBERT L. STULL Robert L. Stull | Director | |
II-18
EXHIBIT INDEX
| Exhibit No. | Description | ||
| 1.1 | * | —Form of | |
| 3.1 | —Certificate of | ||
| 3.2 | —Certificate of | ||
| 3.3 | —Bylaws of Yellow Roadway Corporation, as amended (incorporated herein by reference to Exhibit 3.1 to Yellow Roadway’s Quarterly Report on Form | ||
| 3.4 | —Certificate of Incorporation of Meridian IQ, Inc., formerly known as Yellow Dot Com Subsidiary, Inc., as amended (incorporated herein by reference to Exhibit 3.4 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | ||
| 3.5 | —Amended and Restated Bylaws of Meridian IQ, Inc., formerly known as Yellow Dot Com Subsidiary, Inc. (incorporated herein by reference to Exhibit 3.5 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | ||
| 3.6 | —Certificate of Incorporation of Yellow Roadway Technologies, Inc., formerly known as Yellow Technologies Inc., as amended (incorporated herein by reference to Exhibit 3.7 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | ||
| 3.7 | —Certificate of Amendment of Certificate of Incorporation of Yellow Roadway Technologies, Inc., formerly known as Yellow Technologies, Inc. (incorporated herein by reference to Exhibit 3.7 to Post-Effective Amendment No. 8 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed August 16, 2004, Reg. No. 333-109896). | ||
| 3.8 | —Amended and Restated Bylaws of Yellow Roadway Technologies, Inc., formerly known as Yellow Technologies Inc., (incorporated herein by reference to Exhibit 3.7 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | ||
| 3.9 | —Certificate of Incorporation of Globe.com Lines, Inc., as amended (incorporated herein by reference to Exhibit 3.9 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | ||
| 3.10 | —Amended and Restated Bylaws of Globe.com Lines, Inc. (incorporated herein by reference to Exhibit 3.9 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | ||
| 3.11 | —Articles of Incorporation of Yellow Relocation Services, Inc. (incorporated herein by reference to Exhibit 3.11 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | ||
| 3.12 | —Amended and Restated Bylaws of Yellow Relocation Services, Inc. (incorporated herein by reference to Exhibit 3.11 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | ||
| Exhibit No. | Description | |
| 3.13 | —Articles of Incorporation of Mission Supply Company, as amended (incorporated herein by reference to Exhibit 3.15 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | |
| 3.14 | —Amended and Restated Bylaws of Mission Supply Company (incorporated herein by reference to Exhibit 3.13 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.15 | —Articles of Incorporation of Yellow Transportation, Inc., as amended (incorporated herein by reference to Exhibit 3.14 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.16 | —Amended and Restated Bylaws of Yellow Transportation, Inc. (incorporated herein by reference to Exhibit 3.15 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.17 | —Certificate of Formation of Yellow GPS, LLC, as amended (incorporated herein by reference to Exhibit 3.21 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | |
| 3.18 | —Certificate of Amendment to the Certificate of Formation of Yellow GPS, LLC changing its name to MIQ LLC (incorporated herein by reference to Exhibit 3.17 to Post-Effective Amendment No. 7 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed August 3, 2004, Reg. No. 333-109896). | |
| 3.19 | —Amended and Restated Limited Liability Company Agreement of MIQ LLC, formerly known as Yellow GPS, LLC, and before that formerly known as Yellow Global, LLC (incorporated herein by reference to Exhibit 3.22 to Yellow Corporation’s Registration Statement on Form S-3, filed October 22, 2003, Reg. No. 333-109896). | |
| 3.20 | —Certificate of Formation of Roadway LLC, as amended (incorporated herein by reference to Exhibit 3.18 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.21 | —Limited Liability Company Agreement of Roadway LLC, formerly known as Yankee LLC (incorporated herein by reference to Exhibit 3.19 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.22 | —Amended and Restated Certificate of Incorporation of Roadway Express, Inc. (incorporated herein by reference to Exhibit 3.20 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.23 | —Amended and Restated By-Laws of Roadway Express, Inc. (incorporated herein by reference to Exhibit 3.21 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.24 | —Certificate of Incorporation of Roadway Next Day Corporation, as amended (incorporated herein by reference to Exhibit 3.22 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 3.25 | —By-Laws of Roadway Next Day Corporation, formerly known as Lion Corp., (incorporated herein by reference to Exhibit 3.23 to Yellow Roadway Corporation’s Registration Statement on Form S-3, filed February 23, 2004, Reg. No. 333-113021). | |
| 4.1 | —Paying Agency Agreement dated April 26, 1993 between Yellow Corporation and Citibank, N.A. (incorporated herein by reference to Exhibit 4.4 to Yellow Corporation’s Annual Report on Form 10-K for the year ended December | |
| Exhibit No. | Description | ||
| 4.2 | —Indenture (including form of note) dated August 8, 2003 among Yellow Corporation, certain subsidiary guarantors and Deutsche Bank Trust Company Americas, as trustee, relating to Yellow Roadway Corporation’s 5.0% Contingent Convertible Senior Notes due 2023 (incorporated herein by reference to Exhibit 4.5 to Yellow Corporation’s Registration Statement on Form S-4, filed August 19, 2003, Reg. No. 333-108081). | ||
| 4.3 | —Registration Rights Agreement dated August 8, 2003 among Yellow Corporation, certain subsidiary guarantors and Deutsche Bank Securities Inc., as representative of the initial purchasers (incorporated herein by reference to Exhibit 4.6 to Yellow Corporation’s Registration Statement on Form S-4, filed August 18, 2003, Reg. No. 333-108081). | ||
| 4.4 | —Indenture (including form of note) dated November 25, 2003 among Yellow Corporation, certain subsidiary guarantors and Deutsche Bank Trust Company Americas, as trustee, relating to Yellow Roadway Corporation’s 3.375% Contingent Convertible Senior Notes due 2023 (incorporated herein by reference to Exhibit 4.7 to Yellow Roadway Corporation’s Registration Statement on Form S-8, filed December 23, 2003, Reg. No. 333-11499). | ||
| 4.5 | —Registration Rights Agreement dated November 25, 2003 among Yellow Corporation, certain subsidiary guarantors and Deutsche Bank Securities Inc., as representative of the initial purchasers (incorporated herein by reference to Exhibit 4.8 to Yellow Roadway Corporation’s Registration Statement on Form S-8, filed December 23, 2003, Reg. No. 333-11499). | ||
| 4.6 | —Indenture (including form of note) dated November 30, 2001 among Roadway Corporation | ||
| 4.7 | ** | —Form of Indenture (including form of note) among Yellow Corporation, certain subsidiary guarantors and Deutsche Bank Trust Company Americas, as trustee, relating to the | |
| 4.8 | ** | —Form | |
| 5.1 | ** | —Opinion of | |
| 8.1 | ** | —Opinion of Fulbright & Jaworski L.L.P. regarding tax matters. | |
| 12.1 | —Statement of Computation of Ratios (incorporated herein by reference to Exhibit | ||
| 21.1 | —Subsidiaries of Yellow Roadway Corporation (incorporated herein by reference to Exhibit 21.1 to Yellow Roadway Corporation’s Annual Report on Form | ||
| 23.1 | * | —Consent of KPMG LLP, independent auditors for Yellow Roadway | |
| 23.2 | * | —Consent of Ernst & Young | |
| 23.3 | ** | —Consent of | |
| 24.1 | * | —Powers of | |
| 25.1 | ** | —Statement of Eligibility and Qualification of Trustee under the Trust Indenture Act of 1939, as amended, on Form T-1. | |
| 99.1 | * | —Form of Letter of Transmittal. | |
| 99.2 | * | —Form of Notice of Guaranteed Delivery. | |
| Exhibit No. | Description | ||
| 99.3 | * | —Form of Letter to | |
| 99.4 | * | —Form of Letter to Clients. | |
| 99.5 | * | —Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. | |