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Roadway Corporation

Roadway Corporation

founded: 1930



Contact Information:

headquarters: 1077 gorge blvd.
akron, oh 44310 phone: (330)384-1717 toll free: (800)257-2837 url: http://www.roadwaycorp.com

OVERVIEW

Roadway Corporation, a holding company, was formed in May of 2001 to expand and diversify the company's interests through acquisitions, mergers, and partnerships in the transportation and delivery industry. It holds two subsidiaries: Roadway Express Inc. and Roadway Next Day Corporation. The corporate structure is limited as all subsidiaries operate autonomous businesses.

Founded in 1930, Roadway Express Inc., the primary subsidiary of Roadway Corporation, is a less-than-truckload (LTL) carrier that caters to industrial, commercial, and retail businesses requiring transportation services in the two- to five-day region and long-haul markets across the United States. Reimer Express Lines Ltd., based in Winnipeg, Manitoba, is a subsidiary of Roadway Express. Operating 22 terminals in Canada, it is Canada's largest common carrier. Roadway S.A. de C.V., also a subsidiary of Roadway Express, operates in Mexico. In January of 2002 Roadway Express announced the addition of a third subsidiary to its portfolio: Roadway Air, which provides expedited, on-time deliveries via air.

In 2001 Roadway entered the next-day delivery service with the acquisition of Arnold Industries, which included New Penn and Arnold Transportation Services (ATS). Arnold Industries was restructured to become Roadway Next Day Corporation, of which New Penn and ATS are subsidiaries. New Penn provides LTL next-day service in the northeastern region of the United States. Florida-based Arnold Transportation Services provides regional and short-haul irregular route and truckload deliveries in a 37-state region.

COMPANY FINANCES

In 2001 Roadway generated $2.8 billion in revenues resulting in a net income of $30.8 million, down from $3 billion in revenues and $56.5 million net income in 2000. Along with revenues dropping 8.2 percent and net income dropping 45.5 percent, basic earnings per share also decreased, from $3.03 in 2000 to $1.67 in 2001. Poor performance continued into 2002 as Roadway reported a first quarter loss of $1.7 million, or 9 cents per share, down from $5 million net income, or 26 cents per share, posted for the same period in 2001. Revenues fell 2 percent year-on-year from $650.5 million to $637.2 million. During the downward trend, stock prices remained steady, closing in March 2002 at $37.00 per share, up from $21.84 at same time of the previous year.



ANALYSTS' OPINIONS

Roadway's performance during the fourth quarter of 2001, down 46 percent from 2000, was actually slightly better than analysts had predicted. Expectations are that Roadway will eventually recover from its losses in 2001, but at least some analysts believe that the stock, priced at $37.00 a share at the close of the first quarter of 2002, was higher than its true value. Due to the slow economy in the United States, Roadway's tonnage was down double figures. In addition LTL companies began edging into pricing competition at the beginning of 2002 in order to retain the freight business that they still had. With prices dropping and no short-term recovery of the economy in view, analysts' recommendations ranged between a cautious nod toward buying Roadway stock to encouraging investors to sell in order to take advantage of the inflated stock prices. Others recommended investors hold the stock until it is clear which direction the company will go in the medium-range future. Analysts view the acquisition of Arnold Industries as a positive step as next-day delivery services generate a higher profit margin than LTL services.



HISTORY

In 1930 when the trucking industry was in its infancy, brothers Galen and Carroll Roush founded Roadway Express in Akron, Ohio. Starting with 10 owner-operators, Roadway Express hauled LTL shipments between Chicago, Houston, and Kansas City. Within months terminals were opened in additional locations, including Atlanta, Baltimore, Indianapolis, Nashville, New York, and Philadelphia. By 1935 the trucking industry had expanded sufficiently to cause deep concern among railroaders, who were still the dominant force in production transportation. The railroad industry successfully lobbied Congress, which passed the Motor Carrier Act in 1935. The act created the Interstate Commerce Commission (ICC) to oversee standards and rates. The new law also limited the right to operate trucking operations to those already in existence and any new ones that could prove convenience and necessity. Although Roadway Express was required to justify its operations and abide by the ICC's rulings, the regulation of the trucking industry also served to limit the company's competition and thus allow it to gain a dominant position in many key markets.

FAST FACTS: About Roadway Corporation


Ownership: Roadway Corporation is a publicly held company and trades on the NASDAQ Stock Exchange.

Ticker Symbol: ROAD

Officers: Michael W. Wickham, 54, Chmn. and CEO, 2001 compensation $1,300,000; James D. Staley, 51, Pres. and COO (Roadway Express), 2001 compensation $894,000; J. Dawson Cunningham, 53, EVP and CFO, 2001 total pay $776,000

Employees: 28,000

Principal Subsidiary Companies: Roadway Corporation's main transportation arm is Roadway Express. Roadway Air, Reimer Express Lines Ltd. (Canada) and Roadway S.A. de C.V. (Mexico) are subsidiaries of Roadway Express. Roadway Corporation's other subsidiary is Roadway Next Day Corporation. New Penn and Arnold Transportation Services are subsidiaries of Roadway Next Day.

Chief Competitors: Roadway Corporation's primary competitors include Airborne, American Freight-ways, Consolidated Freightways, DHL, FedEx, UPS, U.S. Postal Service, and USFreightways.




The trucking industry expanded rapidly in the booming post-World War II economy. In 1945 Roadway Express began replacing owner-operators with company drivers. The company also began to focus on the LTL business, charging customers three times more per ton than if shipped by the full truckload. During the 1950s, with a substantial loan from Chase Manhattan Bank, Roadway Express underwent extensive expansion of its terminal system. Between 1958 and 1968, the company's operations network grew from 60 to 135 terminals. From the 1950s into the 1970s Roadway Express was the largest LTL carrier in the United States.

In 1956 Carroll Roush, at serious odds with his brother, decided to sell his shares to the public for $5 million. Solely in charge, Galen Roush pushed his company aggressively with spectacular results, and by the 1970s the debt from rapid expansion during the previous decade was paid off. Operating with a return on investment that averaged 20 percent, Roadway Express was becoming a giant in the LTL carrier business.

The market environment changed dramatically in 1980 when the trucking industry underwent deregulation. This paved the way for a multitude of new competitors to stream into the market. Even though new companies were offering cut-rate prices to attract business, for several years Roadway Express kept its high-end prices and boasted of its higher quality services. The strategy failed, and by 1982 Roadway Express had slipped to third in market share. In response, the company decided to reduce its rates and increase its exposure by developing the first advertising campaign in company history.

In 1982 the company reorganized, creating the holding company Roadway Services Inc. with Roadway Express as its main subsidiary. The company then moved to grow its business through acquisitions, some of which proved successful while others failed and were subsequently sold off. During the 1990s Roadway Services increased its international presence, setting up service networks in The Netherlands, Belgium, France, Luxembourg, England, and Germany as well as Mexico. In 1991 a depressed economy pushed the big three trucking firms, Roadway Services, Yellow, and Consolidated Freight into a price war and profits were adversely affected by a very narrow profit margin. In 1994 Roadway Express' unionized workers went on strike for over three weeks. The work stoppage resulted in the company posting a net loss of $68 million for that quarter.

In 1995 Roadway Express spun off as a separate, publicly traded company. Analysts suspected that the parent company was trying to rid itself of Roadway Express due to the high cost of unionized labor. Few held out hope that Roadway Express would prevail on its own. However, the company posted a profit of $21.8 million in 1996, just a year after the spinoff. Management aggressively cut costs and worked with the union to reach cooperative agreements. The strategy paid off and Roadway Express continued to expand through organic growth and acquisition. Profits increased accordingly, growing from $36.9 in 1997 to $56.5 in 2000, before falling off sharply in 2001 due to a downturn in the economy. During 2001 the company underwent reorganization; Roadway Corporation was established as a holding company with Roadway Express once again becoming a subsidiary.

CHRONOLOGY: Key Dates for Roadway Express, Inc.


1930:

Brothers Galen and Carroll Roush open Roadway Express in Akron, Ohio, and by the end of the year have terminals open in nine states

1941:

World War II causes a substantial increase in demand for truck transportation

1945:

Owner-operator drivers are replaced with hired company drivers

1956:

Carroll Roush sells his half of the business to the public for $5 million

1975:

Roadway Express is the number-one trucking company in the United States, producing high profit margins by specializing in less-than-truckload shipments and operating 300 terminals in 40 states

1982:

Profits decline and Roadway falls to third in the industry behind Yellow Freight and Consolidated Freightways; Roadway Services, Inc. is established as a holding company with Roadway Express as its primary subsidiary

1985:

Launches Roadway Package System, which struggles at first but eventually becomes profitable

1990:

Moves into European market with subsidiary Roberts Express, serving Belgium, France, Luxembourg, the Netherlands, and Germany

1993:

Becomes second largest freight-moving company in the United States with sales nearing $3 billion

1996:

Roadway Express separates from Roadway Services, Inc. and becomes a publicly held company

1997:

Expands market arena by purchasing Canadian trucking firm, Reimer Express Lines, and by launching Asian Roadway Express to service Indonesia, Malaysia, Singapore, and Thailand

2001:

Reorganizes by creating Roadway Corporation as a holding company with Roadway Express as its primary operating subsidiary



STRATEGY

Roadway's strategic focus is multifaceted and includes special attention to information technology and customer service, safety, and remaining competitive. Information technology is a fundamental ingredient in Roadway's ability to provide top-rated services to its customers. The company takes advantage of technologies related to e-commerce in order to integrate scheduling and transit management to provide optimum routing and real-time delivery information. At Roadway Express' Web site, customers are able to check shipment status information as well as obtain online quotes, pick up and delivery notification, and pick up requests. Customers can obtain real-time information on their orders via my.roadway.com, a secure site accessible only to Roadway customers by password. Over two terabytes of shipment data are stored online, and over 99 million transactions are processed daily by the information technology systems. On average, the online shipment tracking systems processes 1,100 requests per second.

The safety of both the public and employees is another strategic priority for Roadway. Tractors, trailers, and other machinery undergo regular inspection and maintenance, and Roadway acknowledges its drivers that go without preventable accidents for extended periods.

To remain competitive in the transportation market, Roadway invests in technology that improves efficiency in its management systems that result in decreased transit times. The company has also increased its competitiveness in regional transit routes through its "Express From" service, which usually delivers in two days. In its LTL long-haul business, Roadway relies on its seamless border crossing into Canada and Mexico, as well as specialized services such as on-time guarantees, volume shipments, and cold-storage loads.



INFLUENCES

Roadway was negatively impacted by the economic recession that took hold during the first half of 2001 and was further exacerbated by the terrorist's attacks on Washington, D.C. and New York on September 11. During the first quarter of 2002, daily tonnage carried by Roadway Express was 14 percent below year-on-year levels. A decrease in commercial and industrial activity during an economic downturn translates into a decrease in transportation needs; on the other hand, during economic boons, the LTL industry profits from extended needs for product delivery. Another factor that influences Roadway's bottom line is the variable and unpredictable price of fuel. Although fluctuations in price are somewhat offset by a variable-rate fuel surcharge, fuel costs can be either a negative or positive factor. Labor relations are also a factor in Roadway's business. Over 70 percent of its 28,000 employees are represented by a labor union, primarily the International Brotherhood of Teamsters.



CURRENT TRENDS

With the acquisition of Arnold Industries in 2001, Roadway marked its clear intentions to move into the next-day LTL shipping business. Other acquisitions are expected to follow in the future to expand Roadway's next-day business region by region. Because next-day hauling is the fastest growing segment of the trucking industry as well as a more profitable endeavor than medium- and long-hauls, Roadway is committed to carving out a niche in the market by acquiring successful regionally-based companies and building on the proven strategies already marked out by New Penn. Roadway further expanded its portfolio with the introduction of Roadway Air in 2002.

Because the LTL industry follows certain cyclical business trends in which certain periods of the year tend to be busier whereas other periods product fewer revenues, Roadway has worked for several years to convert fixed costs into variable costs that could be reduced during off seasons or during economic downturns that reduce the tonnage. For example, instead of purchasing new tires to outfit its trucks and trailers, Roadway began leasing tires on a per mile basis. The company also began moving its long-haul loads on railroad flatcars, thus reducing the number of trucks and drivers that needed to be retained during slow business periods. More than 25 percent of all ton miles are via the rails. Consequently, cost is always relative to the revenues: more revenue equals more cost, and reduced revenue equals reduced cost. Other cost-cutting measures have included a 12 percent reduction in work force between 2001 and 2002, and some tractors and trailers have been taken out of service to avoid maintenance costs.




PRODUCTS

Along with nationwide coverage in the United States, Roadway Express also provides delivery into and out of Canada and Mexico, as well as export services to 66 countries worldwide. The company maintains 379 terminals—257 company-owned and 122 leased. On an average day, Roadway Express' fleet of 34,500 trailers and 10,700 tractors are in transit with over 50,000 shipments. In 2001, the company delivered 7.4 million tons of freight, and its drivers logged over 500 million miles. Reimer Express Lines provides primarily LTL services to destinations throughout Canada, the United States, and Mexico as well as export services to over 65 other countries. Through its 19 terminals in Mexico, Roadway S.A. de C.V. provides LTL services to the electronics, automotive, and textile industries as well as other consumer sectors. With access to nearly 3,000 planes, over 12,000 daily flight departures, and over 40,000 trailers coordinated through a partnership with Integres Global Logistics, Roadway Air provides expedited on-time, hour-specific or day-specific delivery services. Its services are available in all 50 states and Puerto Rico.

New Penn, based in Lebanon, Pennsylvania, specializes in loads of several hundred pounds or more and 95 percent of its deliveries are next-day. As such the company does not directly compete with United Parcel Service or FedEx Corporation, both of which primarily ship loads of 50 pounds or less. ATS is an irregular route and dedicated truckload hauler with an average destination of 450 miles. Based in Jacksonville, Florida, it competes in the truckload sector in a 37-state area of midwestern and eastern states.



GLOBAL PRESENCE

All Roadway Express shipments originate from the United States, all Reimer Express Lines originate from Canada, and all Roadway S.A. de C.V. originate in Mexico, but destinations for all shipments range from the United States, Canada, and Mexico, to more than 65 other countries around the world. Asian Roadway Express, a joint venture, provides services between North America and Singapore, Indonesia, Malaysia, and Thailand. Services are also provided to Africa, Australia, Europe, and the Middle East.



CORPORATE CITIZENSHIP

Corporate citizenship focuses on highway safety, children's health and educational needs, and the United Way. Program participation and support are offered in numerous community service projects. To promote highway safety, Roadway displays "No Zone" signs on its trailers to warn motorists of the driver's blind spots. Children are supported through such programs as Christina's Smile Dental Trailers, a mobile dentistry service that travels in two 48-foot trailers, and St. Jude's Children's Research Hospital. Roadway also participates in a variety of driver education and training programs. Roadway addresses environmental issues through employee training, recycling, employment of fuel-efficient machinery, use of alternative fuels, and advanced leak detection systems for its underground fuel storage tanks.

SAFETY FIRST

At the beginning of 2002, more than 1,600 active Roadway drivers had logged more than 1 million accident free miles; 227 drivers had logged more than 2 million accident-free miles; and 55 active drivers had logged more than 3 million accident-free miles. In 1998 Roadway honored its drivers with more than 3,000 safe miles by presenting them their own new Volvo tractors. In the same year Roadway Express driver Gary Ott was named National Champion at the ATA National Truck Driving Championships.

EMPLOYMENT

Roadway acknowledges that its employees are its greatest asset. Accordingly, the company is deliberate in its efforts to provide a positive working environment that promotes cooperation, diversity, and professional growth. As a unionized carrier Roadway provides highly competitive wages and excellent benefits that allow the company to attract and hire quality drivers and support staff. Driver retention is 98 percent, and average length of employment is 11.5 years, which provides the company with an experienced and well-trained workforce. Along with drivers Roadway hires individuals to work in an array of fields, including accounting and finance, customer service, information technology, management trainee, marketing, communications, mechanics, and sales.




SOURCES OF INFORMATION

Bibliography

kiernan, pat, and ali velshi. "roadway express ceo—controlling costs, excess capacity help hold profits up." cnn, 23 january 2002.

"roadway corporation," hoover's company profiles, 2002. available at http://www.hoovers.com

"roadway corporation," the wall street journal, 10 april 2002.

roadway corporation home page, 2002. available at http://www.roadwaycorporationcom.

"roadway express launches roadway air service as a unique solution for customer shipping needs." business wire, 2 january 2002.

"roadway reports a loss." the new york times, 9 april 2002.

"roadway swung to fiscal 1st-quarter loss, hurt by weak demand." dow jones business news, 9 april 2002.

winter, ralph. "roadway steers toward growth in next-day game," the wall street journal, 27 december 2001.


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. roadway corporation's primary sics are:

4213 trucking, except local

4731 arrangement transport freight & cargo

6719 holding companies, not elsewhere classified

also investigate companies by their north american industry classification system codes, also known as naics codes. roadway corporation's primary naics codes are:

484121 general freight trucking, long-distance, truckload

488510 freight transportation arrangement

551112 offices of other holding companies

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