1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-12255
YELLOW CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 48-0948788
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10777 Barkley, P.O. Box 7563, Overland Park, Kansas 66207
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(Address of principal executive offices) (Zip Code)
(913) 967-4300
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(Registrant's telephone number, including area code)
No Changes
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
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Common Stock, $1 Par Value 28,105,829 shares
2
YELLOW CORPORATION
INDEX
Item Page
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PART I
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1. Financial Statements
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 3
Statements of Consolidated Income -
Three Months and Six Months Ended June 30, 1995 and 1994 4
Statements of Consolidated Cash Flows -
Six Months Ended June 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II
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6. Exhibits and Reports on Form 8-K 9
Signatures 9
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3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
Yellow Corporation and Subsidiaries
June 30, 1995 and December 31, 1994
(Amounts in thousands except share data)
(Unaudited)
June 30 December 31
1995 1994
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ASSETS
CURRENT ASSETS:
Cash $ 10,999 $ 17,613
Short-term investments 7,392 7,305
Accounts receivable 352,261 295,332
Other current assets 91,297 83,107
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Total current assets 461,949 403,357
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OPERATING PROPERTY:
Cost 1,928,841 1,866,565
Less - Accumulated depreciation 1,025,482 989,281
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Net operating property 903,359 877,284
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OTHER ASSETS 26,865 26,580
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$1,392,173 $1,307,221
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 110,289 $ 118,412
Wages and employees' benefits 132,436 118,364
Other current liabilities 119,095 131,474
Current maturities of long-term debt 2,395 7,741
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Total current liabilities 364,215 375,991
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OTHER LIABILITIES:
Long-term debt 331,354 240,019
Deferred income taxes 54,273 54,481
Claims, insurance and other 185,355 175,887
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Total other liabilities 570,982 470,387
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SHAREHOLDERS' EQUITY:
Common stock, $1 par value 28,858 28,858
Capital surplus 6,678 6,678
Retained earnings 439,060 447,887
Shares held by Stock Sharing Plan - (4,961)
Treasury stock (17,620) (17,619)
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Total shareholders' equity 456,976 460,843
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$1,392,173 $1,307,221
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The accompanying notes are an integral part of these statements.
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4
STATEMENTS OF CONSOLIDATED INCOME
Yellow Corporation and Subsidiaries
For the Quarter and Six Months Ended June 30
(Amounts in thousands except per share data)
(Unaudited)
Second Quarter Six Months
-------------------- -----------------------
1995 1994 1995 1994
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OPERATING REVENUE $ 773,825 $ 592,211 $1,538,823 $1,340,370
--------- --------- ---------- ----------
OPERATING EXPENSES:
Salaries, wages and benefits 514,564 417,100 1,016,661 923,810
Operating expenses and supplies 117,900 95,057 233,738 209,960
Operating taxes and licenses 28,307 24,414 57,266 54,183
Claims and insurance 16,808 15,747 37,222 38,374
Communications and utilities 10,540 9,909 22,009 20,848
Depreciation 33,773 33,264 67,879 66,787
Purchased transportation 46,067 26,769 89,581 60,875
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Total operating expenses 767,959 622,260 1,524,356 1,374,837
--------- --------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 5,866 (30,049) 14,467 (34,467)
--------- --------- ---------- ----------
NONOPERATING (INCOME) EXPENSES:
Interest expense 5,720 4,719 10,777 9,243
Other, net (1,408) (876) (3,690) (908)
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Nonoperating expenses, net 4,312 3,843 7,087 8,335
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INCOME (LOSS) BEFORE INCOME TAXES 1,554 (33,892) 7,380 (42,802)
INCOME TAX PROVISION (BENEFIT) 515 (12,016) 3,143 (14,542)
--------- --------- ---------- ----------
NET INCOME (LOSS) $ 1,039 $ (21,876) $ 4,237 $ (28,260)
========= ========= ========== ==========
AVERAGE COMMON SHARES OUTSTANDING 28,106 28,108 28,106 28,106
========= ========= ========== ==========
EARNINGS (LOSS) PER SHARE $ .04 $ (.78) $ .15 $ (1.01)
========= ========= ========== ==========
The accompanying notes are an integral part of these statements.
4
5
STATEMENTS OF CONSOLIDATED CASH FLOWS
Yellow Corporation and Subsidiaries
For the Six Months Ended June 30
(Amounts in thousands)
(Unaudited)
1995 1994
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OPERATING ACTIVITIES:
Net cash from operating activities $ 7,043 $ 50,903
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INVESTING ACTIVITIES:
Acquisition of operating property (104,054) (99,990)
Proceeds from disposal of operating property 12,858 6,587
Purchases of short-term investments (5,335) (3,836)
Proceeds from maturities of short-term investments 5,248 4,724
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Net cash used in investing activities (91,283) (92,515)
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FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 37,000 14,000
Repayment of long-term debt (16,700) (2,896)
Commercial paper borrowings, net 70,537 44,842
Cash dividends paid to shareholders (13,210) (13,208)
Reduction of Stock Sharing Plan debt guarantee (4,961) (4,960)
Shares allocated by Stock Sharing Plan 4,961 4,960
Other, net (1) 111
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Net cash from financing activities 77,626 42,849
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NET INCREASE (DECREASE) IN CASH (6,614) 1,237
CASH, BEGINNING OF PERIOD 17,613 13,937
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CASH, END OF PERIOD $ 10,999 $ 15,174
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 5,789 $ 1,654
========= =========
Interest paid $ 9,507 $ 9,048
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The accompanying notes are an integral part of these statements.
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6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Yellow Corporation and Subsidiaries
1. The accompanying consolidated financial statements include the accounts
of Yellow Corporation and its wholly-owned subsidiaries (the company)
and have been prepared by the company, without audit by independent
public accountants, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
normal recurring adjustments necessary for a fair statement of the
results of operations for the interim periods included herein have been
made. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from these
statements pursuant to such rules and regulations. Accordingly, the
accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements included in the
company's 1994 Annual Report to Shareholders.
2. The company provides freight transportation services through its
subsidiaries, Yellow Freight System, Inc. (Yellow Freight), Preston
Trucking Company, Inc. (Preston Trucking), Saia Motor Freight Line, Inc.
(Saia), CSI/Reeves, Inc. (CSI/Reeves), WestEx, Inc. (WestEx) and Yellow
Logistics Services, Inc. (Yellow Logistics). Yellow Technology
Services, Inc. (Yellow Technology) supports the company's subsidiaries -
primarily Yellow Freight - with information technology. Yellow Freight,
the company's principal subsidiary, comprises approximately 77% of total
revenue while Preston Trucking comprises approximately 14% and Saia
comprises approximately 6%.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
June 30, 1995 Compared to December 31, 1994
Working capital increased by $70.3 million during the first six months of 1995,
resulting in a $97.7 million positive working capital position at June 30,
1995. The increase is primarily due to growth in accounts receivable,
partially because of increased revenue levels at the end of the respective
periods of comparison. Additionally, conversion to a new system for customer
billing and stating contributed to the growth in days sales outstanding. The
company expects to reverse the trend in days sales outstanding during the
remainder of 1995 and early 1996.
The company increased its total debt level by $86.0 million in the first six
months of 1995 compared to that of December 31, 1994 with borrowings from
commercial paper and medium-term notes. These borrowings were used to fund
capital expenditures as accounts receivable growth mostly offset cash flows
from other operating activities. Most of the capital expenditures were for
revenue equipment at Yellow Freight and Saia. It is anticipated that the
remaining capital expenditures for 1995 will be financed through
internally-generated funds and additional borrowings. Net capital expenditures
for 1995 are estimated to be $140 million.
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7
FINANCIAL CONDITION (continued)
The company replaced its $100 million credit agreement during the second
quarter. A new five year $200 million credit agreement with a group of eleven
banks was established to support the commercial paper program and provide
financing capacity for other corporate purposes. The new credit agreement also
enabled the company to increase the authorized size of its commercial paper
program to $150 million.
Given that price discounting and other adverse industry fundamentals are
continuing as described below, the company expects to report a loss for the
full year 1995. The extent of this loss, as well as profitability for 1996, is
dependent upon improvement in pricing and other industry fundamentals. In view
of this, the Board of Directors has decided to suspend the company's quarterly
dividend. This action will be combined with increased cost reduction efforts,
as well as cutbacks in planned capital expenditure levels.
Additionally, the company recently signed a Letter of Intent to sell
CSI/Reeves, a provider of transportation and other services to the carpet and
floor covering industry. This sale is consistent with the company's strategy
of concentrating on its core businesses and will have no material impact on the
company's financial results. The company expects this transaction to close
prior to year end.
RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 1995 and 1994
Yellow Corporation operating revenue in the second quarter was $773.8 million,
up 30.7% from the $592.2 million recorded in last year's strike-impacted second
quarter. Excluding the impact of the strike, revenue was essentially flat.
Net income of $1.0 million, or $.04 per share, for the quarter compares to a
loss of $21.9 million, or $.78 per share, in the same quarter last year. A
24-day strike by the International Brotherhood of Teamsters (Teamsters) in
April 1994 against Yellow Freight severely depressed operating revenue and
caused the large loss.
Yellow Freight recorded operating revenue of $595.3 million in the second
quarter of 1995 compared to $420.1 million in the second quarter of 1994.
Operating income for the current quarter was $8.0 million compared to an
operating loss of $34.3 million in the same quarter last year. After adjusting
for the strike impact in 1994, Yellow Freight's operating results showed a
deterioration from the prior year. Wide-spread price discounting in the second
quarter, compounded by continued slowing in the economy and competitive
pressures, caused most of this decline. In addition, union wage and benefit
increases effective April 1 negatively impacted expense levels.
Although tonnage at Yellow Freight was up 43.8% in this year's second quarter
compared to last year's strike depressed second quarter, for the last two
months of the quarter, total tonnage was up only 1.8% on a per day basis.
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8
RESULTS OF OPERATIONS (continued)
While the softness in business levels has reduced growth, Yellow Freight
continues to move forward with improved service, reduced transit times and an
ongoing emphasis on productivity. In July Yellow Freight announced Further
Faster(TM), a transit time reduction program that will allow it to take one or
more days off its service and 2-Day USA(TM) which provides broad two-day service
for shipments within 500-700 miles. By August 1 Yellow Freight plans to
deliver 40% of its freight within two days and 85% in three days or less.
These programs will increase costs in the short term but are expected to
provide future business volume and profitability improvements.
Preston Trucking continues to expand the geographical coverage of its
SuperRegion while on-time reliability remains extremely high. Operating
revenue for the second quarter was $104.8 million, down 8.2% compared to $114.1
million in the second quarter last year. Preston Trucking saw a dramatic
increase in revenue during the second quarter of 1994 as they returned to work
under an interim agreement with the Teamsters after only six days on strike.
The weak economy and pricing pressure resulted in a $1.3 million operating loss
in the second quarter of 1995 compared to operating income of $2.5 million in
the same quarter last year. In addition, union wage and benefit increases
combined with a step-down in the wage reduction program netted a 5% increase in
labor costs effective April 1.
Saia experienced solid revenue growth of 8.4% in this year's second quarter,
reaching $51.3 million compared to $47.3 million in 1994 which benefited from
the strike against the national carriers. Operating income was $2.7 million
for the second quarter of 1995 compared to $5.4 million in the strike-benefited
second quarter of 1994. Saia's expansion into the Carolinas is proceeding as
planned with eight terminals opened at the end of July.
Comparison of Six Months Ended June 30, 1995 and 1994
For the first half of 1995 operating revenue was $1.54 billion up from $1.34
billion in the first half of 1994. Excluding the impact of the strike in the
second quarter of 1994, revenue was up only slightly. Net income for the first
six months was $4.2 million, or $.15 per share, compared to a net loss of $28.3
million, or $1.01 per share, for the same period last year.
Yellow Freight recorded operating revenue of $1.19 billion in the first half of
1995 compared to $1.02 billion in the first half of 1994. Operating income for
the first six months of 1995 was $17.1 million compared to an operating loss of
$32.6 million in the same period last year. Price discounting in the second
quarter, compounded by continued slowing in the economy and competitive
pressures, as well as union wage and benefit increases effective April 1,
resulted in the moderate operating income for the 1995 period. A 24-day
Teamster strike in April 1994 caused the decreased operating revenue and large
operating loss in the 1994 period.
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RESULTS OF OPERATIONS (continued)
Operating revenue for Preston Trucking in the first six months of 1995 was
$208.1 million, down 3.1% compared to $214.8 million in 1994. The 1994 period
contained benefits from additional business volume during the strike as
described above. Operating income in the first six months of 1995 was $.4
million compared to an operating loss of $3.3 million in the same period last
year. The 1994 period included the impact of severe winter weather in the
first quarter that caused significant business disruptions and higher operating
expenses, offsetting the benefits of additional business during the strike.
Saia recorded operating revenue of $100.5 million in the first half of 1995
compared to $88.3 million in the same period of 1994, an increase of 13.9%.
Operating income was $5.3 million for the first six months of 1995 compared to
$8.0 million in the same period last year. The 1994 period benefited
significantly from the second quarter strike. Additionally, increased business
from new terminal openings over the last year contributed to revenue growth but
were offset by start up costs. These expansions are expected to increase
future profitability as business volumes increase and density benefits are
realized.
Due to continued price discounting, soft business levels, increased labor
costs, transit time improvement start up expenses and other corporate
development expenses, the company expects to show an operating loss for the
full year of 1995.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit (27) - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
On June 12, 1995, a Form 8-K was filed under Item 5, Other
Events, which reported that the company announced on June 8, 1995, that
it expects to report in the range of a small profit to a small loss for
the second quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
YELLOW CORPORATION
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Registrant
Date: August 10, 1995 /s/ H. A. Trucksess, III
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H. A. Trucksess, III
Senior Vice President - Finance
Date: August 10, 1995 /s/ Phillip A. Spangler
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Phillip A. Spangler
Vice President and Treasurer
9
5
1,000
6-MOS
DEC-31-1995
JAN-01-1995
JUN-30-1995
10,999
0
352,261
0
0
461,949
1,928,841
1,025,482
1,392,173
364,215
331,354
28,858
0
0
428,118
1,392,173
0
1,538,823
0
1,524,356
0
0
10,777
7,380
3,143
4,237
0
0
0
4,237
.15
.15
