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 September 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 _______________________
Commission file number 0-12255
YELLOW CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 48-0948788
- ----------------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10777 Barkley, P.O. Box 7563, Overland Park, Kansas 66207
--------------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(913) 967-4300
(Registrant's telephone number, including area code)
No Changes
- --------------------------------------------------------------------------------
(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 ___
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 October 31, 1995
----- -------------------------------
Common Stock, $1 Par Value 28,105,797 shares
2
YELLOW CORPORATION
INDEX
Item Page
- ---- ----
PART I
------
1. Financial Statements
Consolidated Balance Sheets -
September 30, 1995 and December 31, 1994 3
Statements of Consolidated Income -
Three and Nine Months Ended September 30, 1995 and 1994 4
Statements of Consolidated Cash Flows -
Nine Months Ended September 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
-------
6. Exhibits and Reports on Form 8-K 10
Signatures 10
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3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
Yellow Corporation and Subsidiaries
September 30, 1995 and December 31, 1994
(Amounts in thousands except share data)
(Unaudited)
September 30 December 31
1995 1994
---------- ----------
ASSETS
CURRENT ASSETS:
Cash $ 18,070 $ 17,613
Short-term investments 6,493 7,305
Accounts receivable 359,716 295,332
Other current assets 97,213 83,107
---------- ----------
Total current assets 481,492 403,357
---------- ----------
OPERATING PROPERTY:
Cost 1,942,726 1,866,565
Less - Accumulated depreciation 1,045,038 989,281
---------- ----------
Net operating property 897,688 877,284
---------- ----------
OTHER ASSETS 28,006 26,580
---------- ----------
$1,407,186 $1,307,221
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 105,785 $ 118,412
Wages and employees' benefits 135,065 118,364
Other current liabilities 143,827 131,474
Current maturities of long-term debt 2,420 7,741
---------- ----------
Total current liabilities 387,097 375,991
---------- ----------
OTHER LIABILITIES:
Long-term debt 337,555 240,019
Deferred income taxes 55,077 54,481
Claims, insurance and other 181,695 175,887
---------- ----------
Total other liabilities 574,327 470,387
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value 28,858 28,858
Capital surplus 6,678 6,678
Retained earnings 427,846 447,887
Shares held by Stock Sharing Plan - (4,961)
Treasury stock (17,620) (17,619)
---------- ----------
Total shareholders' equity 445,762 460,843
---------- ----------
$1,407,186 $1,307,221
========== ==========
The accompanying notes are an integral part of these statements.
3
4
STATEMENTS OF CONSOLIDATED INCOME
Yellow Corporation and Subsidiaries
For the Quarter and Nine Months Ended September 30
(Amounts in thousands except per share data)
(Unaudited)
Third Quarter Nine Months
--------------------- -----------------------
1995 1994 1995 1994
---- ---- ---- ----
OPERATING REVENUE $ 771,965 $ 769,259 $2,310,788 $2,109,629
--------- --------- ---------- ----------
OPERATING EXPENSES:
Salaries, wages and benefits 523,470 501,247 1,540,131 1,425,057
Operating expenses and supplies 118,607 110,862 352,345 320,822
Operating taxes and licenses 28,512 28,460 85,778 82,643
Claims and insurance 17,124 20,945 54,346 59,319
Communications and utilities 11,166 9,850 33,175 30,698
Depreciation 33,694 33,202 101,573 99,989
Purchased transportation 51,758 37,517 141,339 98,392
--------- --------- ---------- ----------
Total operating expenses 784,331 742,083 2,308,687 2,116,920
--------- --------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS (12,366) 27,176 2,101 (7,291)
--------- --------- ---------- ----------
NONOPERATING (INCOME) EXPENSES:
Interest expense 6,274 4,865 17,051 14,108
Other, net (186) (468) (3,876) (1,376)
--------- --------- ---------- ----------
Nonoperating expenses, net 6,088 4,397 13,175 12,732
--------- --------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (18,454) 22,779 (11,074) (20,023)
INCOME TAX PROVISION (BENEFIT) (6,820) 9,575 (3,677) (4,967)
--------- --------- ---------- ----------
INCOME (LOSS) BEFORE EXTRA. ITEM (11,634) 13,204 (7,397) (15,056)
EXTRAORDINARY ITEM -- WRITE-OFF
OPERATING RIGHTS - (4,058) - (4,058)
--------- --------- ---------- ----------
NET INCOME (LOSS) $ (11,634) 9,146 $ (7,397) $ (19,114)
========= ========= ========== ==========
AVERAGE COMMON SHARES OUTSTANDING 28,106 28,108 28,106 28,107
========= ========= ========== ==========
EARNINGS (LOSS) PER SHARE:
Income (loss) before extra. item $ (.41) $ .47 $ (.26) $ (.54)
========= ========= ========== ==========
Net income (loss) $ (.41) $ .33 $ (.26) $ (.68)
========= ========= ========== ==========
The accompanying notes are an integral part of these statements.
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5
STATEMENTS OF CONSOLIDATED CASH FLOWS
Yellow Corporation and Subsidiaries
For the Nine Months Ended September 30
(Amounts in thousands)
(Unaudited)
1995 1994
--------- ---------
OPERATING ACTIVITIES:
Net cash from operating activities $ 17,275 $ 98,026
--------- ---------
INVESTING ACTIVITIES:
Acquisition of operating property (140,150) (135,198)
Proceeds from disposal of operating property 16,119 14,573
Purchases of short-term investments (6,707) (7,951)
Proceeds from maturities of short-term investments 7,519 6,956
Proceeds from sale of CSI/Reeves, Inc., net 5,106 -
--------- ---------
Net cash used in investing activities (118,113) (121,620)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 47,748 14,000
Repayment of long-term debt (22,349) (13,840)
Commercial paper borrowings, net 71,607 43,925
Proceeds from unsecured bank credit lines, net 17,500 -
Cash dividends paid to shareholders (13,210) (19,812)
Reduction of Stock Sharing Plan debt guarantee (4,961) (4,960)
Shares allocated by Stock Sharing Plan 4,961 4,960
Other, net (1) 109
--------- ---------
Net cash from financing activities 101,295 24,382
--------- ---------
NET INCREASE IN CASH 457 788
CASH, BEGINNING OF PERIOD 17,613 13,937
--------- ---------
CASH, END OF PERIOD $ 18,070 $ 14,725
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 10,313 $ 2,551
========= =========
Interest paid $ 12,959 $ 11,077
========= =========
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), 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. CSI/Reeves, Inc. (CSI/Reeves), a
specialty carpet hauler was sold effective August 31, 1995. 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
September 30, 1995 Compared to December 31, 1994
Working capital increased by $67.0 million during the first nine months of
1995, resulting in a $94.4 million positive working capital position at
September 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 1996.
The company increased its total debt level by $109.7 million in the first nine
months of 1995 compared to that of December 31, 1994 with borrowings from
commercial paper, medium-term notes and bank credit lines. These borrowings
were used to fund capital expenditures as accounts receivable growth offset a
large portion of cash flows from other operating activities. Net capital
expenditures for the first nine months of 1995 were $124.0 million. It is
anticipated that the remaining capital spending for 1995 (approximately $20
million) will be financed through internally-generated funds and additional
borrowings.
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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 current price discounting levels and other adverse industry fundamentals,
the company expects further earnings deterioration in the fourth quarter as
compared to the third quarter. Profitability for 1996 is dependent upon
improvement in pricing and other industry fundamentals. In view of these
factors, the Board of Directors suspended the company's quarterly dividend in
July of this year, saving the company approximately $6.6 million each quarter.
Additionally, expanded cost reduction efforts, reduced capital spending and
reduced accounts receivable days sales outstanding will help improve cash flow.
CSI/Reeves, a specialty carpet hauler was sold effective August 31, 1995 for
net proceeds of $5.1 million. Additionally, Yellow Logistics was integrated
into Yellow Freight in late October to centralize the logistics product
offering and eliminate duplicative costs. As a result, Yellow Freight will now
market logistics capabilities for the company as Yellow Integrated Logistics.
These events had no material impact on the company's financial results.
RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 1995 and 1994
Yellow Corporation operating revenue in the third quarter was $772.0 million,
up slightly from the $769.3 million recorded in last year's third quarter. A
net loss of $11.6 million, or $.41 per share, for the quarter compares to net
income of $13.2 million, or $.47 per share, before an extraordinary item in the
same quarter last year. The extraordinary item in 1994 of $4.1 million, or
$.14 per share, was to write-off intrastate operating rights.
The economy has improved somewhat from sluggish first half levels but the
industry continues to suffer from excess capacity. The cumulative impact of
year-to-date trends has resulted in soft business levels and very weak prices,
both of which are reflected in the company's disappointing financial
performance.
The company has greatly expanded cost reduction efforts, the goal of which is
to return the company to consistent and acceptable profitability in light of
the continuation of adverse industry fundamentals. While the company is taking
substantial measures to reduce costs and increase efficiencies, price
discounting has been a significant company and industry-wide issue.
7
8
RESULTS OF OPERATIONS (continued)
Yellow Freight recorded operating revenue of $597.0 million in the third
quarter of 1995 compared to $608.5 million in the third quarter of 1994, a
decrease of 1.9%. This was caused by a 2.8% decrease in pricing, partially
offset by a small increase in the number of shipments handled. Total tonnage
was flat compared to the prior year quarter, but increased by 1.5% on a per day
basis because of an additional workday in the third quarter of 1994. Yellow
Freight posted an operating loss of $5.7 million in the third quarter of 1995
compared to operating income of $30.2 million in the same period last year.
Expenses increased primarily due to the current year Teamster wage and benefit
increases and the implementation of a transit time improvement program (TTI).
While TTI increased operating expenses, it provides customers with improved
service which enabled Yellow Freight to exceed its revenue plan.
Preston Trucking's financial performance continued to suffer under the weight
of weak industry fundamentals and price discounting. Operating revenue for the
third quarter was $103.3 million, compared to $101.9 million in the third
quarter last year, an increase of 1.4% on one less workday. Growth in shipment
volume of 3.9%, offset by price discounting, resulted in the higher revenue for
the quarter. For the quarter, Preston maintained operating results similar to
last year despite 5% higher Teamster labor costs. The operating loss was $3.0
million in the third quarter of 1995 compared to $2.7 million in last year's
third quarter. This evidences Preston's tight expense control while continuing
their consistently high on-time service levels.
Despite price discounting pressures throughout the third quarter, Saia saw
record revenue growth, reaping the benefits of its recent expansion into North
and South Carolina. Thirteen facilities were opened in the quarter
contributing to its third quarter revenue of $53.8 million, a 19.5% increase
over 1994 revenue of $45.0 million. This revenue growth came primarily from a
17.5% increase in the number of shipments handled and a slight increase in
revenue generated per shipment. Operating income was $2.0 million for the
third quarter of 1995 compared to $2.3 million in the third quarter of 1994.
Saia's focus has now shifted from network expansion to cost efficiency and
yield improvement.
WestEx, the company's regional carrier headquartered in Phoenix, completed its
expansion into California during the quarter and continues to perform according
to plan.
Comparison of Nine Months Ended September 30, 1995 and 1994
For the first nine months of 1995, operating revenue was $2.31 billion compared
to $2.11 billion for the same nine month period in 1994. Excluding the impact
of the strike in the second quarter of 1994, revenue was up about one percent.
There was a loss of $7.4 million, or $.26 per share, compared to a loss of
$15.0 million, or $.54 per share, for the same period last year before the
extraordinary item described above. The 1994 loss was due primarily to the
24-day Teamsters' strike that negatively impacted second quarter performance.
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9
RESULTS OF OPERATIONS (continued)
Yellow Freight recorded operating revenue of $1.78 billion in the first nine
months of 1995 compared to $1.63 billion in the first half of 1994. The
increase in revenue is due entirely to higher shipment volume as price
discounting during the period more than offset the benefit of rate increases
implemented in early 1995. Excluding the impact of the strike in the second
quarter of 1994, revenue was down by about one percent. Operating income for
the first nine months of 1995 was $11.4 million compared to an operating loss
of $2.4 million in the same period last year. Price discounting throughout the
period, 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
operating loss in the 1994 period.
Operating revenue for Preston Trucking in the first nine months of 1995 was
$311.5 million, down 1.7% compared to $316.7 million in 1994. The 1994 period
contained benefits from additional business volume during the strike as Preston
returned to work under an interim agreement with the Teamsters after only six
days on strike. The operating loss in the first nine months of 1995 was $2.6
million compared to $5.9 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. The 1995 period included
union wage and benefit increases combined with a step-down in the wage
reduction program that netted a 5% increase in labor costs effective April 1.
Saia recorded operating revenue of $154.4 million in the first nine months of
1995 compared to $133.3 million in the same period of 1994, an increase of
15.8%. Increased shipment volume was the primary factor in the revenue growth.
Operating income was $7.3 million for the first nine months of 1995 compared to
$10.3 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, Yellow Corporation expects to show an operating loss for
the full year of 1995.
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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 - No reports on Form 8-K were filed for the three
months ended September 30, 1995.
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
-------------------------------------
Registrant
Date: November 7, 1995 /s/ H. A. Trucksess, III
------------------------ -------------------------------------
H. A. Trucksess, III
Senior Vice President - Finance
Date: November 7, 1995 /s/ Phillip A. Spangler
------------------------ -------------------------------------
Phillip A. Spangler
Vice President and Treasurer
10
5
1,000
9-MOS
DEC-31-1995
JAN-01-1995
SEP-30-1995
18,070
0
359,716
0
0
481,492
1,942,726
1,045,038
1,407,186
387,097
337,555
28,858
0
0
416,904
1,407,186
0
2,310,788
0
2,308,687
0
0
17,051
(11,074)
(3,677)
(7,397)
0
0
0
(7,397)
(.26)
(.26)
