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 March 31, 1996
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 April 30, 1996
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Common Stock, $1 Par Value 28,105,797 shares
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YELLOW CORPORATION
INDEX
Item Page
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PART I
1. Financial Statements
Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 3
Statements of Consolidated Income -
Three Months Ended March 31, 1996 and 1995 4
Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II
4.Submission of Matters to a Vote of Security Holders 8
5.Other Information 9
6.Exhibits and Reports on Form 8-K 9
Signatures 10
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PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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CONSOLIDATED BALANCE SHEETS
Yellow Corporation and Subsidiaries
March 31, 1996 and December 31, 1995
(Amounts in thousands except share data)
(Unaudited)
March 31 December 31
1996 1995
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ASSETS
CURRENT ASSETS:
Cash $ 15,725 $ 25,861
Short-term investments - 5,414
Accounts receivable 331,484 323,814
Refundable income taxes 49,351 49,529
Prepaid expenses and other 63,832 80,392
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Total current assets 460,392 485,010
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PROPERTY AND EQUIPMENT:
Cost 1,984,937 1,989,389
Less - Accumulated depreciation 1,091,910 1,067,541
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Net property and equipment 893,027 921,848
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OTHER ASSETS 26,699 28,039
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$1,380,118 $1,434,897
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Unsecured bank credit lines $ 25,000 $ 9,000
Accounts payable and checks outstanding 102,077 154,653
Wages and employees' benefits 144,647 134,178
Other current liabilities 143,955 142,040
Current maturities of long-term debt 2,911 2,925
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Total current liabilities 418,590 442,796
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OTHER LIABILITIES:
Long-term debt 327,442 341,648
Deferred income taxes 54,227 56,032
Claims, insurance and other 171,500 171,744
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Total other liabilities 553,169 569,424
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SHAREHOLDERS' EQUITY:
Common stock, $1 par value 28,858 28,858
Capital surplus 6,678 6,678
Retained earnings 390,443 404,761
Treasury stock (17,620) (17,620)
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Total shareholders' equity 408,359 422,677
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$1,380,118 $1,434,897
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The accompanying notes are an integral part of these statements.
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STATEMENTS OF CONSOLIDATED INCOME
Yellow Corporation and Subsidiaries
For the Three Months Ended March 31, 1996 and 1995
(Amounts in thousands except per share data)
(Unaudited)
1996 1995
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OPERATING REVENUE $ 741,678 $ 764,998
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OPERATING EXPENSES:
Salaries, wages and benefits 500,280 502,097
Operating expenses and supplies 118,280 115,838
Operating taxes and licenses 29,617 28,959
Claims and insurance 17,351 20,414
Communications and utilities 11,325 11,469
Depreciation 33,502 34,106
Purchased transportation 39,474 43,514
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Total operating expenses 749,829 756,397
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INCOME (LOSS) FROM OPERATIONS (8,151) 8,601
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NONOPERATING (INCOME) EXPENSES:
Interest expense 6,852 5,057
Other, net 823 (2,282)
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Nonoperating expenses, net 7,675 2,775
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INCOME (LOSS) BEFORE INCOME TAXES (15,826) 5,826
INCOME TAX PROVISION (BENEFIT) (1,575) 2,628
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NET INCOME (LOSS) $ (14,251) $ 3,198
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AVERAGE COMMON SHARES OUTSTANDING 28,106 28,106
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EARNINGS (LOSS) PER SHARE $ (.51) $ .11
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The accompanying notes are an integral part of these statements.
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STATEMENTS OF CONSOLIDATED CASH FLOWS
Yellow Corporation and Subsidiaries
For the Three Months Ended March 31, 1996 and 1995
(Amounts in thousands)
(Unaudited)
1996 1995
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OPERATING ACTIVITIES:
Net cash from (used in) operating activities $ (10,174) $ 6,019
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INVESTING ACTIVITIES:
Acquisition of property and equipment (9,520) (54,006)
Proceeds from disposal of property and equipment 2,419 7,019
Purchases of short-term investments (1,684) (2,959)
Proceeds from maturities of short-term investments 7,098 3,026
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Net cash used in investing activities (1,687) (46,920)
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FINANCING ACTIVITIES:
Proceeds from unsecured bank credit lines, net 16,000 10,000
Commercial paper borrowings, net (13,644) 38,852
Repayment of long-term debt (631) (662)
Cash dividends paid to shareholders - (6,605)
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Net cash from financing activities 1,725 41,585
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NET INCREASE (DECREASE) IN CASH (10,136) 684
CASH, BEGINNING OF PERIOD 25,861 17,613
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CASH, END OF PERIOD $ 15,725 $ 18,297
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SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 977 $ 3,647
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Interest paid $ 3,293 $ 2,173
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The accompanying notes are an integral part of these statements.
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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 1995 Annual Report to Shareholders.
2. The company provides freight transportation services primarily to the
less-than-truckload (LTL) market in North America through its
subsidiaries, Yellow Freight System, Inc. (Yellow Freight), Preston
Trucking Company, Inc. (Preston Trucking), Saia Motor Freight Line, Inc.
(Saia) and WestEx, Inc. (WestEx). 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 8%.
3. Effective January 1, 1996, the company adopted the Financial Accounting
Standards Board Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The
adoption did not have a material impact on the financial condition or
results of operations of the company.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
March 31, 1996 Compared to December 31, 1995
Working capital remained relatively constant during the first three months
of 1996, resulting in a $41.8 million positive working capital position at
March 31, 1996 compared to $42.2 million at December 31, 1995. Accounts
receivable growth was moderate during the period as increased revenue levels at
the end of the respective periods of comparison were mostly offset by
improvement in days sales outstanding, primarily at Yellow Freight.
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FINANCIAL CONDITION (continued)
Total debt remained essentially unchanged during the first three months of
1996, showing a $1.8 million increase compared to December 31, 1995 levels.
Bank credit line borrowings were used during the period to replace a portion of
the commercial paper borrowings. Working capital and capital spending needs
were funded by a cash dividend from Canadian operations of $23.0 million. In
April, the company received a federal tax refund of $45 million which was used
to pay down debt and improve the balance sheet. Net capital expenditures for
the first three months of 1996 were $7.1 million. It is anticipated that the
remaining net capital spending for 1996 will be approximately $57 million.
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1996 and 1995
Yellow Corporation reported a net loss for the quarter of $14.3 million,
or $.51 per share, including a non-recurring charge to the income tax provision
of $6.7 million, or $.24 per share. This compares to net income of $3.2
million, or $.11 per share, in the first quarter of 1995. First quarter 1996
operating revenue was $741.7 million, down 3.0%, from the $765.0 million
recorded during the same period last year. The loss, excluding the tax charge,
was $7.6 million, or $.27 per share, and was in line with Wall Street
expectations. The tax charge resulted from a cash dividend from Canadian
operations of $23.0 million, which was used to pay down debt.
Yellow Freight recorded operating revenue of $576.1 million in the first
quarter of 1996 compared to $592.0 million in the first quarter of 1995, a
decrease of 2.7%. This decrease was caused mainly by a 1.6% decline in the
number of shipments handled and a 3.5% reduction in LTL tonnage. Pricing
levels in the first quarter of 1996 were relatively static compared to the
first quarter of 1995 as a result of price discounting in 1995 that more than
offset the January 1996 rate increases.
Yellow Freight had an operating loss of $2.3 million in the first quarter
of 1996 compared to operating income of $9.1 million in the first quarter of
1995. Yellow Freight's operating ratio of 100.4 reflects increases in fixed
costs, primarily the April 1, 1995 contract wage and benefit increases of 3.2%,
as well as costs associated with the series of severe winter storms experienced
in the first quarter of 1996. Higher costs also resulted from a decrease in
the system load average attributable to a transit time improvement program
implemented in the third quarter of 1995. Yellow Freight cost and pricing
improvement initiatives proceeded according to plan resulting in some margin
improvement. However, first quarter benefits were more than offset by the
weather-related costs. Additional cost improvement at Yellow Freight is
expected throughout the year even though contract wage and benefit increases of
3.8% went into effect April 1, 1996.
Preston Trucking recorded operating revenue of $98.4 million in the first
quarter of 1996 compared to $103.4 million in the first quarter of 1995, a
decrease of 4.8%. Decreases in the number of shipments handled
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RESULTS OF OPERATIONS (continued)
and LTL weight/shipment caused the lower revenue levels. Despite a January
1996 price increase, pricing levels in the first quarter of 1996 were
relatively static compared to the first quarter of 1995 as a result of price
discounting in 1995.
Preston Trucking had an operating loss of $5.1 million in the first
quarter of 1996 compared to operating income of $1.7 million in the first
quarter of 1995. 1996 results include a 4.9% increase in contract wages and
benefits on April 1, 1995. The relatively greater labor cost increase resulted
from a wage reduction program approved in 1994 whereby employees received the
contractual wage and benefit increases as well as a step-down in the wage
reduction from 7.0% to 5.0%. During the first quarter of 1996, Preston
employees agreed to freeze wages in lieu of the standard contract increase
scheduled for April 1, 1996. Preston's operating performance also suffered
extreme adverse impacts from the severe winter weather as its service area is
concentrated in the Northeast and upper Midwest, yet on-time service remained
superior resulting in continued market share gains.
Saia recorded operating revenue of $60.7 million in the first quarter of
1996 compared to $49.2 million in the first quarter of 1995, an increase of
23.3%. This growth was caused by an increase in shipment volume of 23.0%
reflecting increased tonnage of 18% compared to the first quarter 1995, due
largely to expansion activities. Saia had operating income of $3.1 million in
the first quarter of 1996 compared to operating income of $2.7 million in the
first quarter of 1995. Saia's operating ratio was 94.9 compared to 94.6 in
1995. WestEx's expansion plan is on schedule and the business is expected to
become profitable in 1997.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual Meeting of Stockholders on April 25, 1996
(b) The following directors were elected with the indicated number of votes
set forth below.
For Withheld
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Klaus E. Agthe 18,528,370 2,630,496
Howard M. Dean 18,528,507 2,630,359
George E. Powell III 20,930,241 228,625
The following directors did not stand for election and continued in office
as a director after the Annual Meeting of Stockholders: M. Reid Armstrong,
David H. Hughes, Ronald T. LeMay, John C. McKelvey, A. Maurice Myers,
George E. Powell, Jr. and William L. Trubeck.
(c) An amendment to the Certificate of Incorporation eliminating the
classification of the Board of Directors and reducing the minimum number
of directors from nine to five was voted on and approved
at the meeting by the following vote. For: 17,540,113, Against:
1,200,900, Abstention: 43,268, No-vote: 2,374,585.
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PART II - OTHER INFORMATION (Continued)
Item 4. Submission of Matters to a Vote of Security Holders (continued)
A plan to pay fifty percent of the Board and Committee retainers of
non-employee directors in company stock restricted for three years was
voted on and approved at the meeting by the following vote. For:
20,380,191, Against: 326,637, Abstention: 85,902, No-vote: 366,136.
The appointment of Arthur Andersen LLP as independent public accountants of
the company for 1996 was voted on and approved at the meeting by the
following vote. For: 20,976,693, Against: 140,042, Abstention: 42,131.
Item 5. Other Information
On April 25, 1996, the Board of Directors designated the following
individuals as executive officers of the company. A. Maurice Myers, President
and Chief Executive Officer of the company, M. Reid Armstrong, President of
Yellow Freight, William F. Martin, Jr., Senior Vice President - Legal/Corporate
Secretary of the company and H. A. Trucksess, III, Senior Vice President -
Finance/Chief Financial Officer and Treasurer.
On April 25, 1996, the company announced at its Annual Shareholders
meeting that George E. Powell, Jr. will retire as Chairman of the Board of
Directors effective June 30 upon the attainment of the normal Board retirement
age of 70. Powell will become Chairman Emeritus. A. Maurice Myers, recently
appointed to the post of President and Chief Executive Officer, is appointed by
the Board as Chairman effective upon Powell's retirement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3) - Amendment of Articles of Incorporation occasioned by
declassification of the Board of Directors.
(10) - Executive Officers' Agreement
(27) - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
On January 24, 1996 a Form 8-K was filed under Item 5, Other Events,
which reported that the company announced on January 17, 1996, that its
President and CEO, George E. Powell III, intended to resign. Powell agreed
to remain until a replacement candidate is selected and will be involved in
identifying his successor which is expected in the next few months. Powell
will also continue his current Board term and stand for reelection when
that term expires in April concurrent with the Annual Shareholders meeting.
His father, George E. Powell, Jr. will remain as Chairman of the Board of
Directors.
On March 22, 1996 a Form 8-K was filed under Item 5, Other Events,
which reported that the company announced on March 20, 1996 that A. Maurice
Myers will become its new President and CEO. Myers was also appointed to
the Board of Directors.
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SIGNATURES
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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: May 10, 1996 /s/ A. Maurice Myers
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A. Maurice Myers
President and Chief Executive
Officer
Date: May 10, 1996 /s/ H. A. Trucksess, III
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H. A. Trucksess, III
Senior Vice President - Finance/
Chief Financial Officer & Treasurer
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EXHIBIT 3(i)
CERTIFICATE OF INCORPORATION
OF
YELLOW CORPORATION
(As amended through April 25, 1996)
FIRST: The name of the corporation is Yellow Corporation.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street in the City of Wilmington, County of
New Castle. The name of the registered agent of the Corporation at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may now or hereafter be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of capital stock of all
classifications which the Corporation shall have authority to issue is One
Hundred Twenty Five Million (125,000,000) shares, consisting of One Hundred
Twenty Million (120,000,000) shares of Common Stock having a par value of $1
per share and Five Million (5,000,000) shares of Preferred Stock having a par
value of $1 per share.
(a) Shares of the Preferred Stock may be issued in one or more
series at such time or times and for such consideration or considerations
as the Board of Directors may determine. All shares of any one series
shall be of equal rank and identical in all respects.
(b) Authority is hereby expressly granted to the Board of Directors
to fix from time to time, by resolution or resolutions providing for the
issue of any series of Preferred stock, the designation of such series
and the powers,
CERT. OF INC. YELLOW CORPORATION PAGE 1
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preferences and rights of the shares of such series, and the
qualification, limitations or restrictions thereof, including the
following:
(1) The number of shares constituting that series and the
distinctive designation of that series;
(2) The dividend rate on the shares of that series and the
time of payment thereof, whether dividends shall be cumulative, and
if so, the date or dates which any cumulative dividends shall
commence to accrue, and the relative rights of priority, if any, of
payment of dividends on shares of that series over shares of any
other series;
(3) Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such
voting rights;
(4) Whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as
the Board of Directors shall determine;
(5) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at
different redemption dates;
(6) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and if so, the
terms and amount of such sinking fund;
CERT. OF INC. YELLOW CORPORATION PAGE 2
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(7) The rights of the shares of that series in the event of
merger, acquisition, voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up of the
Corporation, and the relative rights of priority, if any, of
payment of shares of that series over shares of any other series;
(8) Whether the issuance of any additional shares of such
series, or of any shares of any other series, shall be subject to
restrictions as to issuance, or as to the powers, preferences or
rights of any such other series; and
(9) Any other preferences, privileges and powers and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions of such series, as the Board of
Directors may deem advisable and as shall not be inconsistent with
the provisions of this Certificate of Incorporation and to the full
extent now or hereafter permitted by the laws of Delaware.
Dividends on outstanding share of Preferred Stock shall be paid or
declared and set apart for payment, before any dividends shall be paid or
declared and set apart for payment on the common shares with respect to
the same dividend period.
If upon any voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of the Corporation, the assets
available for distribution to holders of shares of Preferred Stock of all
series shall be insufficient to pay such holders the full preferential
amount to which they are entitled, then such assets shall be distributed
ratably among the shares of all series of Preferred Stock in accordance
with the respective preferential amounts (including unpaid cumulative
dividends, if any) payable with respect thereto.
CERT. OF INC. YELLOW CORPORATION PAGE 3
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FIFTH: The business and affairs of the Corporation shall be managed
by the Board of directors consisting of not less than 5 nor more than 15
persons. The exact number of directors within the limitations specified
in the preceding sentence shall be fixed from time to time by the Board
of Directors pursuant to a resolution adopted by a majority of the entire
Board of Directors. The directors need not be elected by ballot unless
required by the Bylaws of the Corporation.
The Board of Directors shall be elected annually at the annual
meeting of stockholders and the members of the Board so elected shall
serve one-year terms to expire at the following annual meeting of
stockholders. Each director shall hold office for the term for which he
is elected or appointed and until his successor shall be elected and
qualified or until his death, or until he shall resign.
Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall be filled by a majority vote of
the directors then in office, and directors so chosen shall hold office
for a term expiring at the next annual meeting of stockholders. No
decrease in the number of directors constituting the Board of Directors
shall shorten the term of any incumbent director.
No director of the corporation shall be removed from his office as a
director by vote or other action of shareholders or otherwise unless the
director to be removed has been convicted of a felony by a court of
competent jurisdiction and such conviction is no longer subject to direct
appeal or unless the director to be removed has been adjudged by a court
of competent jurisdiction to be mentally incompetent or to be liable for
negligence or misconduct in the
CERT. OF INC. YELLOW CORPORATION PAGE 4
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performance of his duty to the corporation and such adjudication is no
longer subject to direct appeal.
SIXTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized to adopt, amend or repeal the bylaws.
SEVENTH:
A. 1. In addition to any affirmative vote required by law or under
any other provision of this Certificate of Incorporation, and except as
otherwise expressly provided in subparagraph B:
a. any merger or consolidation of the Corporation of any
subsidiary (as hereinafter defined) with or into (i) any
Substantial Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself a Substantial
Stockholder which, after such merger or consolidation, would be
an Affiliate (as hereinafter defined) of a Substantial
Stockholder, or
b. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with (i) any Substantial Stockholder or (ii)
an Affiliate of a Substantial Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $5,000,000 or more, or
c. the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to (i) any Substantial Stockholder or (ii) any other
corporation (whether or
CERT. OF INC. YELLOW CORPORATION PAGE 5
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not itself a Substantial Stockholder) which, after such issuance
or transfer, would be an Affiliate of a Substantial Stockholder
in exchange for cash, securities or other property (or a
combination thereof) having an aggregate fair market value of
$5,000,000 or more, or
d. the adoption of any plan or proposal for the liquidation
of dissolution of the Corporation proposed by or on behalf of a
Substantial Stockholder or an Affiliate of a Substantial
Stockholder, or
e. any reclassification of securities (including any
reverse stock split), recapitalization, reorganization, merger or
consolidation of the Corporation with any of its Subsidiaries or
any similar transaction (whether or not with or into or otherwise
involving a Substantial Stockholder or an Affiliate of a
Substantial Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible
securities of the Corporation or any Subsidiary which is directly
or indirectly owned by any Substantial Stockholder or by an
Affiliate of a Substantial Stockholder, shall require the
affirmative vote of the holders of at least 80% of the voting
power of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of
directors, considered for the purpose of this Article Seventh as
one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required,
or that some lesser percentage may be required, or that some
lesser percentage may be specified, by law or in any agreement
with any national securities exchange or otherwise.
CERT. OF INC. YELLOW CORPORATION PAGE 6
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2. The term "business combination" as used in this Article
Seventh shall mean any transaction which is referred to in any
one or more clauses (a) through (e) of Section 1 of this
Subparagraph A.
B. The provisions of Subparagraph A of this Article Seventh
shall not be applicable to any particular business combination, and
such business combination shall require only such affirmative vote as
is required by law and any other provision of this Certificate of
Incorporation, if all of the conditions specified in either of the
following paragraphs 1 and 2 are met:
1. The business combination shall have been approved by a
majority of the "Continuing Directors" (as hereinafter defined).
2. All of the following conditions shall have been met:
a. The ratio of:
(1) the aggregate amount of the cash and the fair
market value of other consideration to be received per share
by holders of common stock of the Corporation ("Common
Stock") in such business combination,
to
(2) the market price of the Common Stock
immediately prior to the public announcement of the proposal
of such business combination, is at least as great as the
ratio of
(i) the highest per share price (including
brokerage commissions, transfer taxes and soliciting
dealers' fees) which such Substantial Stockholder has
paid for any shares of Common Stock acquired by it
within the five year period prior to the business
combination,
CERT. OF INC. YELLOW CORPORATION PAGE 7
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to
(ii) the market price of the Common Stock
immediately prior to the initial acquisition by such
Substantial Stockholder of any Common Stock;
b. The aggregate amount of the cash and fair market value of
other consideration to be received per share by holders of Common
Stock in such business combination
(1) is not less that the highest per share price
(including brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by such Substantial Stockholder
in acquiring any of its holdings of Common Stock, and
(2) is not less than the earnings per share of Common
Stock for the four full consecutive fiscal quarters
immediately preceding the record date for solicitation of
votes on such business combination multiplied by the then
price/earnings multiple (if any) of such Substantial
Stockholder as customarily computed and reported in the
financial community;
c. The aggregate amount of the cash and the fair market
value as of the date of the consummation of the business combination
of consideration other than cash to be received per share by holders
of shares of any other class of outstanding capital stock of the
Corporation shall be at least equal to the highest of the following
(it being intended that the requirements of this paragraph B.2.c.
shall be required to be met with respect to every class of
outstanding capital stock of the Corporation whether or not the
Substantial Stockholder has previously acquired any shares of a
particular class of capital stock):
CERT. OF INC. YELLOW CORPORATION PAGE 8
9
(1) (if applicable) the highest per share (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Substantial Stockholder for any
shares of such class of capital stock acquired by it (1)
within the five year period immediately prior to the first
public announcement of the proposal of the business
combination (the "Announcement Date") or (2) in the
transaction in which it became a Substantial Stockholder,
whichever is higher.
(2) (if applicable) the highest preferential amount per
share to which the holders of shares of such class of capital
stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation;
(3) the fair market value per share of such class of
capital stock (which may be determined by a majority of the
Continuing Directors) on the Announcement Date or on the date
on which the Substantial Stockholder became a Substantial
Stockholder (the "Determination Date"), whichever is higher;
and
(4) (if applicable) the price per share equal to the
fair market value per share of such class of capital stock
determined pursuant to Paragraph B.2.c. (3) above, multiplied
by the ratio of (1) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Substantial Stockholder for any shares of
such class of capital stock acquired by it within the
five-year period immediately prior to the Announcement Date to
(2) the fair market value per share of such class of capital
stock on the first day in such five-year period upon
CERT. OF INC. YELLOW CORPORATION PAGE 9
10
which the Substantial Stockholder acquired any shares of such
class of Voting Shares.
d. The consideration to be received by holders of the
Corporation's capital stock of the Corporation in such business
combination shall be in cash or in the same form and of the same
kind as the consideration paid by the Substantial Stockholder in
acquiring the shares of Stock already owned by it;
e. After such Substantial Stockholder has acquired ownership
of not less than 10% of the then outstanding Voting Shares (a "10%
interest") and prior to the consummation of such business
combination;
(1) the Substantial Stockholder shall have taken steps
to ensure that the Corporation's Board of Directors included
at all times representation by Continuing Director(s) (as
hereinafter defined) proportionate to the ratio that the
Voting Shares which from time to time are owned by persons
other than the Substantial Stockholder ("Public Holders") bear
to all Voting Shares outstanding at such respective times
(with a continuing director to occupy any resulting fractional
board position);
(2) there shall have been no reduction in the rate of
dividends payable on the Common Stock except as may have been
approved by majority vote of the Continuing Directors;
(3) such Substantial Stockholder shall not have
acquired any newly issued shares of capital stock of the
Corporation, directly or indirectly, from the Corporation
(except upon conversion of convertible securities acquired by
it prior to
CERT. OF INC. YELLOW CORPORATION PAGE 10
11
obtaining a 10% Interest or as a result of a pro rata stock
dividend or stock split; and
(4) such Substantial Stockholder shall not have
acquired any additional shares of the Corporation's
outstanding Common Stock or securities convertible into or
exchangeable for Common Stock except as a part of the
transaction which resulted in such Substantial Stockholder
acquiring its 10% Interest:
f. Prior to the consummation of such business combination,
such Substantial Stockholder shall not have (i) received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or tax credits provided by the Corporation; or
(ii) made any major change in the Corporation's business or equity
capital structure without the approval of a majority of the
Continuing Directors; and
g. A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934 shall have been mailed to all
holders of voting Shares for the purpose of soliciting stockholder
approval of such business combination. Such proxy statement shall
contain at the front thereof, in a prominent place, any
recommendations as to the advisability (or inadvisability) of the
business combination which the Continuing Directors, or any of them,
may have furnished in writing and, if deemed advisable by a
majority of the Continuing Directors, an opinion of reputable
investment banking firm as to the fairness (or lack of fairness) of
the terms of such business combination, from the point of view of
the holders of Voting Shares other than the Substantial Stockholder
(such investment banking firm to be selected by a majority of the
Continuing Directors, to be furnished with all information it
reasonably requests and
CERT. OF INC. YELLOW CORPORATION PAGE 11
12
to be paid a reasonable fee for its services upon receipt by the
Corporation of such opinion).
C. For the purposes of this Article Seventh:
1. A "person" shall mean any individual, firm, corporation or
other entity.
2. "Substantial Stockholder" shall mean, in respect of any
business combination, any person (other than the Corporation of any
Subsidiary) who or which, s of the record date for the determination of
stockholders entitled to notice of and to vote on such business
combination, or as of the time of the vote on such business combination,
or immediately prior to the consummation of any such transaction,
a. is the beneficial owner, directly or indirectly, of
not less than 10% of the Voting Shares, or
b. is an Affiliate of the Corporation and at any time
within five years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding Voting Shares, or
c. is an assignee of or has otherwise succeeded to any
shares of capital stock of the Corporation which were at any
time within five years prior thereto beneficially owned by any
Substantial Stockholder, and such assignment or succession
shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
CERT. OF INC. YELLOW CORPORATION PAGE 12
13
3. A person shall be the "beneficial owner" of any Voting
Shares:
a. which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially own, directly
or indirectly, or
b. which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants,
or options, or otherwise, or (ii) the right to vote pursuant to
any agreement, arrangement or understanding or
c. which are beneficially owned, directly or indirectly,
by any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock of
the Corporation.
4. The outstanding Voting Shares shall include shares deemed
owned through application of Section 3 above but shall not include
any other Voting Shares which may be issuable pursuant to any
agreement, or upon exercise of conversion rights, warrants or
options, or otherwise.
5. "Continuing Director" shall mean a person who was a
director prior to June 1, 1983 or who was a member of the Board of
Directors of the Corporation elected by the Public Holders prior to
the date as of which the Substantial Stockholder acquired 10% of the
then outstanding Voting Shares, or a person designated (before his
initial
CERT. OF INC. YELLOW CORPORATION PAGE 13
14
election as a director) as a continuing director by a majority of
the then continuing directors.
6. "Other consideration to be received" shall mean Common
Stock of the Corporation retained by its Public Holders in the event
of a business combination in which the Corporation is the surviving
corporation.
7. "Affiliate" and "Associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect
on January 1, 1982.
8. "Subsidiary" means any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect on January 1, 1982) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Substantial Stockholders set forth in
Section 2 of this subparagraph c, the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
D. A majority of the Continuing Directors shall have the power and
duty to determine for the purposes of this Article Seventh, on the basis
of information known to them, (a) the number of Voting Shares beneficially
owned by any person, (b) whether a person is an Affiliate or Associate of
another, (c) whether a person has an agreement, arrangement or
understanding with another as to the matters referred to in section 3 of
subparagraph C, or (d) whether the assets subject to any business
combination have an aggregate fair market value of $5,000,000 or more.
CERT. OF INC. YELLOW CORPORATION PAGE 14
15
E. Nothing contained in Article Seventh shall be construed to relieve
any Substantial Stockholder from any fiduciary obligation imposed by law.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision consigned in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statue, and all rights conferred upon
stockholders herein are granted subject to this reservation. Notwithstanding
anything to the contrary contained in this Certificate of Incorporation or the
Bylaws of the Corporation ( and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of Incorporation or the
Bylaws of the Corporation), the affirmative vote of the holders of at least 80%
of the voting power of the then outstanding Voting Shares shall be required to
amend, alter, change or repeal, or to adopt any provision inconsistent with,
Articles Fifth, Seventh, Tenth, Twelfth and this Article Eighth of this
Certificate of Incorporation, provided that such 80% vote shall not be required
for any amendment, alteration, change or repeal recommended to the stockholders
by majority of the Continuing Directors, as defined in Article Seventh.
NINTH: The holders of a majority of the Common Stock issued, outstanding,
and entitled to vote at the time a determination is made, present in person, or
represented by proxy, shall be requisite and shall constitute a quorum at all
meetings of the stockholders for the transaction of business.
TENTH: Any action required or permitted to be taken by the shareholders
of the Corporation must effected at a duly called annual or special meeting of
shareholders of the Corporation and may not be effected by any consent in
writing by such shareholders. Special meetings of shareholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors or by the
CERT. OF INC. YELLOW CORPORATION PAGE 15
16
Chairman of the Board or President, upon not less than 10 nor more than 60 days'
written notice.
ELEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of section 279 of Title 8 or the Delaware Code
order a meeting of the creditors or class or creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
TWELFTH: The Bylaws of the Corporation may be amended or repealed, or new
bylaws may be adopted (a) by the affirmative vote of seventy-five percent of the
voting power of the then outstanding Voting Shares; provided that the notice of
such meeting of stockholders whether regular or special, shall specify as one of
the purposes thereof the making of such amendment or repeal; or (b) by
CERT. OF INC. YELLOW CORPORATION PAGE 16
17
the affirmative vote of the majority of the Board of Directors at any regular or
special meeting.
THIRTEENTH: The incorporator is Stephen P. Murphy, whose mailing address
is P.O. Box 7270, Overland Park, KS 66207.
FOURTEENTH: A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, as the same exists or hereafter may be amended, or (iv) for any
transaction from which the director derived an improper personal benefit. If
the Delaware General Corporation law hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extend
permitted by the amended Delaware General Corporation Law. Any repeal or
modification of this paragraph by the stockholders of the corporation shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a director of the corporation existing at the time of such repeal
or modification.
CERT. OF INC. YELLOW CORPORATION PAGE 17
1
EXHIBIT 10.3
SEPARATION AGREEMENT AND MUTUAL RELEASE OF CLAIMS
This agreement is effective the 31st day of March, 1996 by and between
George E. Powell III (hereinafter "George Powell") and Yellow Corporation, its
predecessors, subsidiaries, affiliates, assigns, officers, directors, agents
and employees (hereinafter jointly referenced as "Company") is entered into in
order to set forth the terms and conditions upon which George Powell's
employment with the Company will be terminated. In exchange for the mutual
promises contained herein, the parties agree as follows:
1. George Powell will submit his written resignation as President and
Chief Executive Officer and as Director of any subsidiary of the Company
effective March 31, 1996 in the form attached hereto as "Exhibit A".
2. Commencing April 1, 1996, the Company will pay George Powell $36,667
per month through September 30, 1997 in bi-monthly installments. The parties
agree that the Company shall withhold from such payments the appropriate
deductions required by law. In the event of George Powell's death before the
last installment is paid, any remaining installments will be paid to his
spouse. In the event George Powell and his spouse die before the last
installment is paid, any remaining installments will be paid to the estate of
the last survivor of the two, or if there is no last survivor, to George
Powell's estate.
3. From April 1, 1996 through September 30, 1997, George Powell's health
insurance will continue to be provided and paid for by the Company on the same
basis as any other employee, provided, however, that such coverage will cease
if George Powell becomes otherwise employed during such period and is covered
by comparable coverage paid for by such other employer. If the coverage from
such other employer does not match the Company's coverage, the Company's
coverage shall be secondary to that of the other employer and the Company will
be responsible only for the difference in coverage between that of the Company
and the other employer. Through September 30, 1997, George Powell shall also
continue to vest under the Company's defined Benefit Pension Plan and shall
also be entitled to continued participation in the Company's non-medical
insurance coverages, except those insurance coverages that provide payment for
time not worked which includes holiday, vacation, short and long-term
disability. George Powell's car allowance shall discontinue as of the
effective date of his resignation as President and Chief Executive Officer of
the Company. George Powell shall not be entitled to any bonus or incentive
compensation that is awarded after the effective date of his resignation as
President and Chief Executive Officer.
4. The Company will provide tax return preparation services for George
Powell for calendar year 1996 and 1997, if the Company continues to provide the
same service to its senior officers for 1996 and 1997. George Powell will
return all Company property in his position as of the effective date of his
resignation as President and Chief Executive Officer, with the exception of the
car phone presently installed in his car, which George Powell may retain with
all monthly billings to be switched to George Powell effective April 1, 1996.
2
5. The Company will reimburse George Powell for career assessment services
with DeFrain Mayer Lee Burgess, L.C.C. up to a maximum amount of $2,750. The
Company standard individual financial planning benefit (up to $3,000 per
calendar year) for senior officers shall be available to George Powell through
September 30, 1997 severance payment period.
6. For the period from the effective date of George Powell's resignation
as President and Chief Executive Officer of the Company through September 30,
1997, George Powell agrees not to form or acquire, in whole or in part, or
participate in any manner as partner, employee, officer, independent contractor
or consultant with any entity or concern that is now or should become during
that period engaged in the interstate or intrastate transportation of general
commodities by motor vehicle operating between points in the United States,
Canada or Mexico.
7. George Powell waives and releases for himself and anyone claiming
through him, his administrators, successors and assigns, fully and forever, any
claim against the Company, its subsidiaries, affiliates, their predecessors,
successors, officers, directors, agents, representatives, attorneys or
employees, of any kind whatsoever for any action or any inaction, loss,
expense, or any damage of whatever nature arising from any circumstance or
occurrence from the beginning of time until the date of signing this agreement.
Without limiting the foregoing, George Powell specifically waives any claim
arising out of the Age Discrimination in Employment Act relating in any way to
his employment with the Company or the termination thereof. The only exception
to the aforementioned waiver and release will be claims by George Powell under
any right arising under this agreement.
8. George Powell further agrees that he will never disclose to anyone,
except an authorized representative of the Company, as required by law, any
confidential or proprietary information about the Company, its customers, it
manufacturing, production, or other operational processes, its products, costs,
or other financial information, or any other information he should not have
released or publicized to persons outside the Company during George Powell's
employment. George Powell will not denigrate the Company, its products, its
services, its management or Board of Directors. This paragraph will not apply
to the disclosure of general information about the Company of a kind normally
disclosed to prospective employers or to any information of a routine rather
than confidential, derogatory or proprietary nature.
9. The provisions of this agreement are severable, and if any part of it
is found to be unenforceable or in contravention of some applicable law or
regulation, including the Employee Retirement Income Security Act, or if any
payment or benefit hereunder would result in any disqualification or detriment
to any benefit plan of the Company, such provision will be deemed not to exist
but the other provisions will remain fully valid and enforceable. In the event
any provision is deemed not to exist by reason of this provision, the parties
agree that the Company will pay to George Powell an equivalent amount in cash.
3
10. George Powell agrees that he will not disclose any information
concerning this agreement to anyone except his private attorneys, his spouse,
financial advisors and tax consultants, and only then if such individuals agree
to keep the information confidential. The Company agrees that it will not
disclose any information concerning this agreement to anyone except Company
officials requiring this information in fulfilling their duties to the Company,
except to the extent required by law or any applicable SEC regulations.
11. The Company represents and agrees that neither it nor its directors or
officers will make any derogatory, disparaging or false statements intended to
harm the business or personal reputation of George Powell. George Powell
represents and agrees that he will not make any derogatory, disparaging or
false statements intended to harm the business or personal reputation of the
Company, its directors, officers or employees.
12. George Powell agrees that should he breach any of the material
provisions of this agreement, he shall forfeit his right to any further
payments, benefits, or perquisites payable under this agreement and he shall
reimburse the Company for all payments received after he breached any of said
provisions. The question of whether such breach has occurred is subject to
arbitration pursuant to paragraph 13. If the arbitrator rules that the Company
wrongfully withheld such payment, then he may order the Company to make such
payments plus interest on each payment at the prime rate, accrued from the time
each such payment should have been made.
13. Any dispute between the parties hereto arising out of, in connection
with, or relating to this agreement and its specific subject matter or the
breach thereof shall be settled by arbitration in Overland Park, Kansas in
accordance with the rules then in effect of the American Arbitration
Association ("AAA"). Arbitration shall be the exclusive remedy for any such
dispute except in the event either party fails to abide by an arbitration award
rendered hereunder. Regardless of whether or not both parties hereto
participate in the arbitration proceeding, any arbitration award rendered
hereunder shall be final and binding on each party hereto and judgment upon the
award rendered may be entered in any court having jurisdiction thereof.
The party seeking arbitration shall notify the other party in writing and
request the AAA to submit a list of seven potential arbitrators. In the event
the parties do not agree upon an arbitrator, each party shall, in turn, strike
one arbitrator from the list, George Powell having the first strike, until only
one arbitrator remains, who shall arbitrate the dispute. The arbitration
hearing shall be conducted within 30 days of the selection of an arbitrator or
at the earliest date thereafter that the arbitrator is available.
14. This agreement shall be construed pursuant to the laws of the State of
Kansas.
15. George Powell has been advised, and he understands, that he has the
right to consult, and should consult, an attorney before signing this document.
Further, the parties agree that George Powell has been offered at least 21
days within which to consider the agreement.
4
16. George Powell states that he has read this document and in signing the
agreement and release has relied upon no promise or promise of benefit not
expressly set forth herein. He agrees that he is entitled to no benefit under
this agreement except as specifically and expressly set forth herein.
17. After signing this agreement, for a period of seven days, George
Powell may revoke this agreement, and it shall not be enforceable or effective
until after the passing of such seven days.
YELLOW CORPORATION
BY___________________________
ATTEST:
____________________________
________________________
George E. Powell III
Dated:________________________________
5
1,000
3-MOS
DEC-31-1996
JAN-01-1996
MAR-31-1996
15,725
0
331,484
0
0
460,392
1,984,937
1,091,910
1,380,118
418,590
327,442
0
0
28,858
379,501
1,380,118
0
741,678
0
749,829
0
0
6,852
(15,826)
(1,575)
(14,251)
0
0
0
(14,251)
(.51)
(.51)
