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, 1997
--------------
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.)
10990 Roe Avenue, P.O. Box 7563, Overland Park, Kansas 66207
- ------------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(913) 696-6100
--------------
(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 April 30, 1997
----- -----------------------------
Common Stock, $1 Par Value 28,116,241 shares
2
YELLOW CORPORATION
INDEX
Item Page
- ---- ----
PART I
------
1. Financial Statements
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 3
Statements of Consolidated Income -
Three Months Ended March 31, 1997 and 1996 4
Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1997 and 1996 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 12
Holders
6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
3
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
------- --------------------
CONSOLIDATED BALANCE SHEETS
Yellow Corporation and Subsidiaries
March 31, 1997 and December 31, 1996
(Amounts in thousands except share data)
(Unaudited)
March 31 December 31
1997 1996
------------ -----------
ASSETS
CURRENT ASSETS:
Cash $ 39,161 $ 24,800
Accounts receivable 282,641 280,758
Refundable income taxes - 6,150
Prepaid expenses and other 62,478 78,300
------------ -----------
Total current assets 384,280 390,008
------------ -----------
PROPERTY AND EQUIPMENT:
Cost 1,949,299 1,965,798
Less - Accumulated depreciation 1,165,183 1,153,108
------------ -----------
Net property and equipment 784,116 812,690
------------ -----------
OTHER ASSETS 24,078 25,109
------------ -----------
$1,192,474 $1,227,807
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and checks outstanding $ 102,325 $ 151,538
Wages and employees' benefits 145,933 132,255
Other current liabilities 141,915 136,251
Current maturities of long-term debt 3,027 3,661
------------ -----------
Total current liabilities 393,200 423,705
------------ -----------
OTHER LIABILITIES:
Long-term debt 185,041 192,492
Deferred income taxes 28,032 31,555
Claims, insurance and other 184,097 184,355
------------ -----------
Total other liabilities 397,170 408,402
------------ -----------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value 28,863 28,863
Capital surplus 6,745 6,745
Retained earnings 384,116 377,712
Treasury stock (17,620) (17,620)
------------ -----------
Total shareholders' equity 402,104 395,700
------------ -----------
$1,192,474 $1,227,807
============ ===========
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 Three Months Ended March 31, 1997 and 1996
(Amounts in thousands except per share data)
(Unaudited)
1997 1996
--------- ----------
OPERATING REVENUE $ 785,144 $ 741,678
--------- ----------
OPERATING EXPENSES:
Salaries, wages and benefits 515,048 500,280
Operating expenses and supplies 120,951 118,280
Operating taxes and licenses 29,200 29,617
Claims and insurance 17,327 17,351
Communications and utilities 11,219 11,325
Depreciation 30,213 33,502
Purchased transportation 46,014 39,474
--------- ----------
Total operating expenses 769,972 749,829
--------- ----------
INCOME (LOSS) FROM OPERATIONS 15,172 (8,151)
--------- ----------
NONOPERATING (INCOME) EXPENSES:
Interest expense 3,903 6,852
Other, net (249) 823
--------- ----------
Nonoperating expenses, net 3,654 7,675
--------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 11,518 (15,826)
INCOME TAX PROVISION (BENEFIT) 5,017 (1,575)
--------- ----------
NET INCOME (LOSS) $ 6,501 $ (14,251)
========= ==========
AVERAGE COMMON SHARES OUTSTANDING 28,112 28,106
========= ==========
EARNINGS (LOSS) PER SHARE $ .23 $ (.51)
========= ==========
The accompanying notes are an integral part of these statements.
4
5
STATEMENTS OF CONSOLIDATED CASH FLOWS
Yellow Corporation and Subsidiaries
For the Three Months Ended March 31, 1997 and 1996
(Amounts in thousands)
(Unaudited)
1997 1996
--------- ---------
OPERATING ACTIVITIES:
Net cash from (used in) operating activities $ 25,136 $ (10,174)
--------- ---------
INVESTING ACTIVITIES:
Acquisition of property and equipment (7,856) (9,520)
Proceeds from disposal of property and equipment 5,118 2,419
Purchases of short-term investments - (1,684)
Proceeds from maturities of short-term investments - 7,098
--------- ---------
Net cash used in investing activities (2,738) (1,687)
--------- ---------
FINANCING ACTIVITIES:
Unsecured bank credit lines, net - 16,000
Commercial paper, net 1,787 (13,644)
Repayment of long-term debt (9,824) (631)
--------- ---------
Net cash from (used in) financing activities (8,037) 1,725
--------- ---------
NET INCREASE (DECREASE) IN CASH 14,361 (10,136)
CASH, BEGINNING OF PERIOD 24,800 25,861
--------- ---------
CASH, END OF PERIOD $ 39,161 $ 15,725
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 1,030 $ 977
========= =========
Interest paid $ 2,247 $ 3,293
========= =========
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 1996 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 Services, Inc., formerly Yellow
Technology Services, Inc., (Yellow Services) supports the company's
subsidiaries - primarily Yellow Freight - with information technology and
other services. Yellow Freight, the company's principal subsidiary,
comprises approximately 75% of total revenue while Preston Trucking
comprises approximately 14% and Saia comprises approximately 10%.
3. For periods ended after December 15, 1997, the company will be required
to report basic and diluted earnings per share in accordance with recently
released Financial Accounting Standards Board Statement No. 128, Earnings
Per Share. The accounting change will not impact reported earnings per
share data for the quarter ended March 31, 1997, or any 1996 quarters.
The dilutive impact of outstanding options and other securities during
those periods was not material.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
March 31, 1997 Compared to December 31, 1996
--------------------------------------------
Working capital increased during the first three months of 1997, resulting
in an $8.9 million deficit working capital position at March 31, 1997 compared
to $33.7 million deficit position at December 31, 1996. The improvement in
working capital was mostly the result of a reduction in accounts payable and
outstanding checks. Accounts receivable remained relatively constant during
the period as growth due to increased revenue levels at the end of the
respective periods of comparison were mostly offset by the sale of $25.0
million in accounts receivable under Yellow Freight's receivables purchase
agreement. The company can operate with a
6
7
FINANCIAL CONDITION (continued)
deficit working capital position because of rapid turnover of accounts
receivable, effective cash management and ready access to funding.
Total debt during the first three months of 1997 decreased $8.1 million.
Cash flows from operations were sufficient to pay down debt and cover capital
spending. Net capital expenditures for the first three months of 1997 were
$2.7 million. It is anticipated that the remaining net capital spending for
1997 will be approximately $106.6 million.
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1997 and 1996
Operating revenue in the first quarter was $785.1 million, a 5.9 percent
increase over first quarter 1996 revenue of $741.7 million. Net income for the
quarter was $6.5 million, or $.23 per share, versus a 1996 first quarter net
loss of $14.3 million, or $.51 per share. Operating income was $15.2 million,
a $23.3 million improvement from 1996 when the company recorded an $8.1 million
operating loss in the first quarter.
During the first quarter, Yellow Freight reported operating income of
$15.4 million, a $17.7 million gain from the 1996 first quarter when it
recorded an operating loss of $2.3 million. Yellow Freight revenue for the
1997 period was $598.8 million, a 3.9 percent increase from first quarter 1996
revenue of $576.1 million. Yellow Freight's operating ratio improved to 97.4,
from 100.4 in the 1996 first quarter.
Yellow Freight's improved performance was due primarily to a 4.6 percent
increase in tonnage-per-day, a 2.7 percent average increase in LTL freight
rates and an aggressive cost-control program. Including truckload impacts,
revenue per ton increased by 1.7 percent over the prior year's quarter while
costs per ton decreased by 1.6 percent.
During 1996, Yellow Freight trimmed more than $75 million in expenses.
During 1997, the company expects to achieve cumulative savings of $142 million.
This is comprised of $90 million in a full year of savings from cost
reductions implemented in 1996, $58 million from additional programs designed
to increase workforce productivity and create other efficiencies, less
approximately $6 million in nonrecurring second quarter relocation expenses
resulting from a change of operations in mid-April. The savings will be
partially offset by the $44 million impact of a contract wage and benefit
increase for Yellow Freight's Teamster employees that became effective April 1,
1997. The change of operations is expected to increase Yellow Freight's
utilization of lower-cost rail service to a run rate of 27 percent of total
linehaul miles from 18 percent in 1996.
As further described in the footnotes to the 1996 consolidated financial
statements, Yellow Freight recorded a special charge of $46.1 million, or $28.3
million after taxes in the fourth quarter of 1996. The major components of the
charge and subsequent activity are as summarized below (amounts in millions):
7
8
FINANCIAL CONDITION (continued)
Cumulative
-------------------
March 31,
Original Favorable Paid or 1997
Charge Revisions Utilized Balance
-------- --------- -------- ---------
Write down nonoperating
real estate $16.5 $- $1.1 $15.4
Write off computer software 8.4 - 8.4 -
Early retirement program 13.7 - 13.7 -
Company car program reduction 3.6 .4 3.2 -
Severance and organization
design 3.9 .2 .9 2.8
-------- --------- -------- ---------
Total charge before taxes $46.1 $.6 $27.3 $18.2
======== ========= ======== =========
Marketing efforts continue on nonoperating real estate. During the first
quarter of 1997, nonoperating property written down in the charge to $1.4
million was sold for $1.4 million, utilizing a portion of the write down. As
disclosed in the footnotes to the 1996 consolidated financial statements, the
pension benefit obligation under defined benefit pension plans increased $12.9
million in 1996 as a result of the 130 employees electing the early retirement
program. Other early retirement program costs were paid in cash in the first
quarter of 1997. All company car reduction program costs were paid in cash in
the first quarter of 1997. Severance payments are expected to continue through
the first quarter of 1998. Revisions to estimates were reflected in operations
during the first quarter of 1997.
Preston Trucking, a regional carrier serving the northeastern and upper
midwestern U.S., reported first quarter revenue of $103.5 million, up 5.2
percent from 1996 first quarter revenue of $98.4 million. Preston Trucking
narrowed its quarter-to-quarter operating losses from $5.1 million in 1996 to
$2.9 million in 1997. The operating ratio improved from 105.2 in the 1996
quarter to 102.8 in the 1997 quarter.
Saia, a regional carrier serving the southeastern U.S., recorded revenue
of $72.4 million, up 19.3 percent from $60.7 million in the 1996 first quarter.
Operating income was $3.6 million, compared with $3.1 million in the 1996
period. The operating ratio for the 1997 first quarter was 95.0, versus 94.9
in 1996.
Both Preston Trucking and Saia are positioned to benefit from industry
consolidation as two regional competitors have recently exited the market.
WestEx continued on track with its development plan, recording revenue of $10.4
million, a 59.6 percent increase over first quarter 1996 revenue of $6.5
million. WestEx is a regional carrier serving California and parts of the
southwestern U.S.
The above information includes forward-looking statements. Actual future
results could differ materially from those projected in such statements as a
result of a number of factors which could negatively impact the company,
including adverse weather conditions, the price and availability of diesel
fuel, competitor pricing activity and a downturn in general economic activity.
8
9
Yellow Freight System, Inc.
Financial Information
For the Quarter Ended March 31
(Amounts in thousands)
First Quarter %
-------------------
1997 1996 Change
-------- --------- ------
Operating revenue 598,827 576,077 3.9
Operating income (loss) 15,445 (2,324)
Operating ratio 97.4 100.4
Total assets at March 31 884,593 1,015,483
First Quarter
First Quarter % Amount/Workday %
------------------- -----------------
1997 1996 Change 1997 1996 Change
-------- --------- ------ -------- ------- ------
Workdays (63) (64)
-------- -------
F/S Revenue LTL 545,147 521,532 4.5 8,653.1 8,148.9 6.2
TL 55,066 51,835 6.2 874.1 809.9 7.9
Other (1,386) 2,710 (22.0) 42.3
Total 598,827 576,077 3.9 9,505.2 9,001.2 5.6
Revenue excluding revenue LTL 545,147 521,532 4.5 8,653.1 8,148.9 6.2
recognition adjustment TL 55,066 51,835 6.2 874.1 809.9 7.9
Other 839 2,344 13.3 36.6
Total 601,052 575,711 4.4 9,540.5 8,995.5 6.1
Tonnage LTL 1,677 1,648 1.8 26.62 25.75 3.4
TL 402 372 8.1 6.38 5.81 9.8
Total 2,079 2,020 2.9 33.00 31.56 4.6
Shipments LTL 3,372 3,243 4.0 53.52 50.67 5.6
TL 53 50 6.0 .84 .78 7.7
Total 3,425 3,293 4.0 54.37 51.45 5.7
Revenue/cwt. LTL 16.25 15.82 2.7
TL 6.84 6.97 (1.9)
Total 14.43 14.19 1.7
Revenue/shipment LTL 161.69 160.81 .5
TL 1,031.83 1,040.01 (.8)
Total 175.25 174.12 .7
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Preston Trucking Company, Inc.
Financial Information
For the Quarter Ended March 31
(Amounts in thousands)
First Quarter %
------------------
1997 1996 Change
-------- -------- ------
Operating revenue 103,488 98,390 5.2
Operating income (loss) (2,891) (5,131)
Operating ratio 102.8 105.2
Total assets at March 31 156,404 166,990
First Quarter
First Quarter % Amount/Workday %
------------------ ----------------
1997 1996 Change 1997 1996 Change
-------- -------- ------ ------- ------- ------
Workdays (62) (64)
------- -------
F/S Revenue LTL 91,465 86,486 5.8 1,475.2 1,351.3 9.2
TL 11,080 11,001 .7 178.7 171.9 4.0
Other 943 903 4.4 15.2 14.1 7.8
Total 103,488 98,390 5.2 1,669.2 1,537.3 8.6
Revenue excluding revenue LTL 91,465 86,486 5.8 1,475.2 1,351.3 9.2
recognition adjustment TL 11,080 11,001 .7 178.7 171.9 4.0
Other 1,354 1,247 8.6 21.8 19.5 12.1
Total 103,899 98,734 5.2 1,675.8 1,542.7 8.6
Tonnage LTL 439 436 .7 7.08 6.81 3.9
TL 122 116 5.2 1.97 1.81 8.6
Total 561 552 1.6 9.05 8.63 4.9
Shipments LTL 832 827 .6 13.42 12.92 3.9
TL 17 16 6.3 .27 .25 9.7
Total 849 843 .7 13.69 13.17 4.0
Revenue/cwt. LTL 10.41 9.91 5.0
TL 4.53 4.74 (4.4)
Total 9.13 8.82 3.5
Revenue/shipment LTL 109.94 104.67 5.0
TL 660.96 677.78 (2.5)
Total 120.83 115.71 4.4
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Saia Motor Freight Line, Inc.
Financial Information
For the Quarter Ended March 31
(Amounts in thousands)
First Quarter %
----------------
1997 1996 Change
------- ------- ------
Operating revenue 72,420 60,688 19.3
Operating income 3,595 3,073
Operating ratio 95.0 94.9
Total assets at March 31 162,293 148,773
First Quarter
First Quarter % Amount/Workday %
---------------- ----------------
1997 1996 Change 1997 1996 Change
------- ------- ------ ------- ------- ------
Workdays (63) (64)
------- -------
F/S Revenue LTL 64,523 53,296 21.1 1,024.2 832.8 23.0
TL 7,897 7,392 6.8 125.3 115.5 8.5
Total 72,420 60,688 19.3 1,149.5 948.3 21.2
Revenue excluding revenue LTL 64,583 53,350 21.1 1,025.1 833.6 23.0
recognition adjustment TL 7,904 7,413 6.6 125.5 115.8 8.3
Total 72,487 60,763 19.3 1,150.6 949.4 21.2
Tonnage LTL 376 325 15.7 5.97 5.08 17.5
TL 128 132 (3.0) 2.03 2.06 (1.5)
Total 504 457 10.3 8.00 7.14 12.0
Shipments LTL 719 622 15.6 11.41 9.72 17.4
TL 13 14 (7.1) .21 .22 (5.7)
Total 732 636 15.1 11.62 9.94 16.9
Revenue/cwt. LTL 8.58 8.20 4.6
TL 3.08 2.80 10.0
Total 7.18 6.64 8.1
Revenue/shipment LTL 89.77 85.64 4.8
TL 576.62 551.19 4.6
Total 98.87 95.46 3.6
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual Meeting of Stockholders on April 24, 1997
(b) The following directors were elected with the indicated number of votes
set forth below.
For Withheld
---------- ---------
Klaus E. Agthe 22,497,226 2,082,670
Cassandra C. Carr 24,308,498 271,398
Howard M. Dean 22,496,319 2,083,577
David H. Hughes 24,388,924 190,972
Ronald T. LeMay 24,383,529 196,367
John C. McKelvey 24,390,099 189,797
A. Maurice Myers 24,398,760 181,136
William L. Trubeck 24,391,224 188,672
Carl W. Vogt 24,335,849 244,047
(c) Amendments to the Directors' Stock Compensation Plan eliminating
restrictions on the stock awards, permitting the Directors to take up to
100% of Board and Committee retainers in company common stock and
inclusion of a stock option provision in the Plan were voted on and
approved at the meeting by the following vote. For: 21,778,885, Against:
1,416,768, Abstention: 1,384,242.
(d) Adoption of the 1996 Stock Option Plan was voted on and approved at the
meeting by the following vote. For: 21,494,602, Against: 1,714,597,
Abstention: 1,370,696.
(e) The appointment of Arthur Andersen LLP as independent public accountants
of the company for 1997 was voted on and approved at the meeting by the
following vote. For: 24,319,455, Against: 223,516, Abstention: 36,925.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(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 March 31,
1997.
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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: May 12, 1997 /s/ A. Maurice Myers
-----------------------------------
A. Maurice Myers
Chairman of the Board of Directors,
President & Chief Executive Officer
Date: May 12, 1997 /s/ H. A. Trucksess, III
-----------------------------------
H. A. Trucksess, III
Senior Vice President - Finance/
Chief Financial Officer & Treasurer
13
5
1,000
3-MOS
DEC-31-1997
JAN-01-1997
MAR-31-1997
39,161
0
282,641
0
0
384,280
1,949,299
1,165,183
1,192,474
393,200
185,041
0
0
28,863
373,241
1,192,474
0
785,144
0
769,972
0
0
3,903
11,518
5,017
6,501
0
0
0
6,501
.23
.23
