SEC Filing | Yellow Corporation

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 ------------- 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 July 30, 1999 ----- ---------------------------- Common Stock, $1 Par Value 24,862,774 shares

2 YELLOW CORPORATION INDEX Item Page - ---- ---- PART I ------ 1. Financial Statements Consolidated Balance Sheets - June 30, 1999 and December 31, 1998 3 Statements of Consolidated Operations - Quarter and Six Months Ended June 30, 1999 and 1998 4 Statements of Consolidated Cash Flows - Six Months Ended June 30, 1999 and 1998 5 Notes to Consolidated Financial Statements 6 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 3. Quantitative and Qualitative Disclosures About Market Risk 13 PART II ------- 6. Exhibits and Reports on Form 8-K 17 Signatures 18 2

3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- CONSOLIDATED BALANCE SHEETS Yellow Corporation and Subsidiaries (Amounts in thousands except share data) (Unaudited) June 30, December 31, 1999 1998 ----------- ------------ ASSETS CURRENT ASSETS: Cash $ 25,144 $ 25,522 Accounts receivable 281,536 272,436 Prepaid expenses and other 32,821 76,657 ---------- ---------- Total current assets 339,501 374,615 ---------- ---------- PROPERTY AND EQUIPMENT: Cost 1,935,809 1,897,029 Less - Accumulated depreciation 1,214,935 1,194,227 ---------- ---------- Net property and equipment 720,874 702,802 ---------- ---------- OTHER ASSETS 28,900 28,268 ---------- ---------- $1,089,275 $1,105,685 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and checks outstanding $ 108,663 $ 147,644 Wages and employees' benefits 147,054 119,347 Other current liabilities 144,749 149,127 Current maturities of long-term debt 77 77 ---------- ---------- Total current liabilities 400,543 416,195 ---------- ---------- OTHER LIABILITIES: Long-term debt 150,350 156,988 Deferred income taxes 17,961 18,433 Claims, insurance and other 145,381 142,817 ---------- ---------- Total other liabilities 313,692 318,238 ---------- ---------- SHAREHOLDERS' EQUITY: Common stock, $1 par value 29,375 29,356 Capital surplus 15,210 14,948 Retained earnings 420,994 403,262 Accumulated other comprehensive income (2,564) (3,163) Treasury stock (87,975) (73,151) ---------- ---------- Total shareholders' equity 375,040 371,252 ---------- ---------- $1,089,275 $1,105,685 ========== ========== The accompanying notes are an integral part of these statements. 3

4 STATEMENTS OF CONSOLIDATED OPERATIONS Yellow Corporation and Subsidiaries For the Quarter and Six Months Ended June 30, 1999 and 1998 (Amounts in thousands except per share data) (Unaudited) Second Quarter Six Months -------------------------- ---------------------- 1999 1998 1999 1998 --------- --------- ---------- ---------- OPERATING REVENUE $ 756,056 $ 727,419 $1,483,554 $1,419,879 --------- --------- ---------- ---------- OPERATING EXPENSES: Salaries, wages and benefits 485,104 466,885 958,660 917,253 Operating expenses and supplies 114,669 110,729 227,940 221,356 Operating taxes and licenses 23,417 23,935 46,526 47,641 Claims and insurance 17,418 14,976 33,495 32,058 Depreciation and amortization 24,900 26,369 49,558 53,250 Purchased transportation 66,270 59,341 131,345 114,228 --------- --------- ---------- ---------- Total operating expenses 731,778 702,235 1,447,524 1,385,786 --------- --------- ---------- ---------- INCOME FROM OPERATIONS 24,278 25,184 36,030 34,093 --------- --------- ---------- ---------- NONOPERATING (INCOME) EXPENSES: Interest expense 2,898 3,031 5,751 6,130 Other, net (699) 169 (33) 401 ---------- --------- ---------- ---------- Nonoperating expenses, net 2,199 3,200 5,718 6,531 --------- --------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 22,079 21,984 30,312 27,562 INCOME TAX PROVISION 9,121 9,705 12,579 11,520 --------- --------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS 12,958 12,279 17,733 16,042 Loss from discontinued operations - (62,336) - (66,746) --------- ---------- ---------- ---------- NET INCOME (LOSS) $ 12,958 $ (50,057) $ 17,733 $ (50,704) ========= ========== ========== ========== AVERAGE SHARES OUTSTANDING-BASIC 24,854 27,198 25,131 27,555 ========= ========= ========== ========== AVERAGE SHARES OUTSTANDING-DILUTED 25,013 27,426 25,313 27,784 ========= ========= ========== ========== BASIC EARNINGS (LOSS) PER SHARE: Income from continuing operations $ .52 $ .45 $ .71 $ .58 Loss from discontinued operations - (2.29) - (2.42) --------- --------- ---------- ---------- Net income (loss) $ .52 $ (1.84) $ .71 $ (1.84) ========= ========= ========== ========== DILUTED EARNINGS (LOSS) PER SHARE: Income from continuing operations $ .52 $ .45 $ .70 $ .58 Loss from discontinued operations - (2.27) - (2.40) --------- ---------- ---------- ---------- Net income (loss) $ .52 $ (1.82) $ .70 $ (1.82) ========= ========== ========== ========== The accompanying notes are an integral part of these statements. 4

5 STATEMENTS OF CONSOLIDATED CASH FLOWS Yellow Corporation and Subsidiaries For the Six Months Ended June 30, 1999 and 1998 (Amounts in thousands) (Unaudited) 1999 1998 --------- --------- OPERATING ACTIVITIES: Net cash from operating activities $ 89,174 $ 73,535 --------- --------- INVESTING ACTIVITIES: Acquisition of property and equipment (74,945) (46,471) Proceeds from disposal of property and equipment 5,879 12,431 Net capital expenditures of discontinued operations - 2,203 --------- --------- Net cash used in investing activities (69,066) (31,837) --------- --------- FINANCING ACTIVITIES: Treasury stock purchases (14,824) (33,495) Proceeds from stock options and other, net 228 505 Repayment of long-term debt (5,890) (2,948) --------- --------- Net cash used in financing activities (20,486) (35,938) --------- --------- NET INCREASE (DECREASE) IN CASH (378) 5,760 CASH, BEGINNING OF PERIOD 25,522 17,703 --------- --------- CASH, END OF PERIOD $ 25,144 $ 23,463 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION - ---------------------------------- Income taxes paid (received) $ 8,680 $ (4,298) ========= ========= Interest paid $ 5,702 $ 4,898 ========= ========= The accompanying notes are an integral part of these statements. 5

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 1998 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), Saia Motor Freight Line, Inc. (Saia), WestEx, Inc. (WestEx) and Action Express, Inc. (Action). YCS International, Inc. (YCS) provides global transportation solutions through fully integrated ocean, land and air transportation services. Yellow Services, Inc. (Yellow Services), is a subsidiary that provides information technology and other services to the company and its subsidiaries. Yellow Freight comprises approximately 84 percent of total revenue while Saia comprises approximately 12 percent. 3. The company reports financial and descriptive information about its reportable operating segments, on a basis consistent with that used internally for evaluating segment performance and allocating resources to segments. Consistent with the Business Segments disclosure in the company's 1998 Annual Report to Shareholders, the company has two reportable segments, strategic business units that offer different products and services. The National segment is comprised of the operations of Yellow Freight, a carrier that provides comprehensive national LTL service as well as international service throughout North America. The Southeast regional segment consists of the operations of Saia, a regional LTL carrier that provides overnight and second-day service in twelve southeastern states and Puerto Rico. 6

7 The segments are managed separately because each requires different operating, technology and marketing strategies and processes. The company evaluates performance primarily on operating income and return on capital. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in the company's 1998 Annual Report to Shareholders. The company also charges a trade name fee to Yellow Freight (1% of revenue) for use of the company's trademark. Interest and intersegment transactions are recorded at current market rates. Income taxes are allocated in accordance with a tax sharing agreement in proportion to each segment's contribution to the parent's consolidated tax status. The following table summarizes the company's continuing operations by business segment (in thousands): National S.E. Corporate -------- ---- --------- Regional and Other Consolidated -------- --------- ------------ Y-T-D June 30, 1999 Operating revenue $1,251,603 $171,349 $ 60,602 $1,483,554 Income from operations 31,520 7,814 (3,304) 36,030 Identifiable assets 774,257 222,734 92,284 1,089,275 Y-T-D June 30, 1998 Operating revenue $1,222,615 $166,850 $ 30,414 $1,419,879 Income from operations 27,125 11,268 (4,300) 34,093 Identifiable assets 772,945 205,196 74,582 1,052,723 4. On June 1, 1998 the company reached agreement in principle to sell Preston Trucking Company, Inc. (Preston Trucking) its Northeast regional LTL segment to a management group of three senior officers of Preston Trucking. Preston Trucking was a regional carrier serving the Northeast, Mid-Atlantic and Central States. The sale resulted in a noncash charge of $63.6 million net of anticipated tax benefits of approximately $28.0 million in 1998. The results of Preston Trucking have been classified as discontinued operations in the consolidated financial statements. No interest charges have been allocated to discontinued operations and the company does not anticipate any material change in the loss recorded on disposal of the discontinued operations. In July 1999 Preston Trucking ceased operations and has commenced a liquidation of its assets under federal bankruptcy regulations. 5. The difference between average common shares outstanding used in the computation of basic earnings per share and fully diluted earnings per share is attributable to outstanding common stock options. 6. The company's comprehensive income includes net income and foreign currency translation adjustments. Comprehensive income (loss) for the second quarter ended June 30, 1999 and 1998 was $12.7 million and ($50.3) million, respectively. Comprehensive income (loss) for the six months ended June 30, 1999 and 1998 was $18.3 million and ($50.9) million, respectively. 7

8 7. On July 8, 1999 the company successfully completed its cash tender offer to purchase the outstanding shares of common stock of Jevic Transportation, Inc. at a price of $14.00 per share. The aggregate purchase price of the stock including vested stock options and transaction costs is approximately $161 million net of approximately $4 million tax benefit. Including assumption of debt, the total transaction is approximately $200 million. The transaction is being accounted for under purchase accounting and the excess of purchase price over fair value of assets acquired will be allocated to goodwill and amortized over 40 years. Accordingly, the results of Jevic's operations have not been included in the company's condensed financial statements for the period ended June 30, 1999. The acquisition is being financed under the Yellow Corporation's existing credit facilities. 8

9 Item 2. Management's Discussion and Analysis of Financial Condition and Results - ------- ----------------------------------------------------------------------- of Operations - ------------- FINANCIAL CONDITION June 30, 1999 Compared to December 31, 1998 ------------------------------------------- Working capital is reduced through Yellow Freight's asset backed securitization agreement (ABS). Accounts receivable at June 30, 1999 and December 31, 1998 are net of $61 million and $43 million of receivables sold, resulting in a $18 million reduction in working capital during the period. Excluding the effects of the ABS transactions, working capital decreased slightly during the first six months of 1999, resulting in a breakeven working capital position at June 30, 1999 compared to a $1.4 million working capital position at December 31, 1998. The decrease in working capital was primarily the result of an increase in accrued expenses and decrease in prepaid expenses, which were largely offset by a $28.1 million increase in accounts receivable and decrease in accounts payable and checks outstanding. The company can operate with a deficit working capital position because of rapid turnover of accounts receivable, effective cash management and ready access to funding. Total debt during the first six months of 1999 decreased by approximately $6.6 million from December 31, 1998 due to early retirement of a portion of the company's subordinated debentures. Net capital expenditures for the first six months of 1999 were $69.1 million. Subject to ongoing review, total net capital spending for 1999 is expected to total approximately $147 million, exclusive of the Jevic transaction discussed below. On July 8, 1999 the Company successfully completed a cash tender offer to purchase the outstanding shares of common stock of Jevic Transportation, Inc. at a price of $14 per share. All shares have been accepted for payment and as of July 8, 1999, Yellow beneficially owned approximately 98.6 percent of the outstanding shares of Jevic. Jevic became a wholly owned subsidiary of Yellow Corporation. All remaining Jevic shareholders have the right to receive $14 per share in cash, payable according to terms of the tender offer. The aggregate purchase price of the stock, including transaction costs, is approximately $161 million. Including debt assumption, the total transaction is approximately $200 million. The acquisition is being financed under the company's existing $300 million credit facility. This credit facility and the company's ABS agreement provide adequate capacity to fund working capital and capital expenditures requirements. During the quarter ended June 30, 1999 the company purchased 172,500 additional treasury shares. The company has suspended its treasury repurchase program as a result of the Jevic transaction and more attractive internal investment opportunities. 9

10 RESULTS OF OPERATIONS Comparison of Three Months Ended June 30, 1999 and 1998 ------------------------------------------------------- Continuing Operations: Net income for the quarter ended June 30, 1999 was $13.0 million or $.52 per share (diluted), a 16 percent improvement over earnings per share in the 1998 second quarter. Income from continuing operations for the quarter ended June 30, 1998 was $12.3 million or $.45 per share (diluted). Operating revenue for the 1999 second quarter was $756.1 million an increase of 4 percent over operating revenue of $727.4 million for the 1998 second quarter. Yellow Freight System, the company's national LTL segment had operating income of $22.6 million for the second quarter of 1999 an increase of 15% over operating income of $19.7 million in the second quarter of 1998. Yellow Freight's second quarter 1999 operating revenue was $638.8 million, a 2.2 percent increase over operating revenue of $624.9 million in the second quarter of 1998. Yellow Freight's operating ratio was 96.5 in the second quarter of 1999 versus 96.8 in the second quarter of 1998. LTL tonnage declined (0.8) percent in the second quarter compared to the 1998 quarter, although the number of shipments was essentially even with the 1998 second quarter. A continued strong pricing environment produced an LTL revenue per hundredweight increase of 3.6 percent over the 1998 second quarter. These yield improvements more than offset the LTL volume decline and a decrease in truckload tonnage and other revenue. Saia Motor Freight, the company's southeast regional LTL segment had operating income of $2.8 million in the second quarter of 1999 compared to operating income of $7.0 million in the second quarter of 1998. Saia's operating revenue for the quarter ended June 30, 1999 was $85.1 million, a 1.7 percent decline from operating revenue of $86.6 million in the second quarter of 1998. Saia's business weakness was mostly concentrated in Texas and other Gulf Coast states with economies tied to the petroleum industry. Saia's operating ratio was 96.7 for the second quarter of 1999 versus 91.9 in the 1998 second quarter. WestEx, the company's regional carrier serving California and the Southwest, reported operating revenue of $17.5 million for the second quarter of 1999 compared to $15.9 million for the 1998 second quarter. Action Express, the company's regional carrier serving the Pacific Northwest and Rocky Mountain States had second quarter revenues of $9.4 million. Action Express was acquired in December 1998. WestEx improved its operating ratio to 98.7 for the second quarter of 1999 compared to an operating ratio of 101.7 for the second quarter of 1998. Action Express reported an operating ratio of 98.5 for the second quarter of 1999. Corporate expenses for the second quarter of 1999 include $0.6 million charge for a new technology business venture evaluation, which is still in process. Interest expense for the quarter ended June 30,1999 declined slightly from the 1998 second quarter as a result of reduced debt levels. The effective tax rate was 41.3 percent in the 1999 second quarter and 44.1 percent in the second quarter of 1998. 10

11 The 1999 second quarter earnings per share results also reflect the impact of stock buyback programs which have reduced average shares outstanding by approximately 9 percent compared to last year's second quarter. In addition to continuing operations, the 1998 second quarter included a $62.3 million charge for the divestment of Preston Trucking Company. Comparison of Six Months Ended June 30, 1999 and 1998 ----------------------------------------------------- Continuing Operations: Net income for the six months ended June 30, 1999 was $17.7 million or $.70 per share (diluted). Income from continuing operations for the six months ended June 30, 1998 was $16.0 million or $.58 per share (diluted). Operating revenue for the six months ended June 30, 1999 was $1,483.6 million an increase of 5 percent over operating revenue of $1,419.9 million for the six months ended June 30, 1998. Year to date income from continuing operations for 1999 improved $4.5 million over the six months ended June 30, 1998 after excluding gains on the sale of real estate assets recorded in 1999 and 1998. Yellow Freight System had operating income of $31.5 million for the six months ended June 30, 1999 an increase of 16% over operating income of $27.1 million in the comparable 1998 period. Yellow Freight's 1999 year to date operating revenue was $1,251.6 million, up 2.4 percent from operating revenue of $1,222.6 million for the six months ended June 30, 1998. Yellow Freight's operating ratio was 97.5 for the first six months of 1999 versus 97.8 in the first six months of 1998. Yellow Freight System is benefiting from a continued strong pricing environment that has produced LTL yield improvements in excess of 3 percent for the first six months of 1999 compared to 1998. Year to date LTL tonnage has remained flat while year to date LTL shipments are up slightly compared to 1998. In addition, the first six months of 1998 were adversely affected by the freight diversion problem that resulted from customer concerns over labor contract negotiations and a possible strike. Saia Motor Freight had operating income of $7.8 million for the six months ended June 30, 1999 compared to $11.3 million for the six months ended June 30, 1998. Saia's 1999 year to date operating revenue was $171.3 million up 2.7 percent from $166.9 million for the first six months of 1998. Saia's business weakness was mostly concentrated in Texas and other Gulf Coast states with economies tied to the petroleum industry. Saia's operating ratio was 95.4 for the six months ended June 30, 1999 compared to 93.2 for the six months ended June 30, 1998. Saia's 1999 plans include resuming its geographic growth by opening three terminals in Virginia. 11

12 WestEx reported operating revenue of $33.8 million for the first six months of 1999, up 11.1 percent from $30.4 million for the six months ended June 30, 1998. Action Express had revenues of $17.7 million for the first six months of 1999. Action Express was acquired in December 1998. WestEx reported a small operating profit for the first six months of 1999 while Action Express reported a small operating loss as both companies absorbed one-time expenses related to network realignments. Saia has absorbed Action Express operations in Texas. Action has taken over part of WestEx's operations in Colorado and Utah while WestEx has absorbed part of Action's California operations. During the first half of 1999, market fuel prices actually fell below the company's fuel hedge contract prices, depriving the company of approximately $.14 per share in fuel cost savings. As a result, of fuel price increases in the second quarter of 1999, current market prices approximate the company's current hedge contracts. The company remains substantially hedged for the balance of 1999 and a portion of 2000. Interest expense declined slightly between years as a result of reduced debt levels. The effective tax rate for the first six months of 1999 was 41.5 percent compared to 41.8 percent for the same period in 1998. Earnings per share results through June 30, 1999 also reflect the impact of stock buyback programs, which have reduced average shares outstanding by 9 percent compared to the first six months of 1998. Year 2000: The company's Year 2000 project is intended to minimize the business impact of potential Year 2000 failures. Work efforts both to remediate and replace mainframe and client/server business applications have been completed on schedule. The remainder of the year will be used to finalize business contingency plans, complete the planned rollout of equipment, and continue to retest systems for Year 2000 readiness. The company's Year 2000 strategy includes mainframe, mid-range, and client server applications, PCs, workstations, end-user computing, vendor software, equipment, environmental operations in terminals and offices, suppliers and customers. Inventory and assessment of all areas have been completed. Non-compliant vendor software and equipment determined to be critical to the business has been remediated. PC hardware is being replaced as needed through a systematic schedule of upgrades. The company's strategy also includes developing relationships with vendors who are working toward compliance. The company has material vendor relationships with financial institutions, utilities and telecommunication companies. These vendors indicate that they expect to achieve compliance and do not anticipate business interruptions as the century changes. The company is developing contingency plans to address potential Year 2000 scenarios that may arise with key vendors, customers and other external parties. However, these external risks are beyond the company's total control, thus there can be no assurance that all year 2000 risks can be contained by company contingency plans. The company began its Year 2000 project in 1995 and has estimated total project costs to be approximately $16 million. Through June 30, 1999 the 12

13 company has incurred approximately $14.7 million which represents approximately 7% of its information technology budget over the project period. The company expensed $0.4 million of modification costs in the second quarter of 1999 and $1.1 million for the six months ended June 30, 1999 compared to $1.7 million in the second quarter of 1998 and $3.5 million for the six months ended June 30, 1998. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------- ----------------------------------------------------------- The company is exposed to a variety of market risks, including the effects of interest rates, fuel prices and foreign currency exchange rates. To ensure adequate funding through seasonal business cycles and minimize overall borrowing costs, the company utilizes a variety of both fixed rate and variable rate financial instruments with varying maturities. The company's long-term financing is generally at fixed rates. The company uses swaps as hedges in order to manage a portion of its exposure to variable diesel prices. These agreements provide protection from rising fuel prices, but limit the ability to benefit from price decreases below the purchase price of the agreement. The swap transactions are generally based on the price of heating oil. Based on historical information, the company believes the correlation between the market prices of diesel fuel and heating oil is highly effective. The company's revenues and operating expenses, assets and liabilities of its Canadian and Mexican subsidiaries are denominated in foreign currencies, thereby creating exposures to changes in exchange rates, however the risks related to foreign currency exchange rates are not material to the company's consolidated financial position or results of operations. The table below provides information about the company's debt instruments (including off balance sheet asset backed securitzation (ABS)) as of June 30, 1999. The table presents principal cash flows (in millions) and related weighted average interest rates by contractual maturity dates. Expected Maturity Date There- Fair 1999 2000 2001 2002 2003 after Total Value ---- ---- ---- ---- ---- ----- ----- ----- Fixed Rate Debt $ - $ 28.8 $ 7.0 $ 22.0 19.3 57.9 $ 135.0 $136.1 Ave. Int. Rate - 6.75% 8.31% 7.35% 6.27% 6.78% Var. Rate Debt $ - $ - $ - $ - 5.0 10.4 $ 15.4 $ 15.4 Ave. Int. Rate - - - - 4.23% 5.14% Off Bal. Sheet - ABS $ 61.0 $ 61.0 $ 61.0 Ave. Int. Rate 5.23% In connection with the previously discussed acquisition of Jevic Transportation, Inc. on July 8, 1999, the company increased its outstanding debt under existing credit facilities by approximately $200 million, which was principally variable rate debt. 13

14 The following table provides information about the company's diesel fuel hedging instruments that are sensitive to changes in commodity prices. The table presents notional amounts in gallons and the weighted average contract price by contractual maturity date as of June 30, 1999. The company maintained fuel inventories for use in normal operations at June 30, 1999, which were not material to the company's financial position and represented no significant market exposure. Expected Maturity Date 1999 2000 Total ---- ---- ----- Heating Oil Swaps: Gallons (in millions) 57.6 45.4 103.0 Weighted Average Price per Gallon $ .4491 $ .4586 $ .4533 Fair Value (in millions) $ 4.8 Diesel Fuel Fixed Purchased Contracts: Gallons (in millions) 1.3 1.3 Weighted Average Price per Gallon $ .5170 $ .5170 Fair Value (in millions) $ - Statements contained herein that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the company's expectations, hopes, beliefs and intentions on strategies regarding the future. It is important to note that the company's actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including but not limited to inflation, labor relations, inclement weather, competitor pricing activity, year 2000 issues, expense volatility and a downturn in general economic activity. 14

15 Yellow Freight System, Inc. Financial Information For the Quarter and Six Months Ended June 30 (Amounts in thousands) Second Quarter Six Months ------------------- ---------- 1999 1998 % 1999 1998 % -------- -------- --- -------- -------- --- Operating revenue 638,817 624,897 2.2 1,251,603 1,222,615 2.4 Operating income 22,569 19,719 31,520 27,125 Operating ratio 96.5 96.8 97.5 97.8 Total assets at June 30 774,257 772,945 Second Quarter Second Quarter Amount/Workday ------------------- ----------------------- 1999 1998 % 1999 1998 % -------- -------- --- -------- -------- --- Workdays (64) (64) Financial statement LTL 586,756 571,061 2.7 9,168.1 8,922.8 2.7 revenue TL 51,868 55,306 (6.2) 810.4 864.2 (6.2) Other 193 (1,470) NM 3.0 (23.0) NM Total 638,817 624,897 2.2 9,981.5 9,764.0 2.2 Revenue excluding LTL 586,756 571,061 2.7 9,168.1 8,922.8 2.7 revenue recognition TL 51,868 55,306 (6.2) 810.4 864.2 (6.2) adjustment Other (5) (200) NM (0.1) (3.1) NM Total 638,619 626,167 2.0 9,978.4 9,783.9 2.0 Tonnage LTL 1,713 1,727 (0.8) 26.76 26.98 (0.8) TL 353 396 (10.9) 5.51 6.18 (10.9) Total 2,066 2,123 (2.7) 32.27 33.16 (2.7) Shipments LTL 3,502 3,507 (0.2) 54.71 54.80 (0.2) TL 48 53 (10.2) .75 .83 (10.2) Total 3,550 3,560 (0.3) 55.46 55.63 (0.3) Revenue/cwt. LTL 17.13 16.54 3.6 TL 7.36 6.99 5.2 Total 15.46 14.76 4.8 Revenue/shipment LTL 167.57 162.84 2.9 TL 1,082.72 1,037.22 4.4 Total 179.92 175.93 2.3 15

16 Saia Motor Freight Line, Inc. Financial Information For the Quarter and Six Months Ended June 30 (Amounts in thousands) Second Quarter Six Months ------------------- ------------- 1999 1998 % 1999 1998 % -------- -------- --- -------- -------- --- Operating revenue 85,096 86,579 (1.7) 171,349 166,850 2.7 Operating income 2,771 7,044 7,814 11,268 Operating ratio 96.7 91.9 95.4 93.2 Total assets at June 30 222,734 205,196 Second Quarter Second Quarter Amount/Workday ------------------- -------------- 1999 1998 % 1999 1998 % -------- -------- --- -------- -------- --- Workdays (64) (64) Financial statement LTL 76,058 77,572 (2.0) 1,188.4 1,212.1 (2.0) revenue TL 9,038 9,007 .3 141.2 140.7 .3 Total 85,096 86,579 (1.7) 1,329.6 1,352.8 (1.7) Revenue excluding LTL 76,050 77,531 (1.9) 1,188.3 1,211.4 (1.9) revenue recognition TL 9,037 9,002 .4 141.2 140.7 .4 adjustment Total 85,087 86,533 (1.7) 1,329.5 1,352.1 (1.7) Tonnage LTL 421 439 (4.2) 6.58 6.86 (4.2) TL 154 154 (.4) 2.40 2.41 (.4) Total 575 593 (3.2) 8.98 9.27 (3.2) Shipments LTL 775 830 (6.6) 12.11 12.97 (6.6) TL 15 16 (3.1) .23 .24 (3.1) Total 790 846 (6.5) 12.34 13.21 (6.5) Revenue/cwt. LTL 9.03 8.82 2.4 TL 2.94 2.92 .8 Total 7.40 7.29 1.6 Revenue/shipment LTL 98.13 93.43 5.0 TL 601.10 579.99 3.6 Total 107.70 102.36 5.2 16

17 PART II - OTHER INFORMATION --------------------------- Item 4. Submission of Matters to a Vote of Security Holders - ------- None 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 - July 8, 1999 - Yellow Corporation completes previously announced cash tender offer to acquire Jevic Transportation, Inc. at $14 per share. - August 3, 1999 - Yellow Freight System, Inc. announces price increase effective September 1, 1999. 17

18 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: August 12, 1999 /s/ A. Maurice Myers -------------------------------- --------------------------------- A. Maurice Myers Chairman of the Board of Directors, President & Chief Executive Officer Date: August 12, 1999 /s/ H. A. Trucksess, III -------------------------------- --------------------------------- H. A. Trucksess, III Senior Vice President - Finance/ Chief Financial Officer & Treasurer 18

5 1,000 6-MOS DEC-31-1999 JAN-01-1998 JUN-30-1999 25,144 0 281,536 0 0 339,501 1,935,809 1,214,935 1,089,275 400,543 150,350 0 0 29,375 345,665 1,089,275 0 1,483,554 0 1,447,524 (33) 0 5,751 30,312 12,579 17,733 0 0 0 17,733 .71 .70