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 September 30, 2000 ------------------ 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 October 31, 2000 ----- ------------------------------- Common Stock, $1 Par Value 23,724,841 shares

2 YELLOW CORPORATION INDEX Item Page ---- PART I 1. Financial Statements Consolidated Balance Sheets - September 30, 2000 and December 31, 1999 3 Statements of Consolidated Operations - Quarter and Nine Months Ended September 30, 2000 and 1999 4 Statements of Consolidated Cash Flows - Nine Months Ended September 30, 2000 and 1999 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 14 PART II 6. Exhibits and Reports on Form 8-K 16 Signatures 20

3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS Yellow Corporation and Subsidiaries (Amounts in thousands except share data) (Unaudited) September 30, December 31, 2000 1999 ------------- ------------ ASSETS CURRENT ASSETS: Cash $ 28,894 $ 22,581 Accounts receivable 258,381 265,302 Prepaid expenses and other 44,199 64,009 ---------- ---------- Total current assets 331,474 351,892 ---------- ---------- PROPERTY AND EQUIPMENT: Cost 2,143,526 2,093,470 Less - Accumulated depreciation 1,239,623 1,226,698 ---------- ---------- Net property and equipment 903,903 866,772 ---------- ---------- GOODWILL AND OTHER ASSETS 106,915 106,919 ---------- ---------- $1,342,292 $1,325,583 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and checks outstanding $ 122,661 $ 135,177 Wages and employees' benefits 187,621 172,471 Other current liabilities 137,460 124,769 Current maturities of long-term debt 122,441 2,392 ---------- ---------- Total current liabilities 570,183 434,809 ---------- ---------- OTHER LIABILITIES: Long-term debt 137,185 274,015 Deferred income taxes 82,806 79,005 Claims, insurance and other 106,743 128,374 ---------- ---------- Total other liabilities 326,734 481,394 ---------- ---------- SHAREHOLDERS' EQUITY: Common stock, $1 par value 29,845 29,437 Capital surplus 21,723 16,063 Retained earnings 507,718 454,177 Accumulated other comprehensive income (2,741) (2,322) Treasury stock (111,170) (87,975) ---------- ---------- Total shareholders' equity 445,375 409,380 ---------- ---------- $1,342,292 $1,325,583 ========== ========== The accompanying notes are an integral part of these statements. 3

4 STATEMENTS OF CONSOLIDATED OPERATIONS Yellow Corporation and Subsidiaries For the Quarter and Nine Months Ended September 30, 2000 and 1999 (Amounts in thousands except per share data) (Unaudited) Third Quarter Nine Months --------------------------- ---------------------------- 2000 1999 2000 1999 --------- ---------- ---------- ---------- OPERATING REVENUE $ 918,898 $ 860,983 $2,705,150 $2,344,537 --------- --------- ---------- ---------- OPERATING EXPENSES: Salaries, wages and benefits 564,569 541,427 1,674,782 1,500,088 Operating expenses and supplies 143,636 126,456 420,706 354,394 Operating taxes and licenses 27,513 26,375 83,965 72,901 Claims and insurance 20,332 19,111 60,928 52,606 Depreciation and amortization 32,062 29,683 95,179 79,241 Purchased transportation 87,425 84,039 254,939 215,384 --------- --------- ---------- ---------- Total operating expenses 875,537 827,091 2,590,499 2,274,614 --------- --------- ---------- ---------- INCOME FROM OPERATIONS 43,361 33,892 114,651 69,923 --------- --------- ---------- ---------- NONOPERATING (INCOME) EXPENSES: Interest expense 5,127 4,544 15,071 10,295 Other, net 3,720 1,662 6,627 1,629 --------- --------- ---------- ---------- Nonoperating expenses, net 8,847 6,206 21,698 11,924 --------- --------- ---------- ---------- INCOME BEFORE INCOME TAXES 34,514 27,686 92,953 57,999 INCOME TAX PROVISION 14,961 11,775 39,412 24,355 --------- --------- ---------- ---------- NET INCOME $ 19,553 $ 15,911 $ 53,541 $ 33,644 ========= ========= ========== ========== AVERAGE SHARES OUTSTANDING-BASIC 24,427 24,866 24,949 25,042 ========= ========= ========== ========== AVERAGE SHARES OUTSTANDING-DILUTED 24,503 25,009 25,075 25,211 ========= ========= ========== ========== BASIC EARNINGS PER SHARE $ .80 $ .64 $ 2.15 $ 1.34 DILUTED EARNINGS PER SHARE $ .80 $ .64 $ 2.14 $ 1.33 The accompanying notes are an integral part of these statements. 4

5 STATEMENTS OF CONSOLIDATED CASH FLOWS Yellow Corporation and Subsidiaries For the Nine Months Ended September 30, 2000 and 1999 (Amounts in thousands) (Unaudited) 2000 1999 --------- --------- OPERATING ACTIVITIES: Net cash from operating activities $ 151,993 $ 219,006 --------- --------- INVESTING ACTIVITIES: Acquisition of property and equipment (141,489) (123,182) Acquisition of Jevic, net of cash acquired - (164,507) Proceeds from disposal of property and equipment 29,899 4,975 Other (1,343) - ---------- --------- Net cash used in investing activities (112,933) (282,714) --------- --------- FINANCING ACTIVITIES: Treasury stock purchases (21,868) (14,824) Proceeds from stock options and other, net 5,951 632 Increase (decrease) in long-term debt (16,830) 74,818 ---------- --------- Net cash provided by (used in) financing activities (32,747) 60,626 ---------- --------- NET INCREASE (DECREASE) IN CASH 6,313 (3,082) CASH, BEGINNING OF PERIOD 22,581 25,522 --------- --------- CASH, END OF PERIOD $ 28,894 $ 22,440 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid, net $ 36,304 $ 8,922 ========= ========= Interest paid $ 12,862 $ 6,620 ========= ========= The accompanying notes are an integral part of these statements. 5

6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Yellow Corporation and Subsidiaries (unaudited) 1. The accompanying consolidated financial statements include the accounts of Yellow Corporation and its wholly owned subsidiaries (the company). The company accounts for its investment in Transportation.com under the equity method of accounting. The consolidated financial statements 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 1999 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). The company acquired Jevic Transportation, Inc. (Jevic) on July 9, 1999. Jevic is a hybrid LTL and TL carrier operating principally in the Northeast. Yellow Technologies, Inc. is a subsidiary that provides information technology and other services to the company and its subsidiaries. For the quarter ended September 30, 2000 Yellow Freight comprised approximately 78 percent of total revenue while Saia comprised approximately 10 percent and Jevic approximately 8 percent of total revenue. 3. Transportation.com is an Internet transportation services company funded by Yellow Corporation and the venture capital firms, TL Ventures and EnerTech Capital Partners. On June 30, Transportation.com successfully introduced the first of a broad suite of web-based services designed to serve both shippers and carriers over the Internet. 6

7 4. The company reports financial and descriptive information about its reportable operating segments on a basis consistent with that used internally for evaluating segment operating performance and allocating resources to segments. The company has three reportable segments which are strategic business units that offer different products and services. Yellow Freight is a unionized carrier that provides comprehensive national LTL service as well as international service throughout North America. Saia is a regional LTL carrier that provides overnight and second-day service in twelve southeastern states and Puerto Rico. Jevic is a hybrid regional heavy LTL and TL carrier that provides service primarily in the Northeastern states. 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 1999 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 operations by business segment (in thousands): Yellow Corporate Freight Saia Jevic and Other Consolidated ----------- --------- -------- --------- ------------ As of Sept. 30, 2000 Identifiable assets $ 785,879 $235,197 $259,318 $ 61,898 $1,342,292 As of December 31, 1999 Identifiable assets $ 743,681 $228,653 $257,099 $ 96,150 $1,325,583 Three months ended Sept. 30, 2000 Operating revenue $ 715,138 $ 93,392 $ 74,867 $ 35,501 $ 918,898 Income from operations 39,450 4,821 3,055 (3,965) 43,361 Three months ended Sept. 30, 1999 Operating revenue $ 675,412 $ 89,137 63,380 $ 33,054 $ 860,983 Income from operations 26,590 4,698 4,467 (1,863) 33,892 Nine months ended Sept. 30, 2000 Operating revenue $2,092,165 $276,060 $230,009 $106,916 $2,705,150 Income from operations 104,434 12,068 9,820 (11,671) 114,651 Nine months ended Sept. 30, 1999 Operating revenue $1,927,015 $260,487 63,380 $ 93,655 $2,344,537 Income from operations 58,110 12,512 4,467 (5,166) 69,923 7

8 2. On July 9, 1999 the company completed a cash tender offer for all of the common stock of Jevic Transportation, Inc. at $14 share. The transaction was accounted for as a purchase. The aggregate purchase price of the stock, including vested stock options and transaction costs was approximately $160.8 million, net of an anticipated $4.3 million tax benefit relating to the cost of the stock options. Transaction costs relate primarily to legal and professional fees (in millions). Purchase Price: Common Stock tendered $149.9 Stock options, net of tax benefit 7.0 Transaction fees 3.9 ------ $160.8 ------ The total transaction was approximately $200 million, including assumption of debt. The transaction was accounted for under purchase accounting and the excess of purchase price over fair value of assets acquired was allocated to goodwill and is being amortized over 40 years. Accordingly, the results of Jevic's operations have been included in the company's consolidated financial statements for periods after July 10, 1999. The acquisition was financed using Yellow Corporation's existing credit facilities. The following pro forma financial information for the company gives effect to the Jevic acquisition as if it had occurred on January 1, 1999. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on the date indicated, or which may result in the future. (Unaudited pro forma financial information is in thousands except per share data.) Third Quarter Nine Months -------------------------- ------------------------- 2000 1999 2000 1999 --------- -------- ---------- ---------- Operating revenue $918,898 $867,346 $2,705,150 $2,483,783 Net income 19,553 15,971 53,541 34,926 Diluted earnings per share .80 .64 2.14 1.39 2. 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. 3. The company's comprehensive income includes net income and foreign currency translation adjustments. Comprehensive income for the third quarter ended September 30, 2000 and 1999 was $19.4 million and $16.0 million, respectively. Comprehensive income for the nine months ended September 30, 2000 and 1999 was $53.1 million and $34.3 million, respectively. 8

9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FINANCIAL CONDITION September 30, 2000 Compared to December 31, 1999 The company's liquidity needs arise primarily from capital investment in new equipment, land and structures and information technology, as well as funding working capital requirements. To ensure short-term and longer-term liquidity, the company maintains capacity under a bank credit agreement and an asset backed securitization (ABS) agreement involving Yellow Freight's accounts receivables. These facilities provide adequate capacity to fund working capital and capital expenditures requirements. At September 30, 2000 available unused capacity under the bank credit agreement was $111 million, The bank credit agreement has a maturity date of September 2001. Accordingly, the company has classified its borrowings under this facility as current in the September 30, 2000 balance sheet. The company expects to renew this facility in the first quarter of 2001. Working capital is reduced through Yellow Freight's asset backed securitization agreement (ABS). Capacity under the ABS agreement was increased to $200 million, from $175 million, in July 2000. Accounts receivable at September 30, 2000 and December 31, 1999 are net of $172.5 million and $135 million of receivables sold under the ABS agreement. Including the effects of the ABS transactions and the current classification of debt discussed above, working capital decreased $155.8 million during the first nine months of 2000. This resulted in a working capital deficit of $238.7 million at September 30, 2000 compared to an $82.9 million working capital deficit at December 31, 1999. Increases in accounts receivable, excluding the effects of ABS transactions and decreases in accounts payable and checks outstanding were largely offset by decreases in prepaid expenses. 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. Net capital expenditures for the first nine months of 2000 were $112.9 million. Subject to ongoing review, total net capital spending for 2000 is expected to total approximately $145 million. On June 23, 2000 Yellow Corporation announced that the company's Board of Directors authorized management to purchase Yellow Corporation common shares in the open market up to a limit of $25 million. The program was funded through reductions in the 2000 capital expenditure plan that was originally projected at $177 million. The company had substantially completed the repurchase program at September 30, 2000. 9

10 On July 9, 1999 the company completed a cash tender offer for all of the common stock of Jevic Transportation, Inc. The aggregate purchase price of the stock, including transaction costs, was approximately $164.5 million, net of cash acquired. Including assumption of debt, the total transaction was approximately $200 million. The acquisition was financed under the company's existing $300 million credit facility and the company's ABS agreement. RESULTS OF OPERATIONS Comparison of Three Months Ended September 30, 2000 and 1999 Net income for the third quarter ended September 30, 2000 was $19.6 million, or $.80 per share, compared with net income of $15.9 million, or $.64 per share in the 1999 third quarter. Net income grew 22.9 percent and earnings per share were up 25.0 percent over the 1999 third quarter. Consolidated operating revenue was $919 million, up 7.6 percent on a per-day basis from $861 million in the 1999 third quarter. Consolidated operating income was $43.4 million, up 27.9 percent from $33.9 million in the prior year period. Yellow Freight, the company's largest subsidiary, reported third quarter operating income of $39.5 million up 48.4 percent from $26.6 million in the 1999 third quarter. Yellow Freight's revenue for the third quarter was $715 million, up 7.6 percent on a per-day basis from $675 million in the prior year's period. The 2000 third quarter operating ratio was 94.5, compared with 96.1 a year earlier. Yellow Freight's third quarter less-than-truckload (LTL) tonnage decreased by 2.1 percent on a per-day basis and the number of LTL shipments decreased 3.1 percent on a per-day basis. However, LTL revenue per shipment improved by 10.1 percent over the 1999 third quarter. Yellow freight benefited from a fuel surcharge that offset the rapidly rising cost of diesel fuel. Yellow Freight also implemented a 5.9 percent price increase effective August 1, 2000, one month earlier than the effective date of the September 1, 1999 price increase. Yellow Freight continues to open a series of corridor hubs that further enable the company to significantly increase its two-day and three-day service by scheduling more direct point-to-point routes and by utilizing more driver sleeper teams. Exact Express, an expedited, time-definite air and ground delivery service, also experienced continued growth with revenue per-day increasing 46 percent over the 1999 third quarter. 10

11 During the 2000 third quarter, the four carriers comprising the Yellow Corporation Regional Carrier Group - Saia Motor Freight Line, Jevic Transportation, WestEx and Action Express - reported combined operating income of $6.6 million compared with 9.6 million in the 1999 third quarter. Revenue for the regional group was $197 million compared with $180 million in the 1999 third quarter. Revenue per day increased by 7.0 percent over the prior year's period. At Saia, third quarter 2000 revenue was $93 million and operating income was $4.8 million, compared with revenue of $89 million and operating income of $4.7 million in the 1999 third quarter. The 2000 third quarter operating ratio was 94.8, compared with 94.7 in the year-earlier quarter. Saia's LTL tonnage was up 3.4 percent and LTL shipments were up 2.0 percent on a per-day basis over the 1999 third quarter. Jevic, which was acquired on July 9, 1999 reported third quarter 2000 revenue of $75 million and operating income of $3.1 million. On a comparative basis, Jevic had third quarter 1999 revenue of $70 million and operating income of $4.9 million. The 2000 third quarter operating ratio for Jevic was 95.9, compared with 92.9 in the 1999 third quarter. A combination of higher costs, particularly fuel, and increased competitive conditions weakened margins. Jevic's tonnage was up 2.4 percent on a per-day basis over the 1999 third quarter. Jevic's shipments increased 8.4 percent on a per-day basis over the 1999 third quarter. WestEx reported third quarter revenue of $18 million compared to $19 million in the third quarter of 1999. Excluding a $1.5 million one-time expense, WestEx had a third quarter operating ratio of 100.7. Action Express reported third quarter revenue of $11 million compared with $9 million in the 1999 third quarter. Action Express had a third quarter operating ratio of 96.6. Corporate and other business development expenses were $2.7 million in the 2000 third quarter, up from $2.3 million in the third quarter of 1999. Nonoperating expenses increased to $8.8 million in the third quarter of 2000 compared to $6.2 million in the third quarter of 1999 due to increased financing costs and approximately $1.6 million pre-tax loss pertaining to ongoing business development expenses at Transportation.com. The effective tax rate was 43.3 percent in the 2000 third quarter compared to 42.5 percent in the 1999 third quarter. 11

12 Comparison of Nine Months Ended September 30, 2000 and 1999 Net income for the nine months ended September 30, 2000 was $53.5 million or $2.14 per share (diluted), a 61 percent improvement over earnings per share in the first nine months of 1999. Net income for the nine months ended September 30, 1999 was $33.6 million or $1.33 per share (diluted). Operating revenue for the first nine months of 2000 was $2.705 billion, an increase of 15.4 percent over operating revenue of $2.345 billion for the first nine months of 1999. Results for the nine months ended September 30 1999 do not include operating results of Jevic, prior to the acquisition date of July 9, 1999. Yellow Freight, the company's national LTL segment had operating income of $104.4 million for the first nine months of 2000. Excluding a $14.2 million nonrecurring pre-tax net gain Yellow Freight recorded operating income of $90.2 million, an increase of 55% over operating income of $58.1 million in the first nine months of 1999. Yellow Freight's operating ratio was 95.0 in the nine months of 2000 versus 97.0 in the first nine months of 1999. Yellow Freight's operating revenue for the first nine months of 2000 was $2.092 billion, an 8.0 percent increase on a per-day basis over operating revenue of $1.927 billion in the first nine months of 1999. Less-than-truckload (LTL) tonnage increased by 2.2 percent on a per-day basis over the first nine months of 1999 and the number of LTL shipments was up 0.5 percent on a per-day basis. Revenue per LTL shipment improved by 7.7 percent over the first nine months of 1999. Yellow Freight also benefited from a fuel surcharge that offset rapidly rising costs of diesel fuel throughout the first nine months of 2000. Yellow Freight also implemented a 5.9 percent price increase effective August 1, 2000, one month earlier than the effective date of the September 1, 1999 price increase. Business volume for the first nine months of 2000 was strong because of the robust economy, wide-ranging service improvements and a growing service portfolio. On March 12, Yellow implemented one of the most successful changes of operations in its history, completing a high-speed sleeper team network and introducing an all-new Corridor Hub in the Cleveland area. These changes will allow Yellow Freight to increase its 2-day service offering to 50 percent of their total lanes by year-end, while greatly improving reliability and flexibility. During the first nine months of 2000, the four carriers comprising the Yellow Corporation Regional Carrier Group - Saia Motor Freight Line, Jevic Transportation, WestEx and Action Express - reported combined operating income of $20.6 million, up 18.2 percent from $17.4 million in the first nine months of 1999. Revenue for the regional group was $592 million, up 46.9 percent from $403 million in the first nine months of 1999. 12

13 Saia reported revenue of $276 million and operating income was $12.1 million for the first nine months of 2000, compared with revenue of $260 million and operating income of $12.5 million for the first nine months of 1999. Saia's operating ratio was 95.6 for the first nine months of 2000, compared with 95.2 for the first nine months of 1999. Year-to-date 2000 results were helped by strong productivity trends, but hurt by higher accident and health care costs as well as some January weather effects. Saia experienced some softness in business levels early in the second quarter and took aggressive steps to reduce costs. Jevic, which was acquired July 9, 1999, reported revenue of $230 million and operating income of $9.8 million for the first nine months of 2000. On a comparative basis, Jevic had revenue of $203 million and operating income of $15.1 million for the first nine months of 1999. The 2000 year-to-date operating ratio for Jevic was 95.7, compared with 92.5 for the first nine months of 1999. Jevic's results for the first nine months of 2000 include $1.5 million in acquisition goodwill amortization compared to $0.5 million for the comparable nine-month period in 1999. Jevic was affected more than the company's other subsidiaries by truckload type trends, specifically higher fuel prices and some driver shortages, that increased operating expenses as well as increased competitive conditions that weakened margins. WestEx reported revenue of $55 million for the first nine months of 2000, up 3.8 percent on a per day basis from $52 million for the comparable 1999 period. Excluding a $1.5 million one-time expense, WestEx had an operating ratio of 101.1 for the first nine months of 2000. Action Express reported revenue of $31 million for the first nine months of 2000, up 16.0 percent on a per-day basis from $27 million in the first nine months of 1999. Action Express had an operating ratio of 97.3 for the first nine months of 2000. The company's hedging contracts expired in July 2000. During the first half of 2000, market fuel prices rose above the company's fuel hedge contract prices, resulting in a benefit that partially offset the increased fuel cost. Corporate and other business development expenses were $10.4 million for the first nine months of 2000, up from $5.6 million for the first nine months of 1999. The current year corporate and business development expenses include $3.5 million for on going business development expenses associated with Transportation.com. Nonoperating expenses increased to $21.7 million in the nine months of 2000 compared to $11.9 million in the first nine months of 1999 due to increased financing costs resulting primarily from the Jevic acquisition and approximately $1.6 million pre-tax loss pertaining to ongoing business development expenses at Transportation.com. The effective tax rate was 42.4 percent for the first nine months of 2000 compared to 42.0 percent for the first nine months of 1999. 13

14 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. At September 30, 2000 approximately 70% percent of the company's debt financing, including ABS, is at variable rates with the balance at fixed rates. The company uses interest rate swaps to hedge a portion of its exposure to variable interest rates. The company used swaps as hedges in order to manage a portion of its exposure to variable diesel prices. These agreements provided protection from rising fuel prices, but limited the ability to benefit from price decreases below the purchase price of the agreement. The swap transactions were 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 was 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 following table provides information about the company's debt instruments (including off balance sheet ABS)and interest rate swaps as of September 30, 2000. For debt obligations the table presents principal cash flows (in millions) and related weighted average interest rates by contractual maturity dates. For interest rate swaps the table presents notional amounts (in millions) and weighted average interest rates by contractual maturity. Weighted average variable rates are based on the 30-day LIBOR rate at September 30, 2000. 14

15 Debt Instrument Information Fair 2000 2001 2002 2003 2004 Thereafter Total Value ------ ------ ------ ------ ------ ---------- ------ ------ Fixed Rate Debt $ 13.8 $7.3 $ 22.2 $ 19.5 $ 16.3 $ 52.5 $131.6 $129.0 Average interest rate 6.67% 8.24% 7.35% 6.29% 6.62% 6.97% Variable Rate Debt $0.4 $101.5 $5.8 $5.1 $0.2 $ 15.0 $128.0 $128.0 Average interest rate 7.20% 6.87% 7.26% 5.15% 8.79% 6.29% Off Balance Sheet ABS $172.5 $172.5 $172.5 Average interest rate 6.75% Interest Rate Swaps Notional amount $0.4 $1.5 $5.8 $0.1 $0.2 $4.6 $ 12.6 $ 12.5 Ave. pay rate (fixed) 5.81% 5.81% 5.70% 7.65% 7.65% 7.65% Ave. receive rate 7.20% 7.20% 7.11% 8.74% 8.74% 8.74% (variable) The company used heating oil swaps as diesel fuel hedging instruments. The swaps are sensitive to changes in commodity prices. However, at September 30, 2000 the company had no contracts. The company also maintained fuel inventories for use in normal operations at September 30, 2000, which were not material to the company's financial position and represented no significant market exposure. 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, expense volatility and a downturn in general economic activity. 15

16 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 On October 19, 2000 Yellow Corporation filed a correction for a typographical error contained in its third quarter 2000 earnings release. 16

17 Yellow Freight System, Inc. Financial Information For the Quarter Ended September 30 (Amounts in thousands) Third Quarter Nine Months ------------------------ ------------------------- 2000 1999 % 2000 1999 % -------- -------- --- --------- --------- --- Operating revenue 715,138 675,412 5.9 2,092,165 1,927,015 8.6 Operating income 39,450 26,590 104,434 58,110 Operating ratio 94.5 96.1 95.0 97.0 Total assets at September 30 785,879 781,689 Third Quarter Third Quarter Amount/Workday ----------------------- --------------------------- 2000 1999 % 2000 1999 % -------- --------- --- -------- ---------- --- Workdays (63) (64) Financial statement LTL 656,101 624,900 5.0 10,414.3 9,764.1 6.7 revenue TL 54,842 54,334 0.9 870.5 849.0 2.5 Other 4,195 (3,822) NM 66.6 (59.7) NM Total 715,138 675,412 5.9 11,351.4 10,553.4 7.6 Revenue excluding LTL 656,101 624,900 5.0 10,414.3 9,764.1 6.7 revenue recognition TL 54,842 54,334 0.9 870.5 849.0 2.5 adjustment Other (1) 3 NM 0.0 0.0 NM Total 710,942 679,237 4.7 11,284.8 10,613.1 6.3 Tonnage LTL 1,752 1,819 (3.7) 27.82 28.43 (2.1) TL 346 361 (4.1) 5.49 5.64 (2.6) Total 2,098 2,180 (3.8) 33.31 34.07 (2.2) Shipments LTL 3,514 3,685 (4.6) 55.78 57.58 (3.1) TL 47 49 (3.8) .75 .77 (2.3) Total 3,561 3,734 (4.6) 56.53 58.35 (3.1) Revenue/cwt. LTL 18.72 17.17 9.0 TL 7.93 7.53 5.3 Total 16.94 15.58 8.7 Revenue/shipment LTL 186.72 169.59 10.1 TL 1,157.47 1,102.77 5.0 Total 199.63 181.90 9.7 17

18 Saia Motor Freight Line, Inc. Financial Information For the Quarter Ended September 30 (Amounts in thousands) Third Quarter Nine Months ------------------------ ------------------------ 2000 1999 % 2000 1999 % -------- -------- --- -------- -------- --- Operating revenue 93,392 89,137 4.8 276,060 260,487 6.0 Operating income 4,821 4,698 12,068 12,512 Operating ratio 94.8 94.7 95.6 95.2 Total assets at September 30 235,197 227,645 Third Quarter Third Quarter Amount/Workday ------------------------ ------------------------- 2000 1999 % 2000 1999 % -------- -------- --- -------- -------- ---- Workdays (63) (64) Financial statement LTL 85,177 80,281 6.1 1,352.0 1,254.4 7.8 Revenue TL 8,215 8,856 (7.2) 130.4 138.4 (5.8) Total 93,392 89,137 4.8 1,482.4 1,392.8 6.4 Revenue excluding LTL 85,378 80,379 6.2 1,355.2 1,255.9 7.9 Revenue recognition TL 8,234 8,867 (7.1) 130.7 138.5 (5.7) Adjustment Total 93,612 89,246 4.9 1,485.9 1,394.4 6.6 Tonnage LTL 458 450 1.7 7.27 7.03 3.4 TL 127 148 (14.5) 2.01 2.32 (13.1) Total 585 598 (2.3) 9.28 9.35 (.7) Shipments LTL 827 824 .4 13.12 12.87 2.0 TL 13 15 (10.1) .21 .23 (8.6) Total 840 839 .2 13.33 13.10 1.8 Revenue/cwt. LTL 9.32 8.93 4.4 TL 3.25 2.99 8.6 Total 8.01 7.46 7.3 Revenue/shipment LTL 103.26 97.59 5.8 TL 614.71 595.30 3.3 Total 111.41 106.43 4.7 18

19 Jevic Transportation, Inc. Financial Information For the Quarter Ended September 30 (Amounts in thousands) Third Quarter Nine Months ------------------------ ------------------------ 2000 1999 % 2000 1999 % -------- -------- --- -------- -------- --- Operating revenue 74,867 69,743 7.3 230,009 202,626 13.5 Goodwill amortization 540 454 1,561 454 Operating income 3,055 4,949 9,820 15,121 Operating ratio 95.9 92.9 95.7 92.5 Total assets at September 30 259,318 259,730 Third Quarter Third Quarter Amount/Workday ------------------------ ------------------------- 2000 1999 % 2000 1999 % -------- -------- --- -------- -------- --- Workdays (62) (64) Financial statement LTL 48,548 43,661 11.2 783.0 682.2 14.8 revenue TL 26,319 26,082 0.9 424.5 407.5 4.2 Total 74,867 69,743 7.3 1,207.5 1,089.7 10.8 Revenue excluding LTL 48,634 43,870 10.9 784.4 685.5 14.4 revenue recognition TL 26,361 26,213 0.6 425.2 409.6 3.8 adjustment Total 74,995 70,083 7.0 1,209.6 1,095.1 10.5 Tonnage LTL 259 241 7.5 4.17 3.76 10.9 TL 336 359 (6.4) 5.43 5.62 (3.4) Total 595 600 (0.8) 9.60 9.38 2.4 Shipments LTL 214 203 5.8 3.46 3.16 9.2 TL 37 36 1.0 0.59 0.57 4.3 Total 251 239 5.1 4.05 3.73 8.4 Revenue/cwt. LTL 9.40 9.12 3.1 TL 3.92 3.65 7.5 Total 6.30 5.84 7.9 Revenue/shipment LTL 226.91 216.51 4.8 TL 719.52 722.72 (0.4) Total 298.83 293.37 1.9 19

20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. YELLOW CORPORATION ------------------------------------ Registrant Date: November 13, 2000 /s/ WILLIAM D. ZOLLARS --------------------- ------------------------------------ William D. Zollars Chairman of the Board of Directors, President & Chief Executive Officer Date: November 13, 2000 /s/ H.A. TRUCKSESS,III --------------------- ------------------------------------ H.A. Trucksess,III President Regional Carrier Group & Chief Financial Officer 20

5 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 28,894 0 258,381 0 0 44,199 2,143,526 1,239,623 1,342,292 570,183 137,185 0 0 29,845 415,530 1,342,292 0 2,705,150 0 2,590,499 6,627 0 15,071 92,953 39,412 53,541 0 0 0 53,541 2.15 2.14