yell-10q_20210630.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

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

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

10990 Roe Avenue, Overland Park, Kansas

 

66211

(Address of principal executive offices)

 

(Zip Code)

 

(913) 696-6100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value per share

 

YELL

 

The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

 

 

Accelerated filer

 

 

 

 

 

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes      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, 2021

Common Stock, $0.01 par value per share

 

51,273,210 shares

 

 

 


 

 

INDEX

 

Item

 

Page

 

PART I – FINANCIAL INFORMATION

 

1

Financial Statements

3

 

Consolidated Balance Sheets – June 30, 2021 and December 31, 2020

3

 

Statements of Consolidated Comprehensive Income (Loss) – Three and Six Months Ended June 30, 2021 and 2020

4

 

Statements of Consolidated Cash Flows - Six Months Ended June 30, 2021 and 2020

5

 

Statements of Consolidated Shareholders’ Deficit - Three and Six Months Ended June 30, 2021 and 2020

6

 

Notes to Consolidated Financial Statements

7

2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

3

Quantitative and Qualitative Disclosures About Market Risk

20

4

Controls and Procedures

20

 

 

PART II – OTHER INFORMATION

 

1

Legal Proceedings

21

1A

Risk Factors

21

2

Not Applicable

 

3

Not Applicable

 

4

Not Applicable

 

5

Not Applicable

 

6

Exhibits

21

 

Signatures

22

 

2


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

Yellow Corporation and Subsidiaries

(Amounts in millions except share and per share data)

 

 

 

June 30,

2021

 

 

December 31,

2020

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

372.1

 

 

$

439.3

 

Restricted amounts held in escrow

 

 

52.2

 

 

 

38.7

 

Accounts receivable, net

 

 

633.6

 

 

 

505.0

 

Prepaid expenses and other

 

 

50.8

 

 

 

46.8

 

Total current assets

 

 

1,108.7

 

 

 

1,029.8

 

Property and Equipment:

 

 

 

 

 

 

 

 

Cost

 

 

3,099.5

 

 

 

2,795.5

 

Less – accumulated depreciation

 

 

(2,033.4

)

 

 

(2,031.3

)

Net property and equipment

 

 

1,066.1

 

 

 

764.2

 

Deferred income taxes, net

 

 

2.0

 

 

 

0.9

 

Pension

 

 

68.9

 

 

 

63.2

 

Operating lease right-of-use assets

 

 

219.3

 

 

 

276.0

 

Other assets

 

 

26.2

 

 

 

51.7

 

Total Assets

 

$

2,491.2

 

 

$

2,185.8

 

Liabilities and Shareholders’ Deficit

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

216.0

 

 

$

160.7

 

Wages, vacations and employee benefits

 

 

242.7

 

 

 

214.6

 

Current operating lease liabilities

 

 

98.5

 

 

 

114.2

 

Claims and insurance accruals

 

 

111.0

 

 

 

108.2

 

Other accrued taxes

 

 

73.8

 

 

 

68.6

 

Other current and accrued liabilities

 

 

57.9

 

 

 

30.4

 

Current maturities of long-term debt

 

 

4.9

 

 

 

4.0

 

Total current liabilities

 

 

804.8

 

 

 

700.7

 

Other Liabilities:

 

 

 

 

 

 

 

 

Long-term debt, less current portion

 

 

1,518.8

 

 

 

1,221.4

 

Operating lease liabilities

 

 

128.7

 

 

 

172.6

 

Claims and other liabilities

 

 

325.3

 

 

 

314.4

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders’ Deficit:

 

 

 

 

 

 

 

 

Cumulative preferred stock, $1 par value per share

 

 

 

 

 

 

Common stock, $0.01 par value per share - authorized 95,000,000 shares, issued 50,862,000 and 50,192,000 shares, respectively

 

 

0.5

 

 

 

0.5

 

Capital surplus

 

 

2,386.3

 

 

 

2,383.6

 

Accumulated deficit

 

 

(2,438.6

)

 

 

(2,365.9

)

Accumulated other comprehensive loss

 

 

(141.9

)

 

 

(148.8

)

Treasury stock, at cost

 

 

(92.7

)

 

 

(92.7

)

Total shareholders’ deficit

 

 

(286.4

)

 

 

(223.3

)

Total Liabilities and Shareholders’ Deficit

 

$

2,491.2

 

 

$

2,185.8

 

The accompanying notes are an integral part of these statements.

3


 

STATEMENTS OF CONSOLIDATED COMPREHENSIVE LOSS

Yellow Corporation and Subsidiaries

For the Three and Six Months Ended June 30

(Amounts in millions except per share data, shares in thousands)

(Unaudited)

 

 

 

 

Three Months

 

 

Six Months

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating Revenue

 

$

1,313.1

 

 

$

1,015.4

 

 

$

2,511.5

 

 

$

2,165.8

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

751.3

 

 

 

647.9

 

 

 

1,475.1

 

 

 

1,368.1

 

Fuel, operating expenses and supplies

 

 

217.0

 

 

 

162.7

 

 

 

420.5

 

 

 

370.7

 

Purchased transportation

 

 

210.3

 

 

 

126.0

 

 

 

410.3

 

 

 

262.2

 

Depreciation and amortization

 

 

35.0

 

 

 

34.2

 

 

 

68.3

 

 

 

69.9

 

Other operating expenses

 

 

72.2

 

 

 

55.2

 

 

 

136.6

 

 

 

116.8

 

(Gains) losses on property disposals, net

 

 

0.3

 

 

 

(6.0

)

 

 

1.3

 

 

 

(45.3

)

Total operating expenses

 

 

1,286.1

 

 

 

1,020.0

 

 

 

2,512.1

 

 

 

2,142.4

 

Operating Income (Loss)

 

 

27.0

 

 

 

(4.6

)

 

 

(0.6

)

 

 

23.4

 

Nonoperating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

37.7

 

 

 

40.2

 

 

 

73.6

 

 

 

68.5

 

Non-union pension and postretirement benefits

 

 

(1.1

)

 

 

(1.6

)

 

 

(2.4

)

 

 

(3.2

)

Other, net

 

 

(0.3

)

 

 

1.4

 

 

 

(0.3

)

 

 

(1.2

)

Nonoperating expenses, net

 

 

36.3

 

 

 

40.0

 

 

 

70.9

 

 

 

64.1

 

Loss before income taxes

 

 

(9.3

)

 

 

(44.6

)

 

 

(71.5

)

 

 

(40.7

)

Income tax expense (benefit)

 

 

0.1

 

 

 

(7.5

)

 

 

1.2

 

 

 

(7.9

)

Net loss

 

 

(9.4

)

 

 

(37.1

)

 

 

(72.7

)

 

 

(32.8

)

Other comprehensive income, net of tax

 

 

3.3

 

 

 

3.2

 

 

 

6.9

 

 

 

4.5

 

Comprehensive Loss

 

$

(6.1

)

 

$

(33.9

)

 

$

(65.8

)

 

$

(28.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Common Shares Outstanding - Basic

 

 

50,751

 

 

 

34,021

 

 

 

50,555

 

 

 

33,906

 

Average Common Shares Outstanding - Diluted

 

 

50,751

 

 

 

34,021

 

 

 

50,555

 

 

 

33,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss Per Share - Basic

 

$

(0.18

)

 

$

(1.09

)

 

$

(1.44

)

 

$

(0.97

)

Loss Per Share - Diluted

 

$

(0.18

)

 

$

(1.09

)

 

$

(1.44

)

 

$

(0.97

)

 

The accompanying notes are an integral part of these statements.

4


 

STATEMENTS OF CONSOLIDATED CASH FLOWS

Yellow Corporation and Subsidiaries

For the Six Months Ended June 30

(Amounts in millions)

(Unaudited)

 

 

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(72.7

)

 

$

(32.8

)

Adjustments to reconcile net loss to cash flows from operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

68.3

 

 

 

69.9

 

Lease amortization and accretion expense

 

 

71.1

 

 

 

83.5

 

Lease payments

 

 

(74.6

)

 

 

(55.7

)

Paid-in-kind interest

 

 

4.6

 

 

 

38.8

 

Debt-related amortization

 

 

11.5

 

 

 

6.0

 

Equity-based compensation and employee benefits expense

 

 

8.6

 

 

 

10.5

 

Non-union pension settlement charge

 

 

0.3

 

 

 

 

(Gains) losses on property disposals, net

 

 

1.3

 

 

 

(45.3

)

Deferred income tax benefit, net

 

 

(1.0

)

 

 

0.1

 

Other noncash items, net

 

 

0.8

 

 

 

(1.2

)

Changes in assets and liabilities, net:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(128.5

)

 

 

(31.9

)

Accounts payable

 

 

44.0

 

 

 

22.0

 

Other operating assets

 

 

1.2

 

 

 

8.6

 

Other operating liabilities

 

 

52.4

 

 

 

141.1

 

Net cash provided by (used in) operating activities

 

 

(12.7

)

 

 

213.6

 

Investing Activities:

 

 

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(346.2

)

 

 

(24.1

)

Proceeds from disposal of property and equipment

 

 

0.6

 

 

 

54.1

 

Net cash provided by (used in) investing activities

 

 

(345.6

)

 

 

30.0

 

Financing Activities:

 

 

 

 

 

 

 

 

Issuance of long-term debt, net

 

 

306.3

 

 

 

 

Repayment of long-term debt

 

 

(1.1

)

 

 

(28.2

)

Debt issuance costs

 

 

(0.2

)

 

 

(3.8

)

Payments for tax withheld on equity-based compensation

 

 

(0.4

)

 

 

(0.6

)

Net cash provided by (used in) financing activities

 

 

304.6

 

 

 

(32.6

)

Net Increase (Decrease) In Cash and Cash Equivalents and Restricted Amounts Held in Escrow

 

 

(53.7

)

 

 

211.0

 

Cash and Cash Equivalents and Restricted Amounts Held in Escrow, Beginning of Period

 

 

478.0

 

 

 

109.2

 

Cash and Cash Equivalents and Restricted Amounts Held in Escrow, End of Period

 

$

424.3

 

 

$

320.2

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Interest paid

 

$

(56.1

)

 

$

(22.1

)

 

The accompanying notes are an integral part of these statements.

 

 

5


 

 

STATEMENTS OF CONSOLIDATED SHAREHOLDERS’ DEFICIT

Yellow Corporation and Subsidiaries

For the Three and Six months ended June 30

(Amounts in millions)

(Unaudited)

 

 

 

Preferred Stock

 

Common Stock

 

Capital Surplus

 

Accumulated Deficit

 

Accumulated Other Comprehensive Loss

 

Treasury Stock, At Cost

 

Total Shareholders' Deficit

 

Balances at December 31, 2020

 

$

 

$

0.5

 

$

2,383.6

 

$

(2,365.9

)

$

(148.8

)

$

(92.7

)

$

(223.3

)

Equity-based compensation

 

 

 

 

 

 

1.8

 

 

 

 

 

 

 

 

1.8

 

Net loss

 

 

 

 

 

 

 

 

(63.3

)

 

 

 

 

 

(63.3

)

Pension, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior net losses

 

 

 

 

 

 

 

 

 

 

3.0

 

 

 

 

3.0

 

Amortization of prior service credit

 

 

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

(0.1

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

0.7

 

 

 

 

0.7

 

Balances at March 31, 2021

 

$

 

$

0.5

 

$

2,385.4

 

$

(2,429.2

)

$

(145.2

)

$

(92.7

)

$

(281.2

)

Equity-based compensation

 

 

 

 

 

 

0.9

 

 

 

 

 

 

 

 

0.9

 

Net loss

 

 

 

 

 

 

 

 

(9.4

)

 

 

 

 

 

(9.4

)

Pension, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior net losses

 

 

 

 

 

 

 

 

 

 

3.0

 

 

 

 

3.0

 

Amortization of prior service credit

 

 

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

(0.1

)

Settlement adjustment

 

 

 

 

 

 

 

 

 

 

0.3

 

 

 

 

0.3

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

0.1

 

 

 

 

0.1

 

Balances at June 30, 2021

 

$

 

$

0.5

 

$

2,386.3

 

$

(2,438.6

)

$

(141.9

)

$

(92.7

)

$

(286.4

)

 

 

 

 

Preferred Stock

 

Common Stock

 

Capital Surplus

 

Accumulated Deficit

 

Accumulated Other Comprehensive Loss

 

Treasury Stock, At Cost

 

Total Shareholders' Deficit

 

Balances at December 31, 2019

 

$

 

$

0.3

 

$

2,332.9

 

$

(2,312.4

)

$

(369.3

)

$

(92.7

)

$

(441.2

)

Equity-based compensation

 

 

 

 

 

 

1.8

 

 

 

 

 

 

 

 

1.8

 

Net income

 

 

 

 

 

 

 

 

4.3

 

 

 

 

 

 

4.3

 

Pension, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior net losses

 

 

 

 

 

 

 

 

 

 

3.3

 

 

 

 

3.3

 

Amortization of prior service credit

 

 

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

(0.1

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

(1.9

)

 

 

 

(1.9

)

Balances at March 31, 2020

 

$

 

$

0.3

 

$

2,334.7

 

$

(2,308.1

)

$

(368.0

)

$

(92.7

)

$

(433.8

)

Equity-based compensation

 

 

 

 

 

 

0.8

 

 

 

 

 

 

 

 

0.8

 

Net loss

 

 

 

 

 

 

 

 

(37.1

)

 

 

 

 

 

(37.1

)

Pension, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior net losses

 

 

 

 

 

 

 

 

 

 

2.4

 

 

 

 

2.4

 

Amortization of prior service credit

 

 

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

(0.1

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

0.9

 

 

 

 

0.9

 

Balances at June 30, 2020

 

$

 

$

0.3

 

$

2,335.5

 

$

(2,345.2

)

$

(364.8

)

$

(92.7

)

$

(466.9

)

 

 

The accompanying notes are an integral part of these statements.

 

 

6


 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Yellow Corporation and Subsidiaries

(Unaudited)

1. Description of Business

Yellow Corporation (also referred to as “Yellow,” the “Company,” “we,” “us” or “our”) is a holding company that, through its operating subsidiaries, offers its customers a wide range of transportation services. We have one of the largest, most comprehensive less-than-truckload (“LTL”) networks in North America with local, regional, national and international capabilities. Through our team of experienced service professionals, we offer expertise in LTL shipments and flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence.

Yellow Corporation’s LTL subsidiaries include USF Holland LLC (“Holland”), New Penn Motor Express LLC (“New Penn”), USF Reddaway Inc. (“Reddaway”), YRC Inc. and YRC Freight Canada Company (both doing business as, and herein referred to as, “YRC Freight”). Our LTL companies provide services through a consolidated network of facilities located across the United States, Canada, and Puerto Rico. We also offer services through HNRY Logistics, Inc. (“HNRY Logistics”), our customer-specific logistics solutions provider, specializing in truckload, residential, and warehouse solutions.

As of June 30, 2021, approximately 80% of our labor force is subject to collective bargaining agreements, which predominantly expire on March 31, 2024.

 

2. Basis of Presentation

 

The accompanying unaudited consolidated financial statements include the accounts of Yellow Corporation and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We report on a calendar year basis. The quarters of Holland and Reddaway consist of thirteen weeks that end on a Saturday either before or after the end of March, June and September, whereas all other companies’ quarters end on the natural calendar quarter end.

 

All normal recurring adjustments necessary for a fair presentation of the consolidated financial statements for the interim periods included herein have been made.  These unaudited interim consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information, the instructions to Quarterly Report on Form 10-Q and the applicable rules and regulations.  Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted from these statements.  The accompanying consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (“the 2020 Form 10-K”).  Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results of operations that may be expected for the year ended December 31, 2021 or other reporting periods.

 

Reclassifications

 

Certain immaterial reclassifications have been made to prior year’s balances to conform with current year presentation.

Disaggregation of Revenue

The Company’s revenue is summarized below with LTL shipments defined as shipments less than 10,000 pounds that move in our network:

 

 

Three Months

 

 

Six Months

 

(in millions)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

LTL revenue

 

$

1,182.8

 

 

$

920.5

 

 

$

2,266.3

 

 

$

1,971.2

 

Other revenue

 

 

130.3

 

 

 

94.9

 

 

 

245.2

 

 

 

194.6

 

Total revenue

 

$

1,313.1

 

 

$

1,015.4

 

 

$

2,511.5

 

 

$

2,165.8

 

Newly-Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. The new standard became effective for the Company on January 1, 2021. ASU 2019-12, upon becoming effective, also removed certain exceptions to the general principles in Topic 740 including the general intraperiod tax allocation exception, and clarified and amended existing guidance to improve consistent application. Application of the exception to the intraperiod tax allocation rules was a factor in 2020 and certain previous years. 

7


 

 

While there are other recently issued accounting standards that are applicable to the Company, none of these standards are expected to have a material impact on our consolidated financial statements and accompanying notes.

3. Debt and Financing

Our outstanding debt as of June 30, 2021, which includes our $129.8 million and $306.3 million of additional United States Treasury (“UST”) Loan Tranche B draws during the three and six months then ended, respectively, consisted of the following:

 

(in millions)

 

Par Value

 

 

Discount

 

 

Commitment Fee

 

 

Debt

Issuance

Costs

 

 

Book Value

 

 

Effective

Interest

Rate

 

Term Loan

 

$

612.9

 

 

$

(18.0

)

 

$

 

 

$

(8.0

)

 

$

586.9

 

(a)