UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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 |
☐ |
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☒ |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 |
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Outstanding at October 29, 2021 |
Common Stock, $0.01 par value per share |
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INDEX
Item |
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Page |
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1 |
3 |
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Consolidated Balance Sheets – September 30, 2021 and December 31, 2020 |
3 |
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4 |
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Statements of Consolidated Cash Flows - Nine Months Ended September 30, 2021 and 2020 |
5 |
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6 |
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8 |
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2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 |
3 |
23 |
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4 |
23 |
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1 |
24 |
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1A |
24 |
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2 |
Not Applicable |
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3 |
Not Applicable |
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4 |
Not Applicable |
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5 |
Not Applicable |
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6 |
24 |
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25 |
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)
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September 30, 2021 |
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December 31, 2020 |
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(Unaudited) |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted amounts held in escrow |
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Accounts receivable, net |
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Prepaid expenses and other |
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Total current assets |
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Property and Equipment: |
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Cost |
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Less - accumulated depreciation |
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( |
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Net property and equipment |
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Deferred income taxes, net |
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Pension |
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Operating lease right-of-use assets |
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Other assets |
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Total Assets |
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$ |
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$ |
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Liabilities and Shareholders' Deficit |
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Current Liabilities: |
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Accounts payable |
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$ |
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$ |
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Wages, vacations and employee benefits |
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Current operating lease liabilities |
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Claims and insurance accruals |
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Other accrued taxes |
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Other current and accrued liabilities |
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Current maturities of long-term debt |
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Total current liabilities |
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Other Liabilities: |
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Long-term debt, less current portion |
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Operating lease liabilities |
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Claims and other liabilities |
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Shareholders' Deficit: |
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Cumulative preferred stock, $ |
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Common stock, $ |
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Capital surplus |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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Treasury stock, at cost |
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( |
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( |
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Total shareholders' deficit |
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( |
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( |
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Total Liabilities and Shareholders' Deficit |
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$ |
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$ |
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The accompanying notes are an integral part of these statements.
3
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)
Yellow Corporation and Subsidiaries
For the Three and Nine Months Ended September 30
(Amounts in millions except per share data, shares in thousands)
(Unaudited)
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Three Months |
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Nine Months |
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2021 |
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2020 |
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2021 |
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2020 |
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Operating Revenue |
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$ |
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$ |
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$ |
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$ |
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Operating Expenses: |
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Salaries, wages and employee benefits |
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Fuel, operating expenses and supplies |
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Purchased transportation |
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Depreciation and amortization |
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Other operating expenses |
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(Gains) losses on property disposals, net |
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( |
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Total operating expenses |
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Operating Income |
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Nonoperating Expenses: |
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Interest expense |
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Non-union pension and postretirement expense (benefit) |
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( |
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( |
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( |
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Other, net |
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( |
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( |
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( |
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Nonoperating expenses, net |
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Income (loss) before income taxes |
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( |
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( |
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( |
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Income tax expense (benefit) |
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( |
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( |
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Net income (loss) |
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( |
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( |
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( |
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Other comprehensive income (loss), net of tax |
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( |
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( |
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Comprehensive Income (Loss) |
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$ |
( |
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$ |
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$ |
( |
) |
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$ |
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Average Common Shares Outstanding - Basic |
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Average Common Shares Outstanding - Diluted |
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Earnings (Loss) Per Share - Basic |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Earnings (Loss) Per Share - Diluted |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these statements.
4
STATEMENTS OF CONSOLIDATED CASH FLOWS
Yellow Corporation and Subsidiaries
For the Nine Months Ended September 30
(Amounts in millions)
(Unaudited)
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2021 |
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2020 |
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Operating Activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to cash flows from operating activities: |
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Depreciation and amortization |
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Lease amortization and accretion expense |
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Lease payments |
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( |
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( |
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Paid-in-kind interest |
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Debt-related amortization |
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Equity-based compensation and employee benefits expense |
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Non-union pension settlement charge |
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(Gains) losses on property disposals, net |
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( |
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Deferred income taxes, net |
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( |
) |
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( |
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Other non-cash items, net |
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( |
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Changes in assets and liabilities, net: |
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Accounts receivable |
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( |
) |
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( |
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Accounts payable |
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Other operating assets |
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( |
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( |
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Other operating liabilities |
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Net cash provided by (used in) operating activities |
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Investing Activities: |
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Acquisition of property and equipment |
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( |
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( |
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Proceeds from disposal of property and equipment |
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Net cash provided by (used in) investing activities |
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( |
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Financing Activities: |
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Issuance of long-term debt, net |
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Repayment of long-term debt |
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( |
) |
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( |
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Debt issuance costs |
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( |
) |
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( |
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Payments for tax withheld on equity-based compensation |
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( |
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( |
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Net cash provided by (used in) financing activities |
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Net Increase (Decrease) In Cash and Cash Equivalents and Restricted Amounts Held in Escrow |
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( |
) |
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Cash and Cash Equivalents and Restricted Amounts Held in Escrow, Beginning of Period |
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Cash and Cash Equivalents and Restricted Amounts Held in Escrow, End of Period |
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$ |
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$ |
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Supplemental Cash Flow Information: |
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Interest paid |
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$ |
( |
) |
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$ |
( |
) |
The accompanying notes are an integral part of these statements.
5
Yellow Corporation and Subsidiaries
For the Three and Nine Months ended September 30
(Amounts in millions)
(Unaudited)
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Preferred Stock |
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Common Stock |
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Capital Surplus |
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Accumulated Deficit |
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Accumulated Other Comprehensive Loss |
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Treasury Stock, At Cost |
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Total Shareholders' Deficit |
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Balances at December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
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$ |
( |
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$ |
( |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Pension, net of tax: |
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Amortization of prior net losses |
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— |
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— |
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— |
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— |
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Amortization of prior service credit |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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Balances at March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
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$ |
( |
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$ |
( |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Pension, net of tax: |
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Amortization of prior net losses |
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— |
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— |
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— |
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— |
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Amortization of prior service credit |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Settlement adjustment |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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Balances at June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Pension, net of tax: |
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Amortization of prior net losses |
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— |
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— |
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— |
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— |
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Amortization of prior service credit |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Settlement adjustment |
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— |
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— |
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— |
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— |
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Net actuarial loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Foreign currency translation |
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— |
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— |
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— |
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( |
) |
|
— |
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( |
) |
|
Balances at September 30, 2021 |
|
$ |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
6
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Preferred Stock |
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Common Stock |
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Capital Surplus |
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Accumulated Deficit |
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Accumulated Other Comprehensive Loss |
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Treasury Stock, At Cost |
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Total Shareholders' Deficit |
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|||||||
Balances at December 31, 2019 |
|
$ |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|||
Equity-based compensation |
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— |
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— |
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— |
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— |
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|||
Net income |
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— |
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— |
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— |
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— |
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|||
Pension, net of tax: |
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|||||||
Amortization of prior net losses |
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— |
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— |
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— |
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— |
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|||
Amortization of prior service credit |
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— |
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— |
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— |
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( |
) |
|
— |
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( |
) |
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Foreign currency translation |
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— |
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— |
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— |
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|
( |
) |
|
— |
|
|
( |
) |
|
Balances at March 31, 2020 |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|||
Equity-based compensation |
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— |
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— |
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— |
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— |
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|||
Net loss |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
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Pension, net of tax: |
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|||||||
Amortization of prior net losses |
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— |
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— |
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— |
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— |
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|
|
|||
Amortization of prior service credit |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
Foreign currency translation |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Balances at June 30, 2020 |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|||
Equity-based compensation |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|||
Equity issuance - UST commitment fee |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
||||
Net loss |
|
|
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
|
Pension, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Amortization of prior net losses |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Amortization of prior service credit |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
Settlement adjustment |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Net actuarial gain |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Foreign currency translation |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|||
Balances at September 30, 2020 |
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
The accompanying notes are an integral part of these statements.
7
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 September 30, 2021, approximately
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 consist of thirteen weeks that end on a Saturday either before or after the end of March, June and September. All other companies’ quarters end on the natural calendar quarter end. Prior to the quarter ended September 30, 2021, the interim quarters of Reddaway consisted of thirteen weeks similar to Holland. Reddaway now reports their quarters similar to all of our other companies.
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 nine months ended September 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 |
|
|
Nine Months |
|
||||||||||
(in millions) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
LTL revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
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
8
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.
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 September 30, 2021, consisted of the following:
(in millions) |
|
Par Value |
|
|
Discount |
|
|
Commitment |
|
|
Debt |
|
|
Book Value |
|
|
Effective |
|
||||||
Term Loan (a) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
(b) |
|
% |
||||
ABL Facility |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
||||||
UST Loan Tranche A(a) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
(c) |
|
% |
||||
UST Loan Tranche B |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
(c) |
|
% |
||||
Secured Second A&R CDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
||||||
Unsecured Second A&R CDA |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
% |
|||||
Lease financing obligations |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
(d) |
|
% |
|||||
Total debt |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
|
|||
Current maturities of Unsecured Second A&R CDA |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Current maturities of lease financing obligations |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Long-term debt |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
|
(a) The Par Value and the Book Value both reflect the accumulated cash funds that have been drawn, plus the accumulated paid-in-kind interest.
(b) Variable interest rate based on the Eurodollar rate, which is currently determined by the 1, 3 or 6-month USD LIBOR, with a floor of
(c) Variable interest rate based on the Eurodollar rate, which is currently determined by the 1, 2, 3 or 6-month USD LIBOR, with a floor of
(d) Interest rate for lease financing obligations is derived from the difference between total rent payment and calculated principal amortization over the life of lease agreements.
Principal Maturities of Long-Term Debt
The principal maturities of long-term debt for the next five years are as follows:
(in millions) |
|
Principal Maturity Amount |
|
|
2021 - remaining portion |
|
$ |
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
Fair Value Measurement
The book value and estimated fair values of our long-term debt, including current maturities, are summarized as follows:
|
|
September 30, 2021 |
|
|
December 31, 2020 |
|
||||||||||
(in millions) |
|
Book Value |
|
|
Fair Value |
|
|
Book Value |
|
|
Fair Value |
|
||||
Term Loan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
UST Loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Second A&R CDA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease financing obligations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
The fair values of the Term Loan and Second A&R CDA were estimated based on observable prices (level two inputs for fair value measurements). The fair value of the UST Loans is estimated using certain inputs that are unobservable (level three input for fair value measurement), which are based on the discounted amount of future cash flows using our current estimated incremental rate of borrowing for similar liabilities or assets. The fair value of the lease financing obligations are estimated using a publicly traded secured loan with similar characteristics (level three input for fair value measurement).
9
4. Leases
Leases (in millions) |
|
September 30, 2021 |
|
|
December 31, 2020 |
|
||
Assets |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
$ |
|
|
$ |
|
||
Liabilities |
|
|
|
|
|
|
||
Current operating lease liabilities |
|
$ |
|
|
$ |
|
||
Noncurrent operating lease liabilities |
|
|
|
|
|
|
||
Total lease liabilities |
|
$ |
|
|
$ |
|
|
|
Three Months |
|
|
Nine Months |
|
||||||||||
Lease Cost (in millions) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Operating lease cost(a) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Short-term cost(b) |
|
|
|
|
|
|
|
|
|
|
|
|||||
Variable lease cost(b) |
|
|
|
|
|
|
|
|
||||||||
Total lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Remaining Maturities of Lease Liabilities (in millions) |
|
|
Operating Leases |
|
||
2021 - remaining portion |
|
|
|
$ |
|
|
2022 |
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
After 2025 |
|
|
|
|
|
|
Total lease payments |
|
|
|
$ |
|
|
Less: imputed interest |
|
|
|
|
|
|
Present value of lease liabilities |
|
|
|
$ |
|
Lease Term and Discount Rate |
|
Weighted-Average Remaining Lease Term |
|
|
Weighted-Average Discount Rate |
|
Operating leases |
|
|
|
|
|
|
Three Months |
|
|
Nine Months |
|
|
||||||||
Other Information (in millions) |
|
2021 |
|
2020 |
|
|
2021 |
|
2020 |
|
|
||||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Operating cash flows from operating leases |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
|
||||
Leased assets obtained in exchange for new operating lease liabilities |
|
$ |
|
$ |
|
|
$ |
|
$ |
|
|
5. Employee Benefits
Qualified and Nonqualified Defined Benefit Pension Plans
The following table presents the components of our Company-sponsored pension plans:
|
|
Three Months |
|
|
Nine Months |
|
||||||||||
(in millions) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Interest cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of prior service credit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of prior net pension loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Settlement adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net periodic pension expense (benefit) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
For the three and nine months ended September 30, 2021, net periodic pension expense included non-union pension settlement charges of $
10
Pension Plan (the "Yellow Plan") was triggered due to the amount of lump sum benefit payments distributed from plan assets in 2021. The lump sum benefit payments reduce pension obligations and are funded from existing pension plan assets and therefore do not impact the Company’s cash balance. As a result of this settlement, the Company was required to measure the Yellow Plan as of July 31, 2021.
Plan assets specific to the Yellow Plan decreased by $
The other
6. Earnings (Loss) Per Share
We calculate basic earnings (loss) per share by dividing our net income (loss) available to common shareholders by our basic weighted-average shares outstanding. The calculation for diluted earnings (loss) per share adjusts the weighted average shares outstanding for our dilutive unvested shares and stock units using the treasury stock method.
|
|
Three Months |
|
|
Nine Months |
|
||||||||||
(dollars in millions, except per share data; shares and stock units in thousands) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Basic and dilutive net income (loss) available to common shareholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unvested shares and stock units(a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive weighted average shares outstanding |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Basic earnings (loss) per share(b) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Diluted earnings (loss) per share(b) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Given our net losses incurred during the nine months ended September 30, 2021 and 2020 and the three months ended September 30, 2020, we do
7. Commitments, Contingencies and Uncertainties
Department of Defense Complaints
In December 2018, the United States on behalf of the United States Department of Defense filed a complaint in Intervention against the Company (and two other defendants) in the U.S. District Court for the Western District of New York captioned United States ex rel. James Hannum v. YRC Freight, Inc.; Roadway Express, Inc.; and Yellow Transportation, Inc., Civil Action No. 08-0811(A). The complaint alleges that the Company violated the False Claims Act by overcharging the Department of Defense for freight carrier services by failing to comply with the contractual terms of freight contracts between the Department of Defense and the Company and related government procurement rules. The complaint also alleges claims for unjust enrichment and breach of contract. Under the False Claims Act, the complaint seeks treble damages, civil penalties, attorneys’ fees and costs of suit, all in unspecified amounts. The remaining common causes of action seek an undetermined amount for an alleged breach of contract or alternatively causes constituting unjust enrichment or a payment by mistake. The Company has moved to dismiss the case, and the court heard oral arguments on the motion on August 12, 2019. On July 17, 2020, the Magistrate Judge to whom the case had been referred issued a Report and Recommendation recommending that the District Judge grant the Company’s motion to dismiss in part with respect to one claim and deny it in all other respects. On May 10, 2021, the District Court entered a Decision and Order adopting Magistrate Judge’s Report and Recommendation and Decision and Order. The District Court granted two stays of the case for
11
remaining counts and intends to vigorously defend this action. We are unable to estimate the possible loss, or range of possible loss, associated with these claims at this time.
Class Action Securities Complaint
In January 2019, a purported class action lawsuit captioned Christina Lewis v. YRC Worldwide Inc., et al., Case No. 1:19-cv-00001, was filed in the U.S. District Court for the Northern District of New York against the Company and certain of our current and former officers. The complaint was filed on behalf of persons who purchased or otherwise acquired the Company’s publicly traded securities between March 10, 2014 and December 14, 2018. The complaint generally alleged that the defendants had violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making false and misleading statements relating to the Company’s freight billing practices as alleged in the Department of Defense complaint described above. The action included claims for damages, including interest, and an award of reasonable costs and attorneys’ fees. The co-lead plaintiffs filed an amended complaint on June 14, 2019, and the defendants moved to dismiss it on July 15, 2019. On March 27, 2020, the court granted defendants’ motion to dismiss in its entirety and entered judgment closing the case. The co-lead plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Second Circuit on April 27, 2020. After the appeal was fully briefed, the parties engaged in mediation and reached an agreement in principle to settle the matter for $
Shareholder Derivative Complaint
In February 2021, two putative shareholders filed an action derivatively and on behalf of the Company naming Douglas A. Carty, Raymond J. Bromark, William R. Davidson, Matthew A. Doheny, Robert L Friedman, James E. Hoffman, Michael J. Kneeland, Patricia M. Nazemetz, James F. Winestock, Jamie G. Pierson, Darren D. Hawkins, James L. Welch and Stephanie D. Fisher individually as defendants and the Company as the nominal defendant. The case, captioned Bhandari, et al. v. Carty, et al., Case No. 2021-0090-SG, was filed in the Court of Chancery in the State of Delaware. The complaint alleges that the Company was exposed to harm by the individual defendants’ purported conduct concerning its freight-billing practices as alleged in the Department of Defense complaint and the class action securities complaint described above. The complaint asserts that the individual defendants breached their fiduciary duties and were unjustly enriched as a result of their purported conduct. Claims similar to those raised in Bhandari had been raised in two shareholder derivative cases that were previously disclosed by the Company and have been dismissed. The defendants moved to dismiss the action on April 19, 2021. On July 16, 2021, the putative shareholders moved for entry of an order dismissing the Bhandari action without prejudice. On July 19, 2021, the Court entered an order dismissing the action without prejudice.
Other Legal Matters
We are involved in litigation or proceedings that arise in ordinary business activities. When possible, we insure against these risks to the extent we deem prudent, but no assurance can be given that the nature or amount of such insurance will be sufficient to fully indemnify us against liabilities arising out of pending and future legal proceedings. Many of these insurance policies contain self-insured retentions in amounts we deem prudent. Based on our current assessment of information available as of the date of these consolidated financial statements, we believe that our consolidated financial statements include adequate provisions for estimated costs and losses that may be incurred within the litigation and proceedings to which we are a party.
8. Related Party Transactions
Under the applicable accounting standards the Company is deemed a related party with the United States federal government as a result of the UST Credit Agreements and the associated issuance of approximately
12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements included elsewhere in this report. This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Forward-looking statements include those preceded by, followed by or characterized by words such as “will,” “expect,” “intend,” “anticipate,” “believe,” “could,” “should,” “may,” “project,” “forecast,” “propose,” “plan,” “designed,” “estimate,” “enable” and similar expressions which speak only as of the date the statement was made. Forward-looking statements are inherently uncertain, are based upon current beliefs, assumptions and expectations of Company management and current market conditions, and are subject to significant business, economic, competitive, regulatory and other risks, uncertainties and contingencies, known and unknown, many of which are beyond our control. Readers are cautioned not to place undue reliance on any forward-looking statements. Our future financial condition and results could differ materially from those predicted in such forward-looking statements because of a number of business, financial and liquidity, and common stock related factors, including (without limitation):
13
Overview
MD&A includes the following sections:
Our Business: a brief description of our business and a discussion of how we assess our operating results.
Consolidated Results of Operations: an analysis of our consolidated results of operations for the three and nine months ended September 30, 2021 and 2020.
Certain Non-GAAP Financial Measures: presentation and an analysis of selected non-GAAP financial measures for the three and nine months ended September 30, 2021 and 2020 and trailing-twelve-months ended September 30, 2021 and 2020.
Financial Condition, Liquidity and Capital Resources: a discussion of our major sources and uses of cash and an analysis of our cash flows and, if applicable, material changes in our contractual obligations and commercial commitments.
The “third quarter” and “first three quarters” of the years discussed below refer to the three and nine months ended September 30, respectively.
Our Business
Yellow Corporation is a holding company that, through its operating subsidiaries, offers our customers a wide range of transportation services. The Company has one of the largest, most comprehensive LTL networks in North America with local, regional, national and international capabilities. Through its team of experienced service professionals, the Company offers industry-leading expertise in LTL shipments and flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence.
We measure the performance of our business using several metrics, but rely primarily upon (without limitation) operating revenue, operating income (loss), and operating ratio. We also use certain non-GAAP financial measures as secondary measures to assess our operating performance.
14
We believe our presentation of EBITDA and Adjusted EBITDA is useful to investors and other users as these measures represent key supplemental information our management uses to compare and evaluate our core underlying business results, particularly in light of our leverage position and the capital-intensive nature of our business. Further, EBITDA is a measure that is commonly used by other companies in our industry and provides a comparison for investors to evaluate the performance of the companies in the industry. Additionally, Adjusted EBITDA helps investors to understand how the company is tracking against our financial covenant in our TL Agreements as this measure is calculated as defined in our TL Agreements and serves as a driving component of our key financial covenants.
Our non-GAAP financial measures have the following limitations:
Because of these limitations, our non-GAAP measures should not be considered a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and use our non-GAAP measures as secondary measures.
Business Strategy Overview and Update
Our strategy is focused on our multi-year enterprise transformation to optimize and structurally improve our network that includes more than 300 strategically located terminals throughout North America. The transformation is expected to increase asset utilization, expand service offerings, leverage operational flexibilities gained with our 2019 labor agreement, consolidate disparate company systems onto a single platform and rationalize the more than 300 physical locations in the network while
15
maintaining geographic coverage. The result will be to operate as one Yellow company, one Yellow network, under one Yellow brand that provides great super-regional service.
Capital investment remains a top priority for us. Our UST Credit Agreements have enabled us to significantly increase the amount of capital we are able to invest in revenue equipment to improve the age of our fleet as there is an immediate return in improved fuel miles per gallon and expected reduced vehicle maintenance expense. To properly execute on our transformation plan, we are committed to continued investing in technology in order to enhance the customer experience and improve our operational flexibilities. We expect to spend between $480 million and $530 million on capital investments during 2021. During the third quarter ended September 30, 2021 we migrated Reddaway to the common technology platform that is now shared with YRC Freight and New Penn. We intend to move Holland to the common technology platform near December 31, 2021.
Consolidated Results of Operations
The table below provides summary consolidated financial information for the third quarter and first three quarters of 2021 and 2020:
|
Third Quarter |
|
First Three Quarters |
|
|
|
|
|
|
||||||||||||||||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
Percentage |
|
||||||||||||||||||||
(Amounts in millions) |
$ |
|
% |
|
$ |
|
% |
|
$ |
|
% |
|
$ |
|
% |
|
|
Third |
|
First Three |
|
||||||||||
Operating Revenue |
$ |
1,301.4 |
|
|
100.0 |
|
$ |
1,183.4 |
|
|
100.0 |
|
$ |
3,812.9 |
|
|
100.0 |
|
$ |
3,349.2 |
|
|
100.0 |
|
|
|
10.0 |
|
|
13.8 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Salaries, wages and employee benefits |
|
729.7 |
|
|
56.1 |
|
|
720.6 |
|
|
60.9 |
|
|
2,204.8 |
|
|
57.8 |
|
|
2,088.7 |
|
|
62.4 |
|
|
|
1.3 |
|
|
5.6 |
|
Fuel, operating expenses and supplies |
|
216.1 |
|
|
16.6 |
|
|
175.4 |
|
|
14.8 |
|
|
636.6 |
|
|
16.7 |
|
|
546.1 |
|
|
16.3 |
|
|
|
23.2 |
|
|
16.6 |
|
Purchased transportation |
|
200.3 |
|
|
15.4 |
|
|
177.1 |
|
|
15.0 |
|
|
610.6 |
|
|
16.0 |
|
|
439.3 |
|
|
13.1 |
|
|
|
13.1 |
|
|
39.0 |
|
Depreciation and amortization |
|
37.8 |
|
|
2.9 |
|
|
32.5 |
|
|
2.7 |
|
|
106.1 |
|
|
2.8 |
|
|
102.4 |
|
|
3.1 |
|
|
|
16.3 |
|
|
3.6 |
|
Other operating expenses |
|
68.9 |
|
|
5.3 |
|
|
58.4 |
|
|
4.9 |
|
|
205.5 |
|
|
5.4 |
|
|
175.2 |
|
|
5.2 |
|
|
|
18.0 |
|
|
17.3 |
|
(Gains) losses on property disposals, net |
|
0.2 |
|
|
0.0 |
|
|
— |
|
|
- |
|
|
1.5 |
|
|
0.0 |
|
|
(45.3 |
) |
|
(1.4 |
) |
|
NM* |
|
NM* |
|
||
Total operating expenses |
|
1,253.0 |
|
|
96.3 |
|
|
1,164.0 |
|
|
98.4 |
|
|
3,765.1 |
|
|
98.7 |
|
|
3,306.4 |
|
|
98.7 |
|
|
|
7.6 |
|
|
13.9 |
|
Operating Income |
|
48.4 |
|
|
3.7 |
|
|
19.4 |
|
|
1.6 |
|
|
47.8 |
|
|
1.3 |
|
|
42.8 |
|
|
1.3 |
|
|
|
149.5 |
|
|
11.7 |
|
Nonoperating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nonoperating expenses, net |
|
40.1 |
|
|
3.1 |
|
|
32.3 |
|
|
2.7 |
|
|
111.0 |
|
|
2.9 |
|
|
96.4 |
|
|
2.9 |
|
|
|
24.1 |
|
|
15.1 |
|
Income (loss) before income taxes |
|
8.3 |
|
|
0.6 |
|
|
(12.9 |
) |
|
(1.1 |
) |
|
(63.2 |
) |
|
(1.7 |
) |
|
(53.6 |
) |
|
(1.6 |
) |
|
NM* |
|
NM* |
|
||
Income tax expense (benefit) |
|
— |
|
|
- |
|
|
(10.9 |
) |
|
(0.9 |
) |
|
1.2 |
|
|
0.0 |
|
|
(18.8 |
) |
|
(0.6 |
) |
|
NM* |
|
NM* |
|
||
Net Income (loss) |
$ |
8.3 |
|
|
0.6 |
|
$ |
(2.0 |
) |
|
(0.2 |
) |
$ |
(64.4 |
) |
|
(1.7 |
) |
$ |
(34.8 |
) |
|
(1.0 |
) |
|
NM* |
|
NM* |
|
*Not meaningful
Third Quarter of 2021 Compared to the Third Quarter of 2020
The industry is currently in a tight capacity environment with fewer drivers available to meet shipping demands, which has led to price increases charged to customers and an increase in the cost of purchased transportation. The Company’s yield growth, including fuel surcharge, produced a consolidated operating revenue increase of $118.0 million compared to the third quarter of 2020 with an internal focus of retaining the optimal freight mix relative to human capital availability throughout the third quarter of 2021. Partially offsetting the positive yield growth, the Company experienced shipping volume decreases compared to the third quarter of 2020. Further, the results of operations in the third quarter of 2020 were impacted by the outbreak of COVID-19 as shipping volumes decreased from typical levels in certain markets and negatively impacted the pricing environment.
The Company’s results reflect these revenue increases offset by increased purchased transportation expenses, fuel expense and variable expenses including salaries, wages and benefits. Further material changes are provided below.
Salaries, wages and employee benefits. Salaries, wages and employee benefits increased $9.1 million primarily due to contractual wage rate increases. Additionally, in response to volume declines in the third quarter of 2020, the Company reduced variable expenses including labor through furloughs and reduced headcount.
Fuel, operating expenses and supplies. Fuel, operating expenses and supplies increased $40.7 million primarily due to a $23.1 million increase in fuel expense, which was largely a result higher fuel prices. Additional increases resulted from higher usage of professional services and our rebranding initiative.
Purchased transportation. Purchased transportation increased $23.2 million primarily due to significant rate increases and other factors noted above. These increases were noted in most of our modes of purchased transportation and include an $11.3 million increase in third-party costs due to the growth in customer-specific logistics solutions, a $9.0 million increase in over-the-road
16
purchased transportation expense and an $8.0 million increase in rail purchased transportation expense. These increases were partially offset by a decrease in vehicle rentals and usage of local purchased transportation.
Other operating expenses. Other operating expenses increased $10.5 million primarily due to a $7.2 million increase in third-party liability claims expense mostly due to unfavorable development of prior year claims and a $4.2 million increase in cargo claims.
Income tax. Our effective tax rate for the third quarter of 2021 and 2020 was 0.0% and 83.8%, respectively. There are no significant items impacting the 2021 rate. The most significant item impacting the 2020 rate was a benefit recognized due to application of the exception to the rules regarding intraperiod tax allocation. Due to an accounting standard change that was effective for the Company on January 1, 2021 this exception to the rules regarding intraperiod tax allocation is not applicable to the 2021 rate. The Company had a full valuation allowance against our domestic net deferred tax assets as of the relevant reporting periods.
The table below summarizes the key revenue metrics for the third quarter of 2021 compared to the third quarter of 2020:
|
|
Third Quarter |
|
|
|
|
||||||
|
|
2021 |
|
|
2020 |
|
|
Percent |
|
|||
Workdays |
|
|
63.5 |
|
|
|
64.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Operating ratio |
|
|
96.3 |
% |
|
|
98.4 |
% |
|
2.1 pp |
|
|
|
|
|
|
|
|
|
|
|
|
|||
LTL picked up revenue (in millions) |
|
$ |
1,167.0 |
|
|
$ |
1,076.1 |
|
|
|
8.4 |
% |
LTL tonnage (in thousands) |
|
|
2,323 |
|
|
|
2,584 |
|
|
|
(10.1 |
%) |
LTL tonnage per workday (in thousands) |
|
|
36.58 |
|
|
|
40.38 |
|
|
|
(9.4 |
%) |
LTL shipments (in thousands) |
|
|
4,141 |
|
|
|
4,480 |
|
|
|
(7.6 |
%) |
LTL shipments per workday (in thousands) |
|
|
65.22 |
|
|
|
70.00 |
|
|
|
(6.8 |
%) |
LTL picked up revenue per hundred weight |
|
$ |
25.12 |
|
|
$ |
20.82 |
|
|
|
20.7 |
% |
LTL picked up revenue per hundred weight (excluding fuel surcharge) |
|
$ |
21.84 |
|
|
$ |
18.90 |
|
|
|
15.6 |
% |
LTL picked up revenue per shipment |
|
$ |
282 |
|
|
$ |
240 |
|
|
|
17.3 |
% |
LTL picked up revenue per shipment (excluding fuel surcharge) |
|
$ |
245 |
|
|
$ |
218 |
|
|
|
12.4 |
% |
LTL weight per shipment (in pounds) |
|
|
1,122 |
|
|
|
1,154 |
|
|
|
(2.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|||
Total picked up revenue (in millions)(b) |
|
$ |
1,283.2 |
|
|
$ |
1,179.1 |
|
|
|
8.8 |
% |
Total tonnage (in thousands) |
|
|
3,045 |
|
|
|
3,295 |
|
|
|
(7.6 |
%) |
Total tonnage per workday (in thousands) |
|
|
47.96 |
|
|
|
51.49 |
|
|
|
(6.9 |
%) |
Total shipments (in thousands) |
|
|
4,257 |
|
|
|
4,609 |
|
|
|
(7.6 |
%) |
Total shipments per workday (in thousands) |
|
|
67.05 |
|
|
|
72.02 |
|
|
|
(6.9 |
%) |
Total picked up revenue per hundred weight |
|
$ |
21.07 |
|
|
$ |
17.89 |
|
|
|
17.8 |
% |
Total picked up revenue per hundred weight (excluding fuel surcharge) |
|
$ |
18.40 |
|
|
$ |
16.29 |
|
|
|
13.0 |
% |
Total picked up revenue per shipment |
|
$ |
301 |
|
|
$ |
256 |
|
|
|
17.8 |
% |
Total picked up revenue per shipment (excluding fuel surcharge) |
|
$ |
263 |
|
|
$ |
233 |
|
|
|
13.0 |
% |
Total weight per shipment (in pounds) |
|
|
1,431 |
|
|
|
1,430 |
|
|
|
0.1 |
% |
(in millions) |
|
2021 |
|
|
2020 |
|
||
(b) Reconciliation of operating revenue to total picked up revenue: |
|
|
|
|
|
|
||
Operating revenue |
|
$ |
1,301.4 |
|
|
$ |
1,183.4 |
|
Change in revenue deferral and other |
|
|
(18.2 |
) |
|
|
(4.3 |
) |
Total picked up revenue |
|
$ |
1,283.2 |
|
|
$ |
1,179.1 |
|
17
First Three Quarters of 2021 Compared to the First Three Quarters of 2020
Consistent with the third quarter of 2021, the results of operations in the first three quarters of 2021 were impacted by a tight capacity environment with fewer drivers available to meet shipping demands. This has contributed to price increases charged to customers and an increase in the cost of purchased transportation. Results in 2021 were impacted by significant yield growth on relatively similar shipping volume levels compared to the same period in 2020. The first three quarters of 2020 were impacted by the outbreak of COVID-19 as shipping volumes decreased significantly from typical levels and negatively impacted the pricing environment. As such, our 2021 consolidated operating revenue increased $463.7 million during first three quarters of 2021 compared to the same period in 2020.
The Company’s results reflect these revenue increases offset by increased purchased transportation expenses and variable expenses including salaries, wages and benefits. Further material changes are provided below.
Salaries, wages and employee benefits. Salaries, wages and employee benefits increased $116.1 million primarily due to increased volumes and contractual wage rate increases. Additionally, in response to volume declines in the third quarter of 2020, the Company reduced variable expenses including labor through furloughs and reduced headcount.
Fuel, operating expenses and supplies. Fuel, operating expenses and supplies increased $90.5 million, primarily due to a $54.7 million increase in fuel expense, which was largely a result of higher fuel prices. Additional increases resulted from costs related to our rebranding initiative and certain variable costs, which during the first three quarters of 2020 were managed through cost reduction efforts, including facility maintenance, professional services, and other employee expenses.
Purchased transportation. Purchased transportation increased $171.3 million primarily due to significant rate increases and other factors noted above. These increases were noted in all our modes of purchased transportation and include a $61.5 million increase in over-the-road purchased transportation expense, a $46.6 million increase in rail purchased transportation expense, a $37.3 million increase in third-party costs due to the growth in customer-specific logistics solutions, and a $23.4 million increase from additional usage of local purchased transportation.
Other operating expenses. Other operating expenses increased $30.3 million primarily due to a $20.6 million increase in third-party liability claims expense primarily due to unfavorable development of prior year claims and an $8.5 million increase in cargo claims.
Gains on property disposals. Net losses on disposals of property were $1.5 million in 2021. Comparatively, net gains on disposals of property were $45.3 million in 2020, which was primarily the result of the sale of one real property.
Income tax. Our effective tax rate for the first three quarters of 2021 and 2020 was (1.9%) and 35.1%, respectively. The most significant items impacting the 2021 rate for the first three quarters were net state and foreign tax provisions. The most significant items impacting the 2020 rate were primarily a benefit recognized due to application of the exception to the rules regarding intraperiod tax allocation and, to a lesser extent, a benefit from the reversal of liability for an uncertain tax position resulting from statute expiration. Due to an accounting standard change that was effective for the Company on January 1, 2021 this exception to the rules regarding intraperiod tax allocation is not applicable to the 2021 rate. The Company had a full valuation allowance against our domestic net deferred tax assets as of the relevant reporting periods.
18
The table below summarizes the key revenue metrics for the first three quarters of 2021 compared to the first three quarters of 2020:
|
|
First Three Quarters |
|
|
|
|
||||||
|
|
2021 |
|
|
2020 |
|
|
Percent |
|
|||
Workdays |
|
|
191.0 |
|
|
|
192.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Operating ratio |
|
|
98.7 |
% |
|
|
98.7 |
% |
|
0.0 pp |
|
|
|
|
|
|
|
|
|
|
|
|
|||
LTL picked up revenue (in millions) |
|
$ |
3,446.4 |
|
|
$ |
3,055.5 |
|
|
|
12.8 |
% |
LTL tonnage (in thousands) |
|
|
7,312 |
|
|
|
7,412 |
|
|
|
(1.3 |
%) |
LTL tonnage per workday (in thousands) |
|
|
38.28 |
|
|
|
38.50 |
|
|
|
(0.6 |
%) |
LTL shipments (in thousands) |
|
|
12,824 |
|
|
|
12,806 |
|
|
|
0.1 |
% |
LTL shipments per workday (in thousands) |
|
|
67.14 |
|
|
|
66.52 |
|
|
|
0.9 |
% |
LTL picked up revenue per hundred weight |
|
$ |
23.57 |
|
|
$ |
20.61 |
|
|
|
14.3 |
% |
LTL picked up revenue per hundred weight (excluding fuel surcharge) |
|
$ |
20.67 |
|
|
$ |
18.55 |
|
|
|
11.4 |
% |
LTL picked up revenue per shipment |
|
$ |
269 |
|
|
$ |
239 |
|
|
|
12.6 |
% |
LTL picked up revenue per shipment (excluding fuel surcharge) |
|
$ |
236 |
|
|
$ |
215 |
|
|
|
9.7 |
% |
LTL weight per shipment (in pounds) |
|
|
1,140 |
|
|
|
1,158 |
|
|
|
(1.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|||
Total picked up revenue (in millions)(b) |
|
$ |
3,787.1 |
|
|
$ |
3,338.9 |
|
|
|
13.4 |
% |
Total tonnage (in thousands) |
|
|
9,529 |
|
|
|
9,454 |
|
|
|
0.8 |
% |
Total tonnage per workday (in thousands) |
|
|
49.89 |
|
|
|
49.11 |
|
|
|
1.6 |
% |
Total shipments (in thousands) |
|
|
13,188 |
|
|
|
13,158 |
|
|
|
0.2 |
% |
Total shipments per workday (in thousands) |
|
|
69.05 |
|
|
|
68.35 |
|
|
|
1.0 |
% |
Total picked up revenue per hundred weight |
|
$ |
19.87 |
|
|
$ |
17.66 |
|
|
|
12.5 |
% |
Total picked up revenue per hundred weight (excluding fuel surcharge) |
|
$ |
17.50 |
|
|
$ |
15.95 |
|
|
|
9.7 |
% |
Total picked up revenue per shipment |
|
$ |
287 |
|
|
$ |
254 |
|
|
|
13.2 |
% |
Total picked up revenue per shipment (excluding fuel surcharge) |
|
$ |
253 |
|
|
$ |
229 |
|
|
|
10.3 |
% |
Total weight per shipment (in pounds) |
|
|
1,445 |
|
|
|
1,437 |
|
|
|
0.6 |
% |
(in millions) |
|
2021 |
|
|
2020 |
|
||
(b) Reconciliation of operating revenue to total picked up revenue: |
|
|
|
|
|
|
||
Operating revenue |
|
$ |
3,812.9 |
|
|
$ |
3,349.2 |
|
Change in revenue deferral and other |
|
|
(25.8 |
) |
|
|
(10.3 |
) |
Total picked up revenue |
|
$ |
3,787.1 |
|
|
$ |
3,338.9 |
|
19
Certain Non-GAAP Financial Measures
As previously discussed in the “Our Business” section, we use certain non-GAAP financial measures to assess performance including EBITDA and Adjusted EBITDA. We believe our presentation of EBITDA and Adjusted EBITDA is useful to investors and other users as these measures represent key supplemental information our management uses to compare and evaluate our core underlying business results, particularly in light of our leverage position and the capital-intensive nature of our business. These secondary measures should be considered in addition to the results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, our GAAP financial measures.
Adjusted EBITDA
The reconciliation of net loss to EBITDA and EBITDA to Adjusted EBITDA (defined in our TL Agreements as “Consolidated EBITDA”) for the third quarter of 2021 and 2020, first three quarters of 2021 and 2020, and the trailing twelve months ended September 30, 2021 and 2020, is as follows:
|
|
Third Quarter |
|
|
First Three Quarters |
|
|
Trailing-Twelve-Months Ended |
|
|||||||||||||||
(in millions) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
September 30, 2021 |
|
|
September 30, 2020 |
|
||||||
Reconciliation of net income (loss) to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss) |
|
$ |
8.3 |
|
|
$ |
(2.0 |
) |
|
$ |
(64.4 |
) |
|
$ |
(34.8 |
) |
|
$ |
(83.1 |
) |
|
$ |
(50.1 |
) |
Interest expense, net |
|
|
38.5 |
|
|
|
33.4 |
|
|
|
111.9 |
|
|
|
101.8 |
|
|
|
145.7 |
|
|
|
129.7 |
|
Income tax expense (benefit) |
|
|
— |
|
|
|
(10.9 |
) |
|
|
1.2 |
|
|
|
(18.8 |
) |
|
|
0.4 |
|
|
|
(22.0 |
) |
Depreciation and amortization |
|
|
37.8 |
|
|
|
32.5 |
|
|
|
106.1 |
|
|
|
102.4 |
|
|
|
138.6 |
|
|
|
139.1 |
|
EBITDA |
|
|
84.6 |
|
|
|
53.0 |
|
|
|
154.8 |
|
|
|
150.6 |
|
|
|
201.6 |
|
|
|
196.7 |
|
Adjustments for TL Agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(Gains) losses on property disposals, net |
|
|
0.2 |
|
|
|
— |
|
|
|
1.5 |
|
|
|
(45.3 |
) |
|
|
1.5 |
|
|
|
(55.4 |
) |
Non-cash reserve changes(a) |
|
|
(2.7 |
) |
|
|
— |
|
|
|
0.2 |
|
|
|
3.0 |
|
|
|
0.1 |
|
|
|
5.1 |
|
Letter of credit expense |
|
|
2.1 |
|
|
|
2.0 |
|
|
|
6.3 |
|
|
|
5.2 |
|
|
|
8.4 |
|
|
|
6.9 |
|
Permitted dispositions and other |
|
|
— |
|
|
|
0.3 |
|
|
|
0.8 |
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
0.6 |
|
Equity-based compensation expense |
|
|
0.8 |
|
|
|
1.1 |
|
|
|
3.5 |
|
|
|
4.3 |
|
|
|
3.9 |
|
|
|
5.4 |
|
Non-union pension settlement charge |
|
|
3.1 |
|
|
|
1.9 |
|
|
|
3.4 |
|
|
|
1.9 |
|
|
|
5.1 |
|
|
|
2.0 |
|
Other, net |
|
|
0.8 |
|
|
|
1.0 |
|
|
|
2.7 |
|
|
|
1.5 |
|
|
|
4.7 |
|
|
|
2.1 |
|
Expense amounts subject to 10% threshold(b): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
COVID-19 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.9 |
|
|
|
— |
|
|
|
3.9 |
|
Other, net |
|
|
6.7 |
|
|
|
3.1 |
|
|
|
19.6 |
|
|
|
8.8 |
|
|
|
28.1 |
|
|
|
12.9 |
|
Adjusted EBITDA prior to 10% threshold |
|
|
95.6 |
|
|
|
62.4 |
|
|
|
192.8 |
|
|
|
134.4 |
|
|
|
254.0 |
|
|
|
180.2 |
|
Adjustments pursuant to TTM calculation(b) |
|
|
(1.2 |
) |
|
|
(0.4 |
) |
|
|
(2.3 |
) |
|
|
(0.4 |
) |
|
|
(5.6 |
) |
|
|
(0.4 |
) |
Adjusted EBITDA |
|
$ |
94.4 |
|
|
$ |
62.0 |
|
|
$ |
190.5 |
|
|
$ |
134.0 |
|
|
$ |
248.4 |
|
|
$ |
179.8 |
|
20
Financial Condition, Liquidity and Capital Resources
The following sections provide aggregated information regarding our financial condition, liquidity and capital resources. As of September 30, 2021 and December 31, 2020, our total debt was $1,548.4 million and $1,225.4 million, respectively.
Liquidity
Our principal sources of liquidity are cash and cash equivalents, any prospective net cash flow from operations and available borrowings under our ABL Facility. As of September 30, 2021, our cash and cash equivalents, exclusive of restricted amounts held in escrow, was $358.1 million.
As of September 30, 2021, our maximum availability under our ABL Facility was $96.1 million, and our Managed Accessibility (as defined below) was $51.1 million. Maximum availability is derived by reducing the amount that may be advanced against eligible receivables plus eligible borrowing base cash by certain reserves imposed by the ABL Agent and our $353.9 million of outstanding letters of credit. Our “Managed Accessibility” represents the maximum amount we would access on the ABL Facility and is adjusted for eligible receivables plus eligible borrowing base cash measured for the applicable period. If eligible receivables fall below the threshold management uses to measure availability, which is 10% of the borrowing line, the credit agreement governing the ABL Facility permits adjustments from eligible borrowing base cash to restricted cash prior to the compliance measurement date of October 15, 2021. As of September 30, 2021, our cash and cash equivalents and Managed Accessibility was $409.2 million.
For the December 31, 2020 borrowing base certificate, which was filed in January of 2021, we transferred $3.1 million of cash into restricted cash to maintain the 10% threshold, as permitted under the ABL Facility, which transfer effectively put our cash and cash equivalents and Managed Accessibility to $440.2 million as of that date.
Outside of funding normal operations, our principal uses of cash include principal and interest payments on our funded debt, payments on equipment leases and investments in capital expenditures.
We have no off-balance sheet arrangements except for other contractual obligations for service agreements and capital purchases, letters of credit and surety bonds, which were disclosed in the 2020 Form 10-K. Additionally, there have been no material changes to these arrangements subsequent to December 31, 2020.
Covenants
Beginning at December 31, 2021, the Company has a quarterly requirement to maintain a trailing-twelve-month ("TTM") Adjusted EBITDA of $100.0 million. This requirement increases beginning March 31, 2022 to a TTM Adjusted EBITDA of $150.0 million and increases at June 30, 2022, and thereafter, to a TTM Adjusted EBITDA of $200.0 million. Management expects, based on actual and forecasted operating results, the Company will meet this covenant requirement for the period it becomes effective and the next twelve months.
Cash Flows
For the first three quarters of 2021 and 2020:
|
|
First Three Quarters |
|
|||||
(in millions) |
|
2021 |
|
|
2020 |
|
||
Net cash provided by (used in) operating activities |
|
$ |
9.3 |
|
|
$ |
108.5 |
|
Net cash provided by (used in) investing activities |
|
|
(441.8 |
) |
|
|
13.9 |
|
Net cash provided by (used in) financing activities |
|
|
322.7 |
|
|
|
206.9 |
|
Operating Cash Flow
Cash provided by operating activities was $9.3 million during the first three quarters of 2021, compared to $108.5 million provided during the first three quarters of 2020. The decrease in cash provided was primarily attributable to $58.8 million in changes to accounts receivables due to positive yield growth, as discussed in our Consolidated Results of Operations, and the timing of collections. Additionally, operating cash flows decreased due to a $29.6 million decrease in net loss.
Investing Cash Flow
Cash used in investing activities was $441.8 million during the first three quarters of 2021 compared to $13.9 million of cash provided during the first three quarters of 2020. The decrease of $455.7 million in cash was largely driven by an increase in cash
21
outflows on revenue equipment acquisitions and by lower cash proceeds from the sale of real property. Cash used by investing cash flows for the last quarter of 2021 are anticipated to decline from recent levels based upon planned capital expenditures.
Financing Cash Flow
Cash provided by financing activities for the first three quarters of 2021 was $322.7 million compared to $206.9 million provided during the first three quarters of 2020. The increase in cash is primarily related to amounts drawn during the first three quarters of 2021 and 2020 on our UST Credit Agreements.
Capital Expenditures
Our capital expenditures for the first three quarters of 2021 and 2020 were $442.9 million and $41.4 million, respectively. These amounts were principally used to fund the purchase of new and used revenue equipment, to improve our technology infrastructure and to refurbish engines for our revenue equipment fleet. At September 30, 2021, the Company has fully utilized amounts drawn on the UST Loan Tranche B. The Company begins depreciation on revenue equipment upon placement into active service. Our activity related to new operating lease commitments for revenue equipment was nominal during the first three quarters of 2021 due to the aforementioned purchases. The Company expects total capital expenditures during 2021 to be between $480.0 million and $530.0 million.
Contractual Obligations and Other Commercial Commitments
Contractual Cash Obligations
The Company has completed a review of our material cash requirements to analyze and disclose material changes, if any, in those requirements between those expected cash outflows as of December 31, 2020, as detailed in the Form 2020 10-K, and those as of September 30, 2021.
Our material updates to cash outflows that we are contractually obligated to make now include future principal and interest payments resulting from the additional UST Loan Tranche B borrowings, as disclosed in Note 3. Those specific borrowings were required to be used to fund the purchase of tractors and trailers and such purchases were completed during the quarter ended September 30, 2021.
In addition, as of September 30, 2021 we are contractually obligated to make other capital expenditures of approximately $38.8 million, primarily for revenue equipment and information technology equipment obligations.
The following table summarizes our contractual cash obligations for operating leases as of September 30, 2021.
|
|
Payments Due by Period |
|
|||||||||||||||||
(in millions) |
|
Total |
|
|
Less than |
|
|
1-3 |
|
|
3-5 |
|
|
After |
|
|||||
Operating leases(a) |
|
$ |
271.5 |
|
|
$ |
105.8 |
|
|
$ |
97.6 |
|
|
$ |
27.2 |
|
|
$ |
40.9 |
|
For all other changes in our cash requirements, for cash outflows that we are contractually obligated to make, they were considered by the Company and those changes are reasonably expected based upon our prior financial statement disclosures or in the ordinary course of business.
Other Commercial Commitments
The Company has completed a review of our other commercial commitments in order to analyze and disclose material changes, if any, in those commitments between those as of December 31, 2020, as detailed in the 2020 Form 10-K, and those as of September 30, 2021. As a result, the Company determined that there were no material changes to disclose.
22
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are primarily exposed to the market risk associated with unfavorable movements in interest rates, foreign currencies, and fuel price volatility. The risk inherent in our market risk-sensitive instruments and positions is the potential loss or increased expense arising from adverse changes in those factors. There have been no material changes to our market risk policies or our market risk-sensitive instruments and positions as described in the 2020 Form 10-K.
Item 4. Controls and Procedures
As required by the Exchange Act, we maintain disclosure controls and procedures designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive and financial officers, has evaluated our disclosure controls and procedures as of September 30, 2021 and has concluded that our disclosure controls and procedures were effective as of September 30, 2021.
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
23
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
We discuss legal proceedings in the “Commitments, Contingencies and Uncertainties” note to our consolidated financial statements included with this quarterly report on Form 10-Q, and that discussion is incorporated by reference herein.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed below and as discussed in Part I, Item IA. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, which could materially affect our business, financial condition or future results. The risks described below and in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may eventually prove to materially adversely affect our business, financial condition and/or operating results.
In response to the COVID-19 pandemic, federal, state, and local agencies have issued laws, regulations, and orders regarding vaccinations that could materially adversely affect the Company's operations.
On September 9, 2021, the President of the United States issued Executive Order (EO) 14042, requiring that employees of federal contractors and subcontractors be fully vaccinated against COVID-19 by December 8, 2021. We do business with many departments and agencies of the federal government and are currently evaluating whether and to what extent the EO applies to us. If we determine that the EO applies to us, we may be required to mandate COVID-19 vaccines for our covered employees. The President of the United States also directed the Federal Occupational Safety and Health Administration (Fed-OSHA) to issue Emergency Temporary Standards (ETS) that will direct large employers (those with 100+ employees) to implement a COVID-19 vaccination or regular testing requirement for their employees. Fed-OSHA has not yet issued the ETS, so we are not yet able to determine what the ETS will require or how they might affect our business and operations. If applicable, we expect that the EO mandate will likely exacerbate the industry-wide driver shortages that we are currently experiencing and both the EO mandate and the Fed-OSHA requirement could have a material adverse impact on our ability to serve our customers and on our business, financial condition and results of operations.
Item 6. Exhibits
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32.1* |
|
|
|
|
|
32.2* |
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Interline XBRL document. |
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
__________________________
* Indicates documents filed herewith.
24
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 |
|
|
|
|
|
|
Date: November 3, 2021 |
|
/s/ Darren D. Hawkins |
|
|
Darren D. Hawkins |
|
|
Chief Executive Officer |
|
|
|
Date: November 3, 2021 |
|
/s/ Daniel L. Olivier |
|
|
Daniel L. Olivier |
|
|
Chief Financial Officer |
25
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
EXCHANGE ACT RULES 13a-14 AND 15d-14,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Darren D. Hawkins, certify that:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 3, 2021 |
|
/s/ Darren D. Hawkins |
|
|
Darren D. Hawkins |
|
|
Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
EXCHANGE ACT RULES 13a-14 AND 15d-14,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Daniel L. Olivier, certify that:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 3, 2021 |
|
/s/ Daniel L. Olivier |
|
|
Daniel L. Olivier |
|
|
Chief Financial Officer |
|
|
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Yellow Corporation on Form 10-Q for the period ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Darren D. Hawkins, Chief Executive Officer of Yellow Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
Date: November 3, 2021 |
|
/s/ Darren D. Hawkins |
|
|
Darren D. Hawkins |
|
|
Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Yellow Corporation on Form 10-Q for the period ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel L. Olivier, Interim Chief Financial Officer of Yellow Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
Date: November 3, 2021 |
|
/s/ Daniel L. Olivier |
|
|
Daniel L. Olivier |
|
|
Chief Financial Officer |