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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-12255
YELLOW CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 48-0948788
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10777 Barkley, P.O. Box 7563, Overland Park, Kansas 66207
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(Address of principal executive offices) (Zip Code)
(913) 967-4300
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(Registrant's telephone number, including area code)
No Changes
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1996
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Common Stock, $1 Par Value 28,105,797 shares
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YELLOW CORPORATION
INDEX
Item Page
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PART I
1. Financial Statements
Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 3
Statements of Consolidated Income -
Three Months Ended March 31, 1996 and 1995 4
Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II
4.Submission of Matters to a Vote of Security Holders 8
5.Other Information 9
6.Exhibits and Reports on Form 8-K 9
Signatures 10
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PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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CONSOLIDATED BALANCE SHEETS
Yellow Corporation and Subsidiaries
March 31, 1996 and December 31, 1995
(Amounts in thousands except share data)
(Unaudited)
March 31 December 31
1996 1995
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ASSETS
CURRENT ASSETS:
Cash $ 15,725 $ 25,861
Short-term investments - 5,414
Accounts receivable 331,484 323,814
Refundable income taxes 49,351 49,529
Prepaid expenses and other 63,832 80,392
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Total current assets 460,392 485,010
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PROPERTY AND EQUIPMENT:
Cost 1,984,937 1,989,389
Less - Accumulated depreciation 1,091,910 1,067,541
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Net property and equipment 893,027 921,848
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OTHER ASSETS 26,699 28,039
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$1,380,118 $1,434,897
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Unsecured bank credit lines $ 25,000 $ 9,000
Accounts payable and checks outstanding 102,077 154,653
Wages and employees' benefits 144,647 134,178
Other current liabilities 143,955 142,040
Current maturities of long-term debt 2,911 2,925
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Total current liabilities 418,590 442,796
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OTHER LIABILITIES:
Long-term debt 327,442 341,648
Deferred income taxes 54,227 56,032
Claims, insurance and other 171,500 171,744
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Total other liabilities 553,169 569,424
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SHAREHOLDERS' EQUITY:
Common stock, $1 par value 28,858 28,858
Capital surplus 6,678 6,678
Retained earnings 390,443 404,761
Treasury stock (17,620) (17,620)
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Total shareholders' equity 408,359 422,677
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$1,380,118 $1,434,897
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The accompanying notes are an integral part of these statements.
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STATEMENTS OF CONSOLIDATED INCOME
Yellow Corporation and Subsidiaries
For the Three Months Ended March 31, 1996 and 1995
(Amounts in thousands except per share data)
(Unaudited)
1996 1995
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OPERATING REVENUE $ 741,678 $ 764,998
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OPERATING EXPENSES:
Salaries, wages and benefits 500,280 502,097
Operating expenses and supplies 118,280 115,838
Operating taxes and licenses 29,617 28,959
Claims and insurance 17,351 20,414
Communications and utilities 11,325 11,469
Depreciation 33,502 34,106
Purchased transportation 39,474 43,514
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Total operating expenses 749,829 756,397
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INCOME (LOSS) FROM OPERATIONS (8,151) 8,601
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NONOPERATING (INCOME) EXPENSES:
Interest expense 6,852 5,057
Other, net 823 (2,282)
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Nonoperating expenses, net 7,675 2,775
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INCOME (LOSS) BEFORE INCOME TAXES (15,826) 5,826
INCOME TAX PROVISION (BENEFIT) (1,575) 2,628
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NET INCOME (LOSS) $ (14,251) $ 3,198
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AVERAGE COMMON SHARES OUTSTANDING 28,106 28,106
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EARNINGS (LOSS) PER SHARE $ (.51) $ .11
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The accompanying notes are an integral part of these statements.
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STATEMENTS OF CONSOLIDATED CASH FLOWS
Yellow Corporation and Subsidiaries
For the Three Months Ended March 31, 1996 and 1995
(Amounts in thousands)
(Unaudited)
1996 1995
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OPERATING ACTIVITIES:
Net cash from (used in) operating activities $ (10,174) $ 6,019
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INVESTING ACTIVITIES:
Acquisition of property and equipment (9,520) (54,006)
Proceeds from disposal of property and equipment 2,419 7,019
Purchases of short-term investments (1,684) (2,959)
Proceeds from maturities of short-term investments 7,098 3,026
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Net cash used in investing activities (1,687) (46,920)
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FINANCING ACTIVITIES:
Proceeds from unsecured bank credit lines, net 16,000 10,000
Commercial paper borrowings, net (13,644) 38,852
Repayment of long-term debt (631) (662)
Cash dividends paid to shareholders - (6,605)
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Net cash from financing activities 1,725 41,585
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NET INCREASE (DECREASE) IN CASH (10,136) 684
CASH, BEGINNING OF PERIOD 25,861 17,613
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CASH, END OF PERIOD $ 15,725 $ 18,297
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SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 977 $ 3,647
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Interest paid $ 3,293 $ 2,173
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The accompanying notes are an integral part of these statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Yellow Corporation and Subsidiaries
1. The accompanying consolidated financial statements include the accounts
of Yellow Corporation and its wholly-owned subsidiaries (the company) and
have been prepared by the company, without audit by independent public
accountants, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, all normal recurring
adjustments necessary for a fair statement of the results of operations
for the interim periods included herein have been made. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted from these statements pursuant to such rules and
regulations. Accordingly, the accompanying consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in the company's 1995 Annual Report to Shareholders.
2. The company provides freight transportation services primarily to the
less-than-truckload (LTL) market in North America through its
subsidiaries, Yellow Freight System, Inc. (Yellow Freight), Preston
Trucking Company, Inc. (Preston Trucking), Saia Motor Freight Line, Inc.
(Saia) and WestEx, Inc. (WestEx). Yellow Technology Services, Inc.
(Yellow Technology) supports the company's subsidiaries - primarily Yellow
Freight - with information technology. Yellow Freight, the company's
principal subsidiary, comprises approximately 77% of total revenue while
Preston Trucking comprises approximately 14% and Saia comprises
approximately 8%.
3. Effective January 1, 1996, the company adopted the Financial Accounting
Standards Board Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The
adoption did not have a material impact on the financial condition or
results of operations of the company.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
March 31, 1996 Compared to December 31, 1995
Working capital remained relatively constant during the first three months
of 1996, resulting in a $41.8 million positive working capital position at
March 31, 1996 compared to $42.2 million at December 31, 1995. Accounts
receivable growth was moderate during the period as increased revenue levels at
the end of the respective periods of comparison were mostly offset by
improvement in days sales outstanding, primarily at Yellow Freight.
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FINANCIAL CONDITION (continued)
Total debt remained essentially unchanged during the first three months of
1996, showing a $1.8 million increase compared to December 31, 1995 levels.
Bank credit line borrowings were used during the period to replace a portion of
the commercial paper borrowings. Working capital and capital spending needs
were funded by a cash dividend from Canadian operations of $23.0 million. In
April, the company received a federal tax refund of $45 million which was used
to pay down debt and improve the balance sheet. Net capital expenditures for
the first three months of 1996 were $7.1 million. It is anticipated that the
remaining net capital spending for 1996 will be approximately $57 million.
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1996 and 1995
Yellow Corporation reported a net loss for the quarter of $14.3 million,
or $.51 per share, including a non-recurring charge to the income tax provision
of $6.7 million, or $.24 per share. This compares to net income of $3.2
million, or $.11 per share, in the first quarter of 1995. First quarter 1996
operating revenue was $741.7 million, down 3.0%, from the $765.0 million
recorded during the same period last year. The loss, excluding the tax charge,
was $7.6 million, or $.27 per share, and was in line with Wall Street
expectations. The tax charge resulted from a cash dividend from Canadian
operations of $23.0 million, which was used to pay down debt.
Yellow Freight recorded operating revenue of $576.1 million in the first
quarter of 1996 compared to $592.0 million in the first quarter of 1995, a
decrease of 2.7%. This decrease was caused mainly by a 1.6% decline in the
number of shipments handled and a 3.5% reduction in LTL tonnage. Pricing
levels in the first quarter of 1996 were relatively static compared to the
first quarter of 1995 as a result of price discounting in 1995 that more than
offset the January 1996 rate increases.
Yellow Freight had an operating loss of $2.3 million in the first quarter
of 1996 compared to operating income of $9.1 million in the first quarter of
1995. Yellow Freight's operating ratio of 100.4 reflects increases in fixed
costs, primarily the April 1, 1995 contract wage and benefit increases of 3.2%,
as well as costs associated with the series of severe winter storms experienced
in the first quarter of 1996. Higher costs also resulted from a decrease in
the system load average attributable to a transit time improvement program
implemented in the third quarter of 1995. Yellow Freight cost and pricing
improvement initiatives proceeded according to plan resulting in some margin
improvement. However, first quarter benefits were more than offset by the
weather-related costs. Additional cost improvement at Yellow Freight is
expected throughout the year even though contract wage and benefit increases of
3.8% went into effect April 1, 1996.
Preston Trucking recorded operating revenue of $98.4 million in the first
quarter of 1996 compared to $103.4 million in the first quarter of 1995, a
decrease of 4.8%. Decreases in the number of shipments handled
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RESULTS OF OPERATIONS (continued)
and LTL weight/shipment caused the lower revenue levels. Despite a January
1996 price increase, pricing levels in the first quarter of 1996 were
relatively static compared to the first quarter of 1995 as a result of price
discounting in 1995.
Preston Trucking had an operating loss of $5.1 million in the first
quarter of 1996 compared to operating income of $1.7 million in the first
quarter of 1995. 1996 results include a 4.9% increase in contract wages and
benefits on April 1, 1995. The relatively greater labor cost increase resulted
from a wage reduction program approved in 1994 whereby employees received the
contractual wage and benefit increases as well as a step-down in the wage
reduction from 7.0% to 5.0%. During the first quarter of 1996, Preston
employees agreed to freeze wages in lieu of the standard contract increase
scheduled for April 1, 1996. Preston's operating performance also suffered
extreme adverse impacts from the severe winter weather as its service area is
concentrated in the Northeast and upper Midwest, yet on-time service remained
superior resulting in continued market share gains.
Saia recorded operating revenue of $60.7 million in the first quarter of
1996 compared to $49.2 million in the first quarter of 1995, an increase of
23.3%. This growth was caused by an increase in shipment volume of 23.0%
reflecting increased tonnage of 18% compared to the first quarter 1995, due
largely to expansion activities. Saia had operating income of $3.1 million in
the first quarter of 1996 compared to operating income of $2.7 million in the
first quarter of 1995. Saia's operating ratio was 94.9 compared to 94.6 in
1995. WestEx's expansion plan is on schedule and the business is expected to
become profitable in 1997.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Annual Meeting of Stockholders on April 25, 1996
(b) The following directors were elected with the indicated number of votes
set forth below.
For Withheld
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Klaus E. Agthe 18,528,370 2,630,496
Howard M. Dean 18,528,507 2,630,359
George E. Powell III 20,930,241 228,625
The following directors did not stand for election and continued in office
as a director after the Annual Meeting of Stockholders: M. Reid Armstrong,
David H. Hughes, Ronald T. LeMay, John C. McKelvey, A. Maurice Myers,
George E. Powell, Jr. and William L. Trubeck.
(c) An amendment to the Certificate of Incorporation eliminating the
classification of the Board of Directors and reducing the minimum number
of directors from nine to five was voted on and approved
at the meeting by the following vote. For: 17,540,113, Against:
1,200,900, Abstention: 43,268, No-vote: 2,374,585.
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PART II - OTHER INFORMATION (Continued)
Item 4. Submission of Matters to a Vote of Security Holders (continued)
A plan to pay fifty percent of the Board and Committee retainers of
non-employee directors in company stock restricted for three years was
voted on and approved at the meeting by the following vote. For:
20,380,191, Against: 326,637, Abstention: 85,902, No-vote: 366,136.
The appointment of Arthur Andersen LLP as independent public accountants of
the company for 1996 was voted on and approved at the meeting by the
following vote. For: 20,976,693, Against: 140,042, Abstention: 42,131.
Item 5. Other Information
On April 25, 1996, the Board of Directors designated the following
individuals as executive officers of the company. A. Maurice Myers, President
and Chief Executive Officer of the company, M. Reid Armstrong, President of
Yellow Freight, William F. Martin, Jr., Senior Vice President - Legal/Corporate
Secretary of the company and H. A. Trucksess, III, Senior Vice President -
Finance/Chief Financial Officer and Treasurer.
On April 25, 1996, the company announced at its Annual Shareholders
meeting that George E. Powell, Jr. will retire as Chairman of the Board of
Directors effective June 30 upon the attainment of the normal Board retirement
age of 70. Powell will become Chairman Emeritus. A. Maurice Myers, recently
appointed to the post of President and Chief Executive Officer, is appointed by
the Board as Chairman effective upon Powell's retirement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3) - Amendment of Articles of Incorporation occasioned by
declassification of the Board of Directors.
(10) - Executive Officers' Agreement
(27) - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
On January 24, 1996 a Form 8-K was filed under Item 5, Other Events,
which reported that the company announced on January 17, 1996, that its
President and CEO, George E. Powell III, intended to resign. Powell agreed
to remain until a replacement candidate is selected and will be involved in
identifying his successor which is expected in the next few months. Powell
will also continue his current Board term and stand for reelection when
that term expires in April concurrent with the Annual Shareholders meeting.
His father, George E. Powell, Jr. will remain as Chairman of the Board of
Directors.
On March 22, 1996 a Form 8-K was filed under Item 5, Other Events,
which reported that the company announced on March 20, 1996 that A. Maurice
Myers will become its new President and CEO. Myers was also appointed to
the Board of Directors.
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SIGNATURES
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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
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Registrant
Date: May 10, 1996 /s/ A. Maurice Myers
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A. Maurice Myers
President and Chief Executive
Officer
Date: May 10, 1996 /s/ H. A. Trucksess, III
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H. A. Trucksess, III
Senior Vice President - Finance/
Chief Financial Officer & Treasurer
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