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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-12255
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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.)
10990 Roe Avenue, P.O. Box 7563, Overland Park, Kansas 66207
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (913) 696-6100
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Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 Par Value
Preferred Stock Purchase Rights
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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The aggregate market value of the voting stock held by nonaffiliates of the
registrant at March 12, 1999 was $459,478,279.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 12, 1999
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Common Stock, $1 Par Value 25,176,892 shares
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into the Form 10-K:
1) 1998 Annual Report to Shareholders - Parts I, II and IV
2) Proxy Statement dated March 5, 1999 - Part III
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Yellow Corporation
Form 10-K
Year Ended December 31, 1998
Index
Item Page
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PART I
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1. Business 3
2. Properties 7
3. Legal Proceedings 7
4. Submission of Matters to a Vote of Security Holders 7
Executive Officers of the Registrant (Unnumbered Item) 8
PART II
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5. Market for the Registrant's Common Stock and Related
Stockholder Matters 9
6. Selected Financial Data 9
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
8. Financial Statements and Supplementary Data 9
9. Disagreements on Accounting and Financial Disclosure 9
PART III
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10. Directors and Executive Officers of the Registrant 10
11. Executive Compensation 10
12. Security Ownership of Certain Beneficial Owners and
Management 10
13. Certain Relationships and Related Transactions 10
PART IV
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14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K 11
Report of Independent Public Accountants on Financial
Statement Schedule 12
Financial Statement Schedule II 13
Signatures 14
1998 Annual Report to Shareholders Exhibit (13)
Consent of Independent Public Accountants Exhibit (23)
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PART I
Item 1. Business.
(a) Yellow Corporation and its wholly-owned subsidiaries are collectively
referred to as "the company". The company provides transportation services
primarily to the less-than-truckload (LTL) market throughout North America
and, through partnership alliances, other international markets. During
1998, the company concentrated on improving future earnings growth through
the negotiation of a new five-year National Master Freight Agreement (NMFA)
at its Yellow Freight subsidiary, divesting of its under performing Preston
Trucking subsidiary and the acquisition of Action Express, Inc., a Pacific
Northwest regional LTL transportation company, as well as reducing
outstanding shares of common stock through stock buyback programs.
(b) The company provides interstate transportation of general commodity
freight, primarily LTL, primarily by motor vehicle. The operation of the
company is conducted among two primary business segments. Financial
disclosures for these segments are presented in the Business Segments
footnote on page 43 of the 1998 Annual Report to Shareholders which is
incorporated herein by reference.
(c) Yellow Corporation is a holding company providing freight transportation
services through its subsidiaries, Yellow Freight System, Inc. (Yellow
Freight), Saia Motor Freight Line, Inc. (Saia), WestEx, Inc. (WestEx), and
Action Express, Inc. (Action). Yellow Services, Inc. (Yellow Services) is a
subsidiary that provides information technology services to the company and
its subsidiaries. The company employed an average of 29,700 persons in
1998.
Yellow Freight, the company's principal subsidiary based in Overland Park,
Kansas, accounted for 86% of total company revenue from continuing
operations in 1998, 88% in 1997 and 89% in 1996. It is one of the nation's
largest providers of LTL transportation services. It provides comprehensive
national LTL service as well as international service to Mexico, Canada
and, via alliances, Europe, the Asia/Pacific region, South America and
Central America.
Saia is a regional LTL carrier headquartered in a suburb of Atlanta,
Georgia provides overnight and second-day service in eleven southeastern
states and Puerto Rico. Saia accounted for 12% of total company revenue
from continuing operations in 1998, 11% in 1997 and 10% in 1996.
WestEx provides one and two-day service in Arizona, California, Nevada, New
Mexico, and Texas. WestEx had operating revenue of $65 million in 1998 and
is headquartered in Phoenix, Arizona.
Action provides one and two day service to the Pacific Northwest and Rocky
Mountain states. Action was acquired on December 1, 1998 and is
headquartered in Boise, Idaho. Only revenue since its acquisition date is
included in the results of operations and was not material to the 1998
consolidated financial results of the company.
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Item 1. Business. (cont.)
Yellow Services supports the company's subsidiaries - primarily Yellow
Freight - with information technology. Its headquarters is in Overland
Park, Kansas.
The operations of the freight transportation companies are partially
regulated by the United States Department of Transportation and state
regulatory bodies. The company's competition includes contract motor
carriers, private fleets, railroads, other motor carriers and small
shipment carriers. No single carrier has a dominant share of the motor
freight market.
The company operates in a highly price-sensitive and competitive industry,
making pricing, customer service, effective asset utilization, and cost
control major competitive factors. No single customer accounts for more
than 10% of the company's total revenue. The company's revenue is subject
to seasonal variations throughout the year. The first quarter is generally
the weakest while the third is the strongest.
Operating revenue for Yellow Corporation (the company) totaled $2.9 billion
in 1998, relatively unchanged from 1997. Operating income for the year was
$83.4 million, down from $98.7 million in 1997. Income from continuing
operations was $40.1 million or $1.49 per share (diluted) in 1998, compared
to $52.7 million or $1.84 per share (diluted) in 1997.
Yellow Freight's 1998 operating income of $66.9 million was lower than 1997
operating income of $82.7 million. Operating revenue was $2.49 billion for
1998, down 1.8 percent from $2.54 billion for 1997. The 1998 operating
ratio was 97.3 compare with 96.7 in 1997.
Saia continued its growth with 1998 operating income of $24.7 million, up
from $19.6 million in 1997. Saia's 1998 operating ratio was 92.7 compared
with 93.7 in 1997.
WestEx continued its rapid growth in 1998, reporting revenue of 64.9
million, up 32.4 percent from 49.0 million in 1997.
The company's operations are further described in Management's Discussion
and Analysis on page 17 of the 1998 Annual Report to Shareholders, which is
incorporated herein by reference.
Discontinued Operations
In the second quarter of 1998, the company sold Preston Trucking Company,
Inc. (Preston Trucking) its northeast regional LTL segment to a management
group of three senior officers of Preston Trucking. The sale resulted in a
charge of $63.6 million net of anticipated tax benefits of approximately
$28.0 million, which has been reflected as discontinued operations in the
consolidated statement of operations.
After giving effect to the discontinued operations, the company recorded a
net loss for 1998 of $28.7 million or $1.06 per share (diluted), versus net
income of $52.4 million, or $1.83 per share (diluted) in 1997.
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Item 1. Business. (cont.)
The company's liquidity needs arise primarily from capital investment in
new equipment, land and structures and information technology, as well as
funding working capital requirements. Working capital decreased from a
negative $22 million at year-end 1997 to a negative $42 million at year-end
1998. The company can operate with negative working capital because of the
quick turnover of its account receivables and its ready access to sources
of short-term liquidity.
Future Outlook
The company operates in a highly competitive and changing transportation
business. The 1998 five-year NMFA labor agreement provides stability to the
customers of its largest subsidiary, Yellow Freight with reasonable
economic terms for its largest expense item.
All of the company's subsidiaries can now focus on achieving profitable
revenue growth. This starts with continuous improvement focus on offering
best in class customer satisfaction for core services. It also means
reinventing the business with more customer solutions involving new and
enhanced services, not limited to just LTL. An example of this is Yellow
Freight's introduction in July of Exact Express, a time-definite, expedited
air and ground delivery service.
The company's subsidiaries are also working to continuously improve their
productivity and cost efficiency to best in class levels. This not only
reduces costs, but it also supports improved customer service capabilities.
The company believes its ability to achieve profitable revenue growth and
cost efficiency is enhanced by its technology investments, its
comprehensive physical assets as well as the quality and low turnover of
its experienced work force. Because employees are the company's greatest
asset, the subsidiaries are focused on achieving best in class safety
performance.
In addition to current subsidiaries and businesses, the company will also
evaluate opportunities to grow earnings through acquisitions. Management
believes the company's balance sheet and access to capital provide
flexibility to reinvest in existing businesses as well as new opportunities
with attractive growth prospects.
Statements contained herein, that are not purely historical, are forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements regarding the company's
expectations, hopes, beliefs and intentions on strategies regarding the
future. It is important to note that the company's actual future results
could differ materially from those projected in such forward-looking
statements because of a number of factors, including but not limited to
inflation, labor relations, inclement weather, competitor pricing activity,
year 2000 issues, expense volatility and a downturn in general economic
activity.
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Item 1. Business. (cont.)
(d) Revenue from foreign sources is discussed in the Business Segments footnote
on page 44 of the 1998 Annual Report to Shareholders, which is incorporated
herein by reference. Foreign source revenue was not material to
consolidated financial results in 1998, 1997 and 1996.
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Item 2. Properties.
The company's operating subsidiaries each provide their transportation services
through separate networks, principally consisting of a fleet of tractors and
trailers and real estate terminal facilities.
At December 31, 1998, the company operated a total of 505 freight terminals
located in 50 states, Puerto Rico, parts of Canada and Mexico. Of this total,
238 were owned terminals and 267 were leased, generally for terms of three years
or less. The number of vehicle back-in doors totaled 15,997, of which 12,111
were at owned terminals and 3,886 were at leased terminals. The freight
terminals vary in size ranging from one to three doors at small local terminals,
to over 300 doors at Yellow Freight's largest consolidation and distribution
terminal. Substantially all of the larger terminals, containing the greatest
number of doors, are owned. In addition, the company and most of its
subsidiaries own and occupy general office buildings in their headquarters city.
At December 31, 1998, the company's subsidiaries operated the following number
of linehaul units: tractors - 4,201, and trailers - 36,459. The company operated
the following number of city units: trucks and tractors - 6,738 and trailers -
6,621.
The company's facilitates and equipment are adequate to meet current business
requirements. The company expects moderate growth in 1999 and has projected only
modest increases in its operational capacity. Projected net capital expenditures
for 1999 are $147 million, an increase over $96 million in 1998 net capital
expenditures. Net capital for both periods pertain primarily to replacement of
revenue equipment at all subsidiaries, growth capital at Saia, WestEx and
Action, and additional investments in information technology.
Item 3. Legal Proceedings.
The information set forth under the caption "Commitments and Contingencies" in
the Notes to Consolidated Financial Statements on page 45 of the registrant's
Annual Report to Shareholders for the year ended December 31, 1998, is
incorporated by reference under Item 14 herein.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
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Executive Officers of the Registrant
The names, ages and positions of the executive officers of the company as of
March 23, 1999 are listed below. Officers are appointed annually by the Board of
Directors at their meeting that immediately follows the annual meeting of
shareholders.
Name Age Position(s) Held
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A. Maurice Myers 58 President and Chief Executive Officer of
the company (since March 1996); President
and Chief Operating Officer of America
West Airlines, Inc. (January 1994 -
December 1995); President and Chief
Executive Officer of Aloha Air Group,
Inc. (prior to January 1994)
William F. Martin, Jr. 51 Senior Vice President - Legal/Corporate
Secretary of the company (since December
1993); Vice President and Secretary of
the company (prior to December 1993);
Vice President and Secretary of Yellow
Freight (prior to May 1992)
H. A. Trucksess, III 49 Senior Vice President - Finance and Chief
Financial Officer of the company (since
June 1994); and Treasurer of the company
(since December 1995), Vice President and
Chief Financial Officer of Preston
Corporation (prior to June 1994)
Samuel A. Woodward 49 Senior Vice President - Operations and
Planning of the company (since July 1996);
Senior Vice President and Managing Officer
of SH&E, a management consulting business
(prior to July 1996)
The terms of each officer of the company designated above are scheduled to
expire April 22, 1999. The terms of each officer of the subsidiary companies are
scheduled to expire on the date of the next annual meeting of shareholders of
that company. No family relationships exist between any of the executive
officers named above.
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PART II
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Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
The information set forth under the caption "Common Stock" on page 46 of the
registrant's Annual Report to Shareholders for the year ended December 31, 1998,
is incorporated by reference under Item 14 herein.
Item 6. Selected Financial Data.
The information set forth under the caption "Financial Summary" on pages 26 and
27 of the registrant's Annual Report to Shareholders for the year ended December
31, 1998, is incorporated by reference under Item 14 herein.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing on pages 17 through 25 of the registrant's Annual Report
to Shareholders for the year ended December 31, 1998, is incorporated by
reference under Item 14 herein.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary information, appearing on pages 28
through 46 of the registrant's Annual Report to Shareholders for the year ended
December 31, 1998, are incorporated by reference under Item 14 herein.
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
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PART III
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Item 10. Directors and Executive Officers of the Registrant.
The information regarding Directors of the registrant has previously been
reported in the registrant's definitive proxy statement, filed pursuant to
Regulation 14A, and is incorporated by reference. For information with respect
to the executive officers of the registrant, see "Executive Officers of the
Registrant" at the end of Part I of this report.
Item 11. Executive Compensation.
This information has previously been reported in the registrant's definitive
proxy statement, filed pursuant to Regulation 14A, and is incorporated by
reference. The Employment Agreement between A. Maurice Myers, President and
Chief Executive Officer, and the company, has previously been filed and is
incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
This information has previously been reported in the registrant's definitive
proxy statement, filed pursuant to Regulation 14A, and is incorporated by
reference.
Item 13. Certain Relationships and Related Transactions.
This information has previously been reported in the registrant's definitive
proxy statement, filed pursuant to Regulation 14A, and is incorporated by
reference.
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PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.
(a) (1) Financial Statements
The following information appearing in the 1998 Annual Report to
Shareholders is incorporated by reference in this Form 10-K Annual Report
as Exhibit (13):
Page
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Management's Discussion and Analysis of
Financial Condition and Results of Operations 17-25
Financial Summary 26-27
Consolidated Financial Statements 28-45
Report of Independent Public Accountants 45
Quarterly Financial Information 46
Common Stock 46
With the exception of the aforementioned information, the 1998 Annual
Report to Shareholders is not deemed filed as part of this report.
Financial statements other than those listed are omitted for the reason
that they are not required or are not applicable. The following additional
financial data should be read in conjunction with the consolidated
financial statements in such 1998 Annual Report to Shareholders.
(a) (2) Financial Statement Schedule
Page
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Report of Independent Public Accountants on
Financial Statement Schedule 12
For the years ended December 31, 1998, 1997 and 1996:
Schedule II - Valuation and Qualifying Accounts 13
Schedules other than those listed are omitted for the reason that they
are not required or are not applicable, or the required information is
shown in the financial statements or notes thereto.
(a) (3) Exhibits
(13) - 1998 Annual Report to Shareholders.
(23) - Consent of Independent Public Accountants.
(27) - Financial Data Schedule (for SEC use only).
The remaining exhibits required by Item 7 of Regulation S-K are omitted
for the reason that they are not applicable or have previously been filed.
(b) Reports on Form 8-K
None
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Report of Independent Public
Accountants on Financial Statement Schedule
To the Shareholders of Yellow Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Yellow Corporation and
Subsidiaries' annual report to shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated January 28, 1999. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedule of valuation and qualifying accounts (Schedule II) is the
responsibility of the company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
January 28, 1999
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Schedule II
Yellow Corporation and Subsidiaries
Valuation and Qualifying Accounts
For the Years Ended December 31, 1998, 1997 and 1996
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COL. A COL. B COL. C COL. D COL. E
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Additions
Balance, -1- -2- Deductions- Balance,
Description Beginning Charged Charged Describe End of
of Period To Costs To Other (1) Period
And Accounts-
Expenses Describe
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(In Thousands)
Year ended December 31, 1998:
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Deducted from asset account -
Allowance for uncollectible
accounts $12,264 $14,779 $ - $12,881 $14,162
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Year ended December 31, 1997:
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Deducted from asset account -
Allowance for uncollectible
accounts $10,610 $13,272 $ - $11,618 $12,264
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Year ended December 31, 1996:
Deducted from asset account -
Allowance for uncollectible
accounts $14,094 $16,727 $ - $20,211 $10,610
======= ======= ====== ======= =======
(1) Primarily uncollectible accounts written off - net of recoveries.
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Signatures
Pursuant to the requirements of Section 13 or 15(d) 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
BY: /s/ A. Maurice Myers
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A. Maurice Myers
President, Chief Executive
Officer and Chairman of the
March 23, 1999 Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ H. A. Trucksess, III Senior Vice President - March 23, 1999
- ------------------------------- Finance/Chief Financial
H. A. Trucksess, III Officer and Treasurer
/s/ Howard M. Dean Director March 23, 1999
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Howard M. Dean
/s/ David H. Hughes Director March 23, 1999
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David H. Hughes
/s/ Cassandra C. Carr Director March 23, 1999
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Cassandra C. Carr
/s/ Carl W. Vogt Director March 23, 199
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Carl W. Vogt
/s/ Klaus E. Agthe Director March 23, 1999
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Klaus E. Agthe
/s/ Ronald T. LeMay Director March 23, 1999
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Ronald T. LeMay
/s/ John C. McKelvey Director March 23, 1999
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John C. McKelvey
/s/ William L. Trubeck Director March 23, 1999
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William L. Trubeck
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