<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission file number 0-12255
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YELLOW CORPORATION
------------------
(Exact name of registrant as specified in its charter)
Delaware 48-0948788
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10990 Roe Avenue, P.O. Box 7563, Overland Park, Kansas 66207
- ------------------------------------------------------ ---------
(Address of principal executive offices) (Zip Code)
(913) 696-6100
--------------
(Registrant's telephone number, including area code)
No Changes
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 30, 1999
----- ----------------------------
Common Stock, $1 Par Value 24,862,774 shares
<PAGE> 2
YELLOW CORPORATION
INDEX
Item Page
- ---- ----
PART I
------
1. Financial Statements
Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998 3
Statements of Consolidated Operations -
Quarter and Six Months Ended June 30, 1999 and 1998 4
Statements of Consolidated Cash Flows -
Six Months Ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II
-------
6. Exhibits and Reports on Form 8-K 17
Signatures 18
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
CONSOLIDATED BALANCE SHEETS
Yellow Corporation and Subsidiaries
(Amounts in thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 25,144 $ 25,522
Accounts receivable 281,536 272,436
Prepaid expenses and other 32,821 76,657
---------- ----------
Total current assets 339,501 374,615
---------- ----------
PROPERTY AND EQUIPMENT:
Cost 1,935,809 1,897,029
Less - Accumulated depreciation 1,214,935 1,194,227
---------- ----------
Net property and equipment 720,874 702,802
---------- ----------
OTHER ASSETS 28,900 28,268
---------- ----------
$1,089,275 $1,105,685
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and checks outstanding $ 108,663 $ 147,644
Wages and employees' benefits 147,054 119,347
Other current liabilities 144,749 149,127
Current maturities of long-term debt 77 77
---------- ----------
Total current liabilities 400,543 416,195
---------- ----------
OTHER LIABILITIES:
Long-term debt 150,350 156,988
Deferred income taxes 17,961 18,433
Claims, insurance and other 145,381 142,817
---------- ----------
Total other liabilities 313,692 318,238
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value 29,375 29,356
Capital surplus 15,210 14,948
Retained earnings 420,994 403,262
Accumulated other comprehensive income (2,564) (3,163)
Treasury stock (87,975) (73,151)
---------- ----------
Total shareholders' equity 375,040 371,252
---------- ----------
$1,089,275 $1,105,685
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
STATEMENTS OF CONSOLIDATED OPERATIONS
Yellow Corporation and Subsidiaries
For the Quarter and Six Months Ended June 30, 1999 and 1998
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Second Quarter Six Months
-------------------------- ----------------------
1999 1998 1999 1998
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUE $ 756,056 $ 727,419 $1,483,554 $1,419,879
--------- --------- ---------- ----------
OPERATING EXPENSES:
Salaries, wages and benefits 485,104 466,885 958,660 917,253
Operating expenses and supplies 114,669 110,729 227,940 221,356
Operating taxes and licenses 23,417 23,935 46,526 47,641
Claims and insurance 17,418 14,976 33,495 32,058
Depreciation and amortization 24,900 26,369 49,558 53,250
Purchased transportation 66,270 59,341 131,345 114,228
--------- --------- ---------- ----------
Total operating expenses 731,778 702,235 1,447,524 1,385,786
--------- --------- ---------- ----------
INCOME FROM OPERATIONS 24,278 25,184 36,030 34,093
--------- --------- ---------- ----------
NONOPERATING (INCOME) EXPENSES:
Interest expense 2,898 3,031 5,751 6,130
Other, net (699) 169 (33) 401
---------- --------- ---------- ----------
Nonoperating expenses, net 2,199 3,200 5,718 6,531
--------- --------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 22,079 21,984 30,312 27,562
INCOME TAX PROVISION 9,121 9,705 12,579 11,520
--------- --------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 12,958 12,279 17,733 16,042
Loss from discontinued operations - (62,336) - (66,746)
--------- ---------- ---------- ----------
NET INCOME (LOSS) $ 12,958 $ (50,057) $ 17,733 $ (50,704)
========= ========== ========== ==========
AVERAGE SHARES OUTSTANDING-BASIC 24,854 27,198 25,131 27,555
========= ========= ========== ==========
AVERAGE SHARES OUTSTANDING-DILUTED 25,013 27,426 25,313 27,784
========= ========= ========== ==========
BASIC EARNINGS (LOSS) PER SHARE:
Income from continuing operations $ .52 $ .45 $ .71 $ .58
Loss from discontinued operations - (2.29) - (2.42)
--------- --------- ---------- ----------
Net income (loss) $ .52 $ (1.84) $ .71 $ (1.84)
========= ========= ========== ==========
DILUTED EARNINGS (LOSS) PER SHARE:
Income from continuing operations $ .52 $ .45 $ .70 $ .58
Loss from discontinued operations - (2.27) - (2.40)
--------- ---------- ---------- ----------
Net income (loss) $ .52 $ (1.82) $ .70 $ (1.82)
========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
STATEMENTS OF CONSOLIDATED CASH FLOWS
Yellow Corporation and Subsidiaries
For the Six Months Ended June 30, 1999 and 1998
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net cash from operating activities $ 89,174 $ 73,535
--------- ---------
INVESTING ACTIVITIES:
Acquisition of property and equipment (74,945) (46,471)
Proceeds from disposal of property and equipment 5,879 12,431
Net capital expenditures of discontinued operations - 2,203
--------- ---------
Net cash used in investing activities (69,066) (31,837)
--------- ---------
FINANCING ACTIVITIES:
Treasury stock purchases (14,824) (33,495)
Proceeds from stock options and other, net 228 505
Repayment of long-term debt (5,890) (2,948)
--------- ---------
Net cash used in financing activities (20,486) (35,938)
--------- ---------
NET INCREASE (DECREASE) IN CASH (378) 5,760
CASH, BEGINNING OF PERIOD 25,522 17,703
--------- ---------
CASH, END OF PERIOD $ 25,144 $ 23,463
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
- ----------------------------------
Income taxes paid (received) $ 8,680 $ (4,298)
========= =========
Interest paid $ 5,702 $ 4,898
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
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 1998 Annual Report to Shareholders.
2. The company provides freight transportation services primarily to the
less-than-truckload (LTL) market in North America through its subsidiaries,
Yellow Freight System, Inc. (Yellow Freight), Saia Motor Freight Line, Inc.
(Saia), WestEx, Inc. (WestEx) and Action Express, Inc. (Action). YCS
International, Inc. (YCS) provides global transportation solutions through
fully integrated ocean, land and air transportation services. Yellow
Services, Inc. (Yellow Services), is a subsidiary that provides information
technology and other services to the company and its subsidiaries. Yellow
Freight comprises approximately 84 percent of total revenue while Saia
comprises approximately 12 percent.
3. The company reports financial and descriptive information about its
reportable operating segments, on a basis consistent with that used
internally for evaluating segment performance and allocating resources to
segments.
Consistent with the Business Segments disclosure in the company's 1998
Annual Report to Shareholders, the company has two reportable segments,
strategic business units that offer different products and services. The
National segment is comprised of the operations of Yellow Freight, a
carrier that provides comprehensive national LTL service as well as
international service throughout North America. The Southeast regional
segment consists of the operations of Saia, a regional LTL carrier that
provides overnight and second-day service in twelve southeastern states and
Puerto Rico.
6
<PAGE> 7
The segments are managed separately because each requires different
operating, technology and marketing strategies and processes. The company
evaluates performance primarily on operating income and return on capital.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies in the company's 1998 Annual
Report to Shareholders. The company also charges a trade name fee to Yellow
Freight (1% of revenue) for use of the company's trademark. Interest and
intersegment transactions are recorded at current market rates. Income
taxes are allocated in accordance with a tax sharing agreement in
proportion to each segment's contribution to the parent's consolidated tax
status. The following table summarizes the company's continuing operations
by business segment (in thousands):
<TABLE>
<CAPTION>
National S.E. Corporate
-------- ---- ---------
Regional and Other Consolidated
-------- --------- ------------
<S> <C> <C> <C> <C>
Y-T-D June 30, 1999
Operating revenue $1,251,603 $171,349 $ 60,602 $1,483,554
Income from operations 31,520 7,814 (3,304) 36,030
Identifiable assets 774,257 222,734 92,284 1,089,275
Y-T-D June 30, 1998
Operating revenue $1,222,615 $166,850 $ 30,414 $1,419,879
Income from operations 27,125 11,268 (4,300) 34,093
Identifiable assets 772,945 205,196 74,582 1,052,723
</TABLE>
4. On June 1, 1998 the company reached agreement in principle to sell Preston
Trucking Company, Inc. (Preston Trucking) its Northeast regional LTL
segment to a management group of three senior officers of Preston Trucking.
Preston Trucking was a regional carrier serving the Northeast, Mid-Atlantic
and Central States. The sale resulted in a noncash charge of $63.6 million
net of anticipated tax benefits of approximately $28.0 million in 1998. The
results of Preston Trucking have been classified as discontinued operations
in the consolidated financial statements. No interest charges have been
allocated to discontinued operations and the company does not anticipate
any material change in the loss recorded on disposal of the discontinued
operations. In July 1999 Preston Trucking ceased operations and has
commenced a liquidation of its assets under federal bankruptcy regulations.
5. The difference between average common shares outstanding used in the
computation of basic earnings per share and fully diluted earnings per
share is attributable to outstanding common stock options.
6. The company's comprehensive income includes net income and foreign currency
translation adjustments. Comprehensive income (loss) for the second quarter
ended June 30, 1999 and 1998 was $12.7 million and ($50.3) million,
respectively. Comprehensive income (loss) for the six months ended June 30,
1999 and 1998 was $18.3 million and ($50.9) million, respectively.
7
<PAGE> 8
7. On July 8, 1999 the company successfully completed its cash tender offer to
purchase the outstanding shares of common stock of Jevic Transportation,
Inc. at a price of $14.00 per share. The aggregate purchase price of the
stock including vested stock options and transaction costs is approximately
$161 million net of approximately $4 million tax benefit. Including
assumption of debt, the total transaction is approximately $200 million.
The transaction is being accounted for under purchase accounting and the
excess of purchase price over fair value of assets acquired will be
allocated to goodwill and amortized over 40 years. Accordingly, the results
of Jevic's operations have not been included in the company's condensed
financial statements for the period ended June 30, 1999. The acquisition is
being financed under the Yellow Corporation's existing credit facilities.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations
- -------------
FINANCIAL CONDITION
June 30, 1999 Compared to December 31, 1998
-------------------------------------------
Working capital is reduced through Yellow Freight's asset backed securitization
agreement (ABS). Accounts receivable at June 30, 1999 and December 31, 1998 are
net of $61 million and $43 million of receivables sold, resulting in a $18
million reduction in working capital during the period. Excluding the effects of
the ABS transactions, working capital decreased slightly during the first six
months of 1999, resulting in a breakeven working capital position at June 30,
1999 compared to a $1.4 million working capital position at December 31, 1998.
The decrease in working capital was primarily the result of an increase in
accrued expenses and decrease in prepaid expenses, which were largely offset by
a $28.1 million increase in accounts receivable and decrease in accounts payable
and checks outstanding. The company can operate with a deficit working capital
position because of rapid turnover of accounts receivable, effective cash
management and ready access to funding.
Total debt during the first six months of 1999 decreased by approximately $6.6
million from December 31, 1998 due to early retirement of a portion of the
company's subordinated debentures. Net capital expenditures for the first six
months of 1999 were $69.1 million. Subject to ongoing review, total net capital
spending for 1999 is expected to total approximately $147 million, exclusive of
the Jevic transaction discussed below.
On July 8, 1999 the Company successfully completed a cash tender offer to
purchase the outstanding shares of common stock of Jevic Transportation, Inc. at
a price of $14 per share. All shares have been accepted for payment and as of
July 8, 1999, Yellow beneficially owned approximately 98.6 percent of the
outstanding shares of Jevic. Jevic became a wholly owned subsidiary of Yellow
Corporation. All remaining Jevic shareholders have the right to receive $14 per
share in cash, payable according to terms of the tender offer. The aggregate
purchase price of the stock, including transaction costs, is approximately $161
million. Including debt assumption, the total transaction is approximately $200
million. The acquisition is being financed under the company's existing $300
million credit facility. This credit facility and the company's ABS agreement
provide adequate capacity to fund working capital and capital expenditures
requirements.
During the quarter ended June 30, 1999 the company purchased 172,500 additional
treasury shares. The company has suspended its treasury repurchase program as a
result of the Jevic transaction and more attractive internal investment
opportunities.
9
<PAGE> 10
RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 1999 and 1998
-------------------------------------------------------
Continuing Operations:
Net income for the quarter ended June 30, 1999 was $13.0 million or $.52 per
share (diluted), a 16 percent improvement over earnings per share in the 1998
second quarter. Income from continuing operations for the quarter ended June 30,
1998 was $12.3 million or $.45 per share (diluted). Operating revenue for the
1999 second quarter was $756.1 million an increase of 4 percent over operating
revenue of $727.4 million for the 1998 second quarter.
Yellow Freight System, the company's national LTL segment had operating income
of $22.6 million for the second quarter of 1999 an increase of 15% over
operating income of $19.7 million in the second quarter of 1998. Yellow
Freight's second quarter 1999 operating revenue was $638.8 million, a 2.2
percent increase over operating revenue of $624.9 million in the second quarter
of 1998. Yellow Freight's operating ratio was 96.5 in the second quarter of 1999
versus 96.8 in the second quarter of 1998.
LTL tonnage declined (0.8) percent in the second quarter compared to the 1998
quarter, although the number of shipments was essentially even with the 1998
second quarter. A continued strong pricing environment produced an LTL revenue
per hundredweight increase of 3.6 percent over the 1998 second quarter. These
yield improvements more than offset the LTL volume decline and a decrease in
truckload tonnage and other revenue.
Saia Motor Freight, the company's southeast regional LTL segment had operating
income of $2.8 million in the second quarter of 1999 compared to operating
income of $7.0 million in the second quarter of 1998. Saia's operating revenue
for the quarter ended June 30, 1999 was $85.1 million, a 1.7 percent decline
from operating revenue of $86.6 million in the second quarter of 1998. Saia's
business weakness was mostly concentrated in Texas and other Gulf Coast states
with economies tied to the petroleum industry. Saia's operating ratio was 96.7
for the second quarter of 1999 versus 91.9 in the 1998 second quarter.
WestEx, the company's regional carrier serving California and the Southwest,
reported operating revenue of $17.5 million for the second quarter of 1999
compared to $15.9 million for the 1998 second quarter. Action Express, the
company's regional carrier serving the Pacific Northwest and Rocky Mountain
States had second quarter revenues of $9.4 million. Action Express was acquired
in December 1998. WestEx improved its operating ratio to 98.7 for the second
quarter of 1999 compared to an operating ratio of 101.7 for the second quarter
of 1998. Action Express reported an operating ratio of 98.5 for the second
quarter of 1999.
Corporate expenses for the second quarter of 1999 include $0.6 million charge
for a new technology business venture evaluation, which is still in process.
Interest expense for the quarter ended June 30,1999 declined slightly from the
1998 second quarter as a result of reduced debt levels. The effective tax rate
was 41.3 percent in the 1999 second quarter and 44.1 percent in the second
quarter of 1998.
10
<PAGE> 11
The 1999 second quarter earnings per share results also reflect the impact of
stock buyback programs which have reduced average shares outstanding by
approximately 9 percent compared to last year's second quarter. In addition to
continuing operations, the 1998 second quarter included a $62.3 million charge
for the divestment of Preston Trucking Company.
Comparison of Six Months Ended June 30, 1999 and 1998
-----------------------------------------------------
Continuing Operations:
Net income for the six months ended June 30, 1999 was $17.7 million or $.70 per
share (diluted). Income from continuing operations for the six months ended June
30, 1998 was $16.0 million or $.58 per share (diluted). Operating revenue for
the six months ended June 30, 1999 was $1,483.6 million an increase of 5 percent
over operating revenue of $1,419.9 million for the six months ended June 30,
1998.
Year to date income from continuing operations for 1999 improved $4.5 million
over the six months ended June 30, 1998 after excluding gains on the sale of
real estate assets recorded in 1999 and 1998.
Yellow Freight System had operating income of $31.5 million for the six months
ended June 30, 1999 an increase of 16% over operating income of $27.1 million in
the comparable 1998 period. Yellow Freight's 1999 year to date operating revenue
was $1,251.6 million, up 2.4 percent from operating revenue of $1,222.6 million
for the six months ended June 30, 1998. Yellow Freight's operating ratio was
97.5 for the first six months of 1999 versus 97.8 in the first six months of
1998.
Yellow Freight System is benefiting from a continued strong pricing environment
that has produced LTL yield improvements in excess of 3 percent for the first
six months of 1999 compared to 1998. Year to date LTL tonnage has remained flat
while year to date LTL shipments are up slightly compared to 1998. In addition,
the first six months of 1998 were adversely affected by the freight diversion
problem that resulted from customer concerns over labor contract negotiations
and a possible strike.
Saia Motor Freight had operating income of $7.8 million for the six months ended
June 30, 1999 compared to $11.3 million for the six months ended June 30, 1998.
Saia's 1999 year to date operating revenue was $171.3 million up 2.7 percent
from $166.9 million for the first six months of 1998. Saia's business weakness
was mostly concentrated in Texas and other Gulf Coast states with economies tied
to the petroleum industry. Saia's operating ratio was 95.4 for the six months
ended June 30, 1999 compared to 93.2 for the six months ended June 30, 1998.
Saia's 1999 plans include resuming its geographic growth by opening three
terminals in Virginia.
11
<PAGE> 12
WestEx reported operating revenue of $33.8 million for the first six months of
1999, up 11.1 percent from $30.4 million for the six months ended June 30, 1998.
Action Express had revenues of $17.7 million for the first six months of 1999.
Action Express was acquired in December 1998. WestEx reported a small operating
profit for the first six months of 1999 while Action Express reported a small
operating loss as both companies absorbed one-time expenses related to network
realignments. Saia has absorbed Action Express operations in Texas. Action has
taken over part of WestEx's operations in Colorado and Utah while WestEx has
absorbed part of Action's California operations.
During the first half of 1999, market fuel prices actually fell below the
company's fuel hedge contract prices, depriving the company of approximately
$.14 per share in fuel cost savings. As a result, of fuel price increases in the
second quarter of 1999, current market prices approximate the company's current
hedge contracts. The company remains substantially hedged for the balance of
1999 and a portion of 2000.
Interest expense declined slightly between years as a result of reduced debt
levels. The effective tax rate for the first six months of 1999 was 41.5 percent
compared to 41.8 percent for the same period in 1998.
Earnings per share results through June 30, 1999 also reflect the impact of
stock buyback programs, which have reduced average shares outstanding by 9
percent compared to the first six months of 1998.
Year 2000:
The company's Year 2000 project is intended to minimize the business impact of
potential Year 2000 failures. Work efforts both to remediate and replace
mainframe and client/server business applications have been completed on
schedule. The remainder of the year will be used to finalize business
contingency plans, complete the planned rollout of equipment, and continue to
retest systems for Year 2000 readiness.
The company's Year 2000 strategy includes mainframe, mid-range, and client
server applications, PCs, workstations, end-user computing, vendor software,
equipment, environmental operations in terminals and offices, suppliers and
customers. Inventory and assessment of all areas have been completed.
Non-compliant vendor software and equipment determined to be critical to the
business has been remediated. PC hardware is being replaced as needed through a
systematic schedule of upgrades.
The company's strategy also includes developing relationships with vendors who
are working toward compliance. The company has material vendor relationships
with financial institutions, utilities and telecommunication companies. These
vendors indicate that they expect to achieve compliance and do not anticipate
business interruptions as the century changes. The company is developing
contingency plans to address potential Year 2000 scenarios that may arise with
key vendors, customers and other external parties. However, these external risks
are beyond the company's total control, thus there can be no assurance that all
year 2000 risks can be contained by company contingency plans.
The company began its Year 2000 project in 1995 and has estimated total project
costs to be approximately $16 million. Through June 30, 1999 the
12
<PAGE> 13
company has incurred approximately $14.7 million which represents approximately
7% of its information technology budget over the project period. The company
expensed $0.4 million of modification costs in the second quarter of 1999 and
$1.1 million for the six months ended June 30, 1999 compared to $1.7 million in
the second quarter of 1998 and $3.5 million for the six months ended June 30,
1998.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------- -----------------------------------------------------------
The company is exposed to a variety of market risks, including the effects of
interest rates, fuel prices and foreign currency exchange rates. To ensure
adequate funding through seasonal business cycles and minimize overall borrowing
costs, the company utilizes a variety of both fixed rate and variable rate
financial instruments with varying maturities. The company's long-term financing
is generally at fixed rates.
The company uses swaps as hedges in order to manage a portion of its exposure to
variable diesel prices. These agreements provide protection from rising fuel
prices, but limit the ability to benefit from price decreases below the purchase
price of the agreement. The swap transactions are generally based on the price
of heating oil. Based on historical information, the company believes the
correlation between the market prices of diesel fuel and heating oil is highly
effective.
The company's revenues and operating expenses, assets and liabilities of its
Canadian and Mexican subsidiaries are denominated in foreign currencies, thereby
creating exposures to changes in exchange rates, however the risks related to
foreign currency exchange rates are not material to the company's consolidated
financial position or results of operations.
The table below provides information about the company's debt instruments
(including off balance sheet asset backed securitzation (ABS)) as of June 30,
1999. The table presents principal cash flows (in millions) and related weighted
average interest rates by contractual maturity dates.
<TABLE>
<CAPTION>
Expected Maturity Date
There- Fair
1999 2000 2001 2002 2003 after Total Value
---- ---- ---- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Debt $ - $ 28.8 $ 7.0 $ 22.0 19.3 57.9 $ 135.0 $136.1
Ave. Int. Rate - 6.75% 8.31% 7.35% 6.27% 6.78%
Var. Rate Debt $ - $ - $ - $ - 5.0 10.4 $ 15.4 $ 15.4
Ave. Int. Rate - - - - 4.23% 5.14%
Off Bal. Sheet -
ABS $ 61.0 $ 61.0 $ 61.0
Ave. Int. Rate 5.23%
</TABLE>
In connection with the previously discussed acquisition of Jevic Transportation,
Inc. on July 8, 1999, the company increased its outstanding debt under existing
credit facilities by approximately $200 million, which was principally variable
rate debt.
13
<PAGE> 14
The following table provides information about the company's diesel fuel hedging
instruments that are sensitive to changes in commodity prices. The table
presents notional amounts in gallons and the weighted average contract price by
contractual maturity date as of June 30, 1999. The company maintained fuel
inventories for use in normal operations at June 30, 1999, which were not
material to the company's financial position and represented no significant
market exposure.
<TABLE>
<CAPTION>
Expected Maturity Date
1999 2000 Total
---- ---- -----
<S> <C> <C> <C>
Heating Oil Swaps:
Gallons (in millions) 57.6 45.4 103.0
Weighted Average Price per Gallon $ .4491 $ .4586 $ .4533
Fair Value (in millions) $ 4.8
Diesel Fuel Fixed Purchased Contracts:
Gallons (in millions) 1.3 1.3
Weighted Average Price per Gallon $ .5170 $ .5170
Fair Value (in millions) $ -
</TABLE>
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.
14
<PAGE> 15
Yellow Freight System, Inc.
Financial Information
For the Quarter and Six Months Ended June 30
(Amounts in thousands)
<TABLE>
<CAPTION>
Second Quarter Six Months
------------------- ----------
1999 1998 % 1999 1998 %
-------- -------- --- -------- -------- ---
<S> <C> <C> <C> <C> <C> <C>
Operating revenue 638,817 624,897 2.2 1,251,603 1,222,615 2.4
Operating income 22,569 19,719 31,520 27,125
Operating ratio 96.5 96.8 97.5 97.8
Total assets at June 30 774,257 772,945
Second Quarter
Second Quarter Amount/Workday
------------------- -----------------------
1999 1998 % 1999 1998 %
-------- -------- --- -------- -------- ---
Workdays (64) (64)
Financial statement LTL 586,756 571,061 2.7 9,168.1 8,922.8 2.7
revenue TL 51,868 55,306 (6.2) 810.4 864.2 (6.2)
Other 193 (1,470) NM 3.0 (23.0) NM
Total 638,817 624,897 2.2 9,981.5 9,764.0 2.2
Revenue excluding LTL 586,756 571,061 2.7 9,168.1 8,922.8 2.7
revenue recognition TL 51,868 55,306 (6.2) 810.4 864.2 (6.2)
adjustment Other (5) (200) NM (0.1) (3.1) NM
Total 638,619 626,167 2.0 9,978.4 9,783.9 2.0
Tonnage LTL 1,713 1,727 (0.8) 26.76 26.98 (0.8)
TL 353 396 (10.9) 5.51 6.18 (10.9)
Total 2,066 2,123 (2.7) 32.27 33.16 (2.7)
Shipments LTL 3,502 3,507 (0.2) 54.71 54.80 (0.2)
TL 48 53 (10.2) .75 .83 (10.2)
Total 3,550 3,560 (0.3) 55.46 55.63 (0.3)
Revenue/cwt. LTL 17.13 16.54 3.6
TL 7.36 6.99 5.2
Total 15.46 14.76 4.8
Revenue/shipment LTL 167.57 162.84 2.9
TL 1,082.72 1,037.22 4.4
Total 179.92 175.93 2.3
</TABLE>
15
<PAGE> 16
Saia Motor Freight Line, Inc.
Financial Information
For the Quarter and Six Months Ended June 30
(Amounts in thousands)
<TABLE>
<CAPTION>
Second Quarter Six Months
------------------- -------------
1999 1998 % 1999 1998 %
-------- -------- --- -------- -------- ---
<S> <C> <C> <C> <C> <C> <C>
Operating revenue 85,096 86,579 (1.7) 171,349 166,850 2.7
Operating income 2,771 7,044 7,814 11,268
Operating ratio 96.7 91.9 95.4 93.2
Total assets at June 30 222,734 205,196
Second Quarter
Second Quarter Amount/Workday
------------------- --------------
1999 1998 % 1999 1998 %
-------- -------- --- -------- -------- ---
Workdays (64) (64)
Financial statement LTL 76,058 77,572 (2.0) 1,188.4 1,212.1 (2.0)
revenue TL 9,038 9,007 .3 141.2 140.7 .3
Total 85,096 86,579 (1.7) 1,329.6 1,352.8 (1.7)
Revenue excluding LTL 76,050 77,531 (1.9) 1,188.3 1,211.4 (1.9)
revenue recognition TL 9,037 9,002 .4 141.2 140.7 .4
adjustment Total 85,087 86,533 (1.7) 1,329.5 1,352.1 (1.7)
Tonnage LTL 421 439 (4.2) 6.58 6.86 (4.2)
TL 154 154 (.4) 2.40 2.41 (.4)
Total 575 593 (3.2) 8.98 9.27 (3.2)
Shipments LTL 775 830 (6.6) 12.11 12.97 (6.6)
TL 15 16 (3.1) .23 .24 (3.1)
Total 790 846 (6.5) 12.34 13.21 (6.5)
Revenue/cwt. LTL 9.03 8.82 2.4
TL 2.94 2.92 .8
Total 7.40 7.29 1.6
Revenue/shipment LTL 98.13 93.43 5.0
TL 601.10 579.99 3.6
Total 107.70 102.36 5.2
</TABLE>
16
<PAGE> 17
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
- -------
None
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
(27)- Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
- July 8, 1999 - Yellow Corporation completes previously announced cash
tender offer to acquire Jevic Transportation, Inc. at $14 per share.
- August 3, 1999 - Yellow Freight System, Inc. announces price increase
effective September 1, 1999.
17
<PAGE> 18
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
YELLOW CORPORATION
---------------------------------
Registrant
Date: August 12, 1999 /s/ A. Maurice Myers
-------------------------------- ---------------------------------
A. Maurice Myers
Chairman of the Board of
Directors, President & Chief
Executive Officer
Date: August 12, 1999 /s/ H. A. Trucksess, III
-------------------------------- ---------------------------------
H. A. Trucksess, III
Senior Vice President - Finance/
Chief Financial Officer &
Treasurer
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 25,144
<SECURITIES> 0
<RECEIVABLES> 281,536
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 339,501
<PP&E> 1,935,809
<DEPRECIATION> 1,214,935
<TOTAL-ASSETS> 1,089,275
<CURRENT-LIABILITIES> 400,543
<BONDS> 150,350
0
0
<COMMON> 29,375
<OTHER-SE> 345,665
<TOTAL-LIABILITY-AND-EQUITY> 1,089,275
<SALES> 0
<TOTAL-REVENUES> 1,483,554
<CGS> 0
<TOTAL-COSTS> 1,447,524
<OTHER-EXPENSES> (33)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,751
<INCOME-PRETAX> 30,312
<INCOME-TAX> 12,579
<INCOME-CONTINUING> 17,733
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,733
<EPS-BASIC> .71
<EPS-DILUTED> .70
</TABLE>
