Yellow Corporation Reports Strong Second Quarter Results
- Yellow Transportation more than triples operating income over 2nd
quarter 2002
- Meridian IQ revenue growth of 22 percent over 2nd quarter 2002;
continues to expand customer base
- Exact Express, an expedited service, grows revenue by 54 percent over
2nd quarter 2002
- Announced acquisition of Roadway Corporation on July 8
OVERLAND PARK, Kan., July 17 /PRNewswire-FirstCall/ -- Yellow Corporation (Nasdaq: YELL) today reported second quarter 2003 income of $18.4 million, up substantially from $2.6 million in the second quarter of 2002. Second quarter 2003 results of $.62 per share included a pre-tax benefit of $3.7 million, or $.08 per share, from the completion of an insurance recovery that started in the first quarter of 2003. Excluding the insurance recovery, second quarter 2003 earnings per share was $.54, which is consistent with previously-issued guidance. In the second quarter of 2002, earnings per share from continuing operations was $.09.
Yellow Corporation reported the following consolidated results for the second quarter of 2003:
-- Operating revenue of $713 million, a 10.4% increase over $646 million
in second quarter 2002
-- Operating income of $32.3 million compared to $6.2 million in second
quarter 2002
"Yellow Transportation and Meridian IQ continue to perform very well," said Bill Zollars, Chairman, President and CEO of Yellow Corporation. "We were able to grow consolidated revenue by over ten percent through increased business volumes and effective yield management. More importantly, by continuing to leverage our cost structure, operating income for the quarter was more than five times the amount earned in the second quarter of 2002. In addition, over the last six to eight weeks, we have experienced volume increases that appear to be modestly above normal seasonality," Zollars stated.
"The growth in Exact Express, our expedited, time-definite service, highlights the effectiveness of our one-stop shopping strategy," Zollars continued. "When it comes to big shipments for business, our customers can rely on Yellow to manage their transportation needs whatever the mode, speed or destination."
For the six months ended June 30, 2003, Yellow Corporation reported the following consolidated results:
-- Diluted EPS from continuing operations of $.80 compared to $.09 in the
same period of 2002
-- Operating revenue of $1.4 billion, a 13.9% increase over $1.2 billion
in the same period of 2002
-- Operating income of $44.1 million, almost four times the $8.9 million
earned in the same period of 2002
Yellow Transportation
Yellow Transportation reported second quarter 2003 results, as follows:
-- Revenue of $691 million, up 10.1% from $628 million in second quarter
2002
-- Operating income of $36.4 million, up from $10.5 million in second
quarter 2002; excluding the insurance recovery, operating income was
$32.7 million
-- Operating ratio of 94.7% compared to 98.3% in second quarter 2002;
excluding the insurance recovery, the operating ratio was 95.3%
"Yellow Transportation continues to excel at yield management, cost management and service quality," said Zollars. "Maintaining the right balance between business volumes and yield resulted in significant profit improvement."
Less-than-truckload (LTL) revenue per day, for the second quarter of 2003, was up 10.2% over the second quarter of 2002, primarily reflecting a 5.0% increase in LTL tonnage per day and a 4.9% improvement in LTL revenue per hundred weight (3.5% excluding fuel surcharge). Second quarter 2003 business volumes benefited primarily from the September 2002 closure of a significant competitor and the continued growth of premium services such as Exact Express and Definite Delivery.
For the six months ended June 30, 2003, Yellow Transportation reported the following results:
-- Revenue of $1.35 billion, up 13.3% from $1.19 billion in the same
period of 2002
-- Operating income of $55.9 million, up from $17.2 million in the same
period of 2002
-- Operating ratio of 95.9% compared to 98.6% in the same period of 2002
"For the six months ended June 30, 2003, revenue was up $159 million and operating income was up $39 million, from the same period in 2002," Zollars stated. "The 24% incremental margin reflects outstanding cost management, operational excellence and the right balance of yield and volume."
Meridian IQ
Meridian IQ, entering its second year of operations, reported the following second quarter 2003 results:
-- Operating revenue of $23 million, up 22% over $19 million in second
quarter 2002
-- Operating income of $0.1 million compared to a $0.5 million loss in
second quarter 2002
"Meridian IQ continues to show significant progress. We expect continued revenue growth and improved profitability in the coming quarters," said Zollars.
For the six months ended June 30, 2003, Meridian IQ reported the following results:
-- Operating revenue of $45 million, up 32% over $34 million in the same
period of 2002
-- Operating loss of $0.8 million compared to a $2.0 million loss in the
same period of 2002
Outlook
"As a result of the strong performance at Yellow Transportation and Meridian IQ, we remain comfortable with our full year 2003 guidance of $2.25 to $2.35 per share, and expect the third quarter to be between $.70 and $.80 per share," Zollars stated. "We are assuming that current economic activity continues throughout 2003. However, due to our significant operating leverage, we are well positioned to take advantage of improved economic conditions when they occur."
Other Material Information
On July 8, 2003, Yellow Corporation and Roadway Corporation announced a definitive agreement under which Yellow Corporation will acquire Roadway Corporation for approximately $966 million, or $48 per share (based on a fixed exchange ratio and a 60-day average price per share of $24.95 for Yellow common stock in a half cash, half stock transaction). Yellow Corporation will also assume an expected $140 million in net Roadway indebtedness, bringing the enterprise value of the acquisition to approximately $1.1 billion.
The combined enterprise, which will be known as Yellow-Roadway Corporation, will be one of the largest transportation service providers in the world. Yellow-Roadway will be the largest U.S.-based transportation service provider with a focus on big shipments for business-to-business customers.
Bill Zollars, currently Chairman, President, and Chief Executive Officer of Yellow, will be Chairman, President, and Chief Executive Officer of the combined company. James D. Staley, currently President and Chief Executive Officer of Roadway, will continue to lead Roadway, which will be an operating entity under the Yellow-Roadway holding company. Three members of the Roadway Board of Directors will join the Board of Yellow-Roadway - Frank P. Doyle, John F. Fiedler, and Phillip J. Meek.
For more information concerning this transaction, please refer to the company's current report on Form 8-K filed with the Securities and Exchange Commission. A copy of the Form 8-K can be obtained from www.sec.gov as well as the Yellow Corporation Internet site www.yellowcorp.com or a special transaction website, www.yellowroadwayinformationcenter.com .
Review of Financial Results
A teleconference review of Yellow Corporation second quarter 2003 financial results has been scheduled for Friday, July 18, 2003, beginning at 9:30 a.m. Eastern, 8:30 a.m. Central. Hosting the conference call will be: Bill Zollars, Chairman, President and CEO of Yellow Corporation; Don Barger, CFO of Yellow Corporation; James Welch, President of Yellow Transportation; and Jim Ritchie, President of Meridian IQ.
To participate, please dial 1-888-609-3912 and allow five to ten minutes prior to the start of the call. The conference call will be webcast live via StreetEvents at www.streetevents.com and via the Yellow Corporation Internet site www.yellowcorp.com . An audio playback will be available until July 24, 2003 by calling 1-800-642-1687 then dialing the access code 1342595. In addition, an audio playback will be available for 30 days via the StreetEvents and Yellow Corporation web sites.
This news release (and oral statements made regarding the subjects of this release, including on the conference call announced herein) contain 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. The words "expect," "believe," "intend," and similar expressions are intended to identify forward-looking statements. 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 (without limitation), labor relations, inclement weather, price and availability of fuel, competitor pricing activity, expense volatility, changes in and customer acceptance of new technology and a downturn in general or regional economic activity.
Yellow Corporation, a Fortune 500 company, is a holding company that through wholly owned operating subsidiaries offers its customers a wide range of asset and non-asset based transportation services integrated by technology. Its largest subsidiary, Yellow Transportation, offers a full range of regional, national and international services for the movement of industrial, commercial and retail goods. Meridian IQ is a non-asset global transportation management company that plans and coordinates the movement of goods worldwide. Yellow Technologies provides innovative technology solutions and services exclusively for Yellow Corporation companies. Headquartered in Overland Park, Kansas, Yellow Corporation employs approximately 23,000 people.
CONSOLIDATED BALANCE SHEETS
Yellow Corporation and Subsidiaries
(Amounts in thousands except per share data)
(Unaudited)
June 30, December 31,
2003 2002
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $49,811 $28,714
Accounts receivable 334,360 327,913
Prepaid expenses and other 31,765 68,726
Total current assets 415,936 425,353
Property and equipment, net of
accumulated depreciation of $1,127,405
and $1,114,120 571,181 564,976
Goodwill and other assets 53,564 52,656
Total assets $1,040,681 $1,042,985
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $71,283 $114,989
Wages, vacations, and employees' benefits 166,369 159,998
Other current and accrued liabilities 113,572 101,111
ABS borrowings 50,000 50,000
Current maturities of long-term debt 40,259 24,261
Total current liabilities 441,483 450,359
OTHER LIABILITIES:
Long-term debt, less current portion 33,983 50,024
Claims and other liabilities 180,349 182,644
Total other liabilities 214,332 232,668
SHAREHOLDERS' EQUITY:
Common stock, $1 par value per share 31,910 31,825
Capital surplus 82,104 80,610
Retained earnings 349,460 325,474
Accumulated other comprehensive loss (33,575) (35,596)
Unamortized restricted stock awards (810) (1,053)
Treasury stock, at cost (2,359 and
2,244 shares) (44,223) (41,302)
Total shareholders' equity 384,866 359,958
Total liabilities and
shareholders' equity $1,040,681 $1,042,985
STATEMENTS OF CONSOLIDATED OPERATIONS
Yellow Corporation and Subsidiaries
For the Three Months and Six Months Ended June 30
(Amounts in thousands except per share data)
(Unaudited)
Three Months Six Months
2003 2002 2003 2002
OPERATING REVENUE $713,453 $646,061 $1,394,546 $1,224,863
OPERATING EXPENSES:
Salaries, wages
and benefits 458,036 429,782 896,784 820,021
Operating expenses and
supplies 103,908 92,753 213,851 173,821
Operating taxes and licenses 19,492 18,722 39,259 37,101
Claims and insurance 10,730 16,642 23,454 30,222
Depreciation and
amortization 20,818 19,482 41,086 38,411
Purchased transportation 68,106 61,471 135,979 114,717
Losses on property
disposals, net 30 438 41 906
Spin-off and reorganization
charges - 561 - 797
Total operating expenses 681,120 639,851 1,350,454 1,215,996
OPERATING INCOME 32,333 6,210 44,092 8,867
NONOPERATING (INCOME) EXPENSES:
Interest expense 2,625 1,437 5,271 3,747
ABS facility charges - 715 - 1,469
Other, net (343) (44) (436) (202)
Nonoperating expenses, net 2,282 2,108 4,835 5,014
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 30,051 4,102 39,257 3,853
INCOME TAX PROVISION 11,691 1,474 15,271 1,372
INCOME FROM CONTINUING
OPERATIONS 18,360 2,628 23,986 2,481
Income (loss) from
discontinued operations, net - 3,592 - (69,297)
NET INCOME (LOSS) $18,360 $6,220 $23,986 $(66,816)
AVERAGE SHARES OUTSTANDING-
BASIC 29,586 28,404 29,585 26,687
AVERAGE SHARES OUTSTANDING-
DILUTED 29,834 28,810 29,826 27,053
BASIC EARNINGS (LOSS) PER SHARE:
Income from continuing
operations $0.62 $0.09 $0.81 $0.09
Income (loss) from
discontinued operations - 0.13 - (2.59)
Net income (loss) $0.62 $0.22 $0.81 $(2.50)
DILUTED EARNINGS (LOSS) PER SHARE:
Income from continuing
operations $0.62 $0.09 $0.80 $0.09
Income (loss) from
discontinued operations - 0.13 - (2.56)
Net income (loss) $0.62 $0.22 $0.80 $(2.47)
STATEMENTS OF CONSOLIDATED CASH FLOWS
Yellow Corporation and Subsidiaries
For the Six Months Ended June 30
(Amounts in thousands)
(Unaudited)
2003 2002
OPERATING ACTIVITIES:
Net income (loss) $23,986 $(66,816)
Noncash items included in net
income (loss):
Depreciation and amortization 41,086 38,411
Loss from discontinued operations - 69,297
Losses on property disposals, net 41 906
Changes in assets and liabilities, net:
Accounts receivable (6,447) (49,858)
Accounts receivable securitizations - (22,000)
Accounts payable (43,706) (21,641)
Other working capital items 55,861 67,522
Claims and other (2,653) 20,056
Other 1,603 2,760
Net change in operating activities of
discontinued operations - 19,081
Net cash from operating activities 69,771 57,718
INVESTING ACTIVITIES:
Acquisition of property and equipment (48,038) (39,398)
Proceeds from disposal of property
and equipment 1,204 1,528
Net capital expenditures of
discontinued operations - (9,229)
Net cash used in investing activities (46,834) (47,099)
FINANCING ACTIVITIES:
Decrease in long-term debt (43) (113,011)
ABS borrowings, net - -
Proceeds from issuance of common stock - 93,792
Treasury stock purchases (2,921) -
Proceeds from exercise of stock options 1,124 6,189
Net cash used in financing activities (1,840) (13,030)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 21,097 (2,411)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 28,714 19,214
CASH AND CASH EQUIVALENTS, END OF PERIOD $49,811 $16,803
SUPPLEMENTAL FINANCIAL INFORMATION
Yellow Corporation and Subsidiaries
For the Three Months and Six Months Ended June 30
(Amounts in thousands except per share data)
(Unaudited)
Three Months Six Months
2003 2002 % 2003 2002 %
Operating revenue:
Yellow
Transportation $691,449 $628,215 10.1 $1,351,574 $1,192,858 13.3
Meridian IQ 23,185 18,942 22.4 45,268 34,344 31.8
Corporate/Other (1,181) (1,096) (7.8) (2,296) (2,339) 1.8
Consolidated 713,453 646,061 10.4 1,394,546 1,224,863 13.9
Operating income:
Yellow
Transportation 36,361 10,525 245.5 55,861 17,187 225.0
Meridian IQ 64 (454) 114.1 (829) (1,969) 57.9
Corporate/Other (4,092) (3,861) (6.0) (10,940)(a) (6,351)(72.3)
Consolidated 32,333 6,210 420.7 44,092 8,867 397.3
Losses on property
disposals and spin-
off and reorganization
charges:
Yellow Transportation 25 469 37 1,040
Meridian IQ 6 3 6 84
Corporate/Other (1) 527 (2) 579
Consolidated 30 999 41 1,703
Operating income
excluding property
disposals, spin-off
and reorganization
charges (b):
Yellow
Transportation 36,386 10,994 231.0 55,898 18,227 206.7
Meridian IQ 70 (451) 115.5 (823) (1,885) 56.3
Corporate/Other (4,093) (3,334) (22.8) (10,942) (5,772)(89.6)
Consolidated 32,363 7,209 348.9 44,133 10,570 317.5
Operating ratio:
Yellow
Transportation 94.7% 98.3% 95.9% 98.6%
Consolidated 95.5% 99.0% 96.8% 99.3%
Operating ratio
excluding property
disposals, spin-off
and reorganization
charges:
Yellow
Transportation 94.7% 98.2% 95.9% 98.5%
Consolidated 95.5% 98.9% 96.8% 99.1%
Diluted EPS from
continuing
operations $0.62 $0.09 $0.80 $0.09
Diluted EPS from
property disposals,
spin-off and
reorganization
charges - 0.02 - 0.04
Diluted EPS from
continuing operations
excluding property
disposals, spin-off
and reorganization
charges 0.62 0.11 0.80 0.13
Pro forma stock
option expense
(after tax) (c) 552 345 1,101 705
Pro forma stock
option impact on
diluted EPS from
continuing
operations 0.02 0.01 0.04 0.03
(a) Includes approximately $4 million for an industry conference that
Yellow Corporation hosts every other year.
(b) Management does not consider these items a component of recurring
operations and excludes them when evaluating operating income.
(c) The fair value in accordance with SFAS 123, Accounting for Stock-Based
Compensation, not reflected in income.
STATISTICAL INFORMATION
Yellow Transportation, Inc.
For the Three Months Ended June 30
(Amounts in thousands except per unit data)
Three Months Amount/Workday
2003 2002 % 2003 2002 %
Workdays 64 64
Revenue:
LTL 645,551 585,826 10.2 10,086.7 9,153.5 10.2
TL 47,067 44,255 6.4 735.4 691.5 6.4
Subtotal - pickup
basis 692,618 630,081 9.9 10,822.1 9,845.0 9.9
Revenue recognition
adjustment (1,169) (1,866) (37.4) (18.2) (29.1) (37.4)
Total - as reported 691,449 628,215 10.1 10,803.9 9,815.9 10.1
Tonnage - pickup basis:
LTL 1,613 1,536 5.0 25.20 23.99 5.0
TL 298 297 0.2 4.66 4.65 0.2
Total 1,911 1,833 4.2 29.86 28.64 4.2
Shipments - pickup basis:
LTL 3,298 3,084 6.9 51.54 48.20 6.9
TL 41 41 (0.2) 0.63 0.63 (0.2)
Total 3,339 3,125 6.8 52.17 48.83 6.8
Revenue/cwt. - pickup basis:
LTL 20.01 19.07 4.9
TL 7.90 7.44 6.2
Total 18.13 17.19 5.5
Revenue/cwt. - pickup basis:
(excluding fuel surcharge)
LTL 19.42 18.76 3.5
TL 7.69 7.35 4.6
Total 17.59 16.90 4.1
Revenue/shipment - pickup basis:
LTL 195.73 189.94 3.0
TL 1,162.96 1,091.07 6.6
Total 207.45 201.63 2.9
SOURCE Yellow Corporation
/CONTACT: Analyst, Stephen Bruffett of Yellow Corporation,
+1-913-696-6108, steve.bruffett@yellowcorp.com , or Media, Suzanne Dawson of
Linden Alschuler & Kaplan, +1-212-329-1420, sdawson@lakpr.com /
/Web site: http://www.yellowroadwayinformationcenter.com http://www.yellowcorp.com /
(YELL)