Yellow Roadway Corporation Reports Strong Third Quarter 2004 Results
"All of our operating companies delivered another impressive quarter and we are well positioned to complete a very successful first year as Yellow Roadway," said Bill Zollars, Chairman, President and CEO of Yellow Roadway. "We are pleased with the progress of our synergy efforts and remain on track to achieve run-rate synergies of about $100 million as we exit 2004."
Yellow Roadway reported the following consolidated results for the third
quarter of 2004:
-- Operating revenue of $1.77 billion compared to third quarter 2003
operating revenue of $771 million.
-- Adjusted operating income of $119.7 million, more than three times
third quarter 2003 adjusted operating income of $39.1 million.
-- Adjustments of $0.9 million in the third quarter of 2004 related
entirely to property gains. Adjustments of $1.3 million in 2003
related to acquisition charges and losses on property disposals.
Reported operating income was $120.6 million compared to reported
operating income of $37.8 million in the third quarter of 2003.
For the nine months ended September 30, 2004, Yellow Roadway reported the
following consolidated results:
-- Adjusted EPS of $2.73, an increase of 75% from adjusted EPS of $1.56
for the same period last year. Reported EPS of $2.50, up 80% from
reported EPS of $1.39 for the same period in 2003.
-- Operating revenue of $4.99 billion compared to operating revenue of
$2.17 billion in the same period last year.
-- Adjusted operating income of $249.6 million, up from adjusted
operating income of $83.2 million for the same period in 2003.
Reported operating income of $250.2 million compared to reported
operating income of $81.9 million in the same period last year.
Results for the three and nine months ended September 30, 2003 provided above represent the former Yellow Corporation entities only. Roadway Express and New Penn Motor Express were not included in the results of Yellow Roadway until the acquisition date of December 11, 2003.
Selected Segment Highlights for Third Quarter 2004 Compared to Third Quarter 2003
"Our business units posted significant increases in both revenue and operating income in the third quarter," Zollars stated. "The ability to handle increased business volumes, effectively manage yield, grow premium services and capture additional synergies is a reflection of the collective commitment to delivering solid results."
-- Yellow Transportation
-- Record quarterly revenue and operating income for the second
consecutive quarter
-- Adjusted operating ratio of 92.5%, the best since 1988
-- LTL tonnage per workday up 4.8%
-- LTL revenue per hundred weight, excluding fuel surcharge, up 2.8%,
and with further adjustments for business mix, up 4.5%
-- Roadway Express
-- The best third quarter operating income ever
-- Adjusted operating ratio of 93.5%, the best since 1988
-- LTL tonnage per workday up 1.4%
-- LTL revenue per hundred weight, excluding fuel surcharge, up 1.9%,
and with further adjustments for business mix, up 4.4%
-- New Penn Motor Express
-- Revenue growth of 26%
-- Operating ratio of 85.4%
-- LTL tonnage per workday up 21.3%
-- Meridian IQ
-- Revenue increase of 70%, resulting from organic growth and
acquisitions
-- Adjusted operating income of $1.1 million, up 90%
For complete statistical information, refer to the company's website at http://www.yellowroadway.com under Investor Relations and then select Earnings Releases & Annual Reports. The preceding disclosures for Roadway Express and New Penn Motor Express are based on comparisons to 2003 'adjusted' revenue, operating income and operating ratios. Management has adjusted the prior year results for conforming accounting policies, acquisition charges and the conversion to a calendar quarter to more accurately compare operating results to the current period. For further detail of 2004 adjustments by segment, refer to the attached "Supplemental Financial Information."
Outlook
"Our full year 2004 EPS guidance is increasing to $3.90 to $3.95 per share, which means we expect to earn $1.17 - $1.22 in the fourth quarter," Zollars stated. "Our increased guidance is being driven by excellent execution, synergy efforts and favorable economic conditions." In addition, the company expects to pay down about $200 million of debt in 2004, an increase over its previous guidance of $150 million. The EPS guidance includes the expected legal and banking fees to complete exchange offers for the company's contingent convertibles. However, it does not include the potential dilution from conversion of the contingent convertibles. Please refer to the company's October 19 news release for further details.
Review of Financial Results
A teleconference review of Yellow Roadway Corporation (Nasdaq: YELL - News) third quarter 2004 financial results has been scheduled for October 22, 2004, beginning at 9:30 a.m. ET, 8:30 a.m. CT.
Hosting the teleconference will be: Bill Zollars-Chairman, President and CEO, Yellow Roadway Corporation; Don Barger-Sr. Vice President and CFO, Yellow Roadway Corporation; Jim Staley-President, Roadway Group; James Welch- President, Yellow Transportation; and Jim Ritchie-President, Meridian IQ.
To participate, please dial 1.888.609.3912. Callers should dial in 5 to 10 minutes prior to the start of the call.
The conference call will be webcast live via StreetEvents at http://www.streetevents.com and via the Yellow Roadway Corporation Internet site http://www.yellowroadway.com .
An audio playback will be available beginning two hours after the call ends until midnight on October 29, 2004 by calling 1.800.642.1687 and then entering the access code, 211186. An audio playback also will be available for 30 days after the call via the StreetEvents and Yellow Roadway 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), inclement weather, price and availability of fuel, competitor pricing activity, expense volatility, ability to capture cost synergies, a downturn in general or regional economic activity, effects of a terrorist attack, and labor relations, including (without limitation), the impact of work rules, any obligations to multi-employer health, welfare and pension plans, wage requirements and employee satisfaction.
Yellow Roadway Corporation is one of the largest transportation service providers in the world. Through its subsidiaries including Yellow Transportation, Roadway Express, New Penn Motor Express, Reimer Express, Meridian IQ and Yellow Roadway Technologies, Yellow Roadway provides a wide range of asset and non-asset-based transportation services integrated by technology. The portfolio of brands provided through Yellow Roadway Corporation subsidiaries represents a comprehensive array of services for the shipment of industrial, commercial and retail goods domestically and internationally. Headquartered in Overland Park, Kansas, Yellow Roadway Corporation employs over 50,000 people.
STATEMENTS OF CONSOLIDATED OPERATIONS Yellow Roadway Corporation and Subsidiaries For the Three Months and Nine Months Ended September 30 (Amounts in thousands except per share data) (Unaudited) Three Months Nine Months 2004 2003(a) 2004 2003(a) OPERATING REVENUE $1,767,082 $770,705 $4,993,348 $2,165,251 OPERATING EXPENSES: Salaries, wages and employees' benefits 1,083,027 489,277 3,107,697 1,386,061 Operating expenses and supplies 251,261 106,490 738,746 320,341 Operating taxes and licenses 41,683 20,251 125,435 59,510 Claims and insurance 32,150 16,518 98,445 39,972 Depreciation and amortization 43,158 21,120 126,746 62,206 Purchased transportation 196,070 77,992 546,718 213,971 (Gains) losses on property disposals, net (859) 381 (590) 422 Acquisition charges - 864 - 864 Total operating expenses 1,646,490 732,893 4,743,197 2,083,347 OPERATING INCOME 120,592 37,812 250,151 81,904 NONOPERATING EXPENSES: Interest expense 11,041 6,525 34,448 11,796 Write off debt issuance costs 18,279 - 18,279 - Other 364 2,414 706 1,978 Nonoperating expenses, net 29,684 8,939 53,433 13,774 INCOME BEFORE INCOME TAXES 90,908 28,873 196,718 68,130 INCOME TAX PROVISION 34,999 11,504 75,736 26,775 NET INCOME $55,909 $17,369 $120,982 $41,355 AVERAGE SHARES OUTSTANDING- BASIC 48,204 29,565 47,993 29,578 AVERAGE SHARES OUTSTANDING- DILUTED 48,778 29,843 48,492 29,832 BASIC EARNINGS PER SHARE $1.16 $0.59 $2.52 $1.40 DILUTED EARNINGS PER SHARE $1.15 $0.58 $2.50 $1.39 (a) Represents the reported results of the former Yellow Corporation entities only SUPPLEMENTAL FINANCIAL INFORMATION Yellow Roadway Corporation and Subsidiaries For the Three Months and Nine Months Ended September 30 (Amounts in thousands except per share data) (Unaudited) Three Months 2004 2003(a) % Operating revenue: Yellow Transportation $828,993 $738,311 12.3 Roadway Express 812,359 (b) New Penn 70,680 (b) Meridian IQ 57,028 33,476 70.4 Corporate (1,978) (1,082) (82.8) Consolidated 1,767,082 770,705 Reported operating income (loss): Yellow Transportation 63,678 42,835 48.7 Roadway Express 52,097 New Penn 10,284 Meridian IQ 1,092 156 n/m Corporate (6,559) (5,179) (26.6) Consolidated 120,592 37,812 Adjustments to operating income by segment(c): Yellow Transportation (1,236) 342 Roadway Express 340 New Penn 39 Meridian IQ (2) 419 Corporate - 484 Consolidated (859) 1,245 Adjusted operating income (loss): Yellow Transportation 62,442 43,177 44.6 Roadway Express 52,437 New Penn 10,323 Meridian IQ 1,090 575 89.6 Corporate (6,559) (4,695) 39.7 Consolidated $119,733 $39,057 Reported operating ratio: Yellow Transportation 92.3% 94.2% Roadway Express 93.6% New Penn 85.4% Consolidated 93.2% 95.1% Adjusted operating ratio: Yellow Transportation 92.5% 94.2% Roadway Express 93.5% New Penn 85.4% Consolidated 93.2% 94.9% Reconciliation of reported net income to adjusted net income: Reported net income $55,909 $17,369 (Gains) losses on property disposals (524) 240 Acquisition charges - operating - 554 Acquisition charges - nonoperating - 4,201 Write off debt issuance costs - nonoperating 11,662 - Adjusted net income 67,047 22,364 Reconciliation of reported diluted earnings per share (EPS) to adjusted diluted EPS: Reported diluted EPS 1.15 0.58 (Gains) losses on property disposals (0.01) 0.01 Acquisition charges - operating - 0.02 Acquisition charges - nonoperating - 0.14 Write off debt issuance costs - nonoperating 0.24 - Adjusted diluted EPS 1.38 0.75 Nine Months 2004 2003(a) % Operating revenue: Yellow Transportation $2,356,099 $2,089,885 12.7 Roadway Express 2,297,700 (b) New Penn 191,102 (b) Meridian IQ 153,338 78,744 94.7 Corporate (4,891) (3,378) 44.8 Consolidated 4,993,348 2,165,251 Reported operating income (loss): Yellow Transportation 135,818 98,696 37.6 Roadway Express 103,494 New Penn 25,229 Meridian IQ 2,254 (673) n/m Corporate (16,644) (16,119)(d) (3.3) Consolidated 250,151 81,904 Adjustments to operating income by segment(c): Yellow Transportation (784) 379 Roadway Express 202 New Penn (8) Meridian IQ - 425 Corporate - 482 Consolidated (590) 1,286 Adjusted operating income (loss): Yellow Transportation 135,034 99,075 36.3 Roadway Express 103,696 New Penn 25,221 Meridian IQ 2,254 (248) n/m Corporate (16,644) (15,637) 6.4 Consolidated $249,561 $83,190 Reported operating ratio: Yellow Transportation 94.2% 95.3% Roadway Express 95.5% New Penn 86.8% Consolidated 95.0% 96.2% Adjusted operating ratio: Yellow Transportation 94.3% 95.3% Roadway Express 95.5% New Penn 86.8% Consolidated 95.0% 96.2% Reconciliation of reported net income to adjusted net income: Reported net income $120,982 $41,355 (Gains) losses on property disposals (368) 265 Acquisition charges - operating - 554 Acquisition charges - nonoperating - 4,201 Write off debt issuance costs - nonoperating 11,662 - Adjusted net income 132,276 46,375 Reconciliation of reported diluted EPS to adjusted diluted EPS: Reported diluted EPS 2.50 1.39 (Gains) losses on property disposals (0.01) 0.01 Acquisition charges - operating - 0.02 Acquisition charges - nonoperating - 0.14 Write off debt issuance costs - nonoperating 0.24 - Adjusted diluted EPS 2.73 1.56 (a) Represents the reported results of the former Yellow Corporation entities only. (b) Prior to the date of the Roadway acquisition (December 11, 2003), Roadway Express and New Penn were not included in our reported results. (c) Management excludes these items when evaluating operating income and segment performance to more accurately compare the results of our core operations among periods. Adjustments presented in the periods herein consist of property gains and losses and acquisition charges. (d) Includes approximately $4 million for an industry conference that we host every other year. Selected Financial Data Yellow Roadway Corporation and Subsidiaries (Amounts in thousands unless otherwise noted) (Unaudited) Nine Months Ended September 30 2004 2003(a) Net cash from operating activities $274,663 $87,470 Net cash used in investing activities (152,761) (75,704) Net cash provided by (used in) financing activities (171,066) 186,034 Net capital expenditures (142,298) (75,704) Proceeds from exercise of stock options 9,321 1,768 Free cash flow(b) 141,686 13,534 September 30, December 31, 2004 2003 Cash and cash equivalents $26,002 $75,166 Accounts receivable, net 832,151 699,142 Net property and equipment 1,435,883 1,403,268 Total assets 3,586,641 3,463,229 Long-term debt, less current portion 659,151 836,082 Asset backed securitization borrowings 69,000 71,500 Total debt 728,151 909,339 Total shareholders' equity 1,145,692 1,002,085 Debt to capitalization(c) 38.9% 47.6% Debt to capitalization, less available cash 38.0% 45.4% (a) Represents the reported results of the former Yellow Corporation entities only. (b) Management uses free cash flow as an indication of the cash available to fund additional capital expenditures, to reduce outstanding debt (including current maturities), or to invest in our growth strategies. Free cash flow is calculated as net cash from operating activities plus stock option proceeds less net capital expenditures. This measurement is used for internal management purposes and should not be construed as a better measurement than net cash from operating activities as defined by generally accepted accounting principles. (c) We calculate debt to capitalization as total debt divided by total debt plus total shareholders' equity.