UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class |
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Outstanding at May 5, 2022 |
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Common Stock, $0.01 par value per share |
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IND EX
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Item |
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Page |
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1 |
3 |
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Consolidated Balance Sheets – March 31, 2022 and December 31, 2021 |
3 |
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Statements of Consolidated Comprehensive Income (Loss) – Three Months Ended March 31, 2022 and 2021 |
4 |
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Statements of Consolidated Cash Flows - Three Months Ended March 31, 2022 and 2021 |
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Statements of Consolidated Shareholders’ Deficit - Three Months Ended March 31, 2022 and 2021 |
6 |
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7 |
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2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 |
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3 |
19 |
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19 |
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1 |
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1A |
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2 |
Not Applicable |
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3 |
Not Applicable |
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4 |
Not Applicable |
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5 |
Not Applicable |
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6 |
20 |
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21 |
2
PART I—FINANCI AL INFORMATION
Item 1. Financi al Statements
CONSOLIDATED B ALANCE SHEETS
Yellow Corporation and Subsidiaries
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(Amounts in millions except share and per share data) |
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March 31, 2022 |
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December 31, 2021 |
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(Unaudited) |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted amounts held in escrow |
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Accounts receivable, net |
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Prepaid expenses and other |
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Total current assets |
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Property and Equipment: |
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Cost |
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Less – accumulated depreciation |
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(
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Net property and equipment |
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Deferred income taxes, net |
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Pension |
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Operating lease right-of-use assets |
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Other assets |
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Total Assets |
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$ |
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$ |
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Liabilities and Shareholders’ Deficit |
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Current Liabilities: |
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Accounts payable |
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$ |
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$ |
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Wages, vacations and employee benefits |
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Current operating lease liabilities |
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Claims and insurance accruals |
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Other accrued taxes |
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Other current and accrued liabilities |
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Current maturities of long-term debt |
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Total current liabilities |
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Other Liabilities: |
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Long-term debt, less current portion |
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Pension and postretirement |
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Operating lease liabilities |
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Claims and other liabilities |
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Shareholders’ Deficit: |
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Cumulative preferred stock, $
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Common stock, $
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Capital surplus |
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Accumulated deficit |
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(
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Accumulated other comprehensive loss |
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Treasury stock, at cost |
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(
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Total shareholders’ deficit |
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(
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(
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Total Liabilities and Shareholders’ Deficit |
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$ |
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$ |
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The accompanying notes are an integral part of these statements.
3
STATEMENTS OF CONSOLIDATED C OMPREHENSIVE INCOME (LOSS)
Yellow Corporation and Subsidiaries
For the Three Months Ended March 31
(Unaudited)
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(Amounts in millions except per share data; shares in thousands) |
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2022 |
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2021 |
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Operating Revenue |
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$ |
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$ |
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Operating Expenses: |
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Salaries, wages and employee benefits |
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Fuel, operating expenses and supplies |
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Purchased transportation |
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Depreciation and amortization |
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Other operating expenses |
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(Gains) losses on property disposals, net |
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(
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Total operating expenses |
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Operating Income (Loss) |
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(
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Nonoperating Expenses: |
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Interest expense |
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Non-union pension and postretirement benefits |
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(
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(
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Other, net |
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Nonoperating expenses, net |
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Loss before income taxes |
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(
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(
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Income tax expense (benefit) |
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(
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Net loss |
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(
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(
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Other comprehensive income, net of tax |
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Comprehensive Loss |
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$ |
(
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$ |
(
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Average Common Shares Outstanding - Basic |
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Average Common Shares Outstanding - Diluted |
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Loss Per Share - Basic |
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$ |
(
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$ |
(
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Loss Per Share - Diluted |
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$ |
(
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$ |
(
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The accompanying notes are an integral part of these statements.
4
STATEMENTS OF CONSO LIDATED CASH FLOWS
Yellow Corporation and Subsidiaries
For the Three Months Ended March 31
(Unaudited)
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(in millions) |
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2022 |
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2021 |
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Operating Activities: |
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Net loss |
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$ |
(
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$ |
(
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Adjustments to reconcile net loss to cash flows from operating activities: |
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Depreciation and amortization |
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Lease amortization and accretion expense |
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Lease payments |
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(
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(
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Paid-in-kind interest |
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Debt-related amortization |
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Equity-based compensation and employee benefits expense |
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(Gains) losses on property disposals, net |
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(
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Deferred income taxes, net |
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(
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Other non-cash items, net |
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Changes in assets and liabilities, net: |
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Accounts receivable |
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(
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(
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Accounts payable |
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Other operating assets |
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(
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Other operating liabilities |
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(
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Net cash provided by (used in) operating activities |
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(
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(
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Investing Activities: |
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Acquisition of property and equipment |
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(
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(
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Proceeds from disposal of property and equipment |
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Net cash provided by (used in) investing activities |
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(
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(
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Financing Activities: |
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Issuance of long-term debt, net |
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Repayment of long-term debt |
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(
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(
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Debt issuance costs |
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(
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Payments for tax withheld on equity-based compensation |
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(
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(
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Net cash provided by (used in) financing activities |
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(
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Net Increase (Decrease) In Cash and Cash Equivalents and Restricted Amounts Held in Escrow |
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(
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(
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Cash and Cash Equivalents and Restricted Amounts Held in Escrow, Beginning of Period |
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Cash and Cash Equivalents and Restricted Amounts Held in Escrow, End of Period |
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$ |
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$ |
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Supplemental Cash Flow Information: |
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Interest paid |
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$ |
(
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$ |
(
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The accompanying notes are an integral part of these statements.
5
Yellow Corporation and Subsidiaries
For the Three Months ended March 31
(Unaudited)
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(in millions) |
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Preferred Stock |
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Common Stock |
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Capital Surplus |
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Accumulated Deficit |
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Accumulated Other Comprehensive Loss |
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Treasury Stock, At Cost |
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Total Shareholders' Deficit |
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Balances at December 31, 2021 |
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$ |
— |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
(
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$ |
(
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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(
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— |
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— |
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(
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Pension, net of tax: |
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Amortization of prior net losses |
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— |
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— |
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— |
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— |
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— |
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Amortization of prior service credit |
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— |
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— |
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— |
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— |
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(
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— |
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(
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Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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Balances at March 31, 2022 |
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$ |
— |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
(
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$ |
(
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(in millions) |
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Preferred Stock |
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Common Stock |
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Capital Surplus |
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Accumulated Deficit |
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Accumulated Other Comprehensive Loss |
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Treasury Stock, At Cost |
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Total Shareholders' Deficit |
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Balances at December 31, 2020 |
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$ |
— |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
(
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$ |
(
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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(
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— |
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(
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Pension, net of tax: |
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Amortization of prior net losses |
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— |
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— |
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— |
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— |
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— |
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Amortization of prior service credit |
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— |
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— |
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— |
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— |
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(
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— |
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(
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Foreign currency translation |
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— |
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— |
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— |
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— |
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— |
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Balances at March 31, 2021 |
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$ |
— |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
(
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$ |
(
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) |
The accompanying notes are an integral part of these statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Yellow Corporation and Subsidiaries
(Unaudited)
1. Description of Business
Yellow Corporation (also referred to as “Yellow,” the “Company,” “we,” “us” or “our”) is a holding company that, through its operating subsidiaries, offers its customers a wide range of transportation services. We have one of the largest, most comprehensive less-than-truckload (“LTL”) networks in North America with local, regional, national and international capabilities. Through our team of experienced service professionals, we offer expertise in LTL shipments and flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence.
Yellow provides for the movement of industrial, commercial and retail goods through our LTL subsidiaries including USF Holland LLC (“Holland”), New Penn Motor Express LLC (“New Penn”), USF Reddaway Inc. (“Reddaway”), YRC Inc. and YRC Freight Canada Company (both doing business as, and herein referred to as, “YRC Freight”). Our LTL companies provide regional, national and international services through a consolidated network of facilities located primarily across the United States and Canada. We also offer services through Yellow Logistics, Inc. (“Yellow Logistics”), our customer-specific logistics solutions provider, specializing in truckload, residential, and warehouse solutions.
The Company's labor force is subject to collective bargaining agreements, which predominantly expire on March 31, 2024.
2. Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of Yellow and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We report on a calendar year basis.
All normal recurring adjustments necessary for a fair presentation of the consolidated financial statements for the interim periods included herein have been made. These unaudited interim consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information, the instructions to Quarterly Report on Form 10-Q and the applicable rules and regulations. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted from these statements. The accompanying consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (“the 2021 Form 10-K”). Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for the year ended December 31, 2022 or other reporting periods.
Use of Estimates
Management makes estimates and assumptions when preparing the financial statements in conformity with U.S. generally accepted accounting principles which affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Disaggregation of Revenue
The Company’s revenue is summarized below with LTL shipments defined as shipments less than 10,000 pounds that move in our network:
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(in millions) |
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Three Months Ended March 31, 2022 |
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Three Months Ended March 31, 2021 |
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LTL revenue |
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$ |
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$ |
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Other revenue (a) |
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Total revenue |
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$ |
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$ |
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(a)
Accounting Standards
While there are recently issued accounting standards that are applicable to the Company, none of these standards are expected to have a material impact on our consolidated financial statements and accompanying notes.
7
3. Debt and Financing
Our outstanding debt as of March 31, 2022, consisted of the following:
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(in millions) |
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Par Value |
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Discount |
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Commitment
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Debt
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Book Value |
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Effective
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|
UST Loan Tranche A (a) |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
|
|
(b) |
|
|
% |
|
UST Loan Tranche B |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
(b) |
|
|
% |
|
Term Loan (a) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
(c) |
|
|
% |
|
ABL Facility |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Second A&R CDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
Unsecured Second A&R CDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
Lease financing obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
(d) |
|
|
% |
|
Total debt |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
Current maturities of Second A&R CDA |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Current maturities of lease financing obligations |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Long-term debt |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
(a)
(b) Variable interest rate based on the Eurodollar rate, which is currently determined by the 1, 2, 3 or 6-month USD LIBOR, with a floor of
(c) Variable interest rate based on the Eurodollar rate, which is currently determined by the 1, 3 or 6-month USD LIBOR, with a floor of
(d) Interest rate for lease financing obligations is derived from the difference between total rent payment and calculated principal amortization over the life of lease agreements.
Maturities
The principal maturities over the next five years and thereafter of total debt as of March 31, 2022 are as follows:
|
(in millions) |
|
Principal Maturity Amount |
|
|
|
2022 - remaining portion |
|
$ |
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total |
|
$ |
|
|
Fair Value Measurement
The book value and estimated fair values of our long-term debt, including current maturities, are summarized as follows:
|
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
(in millions) |
|
Book Value |
|
|
Fair Value |
|
|
Book Value |
|
|
Fair Value |
|
||||
|
UST Loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second A&R CDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease financing obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The fair values of the Term Loan and Second A&R CDA are estimated based on observable prices (level two inputs for fair value measurements). The fair value of the UST Loans is estimated using certain inputs that are unobservable (level three input for fair value measurement), which are based on the discounted amount of future cash flows using our current estimated incremental rate of borrowing for similar liabilities or assets. The fair value of the lease financing obligations are estimated using a publicly traded secured loan with similar characteristics (level three input for fair value measurement).
8
4. Leases
|
Leases (in millions) |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
|
Assets |
|
|
|
|
|
|
||
|
Operating lease right-of-use assets |
|
$ |
|
|
|
$ |
|
|
|
Liabilities |
|
|
|
|
|
|
||
|
Current operating lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
Noncurrent operating lease liabilities |
|
|
|
|
|
|
|
|
|
Total lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
Lease Cost (in millions) |
|
Three Months Ended March 31, 2022 |
|
|
Three Months Ended March 31, 2021 |
|
||
|
Operating lease cost (a) |
|
$ |
|
|
|
$ |
|
|
|
Short-term cost (b) |
|
|
|
|
|
|
|
|
|
Variable lease cost (b) |
|
|
|
|
|
|
||
|
Total lease cost |
|
$ |
|
|
|
$ |
|
|
The maturities over the next five years and thereafter of lease liabilities as of March 31, 2022 are as follows:
|
Remaining Maturities of Lease Liabilities (in millions) |
|
|
Operating Leases |
|
||
|
2022 - remaining portion |
|
|
|
$ |
|
|
|
2023 |
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
2026 |
|
|
|
|
|
|
|
After 2026 |
|
|
|
|
|
|
|
Total lease payments |
|
|
|
$ |
|
|
|
Less: Imputed interest |
|
|
|
|
|
|
|
Present value of lease liabilities |
|
|
|
$ |
|
|
|
Lease Term and Discount Rate |
|
2022 |
|
|
2021 |
|
||
|
Weighted-average remaining lease term - operating leases (years) |
|
|
|
|
|
|
|
|
|
Weighted-average discount rate - operating leases |
|
|
|
% |
|
|
|
% |
|
|
|
Three Months |
|
|
||||
|
Other Information (in millions) |
|
2022 |
|
2021 |
|
|
||
|
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
||
|
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
|
|
|
Leased assets obtained in exchange for new operating lease liabilities |
|
|
|
|
|
|
|
|
5. Employee Benefits
Non-Union Pension Plans
The following table presents the primary components of net periodic pension expense (benefit) for our Company-sponsored pension plans:
|
(in millions) |
|
Three Months Ended March 31, 2022 |
|
|
Three Months Ended March 31, 2021 |
|
||
|
Interest cost |
|
$ |
|
|
|
$ |
|
|
|
Expected return on plan assets |
|
|
(
|
) |
|
|
(
|
) |
|
Amortization of prior net losses |
|
|
|
|
|
|
|
|
|
Amortization of prior net service credit |
|
|
(
|
) |
|
|
(
|
) |
|
Total net periodic pension expense (benefit) |
|
$ |
(
|
) |
|
$ |
(
|
) |
9
6. Loss Per Share
Given our net losses incurred during the three months ended March 31, 2022 and 2021
, we do
7. Commitments, Contingencies and Uncertainties
Department of Defense Complaints
In December 2018, the United States on behalf of the United States Department of Defense filed a complaint in Intervention against the Company (and two other defendants) in the U.S. District Court for the Western District of New York captioned United States ex rel. James Hannum v. YRC Freight, Inc.; Roadway Express, Inc.; and Yellow Transportation, Inc., Civil Action No. 08-0811(A). The complaint alleged that the Company violated the False Claims Act by overcharging the Department of Defense for freight carrier services by failing to comply with the contractual terms of freight contracts between the Department of Defense and the Company and related government procurement rules. The complaint also alleges claims for unjust enrichment and breach of contract. Under the False Claims Act, the complaint seeks treble damages, civil penalties, attorneys’ fees and costs of suit, all in unspecified amounts. The remaining common causes of action seek an undetermined amount for an alleged breach of contract or alternatively causes constituting unjust enrichment or a payment by mistake. The Company has moved to dismiss the case, and the court heard oral arguments on the motion on August 12, 2019. On July 17, 2020, the Magistrate Judge to whom the case had been referred issued a Report and Recommendation recommending that the District Judge grant the Company’s motion to dismiss in part with respect to one claim and deny it in all other respects. On May 10, 2021, the District Court entered a Decision and Order adopting Magistrate Judge’s Report and Recommendation and Decision and Order. On December 6, 2021, the District Court granted a
Shareholder Derivative Complaint
In February 2021, two putative shareholders filed an action derivatively and on behalf of the Company naming Douglas A. Carty, Raymond J. Bromark, William R. Davidson, Matthew A. Doheny, Robert L. Friedman, James E. Hoffman, Michael J. Kneeland, Patricia M. Nazemetz, James F. Winestock, Jamie G. Pierson, Darren D. Hawkins, James L. Welch and Stephanie D. Fisher individually as defendants and the Company as the nominal defendant. The case, captioned Bhandari, et al. v. Carty, et al., Case No. 2021-0090-SG, was filed in the Court of Chancery in the State of Delaware. The complaint alleged that the Company was exposed to harm by the individual defendants’ purported conduct concerning its freight-billing practices as alleged in the Department of Defense complaint and a settled class action securities complaint. The complaint asserts that the individual defendants breached their fiduciary duties and were unjustly enriched as a result of their purported conduct. Claims similar to those raised in Bhandari had been raised in two shareholder derivative cases that were previously disclosed by the Company and have been dismissed. The defendants moved to dismiss the action on April 19, 2021. On July 16, 2021, the putative shareholders moved for entry of an order dismissing the Bhandari action without prejudice. On July 19, 2021, the Court entered an order dismissing the action without prejudice.
Other Legal Matters
We are involved in litigation or proceedings that arise in ordinary business activities. When possible, we insure against these risks to the extent we deem prudent, but no assurance can be given that the nature or amount of such insurance will be sufficient to fully indemnify us against liabilities arising out of pending and future legal proceedings. Many of these insurance policies contain self-insured retentions in amounts we deem prudent. Based on our current assessment of information available as of the date of these consolidated financial statements, we believe that our consolidated financial statements include adequate provisions for estimated costs and losses that may be incurred within the litigation and proceedings to which we are a party.
10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements included elsewhere in this report. This report includes 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 (“Exchange Act”). Forward-looking statements include those preceded by, followed by or characterized by words such as “will,” “expect,” “intend,” “anticipate,” “believe,” “could,” “should,” “may,” “project,” “forecast,” “propose,” “plan,” “designed,” “estimate,” “enable” and similar expressions which speak only as of the date the statement was made. Forward-looking statements are inherently uncertain, are based upon current beliefs, assumptions and expectations of Company management and current market conditions, and are subject to significant business, economic, competitive, regulatory and other risks, uncertainties and contingencies, known and unknown, many of which are beyond our control. Readers are cautioned not to place undue reliance on any forward-looking statements. Our future financial condition and results could differ materially from those predicted in such forward-looking statements because of a number of business, financial and liquidity, and common stock related factors, including (without limitation):
11
Overview
MD&A includes the following sections:
Our Business: a brief description of our business and a discussion of how we assess our operating results.
Consolidated Results of Operations: an analysis of our consolidated results of operations for the three months ended March 31, 2022 and 2021.
Certain Non-GAAP Financial Measures: presentation and an analysis of selected non-GAAP financial measures for the three months ended March 31, 2022 and 2021 and trailing-twelve-months ended March 31, 2022 and 2021.
Financial Condition, Liquidity and Capital Resources: a discussion of our major sources and uses of cash and an analysis of our cash flows and, if applicable, material changes in our contractual obligations and commercial commitments.
The “first quarter" of the years discussed below refer to the three months ended March 31.
Our Business
Yellow Corporation is a holding company that, through its operating subsidiaries, offers our customers a wide range of transportation services. The Company has one of the largest, most comprehensive LTL networks in North America with local, regional, national and international capabilities. Through its team of experienced service professionals, the Company offers industry-leading expertise in LTL shipments and flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence.
We measure the performance of our business using several metrics, but rely primarily upon (without limitation) operating revenue, operating income (loss), and operating ratio. We also use certain non-GAAP financial measures as secondary measures to assess our operating performance.
12
We believe our presentation of EBITDA and Adjusted EBITDA is useful to investors and other users as these measures represent key supplemental information our management uses to compare and evaluate our core underlying business results, particularly in light of our leverage position and the capital-intensive nature of our business. Further, EBITDA is a measure that is commonly used by other companies in our industry and provides a comparison for investors to evaluate the performance of the companies in the industry. Additionally, Adjusted EBITDA helps investors to understand how the company is tracking against our financial covenant in our TL Agreements as this measure is calculated as defined in our TL Agreements and serves as a driving component of our key financial covenants.
Our non-GAAP financial measures have the following limitations:
Because of these limitations, our non-GAAP measures should not be considered a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and use our non-GAAP measures as secondary measures.
13
Consolidated Results of Operations
The table below provides summary consolidated financial information for the first quarter of 2022 and 2021:
|
|
First Quarter |
|
|
|
|
|||||||||||
|
|
2022 |
|
2021 |
|
|
Percentage Change 2022 vs 2021 |
|
|||||||||
|
(in millions) |
$ |
|
% |
|
$ |
|
% |
|
|
% |
|
|||||
|
Operating Revenue |
$ |
1,260.4 |
|
|
100.0 |
|
$ |
1,198.4 |
|
|
100.0 |
|
|
|
5.2 |
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Salaries, wages and employee benefits |
|
711.0 |
|
|
56.4 |
|
|
723.8 |
|
|
60.4 |
|
|
|
(1.8 |
) |
|
Fuel, operating expenses and supplies |
|
243.6 |
|
|
19.3 |
|
|
203.5 |
|
|
17.0 |
|
|
|
19.7 |
|
|
Purchased transportation |
|
185.4 |
|
|
14.7 |
|
|
200.0 |
|
|
16.7 |
|
|
|
(7.3 |
) |
|
Depreciation and amortization |
|
35.7 |
|
|
2.8 |
|
|
33.3 |
|
|
2.8 |
|
|
|
7.2 |
|
|
Other operating expenses |
|
81.0 |
|
|
6.4 |
|
|
64.4 |
|
|
5.4 |
|
|
|
25.8 |
|
|
(Gains) losses on property disposals, net |
|
(5.5 |
) |
|
(0.4 |
) |
|
1.0 |
|
|
0.1 |
|
|
NM* |
|
|
|
Total operating expenses |
|
1,251.2 |
|
|
99.3 |
|
|
1,226.0 |
|
|
102.3 |
|
|
|
2.1 |
|
|
Operating Income (Loss) |
|
9.2 |
|
|
0.7 |
|
|
(27.6 |
) |
|
(2.3 |
) |
|
NM* |
|
|
|
Nonoperating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Nonoperating expenses, net |
|
37.5 |
|
|
3.0 |
|
|
34.6 |
|
|
2.9 |
|
|
|
8.4 |
|
|
Loss before income taxes |
|
(28.3 |
) |
|
(2.2 |
) |
|
(62.2 |
) |
|
(5.2 |
) |
|
|
(54.5 |
) |
|
Income tax expense (benefit) |
|
(0.8 |
) |
|
(0.1 |
) |
|
1.1 |
|
|
0.1 |
|
|
NM* |
|
|
|
Net loss |
$ |
(27.5 |
) |
|
(2.2 |
) |
$ |
(63.3 |
) |
|
(5.3 |
) |
|
|
(56.6 |
) |
*Not meaningful
First Quarter of 2022 Compared to the First Quarter of 2021
During these reporting periods, the industry has been in a tight capacity environment with fewer drivers available to meet shipping demands, which has led to price increases charged to customers and an increase in the cost of purchased transportation. The Company’s results reflect a consolidated operating revenue including fuel surcharge increase of $62.0 million compared to the first quarter of 2021 on lower shipping volumes, which reflects both a short-term strategic decision to limit terminal operations in select markets and an internal focus of retaining the optimal freight mix relative to human capital availability throughout the first quarter of 2022. Fuel surcharge revenue grew significantly compared to the first quarter of 2021 primarily due to higher fuel prices, despite the shipping volume decreases. Excluding the fuel surcharge revenue, the consolidated operating revenue was relatively unchanged as the shipping volume decreases were largely offset by the yield increases charged to customers.
The Company’s results reflect the net revenue increase offset by increased fuel expense and certain variable operating expenses. Further material changes are provided below.
Salaries, wages and employee benefi ts. Salaries, wages and employee benefits decreased $12.8 million primarily due to shipping volume decreases partially offset by contractual wage and benefit increases. During the first quarter of 2021, severe winter weather impacted results, causing 215 of our terminals to have service outages. This increased the need for additional labor hours in the prior year to meet customer service expectations.
Fuel, operating expenses and supplies. Fuel, operating expenses and supplies increased $40.1 million primarily due to a $22.5 million increase in fuel expense, which was largely a result of higher fuel prices partially offset by fewer miles driven, a $10.7 million increase in uncollectible receivables and expected customer credit losses. Additional increases resulted from higher travel expenses, facility maintenance, and usage of professional services.
Purchased transportation. Purchased transportation decreased $14.6 million primarily due to targeted efforts by the Company to mitigate certain impacts from significant rate increases and other factors noted above. These decreases were noted in most of our modes of purchased transportation and include a $16.0 million decrease in over-the-road purchased transportation expense, a $13.4 million decrease in vehicle rentals and a $8.5 million decrease in local purchased transportation expense. These decreases were partially offset by an increase of $13.6 million in third-party costs due to the growth in customer-specific logistics solutions and an $8.3 million increase in rail purchased transportation expense.
Other operating expenses. Other operating expenses increased $16.6 million primarily due to a $9.6 million increase in third-party liability claims expense mostly due to unfavorable development of prior year claims and a $5.3 million settlement charge in association with the Department of Defense claim. Additionally, increases in cargo claims were partially offset by decreases in operating taxes.
Income tax. The Company’s tax provision or benefit for interim periods is computed using an estimate of the annual effective tax rate and adjusted for discrete items, if any, that occurred during the reporting periods presented. Our effective tax rate for the first quarter of 2022 and 2021 was 2.8% and (1.8%), respectively. The effective tax rate for the reporting periods presented
14
differed from the U.S. federal statutory rate primarily due to the valuation allowance on our domestic net deferred tax assets. The Company maintained a full valuation allowance on our domestic net deferred tax assets as of the reporting periods presented.
The table below summarizes the key revenue metrics for the first quarter of 2022 compared to the first quarter of 2021:
|
|
|
First Quarter |
|
|
|
|
||||||
|
|
|
2022 |
|
|
2021 |
|
|
Percent
|
|
|||
|
Workdays |
|
|
63.5 |
|
|
|
63.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Operating ratio |
|
|
99.3 |
% |
|
|
102.3 |
% |
|
3.0 pp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
LTL picked up revenue (in millions) |
|
$ |
1,137.2 |
|
|
$ |
1,090.6 |
|
|
|
4.3 |
% |
|
LTL tonnage (in thousands) |
|
|
1,980 |
|
|
|
2,478 |
|
|
|
(20.1 |
%) |
|
LTL tonnage per workday (in thousands) |
|
|
31.18 |
|
|
|
39.02 |
|
|
|
(20.1 |
%) |
|
LTL shipments (in thousands) |
|
|
3,561 |
|
|
|
4,263 |
|
|
|
(16.5 |
%) |
|
LTL shipments per workday (in thousands) |
|
|
56.08 |
|
|
|
67.13 |
|
|
|
(16.5 |
%) |
|
LTL picked up revenue per hundred weight |
|
$ |
28.72 |
|
|
$ |
22.00 |
|
|
|
30.5 |
% |
|
LTL picked up revenue per hundred weight (excluding fuel surcharge) |
|
$ |
23.83 |
|
|
$ |
19.53 |
|
|
|
22.0 |
% |
|
LTL picked up revenue per shipment |
|
$ |
319 |
|
|
$ |
256 |
|
|
|
24.8 |
% |
|
LTL picked up revenue per shipment (excluding fuel surcharge) |
|
$ |
265 |
|
|
$ |
227 |
|
|
|
16.7 |
% |
|
LTL weight per shipment (in pounds) |
|
|
1,112 |
|
|
|
1,163 |
|
|
|
(4.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Total picked up revenue (in millions) (b) |
|
$ |
1,252.4 |
|
|
$ |
1,196.3 |
|
|
|
4.7 |
% |
|
Total tonnage (in thousands) |
|
|
2,543 |
|
|
|
3,216 |
|
|
|
(20.9 |
%) |
|
Total tonnage per workday (in thousands) |
|
|
40.05 |
|
|
|
50.64 |
|
|
|
(20.9 |
%) |
|
Total shipments (in thousands) |
|
|
3,653 |
|
|
|
4,380 |
|
|
|
(16.6 |
%) |
|
Total shipments per workday (in thousands) |
|
|
57.53 |
|
|
|
68.98 |
|
|
|
(16.6 |
%) |
|
Total picked up revenue per hundred weight |
|
$ |
24.62 |
|
|
$ |
18.60 |
|
|
|
32.4 |
% |
|
Total picked up revenue per hundred weight (excluding fuel surcharge) |
|
$ |
20.59 |
|
|
$ |
16.56 |
|
|
|
24.3 |
% |
|
Total picked up revenue per shipment |
|
$ |
343 |
|
|
$ |
273 |
|
|
|
25.5 |
% |
|
Total picked up revenue per shipment (excluding fuel surcharge) |
|
$ |
287 |
|
|
$ |
243 |
|
|
|
17.9 |
% |
|
Total weight per shipment (in pounds) |
|
|
1,392 |
|
|
|
1,468 |
|
|
|
(5.2 |
%) |
|
(in millions) |
|
2022 |
|
|
2021 |
|
||
|
(b) Reconciliation of operating revenue to total picked up revenue: |
|
|
|
|
|
|
||
|
Operating revenue |
|
$ |
1,260.4 |
|
|
$ |
1,198.4 |
|
|
Change in revenue deferral and other |
|
|
(8.0 |
) |
|
|
(2.1 |
) |
|
Total picked up revenue |
|
$ |
1,252.4 |
|
|
$ |
1,196.3 |
|
15
Certain Non-GAAP Financial Measures
As previously discussed in the “Our Business” section, we use certain non-GAAP financial measures to assess performance including EBITDA and Adjusted EBITDA. We believe our presentation of EBITDA and Adjusted EBITDA is useful to investors and other users as these measures represent key supplemental information our management uses to compare and evaluate our core underlying business results, particularly in light of our leverage position and the capital-intensive nature of our business. These secondary measures should be considered in addition to the results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, our GAAP financial measures.
Adjusted EBITDA
The reconciliation of net loss to EBITDA and EBITDA to Adjusted EBITDA (defined in our TL Agreements as “Consolidated EBITDA”) for the first quarter of 2022 and 2021, and the trailing twelve months ended March 31, 2022 and 2021, is as follows:
|
|
|
First Quarter |
|
|
Trailing-Twelve-Months Ended |
|
||||||||||
|
(in millions) |
|
2022 |
|
|
2021 |
|
|
March 31, 2022 |
|
|
March 31, 2021 |
|
||||
|
Reconciliation of net loss to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net loss |
|
$ |
(27.5 |
) |
|
$ |
(63.3 |
) |
|
$ |
(73.3 |
) |
|
$ |
(121.1 |
) |
|
Interest expense, net |
|
|
37.7 |
|
|
|
35.8 |
|
|
|
152.3 |
|
|
|
143.2 |
|
|
Income tax expense (benefit) |
|
|
(0.8 |
) |
|
|
1.1 |
|
|
|
1.2 |
|
|
|
(18.1 |
) |
|
Depreciation and amortization |
|
|
35.7 |
|
|
|
33.3 |
|
|
|
146.0 |
|
|
|
132.5 |
|
|
EBITDA |
|
|
45.1 |
|
|
|
6.9 |
|
|
|
226.2 |
|
|
|
136.5 |
|
|
Adjustments for TL Agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
(Gains) losses on property disposals, net |
|
|
(5.5 |
) |
|
|
1.0 |
|
|
|
(5.8 |
) |
|
|
(5.0 |
) |
|
Non-cash reserve changes (a) |
|
|
(1.9 |
) |
|
|
(1.8 |
) |
|
|
11.5 |
|
|
|
0.8 |
|
|
Letter of credit expense |
|
|
2.1 |
|
|
|
2.1 |
|
|
|
8.5 |
|
|
|
7.8 |
|
|
Permitted dispositions and other |
|
|
0.3 |
|
|
|
0.7 |
|
|
|
0.4 |
|
|
|
0.8 |
|
|
Equity-based compensation expense |
|
|
2.3 |
|
|
|
2.1 |
|
|
|
4.6 |
|
|
|
4.8 |
|
|
Non-union pension settlement charge |
|
|
— |
|
|
|
— |
|
|
|
64.7 |
|
|
|
3.6 |
|
|
Other, net |
|
|
0.7 |
|
|
|
1.0 |
|
|
|
2.7 |
|
|
|
6.1 |
|
|
Expense amounts subject to 10% threshold (b) : |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Department of Defense settlement charge |
|
|
5.3 |
|
|
|
— |
|
|
|
5.3 |
|
|
|
— |
|
|
COVID-19 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.7 |
|
|
Other, net |
|
|
3.6 |
|
|
|
4.6 |
|
|
|
23.3 |
|
|
|
19.0 |
|
|
Adjusted EBITDA prior to 10% threshold |
|
|
52.0 |
|
|
|
16.6 |
|
|
|
341.4 |
|
|
|
178.1 |
|
|
Adjustments pursuant to TTM calculation (b) |
|
|
— |
|
|
|
(3.4 |
) |
|
|
— |
|
|
|
(7.1 |
) |
|
Adjusted EBITDA |
|
$ |
52.0 |
|
|
$ |
13.2 |
|
|
$ |
341.4 |
|
|
$ |
171.0 |
|
16
Financial Condition, Liquidity and Capital Resources
The following sections provide aggregated information regarding our financial condition, liquidity and capital resources. As of March 31, 2022 and December 31, 2021, our total debt was $1,552.8 million and $1,554.5 million, respectively.
Liquidity
Our principal sources of liquidity are cash and cash equivalents, any prospective net cash flow from operations and available borrowings under our ABL Facility. As of March 31, 2022, our cash and cash equivalents, exclusive of restricted amounts held in escrow, was $233.8 million.
As of March 31, 2022, our Availability under our ABL Facility was $88.1 million, and our Managed Accessibility (as defined below) was $43.1 million. Availability is derived by reducing the amount that may be advanced against eligible receivables plus eligible borrowing base cash by certain reserves imposed by the ABL Agent and our $361.9 million of outstanding letters of credit. Our Managed Accessibility represents the maximum amount we would access on the ABL Facility and is adjusted for eligible receivables plus eligible borrowing base cash measured as of March 31, 2022. If eligible receivables fall below the threshold management uses to measure availability, which is 10% of the borrowing line, the credit agreement governing the ABL Facility permits adjustments from eligible borrowing base cash to restricted cash prior to the compliance measurement date of April 15, 2022. Cash and cash equivalents and Managed Accessibility totaled $276.9 million at March 31, 2022.
As of December 31, 2021, our availability under our ABL Facility was $93.1 million. Of the $93.1 million in availability, Managed Accessibility was $48.1 million. Our cash and cash equivalents and Managed Accessibility was $358.8 million as of December 31, 2021.
Covenants
Under the UST Loans and Credit Agreement, beginning at December 31, 2021, the Company had a quarterly requirement to maintain a trailing-twelve-month ("TTM") Adjusted EBITDA of $100.0 million. This requirement increased beginning March 31, 2022 to a TTM Adjusted EBITDA of $150.0 million and increases at June 30, 2022, and thereafter through the maturity of these agreements, to a TTM Adjusted EBITDA of $200.0 million. Management expects, based on actual and forecasted operating results, the Company will meet this covenant requirement for the next twelve months.
Cash Flows
For the first quarter of 2022 and 2021:
|
|
|
First Quarter |
|
|||||
|
(in millions) |
|
2022 |
|
|
2021 |
|
||
|
Net cash provided by (used in) operating activities |
|
$ |
(33.5 |
) |
|
$ |
(38.8 |
) |
|
Net cash provided by (used in) investing activities |
|
|
(29.8 |
) |
|
|
(202.0 |
) |
|
Net cash provided by (used in) financing activities |
|
|
(9.4 |
) |
|
|
175.6 |
|
Operating Cash Flow
Cash used in operating activities was $33.5 million during the first quarter of 2022, compared to $38.8 million used during the first quarter of 2021. The decrease in cash used was primarily attributable to a $35.8 million decrease in net loss partially offset by changes in working capital, including a $36.4 million change in other operating liabilities.
Investing Cash Flow
Cash used in investing activities was $29.8 million during the first quarter of 2022 compared to $202.0 million of cash used during the first quarter of 2021. The d ecrease of $172.2 million in cash used was primarily driven by a decrease in cash outflows on revenue equipment acquisitions, including those primarily funded by our UST Credit Agreements, and partially offset by higher cash proceeds from the sales of real properties.
Financing Cash Flow
Cash used in financing activities for the first quarter of 2022 was $9.4 million compared to $175.6 million of cash provided during the first quarter of 2021. The decrease in cash is primarily related to amounts drawn during the first quarter of 2021 on our UST Credit Agreements.
17
Capital Expenditures
Our capital expenditures for the first quarter of 2022 and 2021 were $36.4 million and $202.4 million, respectively. These amounts were principally used to fund the purchase of new and used revenue equipment, to improve our technology infrastructure and to refurbish engines for our revenue equipment fleet.
Contractual Obligations and Other Commercial Commitments
The following sections summarize consolidated information regarding our contractual cash obligations and other commercial commitments for any updates for material changes during the reporting period ended March 31, 2022.
Contractual Cash Obligations
The Company has completed a review of our material cash requirements to analyze and disclose material changes, if any, in those requirements between those expected cash outflows as of December 31, 2021, as detailed in the Form 2021 10-K, and those as of March 31, 2022.
As of March 31, 2022 and December 31, 2021, we are contractually obligated to make other capital expenditures of approximately $62.8 million and $27.7 million, respectively, primarily for revenue equipment and information technology equipment obligations.
All other changes in our cash requirements, for cash outflows that we are contractually obligated to make were considered by the Company and determined to be reasonably expected based upon our prior financial statement disclosures or in the ordinary course of business.
Other Commercial Commitments
The Company has completed a review of our other commercial commitments in order to analyze and disclose material changes, if any, in those commitments between those as of December 31, 2021, as detailed in the 2021 Form 10-K, and those as of March 31, 2022. As a result, the Company determined that there were no material changes to disclose.
We have no off-balance sheet arrangements except for other contractual obligations for letters of credit and surety bonds and normal course service agreements and capital purchases, which were disclosed in the 2021 Form 10-K. Additionally, there have been no material changes to these arrangements subsequent to December 31, 2021.
18
Item 3. Quantitative and Qualitati ve Disclosures About Market Risk
We are primarily exposed to the market risk associated with unfavorable movements in interest rates, foreign currencies, and fuel price volatility. The risk inherent in our market risk-sensitive instruments and positions is the potential loss or increased expense arising from adverse changes in those factors. There have been no material changes to our market risk policies or our market risk-sensitive instruments and positions as described in the 2021 Form 10-K.
Item 4. Controls and Procedures
As required by the Exchange Act, we maintain disclosure controls and procedures designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive and financial officers, has evaluated our disclosure controls and procedures as of March 31, 2022 and has concluded that our disclosure controls and procedures were effective as of March 31, 2022.
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
19
PART II—OTH ER INFORMATION
Item 1. Legal Proceedings
We discuss legal proceedings in the “Commitments, Contingencies and Uncertainties” note to our consolidated financial statements included with this quarterly report on Form 10-Q, and that discussion is incorporated by reference herein.
Item 1A. Ri sk Factors
You should carefully consider the factors discussed in Part I, Item IA. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 which could materially affect our business, financial condition or future results. The risks in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may eventually prove to materially adversely affect our business, financial condition and/or operating results.
Item 6. Exh ibits
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
32.1* |
|
|
|
|
|
|
|
32.2* |
|
|
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Interline XBRL document. |
|
|
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
_ _________________________
* Indicates documents filed herewith.
20
SIGNAT URES
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 |
|
|
|
|
|
|
|
|
|
Date: May 10, 2022 |
|
/s/ Darren D. Hawkins |
|
|
|
Darren D. Hawkins |
|
|
|
Chief Executive Officer |
|
|
|
|
|
Date: May 10, 2022 |
|
/s/ Daniel L. Olivier |
|
|
|
Daniel L. Olivier |
|
|
|
Chief Financial Officer |
21