August 9, 2023

Defunct Yellow reports Q2 loss


Yellow Corp. reported Wednesday a net loss of $14.7 million for the second quarter, but that included $75.9 million in gains from the sale of properties. The update followed the company’s bankruptcy petition in a federal court on Sunday.

Revenue of $1.13 billion was 21% lower year over year (y/y). The decline was in line with an early-June update from the now-defunct less-than-truckload carrier, which implied y/y revenue declines of 18% in April and 20% in May. That report showed the carrier’s tonnage was down 16% y/y in the two-month period with yields down low-single digits.

No daily operating metrics were provided in the release.

Yellow (NASDAQ: YELL) recorded a 96.5% operating ratio, which was 350 basis points worse y/y. Absent gains on property disposals in both periods, its OR was 1,000 bps worse y/y at 103.3%.

The result was prior to the carnage that would ensue.

The fallout from Yellow’s inability to push through a change of operations with its union workforce — a change it asserted was vital to its survival — became apparent by the middle of July. In efforts to preserve liquidity, it informed Central States Funds it wouldn’t be making required benefits and pension contributions. That resulted in the Teamsters union issuing a strike notice and Yellow’s customers fleeing en masse.

Yellow ceased all operations on July 30.

Court filings showed the carrier had 40,000 shipments in its network the day the strike was announced. Shipments fell by 10,000 per day to “near zero” by the end of that week.

“Over the course of just four days, Yellow’s business had evaporated. Yellow’s most loyal customers, facing the uncertainty of the threatened strike, dropped Yellow as a carrier. Competitors absorbed Yellow’s shipments. Any realistic prospect of obtaining out-of-court financing dried up,” the filing read.

Publicly traded LTL carriers provided a July update on their second-quarter earnings calls, which concluded last week. Most carriers said shipments increased by mid-single-digit to low-double-digit percentages in recent weeks.

The most pronounced increases were seen at the two remaining union carriers. TForce Freight, a TFI International (NYSE: TFII) company, noted a 13% jump in volumes from the beginning to the end of the month. ABF Freight, an ArcBest (NASDAQ: ARCB) subsidiary, said shipments from core accounts had increased 10% in the week heading into its report.

Even ahead of the July meltdown, Yellow had been losing share as it advanced a network overhaul that was designed to consolidate terminals, redefine work rules and streamline its cost structure. At the same time, it was allowing less profitable and unprofitable freight to walk in efforts to raise yields and improve margins.

Most expense lines were up as a percentage of revenue during the second quarter. Salaries, wages and benefits was the biggest mover, 920 bps worse y/y.

Yellow reported a cash balance of $113 million. The company disclosed in a July 10 filing that it had in excess of $100 million in cash.

Property and equipment net of depreciation was listed at $1.14 billion. The bankruptcy filing estimated assets of $2.15 billion and liabilities of $2.59 billion.

The unwinding of the company and auction of its assets is expected to produce proceeds in excess of the amounts owed to secured lenders, including an additional $142.5 million in debtor-in-possession financing.

A separate filing Wednesday showed the company had been notified by Nasdaq that its stock will be delisted. Trading will be suspended on Aug. 16.

The Teamsters said Tuesday it would call on lawmakers to reform bankruptcy laws.

“The Teamsters are calling on Congress and the White House to pass and enact new legislation that prioritizes workers throughout the corporate bankruptcy process,” a statement read. “Legal safeguards must be established to protect earned pension credits and retirement benefits and ensure payment of severance money owed to workers.”

The union estimates it consented to $5.1 billion in wage cuts and benefits reductions since 2009 to keep Yellow afloat.

Yellow was the third-largest LTL carrier in the nation with roughly 30,000 employees, 22,000 of whom are Teamsters.

More FreightWaves articles by Todd Maiden


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