UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2007
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-12255
YRC Worldwide Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 48-0948788 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 10990 Roe Avenue, Overland Park, Kansas | 66211 | |
| (Address of principal executive offices) | (Zip Code) |
(913) 696-6100
(Registrant's telephone number, including area code)
No Changes
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
| Class |
Outstanding at July 31, 2007 | |
| Common Stock, $1 Par Value Per Share |
57,668,645 shares |
2
PART I – FINANCIAL INFORMATION
| Item 1. | Financial Statements |
CONSOLIDATED BALANCE SHEETS
YRC Worldwide Inc. and Subsidiaries
(Amounts in thousands except per share data)
| June 30, 2007 |
December 31, 2006 |
|||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 56,675 | $ | 76,391 | ||||
| Accounts receivable, net |
1,214,541 | 1,190,818 | ||||||
| Prepaid expenses and other |
294,129 | 323,882 | ||||||
| Total current assets |
1,565,345 | 1,591,091 | ||||||
| Property and Equipment: |
||||||||
| Cost |
3,988,391 | 3,841,657 | ||||||
| Less – accumulated depreciation |
1,614,005 | 1,571,811 | ||||||
| Net property and equipment |
2,374,386 | 2,269,846 | ||||||
| Goodwill |
1,325,318 | 1,326,583 | ||||||
| Intangibles, net |
684,172 | 691,417 | ||||||
| Other assets |
68,144 | 73,300 | ||||||
| Total assets |
$ | 6,017,365 | $ | 5,952,237 | ||||
| Liabilities and Shareholders’ Equity |
||||||||
| Current Liabilities: |
||||||||
| Accounts payable |
$ | 406,999 | $ | 397,586 | ||||
| Wages, vacations and employees’ benefits |
442,123 | 413,759 | ||||||
| Other current and accrued liabilities |
386,019 | 324,124 | ||||||
| Asset backed securitization borrowings |
250,000 | 225,000 | ||||||
| Current maturities of long-term debt |
150,000 | — | ||||||
| Total current liabilities |
1,635,141 | 1, 360,469 | ||||||
| Other Liabilities: |
||||||||
| Long-term debt, less current portion |
903,702 | 1,058,496 | ||||||
| Deferred income taxes, net |
611,882 | 609,193 | ||||||
| Pension and postretirement |
238,107 | 349,723 | ||||||
| Claims and other liabilities |
351,655 | 381,807 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ Equity: |
||||||||
| Common stock, $1 par value per share |
61,231 | 60,876 | ||||||
| Preferred stock, $1 par value per share |
— | — | ||||||
| Capital surplus |
1,201,723 | 1,180,578 | ||||||
| Retained earnings |
1,166,146 | 1,115,246 | ||||||
| Accumulated other comprehensive loss |
(42,605 | ) | (54,534 | ) | ||||
| Treasury stock, at cost (3,679 shares) |
(109,617 | ) | (109,617 | ) | ||||
| Total shareholders’ equity |
2,276,878 | 2,192,549 | ||||||
| Total liabilities and shareholders’ equity |
$ | 6,017,365 | $ | 5,952,237 | ||||
The accompanying notes are an integral part of these statements.
3
STATEMENTS OF CONSOLIDATED OPERATIONS
YRC Worldwide Inc. and Subsidiaries
For the Three and Six Months Ended June 30
(Amounts in thousands except per share data)
(Unaudited)
| Three Months | Six Months | ||||||||||||||
| 2007 | 2006 | 2007 | 2006 | ||||||||||||
| Operating Revenue |
$ | 2,486,505 | $ | 2,565,779 | $ | 4,814,847 | $ | 4,939,940 | |||||||
| Operating Expenses: |
|||||||||||||||
| Salaries, wages and employees’ benefits |
1,464,840 | 1,459,881 | 2,886,365 | 2,861,813 | |||||||||||
| Operating expenses and supplies |
469,644 | 468,422 | 911,572 | 918,349 | |||||||||||
| Purchased transportation |
273,184 | 280,618 | 524,952 | 533,904 | |||||||||||
| Depreciation and amortization |
60,345 | 74,722 | 119,336 | 148,162 | |||||||||||
| Other operating expenses |
113,464 | 105,600 | 229,788 | 212,466 | |||||||||||
| (Gains) losses on property disposals, net |
(2,788 | ) | (3,226 | ) | 161 | (2,344 | ) | ||||||||
| Reorganization and settlements |
(606 | ) | 7,481 | 13,851 | 7,481 | ||||||||||
| Total operating expenses |
2,378,083 | 2,393,498 | 4,686,025 | 4,679,831 | |||||||||||
| Operating Income |
108,422 | 172,281 | 128,822 | 260,109 | |||||||||||
| Nonoperating (Income) Expenses: |
|||||||||||||||
| Interest expense |
21,766 | 23,111 | 41,804 | 43,659 | |||||||||||
| Other |
2,012 | (563 | ) | 278 | (1,359 | ) | |||||||||
| Nonoperating expenses, net |
23,778 | 22,548 | 42,082 | 42,300 | |||||||||||
| Income Before Income Taxes |
84,644 | 149,733 | 86,740 | 217,809 | |||||||||||
| Income tax provision |
29,277 | 57,481 | 30,094 | 83,421 | |||||||||||
| Net Income |
$ | 55,367 | $ | 92,252 | $ | 56,646 | $ | 134,388 | |||||||
| Average Common Shares Outstanding – Basic |
57,514 | 57,464 | 57,426 | 57,419 | |||||||||||
| Average Common Shares Outstanding – Diluted |
58,511 | 58,422 | 58,546 | 58,801 | |||||||||||
| Basic Earnings Per Share |
$ | 0.96 | $ | 1.61 | $ | 0.99 | $ | 2.34 | |||||||
| Diluted Earnings Per Share |
$ | 0.95 | $ | 1.58 | $ | 0.97 | $ | 2.29 | |||||||
The accompanying notes are an integral part of these statements.
4
STATEMENTS OF CONSOLIDATED CASH FLOWS
YRC Worldwide Inc. and Subsidiaries
For the Six Months Ended June 30
(Amounts in thousands)
(Unaudited)
| 2007 | 2006 | |||||||
| Operating Activities: |
||||||||
| Net income |
$ | 56,646 | $ | 134,388 | ||||
| Noncash items included in net income: |
||||||||
| Depreciation and amortization |
119,336 | 148,162 | ||||||
| (Gains) losses on property disposals, net |
161 | (2,344 | ) | |||||
| Deferred income tax benefit |
(842 | ) | (228 | ) | ||||
| Other noncash items |
4,725 | 2,915 | ||||||
| Changes in assets and liabilities, net: |
||||||||
| Accounts receivable |
(32,794 | ) | (89,195 | ) | ||||
| Accounts payable |
8,418 | (38,879 | ) | |||||
| Other operating assets |
19,774 | 27,479 | ||||||
| Other operating liabilities |
(12,521 | ) | (24,375 | ) | ||||
| Net cash provided by operating activities |
162,903 | 157,923 | ||||||
| Investing Activities: |
||||||||
| Acquisition of property and equipment |
(241,860 | ) | (250,162 | ) | ||||
| Proceeds from disposal of property and equipment |
27,939 | 24,045 | ||||||
| Acquisition of companies |
— | (14,842 | ) | |||||
| Other |
(103 | ) | (2,548 | ) | ||||
| Net cash used in investing activities |
(214,024 | ) | (243,507 | ) | ||||
| Financing Activities: |
||||||||
| Asset backed securitization borrowings, net |
25,000 | 74,530 | ||||||
| Borrowing of long-term debt, net |
— | 10,000 | ||||||
| Proceeds from exercise of stock options |
6,405 | 2,296 | ||||||
| Net cash provided by financing activities |
31,405 | 86,826 | ||||||
| Net Increase (Decrease) In Cash and Cash Equivalents |
(19,716 | ) | 1,242 | |||||
| Cash and Cash Equivalents, Beginning of Period |
76,391 | 82,361 | ||||||
| Cash and Cash Equivalents, End of Period |
$ | 56,675 | $ | 83,603 | ||||
The accompanying notes are an integral part of these statements.
5
STATEMENT OF CONSOLIDATED SHAREHOLDERS’ EQUITY
YRC Worldwide Inc. and Subsidiaries
For the Six Months Ended June 30
(Amounts in thousands)
(Unaudited)
| 2007 | ||||
| Common Stock |
||||
| Beginning balance |
$ | 60,876 | ||
| Exercise of stock options |
216 | |||
| Employer contribution to 401(k) plan |
121 | |||
| Issuance of equity awards, net |
18 | |||
| Ending balance |
$ | 61,231 | ||
| Capital Surplus |
||||
| Beginning balance |
$ | 1,180,578 | ||
| Exercise of stock options, including tax benefits |
6,189 | |||
| Employer contribution to 401(k) plan |
5,140 | |||
| Share-based compensation |
7,203 | |||
| Other, net |
2,613 | |||
| Ending balance |
$ | 1,201,723 | ||
| Retained Earnings |
||||
| Beginning balance |
$ | 1,115,246 | ||
| Cumulative effect—adoption of FIN 48, “Accounting for Uncertainty in Income Taxes” |
(5,746 | ) | ||
| Net income |
56,646 | |||
| Ending balance |
$ | 1,166,146 | ||
| Accumulated Other Comprehensive Loss |
||||
| Beginning balance |
$ | (54,534 | ) | |
| Amortization of pension costs |
2,814 | |||
| Foreign currency translation adjustment |
9,115 | |||
| Ending balance |
$ | (42,605 | ) | |
| Treasury Stock, At Cost |
||||
| Beginning and ending balance |
$ | (109,617 | ) | |
| Total Shareholders’ Equity |
$ | 2,276,878 | ||
The accompanying notes are an integral part of these statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YRC Worldwide Inc. and Subsidiaries
(Unaudited)
| 1. | Description of Business |
YRC Worldwide Inc. (also referred to as “YRC Worldwide”, “the Company”, “we” or “our”), one of the largest transportation service providers in the world, is a holding company that through wholly owned operating subsidiaries offers its customers a wide range of transportation services. These services include global, national and regional transportation as well as logistics. The YRC Worldwide portfolio of brands provides a comprehensive suite of services for the shipment of industrial, commercial and retail goods domestically and internationally. Our reportable segments, which are comprised of our various operating subsidiaries, include the following:
| • | YRC National Transportation (“National Transportation”) is a holding company for our transportation service providers focused on business opportunities in regional, national and international services. National Transportation is comprised of Yellow Transportation and Roadway. These companies each provide for the movement of industrial, commercial and retail goods, primarily through regionalized and centralized management and customer facing organizations. National Transportation also includes Reimer Express Lines, located in Canada, that specializes in shipments into, across and out of Canada. Approximately 38% of National Transportation shipments are completed in two days or less. In addition to the United States and Canada, National Transportation also serves parts of Mexico and Puerto Rico. |
| • | YRC Regional Transportation (“Regional Transportation”) is a holding company for our transportation service providers focused on business opportunities in the regional and next-day delivery markets. Regional Transportation is comprised of New Penn Motor Express, USF Holland and USF Reddaway. These companies each provide regional, next-day ground services in their respective regions through a network of facilities located across the United States; Quebec, Canada; Mexico and Puerto Rico. USF Glen Moore, a provider of truckload services throughout the United States, is also a subsidiary of Regional Transportation. Approximately 90% of Regional Transportation less-than-truckload (“LTL”) shipments are completed in two days or less. In 2006, Regional Transportation also included USF Bestway. In February 2007, the majority of USF Bestway’s operations were consolidated into USF Reddaway. |
| • | YRC Logistics (“Logistics”, formerly Meridian IQ) includes the family of companies that plan and coordinate the movement of goods worldwide to provide customers a single source for logistics management solutions. Logistics delivers a wide range of global logistics management services, with the ability to provide customers improved return-on-investment results through flexible, fast and easy-to-implement logistics services and technology management solutions. |
At June 30, 2007, approximately 70% of our labor force is subject to various collective bargaining agreements, which predominantly expire in 2008.
| 2. | Principles of Consolidation |
The accompanying consolidated financial statements include the accounts of YRC Worldwide and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Investments in non-majority owned affiliates where the entity is either not a variable interest entity or YRC Worldwide is not the primary beneficiary are accounted for on the equity method. Management makes estimates and assumptions that affect the amounts reported in the consolidated financial statements and notes. Actual results could differ from those estimates. We have prepared the consolidated financial statements, without audit by an independent registered public accounting firm, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In management’s opinion, all normal recurring adjustments except as otherwise noted, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods included in these financial statements herein have been made. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these statements pursuant to SEC rules and regulations. Accordingly, the accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006.
7
Property and Equipment
Property and equipment are recorded at cost. In the third quarter of 2006, the Company revised the estimated useful lives and salvage values of certain classes of property and equipment to more appropriately reflect how the Company expects to use the assets over time. Effective July 1, 2006, the Company increased revenue equipment lives to ten to twenty years from three to fourteen years and modified certain salvage values. If the Company had not changed the estimated useful lives and salvage values of this property and equipment, additional depreciation expense of approximately $13.6 million and $27.1 million would have been recorded during the three and six months ended June 30, 2007, respectively. Accordingly, the changes in estimates resulted in an increase in income from continuing operations of approximately $13.6 million and $27.1 million (an $8.9 million and $17.7 million increase in net income) for the three and six months ended June 30, 2007, respectively. The change in estimate also increased diluted earnings per share by $0.15 and $0.30 for the three and six months ended June 30, 2007, respectively.
| 3. | Restructuring and Reorganization |
In June 2007, Logistics announced the closure of its Montgomery, Alabama flow-through and warehousing facility. Related to this action, we incurred certain restructuring charges of $0.4 million.
In January 2007, we announced the consolidation of USF Reddaway and USF Bestway, two subsidiaries within our Regional Transportation segment. As part of the consolidation, effective February 12, 2007, we no longer market the USF Bestway brand. We incurred certain restructuring and other closure related charges in conjunction with this organizational change consisting primarily of employee separation and contract termination costs.
In addition, in January 2007 we announced further organizational changes that brought the management of Yellow Transportation and Roadway under one organization established as YRC National Transportation. We incurred employee separation charges in the first quarter of 2007 related to these changes.
As a part of our 2005 acquisition of USF Corporation, we closed an operating subsidiary (USF Dugan) and consolidated certain administrative functions and locations. We incurred restructuring and other closure related charges related to these actions. During 2007, we have continued to make payments under these obligations.
We reassess the reserve requirements under the above restructuring efforts at the end of each reporting period. A rollforward of the restructuring accrual is set forth below:
| (in millions) |
Employee Separation |
Contract Termination and Other Costs |
Total | |||||||||
| Balance at December 31, 2006 |
$ | 1.0 | $ | 6.5 | $ | 7.5 | ||||||
| Restructuring charges |
8.4 | 1.1 | 9.5 | |||||||||
| Adjustments (a) |
(0.5 | ) | (3.2 | ) | (3.7 | ) | ||||||
| Payments |
(2.5 | ) | (1.6 | ) | (4.1 | ) | ||||||
| Balance at June 30, 2007 |
$ | 6.4 | $ | 2.8 | $ | 9.2 | ||||||
| (a) | Amounts credited to goodwill in accordance with purchase accounting requirements. |
In addition to the above restructuring charges of $9.5 million, we incurred reorganization and other closure related charges of $1.4 million and $7.8 million during the three and six months ended June 30, 2007, respectively. These charges are included in the “Reorganization and settlements” caption in the consolidated statements of operations and consist primarily of the following through June 30, 2007:
| (in millions) |
Three Months |
Six Months | ||||
| Acceleration of stock-based compensation related to certain terminated executives |
$ | — | $ | 2.3 | ||
| Write off of signage and other assets resulting from the YRC Logistics name change |
1.4 | 1.4 | ||||
| Other USF Bestway closure related charges |
— | 4.1 | ||||
| Total |
$ | 1.4 | $ | 7.8 | ||
8
| 4. | Debt and Financing |
Total debt consisted of the following:
| (in millions) |
June 30, 2007 | December 31, 2006 | ||||||
| ABS borrowings, secured by accounts receivable |
$ | 250.0 | $ | 225.0 | ||||
| Floating rate notes |
150.0 | 150.0 | ||||||
| USF senior notes |
262.3 | 264.7 | ||||||
| Roadway senior notes |
231.9 | 234.3 | ||||||
| Contingent convertible senior notes |
400.0 | 400.0 | ||||||
| Other |
9.5 | 9.5 | ||||||
| Total debt |
$ | 1,303.7 | $ | 1,283.5 | ||||
| ABS borrowings |
(250.0 | ) | (225.0 | ) | ||||
| Current maturities |
(150.0 | ) | — | |||||
| Long-term debt |
$ | 903.7 | $ | 1,058.5 | ||||
| 5. | Employee Benefits |
Components of Net Periodic Pension and Other Postretirement Cost
The following table sets forth the components of our company-sponsored pension and other postretirement costs for the three and six months ended June 30:
| Three Months | Six Months | |||||||||||||||
| (in millions) |
2007 | 2006 | 2007 | 2006 | ||||||||||||
| Service cost |
$ | 9.8 | $ | 11.1 | $ | 19.6 | $ | 22.0 | ||||||||
| Interest cost |
16.3 | 15.9 | 32.7 | 31.6 | ||||||||||||
| Expected return on plan assets |
(17.3 | ) | (14.8 | ) | (34.9 | ) | (29.6 | ) | ||||||||
| Amortization of prior service cost |
0.3 | 0.4 | 0.6 | 0.8 | ||||||||||||
| Amortization of net loss |
2.0 | 3.0 | 4.0 | 5.5 | ||||||||||||
| Net periodic pension cost |
11.1 | 15.6 | 22.0 | 30.3 | ||||||||||||
| Settlement cost |
— | 0.6 | 1.4 | 0.6 | ||||||||||||
| Special termination benefit cost |
— | — | 1.5 | — | ||||||||||||
| Total periodic pension cost |
$ | 11.1 | $ | 16.2 | $ | 24.9 | $ | 30.9 | ||||||||
The settlement and special termination benefit costs of $2.9 million presented above are included in “Reorganization and settlements” in our consolidated statement of operations for the six months ended June 30, 2007.
The following table sets forth the components of our other postretirement costs for the three and six months ended June 30:
| Three Months | Six Months | |||||||||||||||
| (in millions) |
2007 | 2006 | 2007 | 2006 | ||||||||||||
| Service cost |
$ | 0.1 | $ | 0.1 | $ | 0.2 | $ | 0.3 | ||||||||
| Interest cost |
0.5 | 0.5 | 1.0 | 1.0 | ||||||||||||
| Amortization of prior service cost |
0.1 | 0.1 | 0.2 | 0.1 | ||||||||||||
| Amortization of net (gain) |
(0.1 | ) | (0.1 | ) | (0.2 | ) | (0.2 | ) | ||||||||
| Other postretirement cost |
$ | 0.6 | $ | 0.6 | $ | 1.2 | $ | 1.2 | ||||||||
9
| 6. | Income Taxes |
Uncertain Tax Positions
We adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), on January 1, 2007. As a result of the implementation of FIN 48, we recognized a $7.1 million increase in the liability for unrecognized tax benefits, which was accounted for as a reduction of $5.7 million to the January 1, 2007 balance of retained earnings and an increase of $1.4 million to goodwill resulting from prior acquisitions. Additionally, we reclassified a $53 million credit from “Prepaid Expenses and Other” to “Other Current and Accrued Liabilities” effective January 1, 2007. We have elected to treat interest and penalties on uncertain tax positions as interest expense and other operating expenses, respectively, rather than continue the pre-FIN 48 treatment as components of the income tax provision.
The total amounts of unrecognized tax benefits and accrued interest as of the date of adoption were $78.3 million and $2.1 million, respectively. Both are classified on our consolidated balance sheet within “Other Current and Accrued Liabilities”. The balance of unrecognized tax benefits as of the date of adoption has been adjusted by $3.6 million during the three months ended June 30, 2007, to reflect the reclass of deferred tax assets associated with certain indirect federal benefits. We accrued $1.6 million of interest on uncertain tax positions during the six months ended June 30, 2007. We have accrued no penalties relative to uncertain tax positions.
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of the date of adoption was $5 million.
Tax years that remain subject to examination for our major tax jurisdictions as of the date of adoption and at June 30, 2007:
| Pre-acquisition tax years | ||||||
| YRC Worldwide | USF Corporation (a) | Roadway (b) | ||||
| Statute remains open |
2003-2006 | 2000-2005 | 2001-03 | |||
| Tax years currently under examination/exam completed |
2003-2005 | 2000-2005 | 2001-03 | |||
| Tax years not examined |
2006 | None | None | |||
| (a) | Years ending on or before May 24, 2005. |
| (b) | Years ending on or before December 11, 2003. |
Reasonably possible changes in the next 12 months in the amount of unrecognized tax benefits relate to the following tax positions:
The United States Internal Revenue Service (“IRS”) has begun an audit of the Company’s 2005 tax return and has proposed an adjustment relative to the deduction claimed for contributions to union pension plans. We are protesting the adjustment. The additional tax that could result from the adjustment is approximately $51 million. Pursuant to the provisions of FIN 48, we have posted no tax benefit for this deduction. This audit could be resolved by June 30, 2008.
The IRS has audited certain pre-acquisition tax returns for a consolidated group acquired in 2005 and disallowed a 2002 loss related to the disposition of the stock of a member of that group. The Company believes the loss is fully deductible and has protested the IRS adjustment. The additional tax that could result should the loss ultimately be totally denied is approximately $50 million. This audit could be resolved by June 30, 2008. Any tax liability resulting from the audit would affect only goodwill recognized in the allocation of the purchase price of the acquired subsidiary.
There have been no significant changes in the status of uncertain tax positions during the six months ended June 30, 2007.
Effective Tax Rate
The Company’s accounting policy is to report income tax expense for interim reporting periods using an estimated annual effective income tax rate. However, the effects of significant discrete events are not considered in the estimated annual effective tax rate. The tax effects of these events are recognized in the interim period in which the events occur.
For the three months ended June 30, 2007, the Company recorded income tax expense of $29.3 million, resulting in an effective rate of 34.6% compared to 38.4% for the three months ended June 30, 2006.
10
For the six months ended June 30, 2007, the Company recorded income tax expense of $30.1 million resulting in an effective rate of 34.7% compared to 38.3% for the six months ended June 30, 2006. During the three months ended June 30, 2007, the Company recorded an income tax benefit of $1.9 million for a propane fuel tax credit related to 2006. Additionally, the second quarter 2007 effective tax rate is favorably impacted by a projected $7.6 million benefit related to a propane fuel credit for 2007.
| 7. | Earnings Per Share |
Dilutive securities, consisting of options to purchase our common stock or rights to receive common stock in the future, included in the calculation of diluted weighted average common shares were 700,000 and 650,000 for the three and six months ended June 30, 2007, respectively, and 573,000 and 584,000 for the three and six months ended June 30, 2006, respectively. In addition, dilutive securities related to our net share settle contingent convertible notes were 297,000 and 470,000 for the three and six months ended June 30, 2007, respectively, and 385,000 and 798,000 for the three and six months ended June 30, 2006, respectively.
The impact of certain other options were excluded from the calculation of diluted earnings per share because average exercise prices were greater than the average market price of common shares. In addition, the computation of the assumed conversion of the convertible senior notes includes inputs of the year-to-date average stock price relative to the stated conversion price. If this relationship is such that the year-to-date average stock price is less then the stated conversion price, the computed shares would be antidilutive under the treasury stock method. Data regarding antidilutive securities for the three and six months ended June 30 is summarized below:
| Three Months | Six Months | |||||||||||
| (in thousands except per share data) |
2007 | 2006 | 2007 | 2006 | ||||||||
| Weighted average exercise price per share |
$ | 43.46 | $ | 43.46 | $ | 43.46 | $ | — | ||||
| Antidilutive weighted average option shares outstanding |
23 | 23 | 23 | — | ||||||||
| Antidilutive convertible senior note conversion shares |
472 | 420 | 371 | 179 | ||||||||
| 8. | Business Segments |
We report financial and descriptive information about our reportable operating segments on a basis consistent with that used internally for evaluating segment performance and allocating resources to segments. We evaluate performance primarily on adjusted operating income and return on capital.
We have three reportable segments, which are strategic business units that offer complementary transportation services to their customers. National Transportation includes carriers that provide comprehensive regional, national and international transportation services. Regional Transportation is comprised of carriers that focus primarily on business opportunities in the regional and next-day delivery markets. Logistics, previously referred to as our Meridian IQ segment, provides domestic and international freight forwarding, warehousing, cross-dock services, multi-modal brokerage services and transportation management services.
Information relative to USF Red Star and USF Dugan, previously included in Regional Transportation, has been included in the Corporate segment in 2007 as these entities are no longer operating.
Prior to 2007, we reported four operating segments. In January 2007, we consolidated the management structure of Yellow Transportation and Roadway to form YRC National Transportation. As a result, these two previously separate segments have been combined in 2007. Amounts presented for 2006 have been restated to reflect this change.
The accounting policies of the segments are the same as those described in the Summary of Accounting Policies note in our Annual Report on Form 10-K for the year ended December 31, 2006. We charge management fees and other corporate services to our segments based on the direct benefits received or as a percentage of revenue. Corporate and other operating losses represent residual operating expenses of the holding company, including compensation and benefits and professional services for all periods presented. Corporate identifiable assets primarily refer to cash, cash equivalents and deferred debt issuance costs. Intersegment revenue relates to transportation services between our segments.
11
The following table summarizes our operations by business segment:
| (in millions) |
National Transportation |
Regional Transportation |
Logistics | Corporate/ Eliminations |
Consolidated | ||||||||||||||
| As of June 30, 2007 |
|||||||||||||||||||
| Identifiable assets |
$ | 3,351.5 | $ | 2,227.9 | $ | 449.3 | $ | (11.3 | ) | $ | 6,017.4 | ||||||||
| As of December 31, 2006 |
|||||||||||||||||||
| Identifiable assets |
3,269.1 | 2,179.2 | 413.5 | 90.4 | 5,952.2 | ||||||||||||||
| Three months ended June 30, 2007 |
|||||||||||||||||||
| External revenue |
1,702.5 | 628.5 | 155.5 | — | 2,486.5 | ||||||||||||||
| Intersegment revenue |
1.0 | — | 2.7 | (3.7 | ) | — | |||||||||||||
| Operating income |
92.8 | 14.8 | 1.5 | (0.7 | ) | 108.4 | |||||||||||||
| Adjustments to operating income(a) |
(5.1 | ) | 1.8 | 2.6 | (2.7 | ) | (3.4 | ) | |||||||||||
| Adjusted operating income(b) |
87.7 | 16.6 | 4.1 | (3.4 | ) | 105.0 | |||||||||||||
| Three months ended June 30, 2006 |
|||||||||||||||||||
| External revenue |
1,759.5 | 654.1 | 152.2 | — | 2,565.8 | ||||||||||||||
| Intersegment revenue |
1.0 | — | 1.4 | (2.4 | ) | — | |||||||||||||
| Operating income |
124.2 | 53.6 | 2.7 | (8.2 | ) | 172.3 | |||||||||||||
| Adjustments to operating income(a) |
1.7 | (0.3 | ) | 1.5 | 1.3 | 4.2 | |||||||||||||
| Adjusted operating income (b) |
125.9 | 53.3 | 4.2 | (6.9 | ) | 176.5 | |||||||||||||
| Six months ended June 30, 2007 |
|||||||||||||||||||
| External revenue |
3,309.9 | 1,204.4 | 300.5 | — | 4,814.8 | ||||||||||||||
| Intersegment revenue |
2.0 | — | 7.4 | (9.4 | ) | — | |||||||||||||
| Operating income |
125.9 | 9.8 | 0.4 | (7.3 | ) | 128.8 | |||||||||||||
| Adjustments to operating income(a) |
1.7 | 8.3 | 2.7 | 1.3 | 14.0 | ||||||||||||||
| Adjusted operating income(b) |
127.6 | 18.1 | 3.1 | (6.0 | ) | 142.8 | |||||||||||||
| Six months ended June 30, 2006 |
|||||||||||||||||||
| External revenue |
3,402.0 | 1,246.1 | 291.8 | — | 4,939.9 | ||||||||||||||
| Intersegment revenue |
2.4 | — | 1.6 | (4.0 | ) | — | |||||||||||||
| Operating income |
193.4 | 75.0 | 5.2 | (13.5 | ) | 260.1 | |||||||||||||
| Adjustments to operating income(a) |
1.6 | (0.3 | ) | 1.5 | 2.3 | 5.1 | |||||||||||||
| Adjusted operating income (b) |
195.0 | 74.7 | 6.7 | (11.2 | ) | 265.2 | |||||||||||||
| (a) | Management excludes these items when evaluating operating income and segment performance to better evaluate the results of our core operations. The 2007 adjustments relate to reorganization charges, gains and charges for settlements of obligations and losses (gains) on property disposals. The 2006 adjustments relate to reorganization charges and losses (gains) on property disposals. |
| (b) | This measurement is used for internal management purposes and should not be construed as a better measurement than operating income as defined by generally accepted accounting principles. |
| 9. | Comprehensive Income |
Comprehensive income for the three and six months ended June 30 follows:
| Three Months | Six Months | |||||||||||
| (in millions) |
2007 | 2006 | 2007 | 2006 | ||||||||
| Net income |
$ | 55.4 | $ | 92.3 | $ | 56.6 | $ | 134.4 | ||||
| Other comprehensive income, net of tax: |
||||||||||||
| Amortization of pension costs |
1.4 | — | 2.8 | — | ||||||||
| Changes in foreign currency translation adjustments |
8.5 | 2.2 | 9.1 | 4.5 | ||||||||
| Other comprehensive income |
9.9 | 2.2 | 11.9 | 4.5 | ||||||||
| Comprehensive income |
$ | 65.3 | $ | 94.5 | $ | 68.5 | $ | 138.9 | ||||
12
| 10. | Commitments and Contingencies |
Grupo Almex
On May 18, 2007, the Company settled the arbitration proceedings initiated against the Company by Gustavo Gonzalez Garcia and various members of his family (the “Gonzalez Family”) and Autolineas Mexicanas, S.A. de C.V., Servicios Gerenciales del Norte, S.A. de C.V. and Logistica ALM, S.A. de C.V. (collectively, “Grupo Almex”). Pursuant to the settlement, the Company has agreed to pay the Gonzalez Family and Grupo Almex $2.0 million and forgive approximately $9.3 million of debt that Soflex, S. de R.L. de C.V. (“Soflex”) owed to the Company pursuant to a series of notes. The Gonzalez Family wholly owns Soflex. The notes from Soflex were previously written off as uncollectible debt in 2005 as part of the Company’s acquisition consideration for USF Corporation. The Company previously accrued $0.6 million of the $2.0 million settlement. The remaining $1.4 million was expensed in the second quarter of 2007 and is included in “Reorganization and settlements” in the accompanying consolidated statement of operations.
USF Red Star
In June 2007, we reached a settlement agreement with one of the multi-employer pension plans that claimed a withdrawal liability from USF Red Star, a discontinued operation we assumed responsibility for as part of the acquisition of USF Corporation. As a part of the settlement, we agreed to pay $26.4 million to be released from the obligation. This amount was paid in July 2007 and was classified as a short-term liability at June 30, 2007. As we had previously accrued $31.3 million for this obligation, a resulting gain on settlement of $4.9 million was recorded during the second quarter of 2007 and is included in “Reorganization and settlements” in the accompanying consolidated statement of operations.
13
| 11. | Guarantees of the Contingent Convertible Senior Notes and Senior Floating Rate Notes |
In August 2003, YRC Worldwide issued 5.0% contingent convertible senior notes due 2023. In November 2003, we issued 3.375% contingent convertible senior notes (the August and November issuances, collectively, may also be known as the “contingent convertible senior notes”) due 2023. In December 2004, we completed exchange offers pursuant to which holders of the contingent convertible senior notes could exchange their notes for an equal amount of new net share settled contingent convertible senior notes. Substantially all notes were exchanged as part of the exchange offers. In May 2005, we completed the private placement of $150 million in aggregate principle amount of senior floating rate notes due 2008. In connection with the net share settled contingent convertible senior notes and the floating rate notes, the following 100% owned subsidiaries of YRC Worldwide have issued guarantees in favor of the holders of the net share settled contingent convertible senior notes and floating rate notes: Yellow Transportation, Inc., Mission Supply Company, Yellow Relocation Services, Inc., YRC Worldwide Technologies, Inc., YRC Logistics, Inc. (formerly Meridian IQ Inc.), YRC Logistics Global, LLC (formerly MIQ LLC), Globe.com Lines, Inc., Roadway LLC, Roadway Next Day Corporation, Roadway Express, Inc., USF Holland and Regional Transportation. Each of the guarantees is full and unconditional and joint and several.
The condensed consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantors and issuer because management does not believe that separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of YRC Worldwide or any guarantor to obtain funds from its subsidiaries by dividend or loan.
The following represents condensed consolidating financial information as of June 30, 2007 and December 31, 2006 with respect to the financial position and for the three and six months ended June 30, 2007 and 2006 for results of operations and for the six months ended June 30, 2007 and 2006 for the statements of cash flows of YRC Worldwide and its subsidiaries. The Parent column presents the financial information of YRC Worldwide, the primary obligor of the contingent convertible senior notes and the floating rate notes. The Guarantor Subsidiaries column presents the financial information of all guarantor subsidiaries of the net share settled contingent convertible senior notes and the floating rate notes. The Non-Guarantor Subsidiaries column presents the financial information of all non-guarantor subsidiaries, including those subsidiaries that are governed by foreign laws and Yellow Roadway Receivables Funding Corporation, the special-purpose entity that is associated with our asset backed securitization (“ABS”) agreement.
Condensed Consolidating Balance Sheets
| June 30, 2007 (in millions) |
Parent | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Cash and cash equivalents |
$ | 15 | $ | 23 | $ | 19 | $ | — | $ | 57 | ||||||||||
| Intercompany advances receivable |
— | (78 | ) | 78 | — | — | ||||||||||||||
| Accounts receivable, net |
4 | (12 | ) | 1,239 | (16 | ) | 1,215 | |||||||||||||
| Prepaid expenses and other |
3 | 102 | 189 | — | 294 | |||||||||||||||
| Total current assets |
22 | 35 | 1,525 | (16 | ) | 1,566 | ||||||||||||||
| Property and equipment |
— | 3,401 | 587 | — | 3,988 | |||||||||||||||
| Less – accumulated depreciation |
— | (1,495 | ) | (119 | ) | — | (1,614 | ) | ||||||||||||
| Net property and equipment |
— | 1,906 | 468 | — | 2,374 | |||||||||||||||
| Investment in subsidiaries |
3,863 | 458 | (31 | ) | (4,290 | ) | — | |||||||||||||
| Receivable from affiliate |
(658 | ) | 635 | 23 | — | — | ||||||||||||||
| Goodwill and other assets |
262 | 1,856 | 309 | (350 | ) | 2,077 | ||||||||||||||
| Total assets |
$ | 3,489 | $ | 4,890 | $ | 2,294 | $ | (4,656 | ) | $ | 6,017 | |||||||||
| Intercompany advances payable |
$ | 402 | $ | (527 | ) | $ | 334 | $ | (209 | ) | $ | — | ||||||||
| Accounts payable |
31 | 306 | 77 | (7 | ) | 407 | ||||||||||||||
| Wages, vacations and employees’ benefits |
25 | 369 | 48 | — | 442 | |||||||||||||||
| Other current and accrued liabilities |
71 | 132 | 186 | (3 | ) | 386 | ||||||||||||||
| Asset backed securitization borrowings |
— | — | 250 | — | 250 | |||||||||||||||
| Current maturities of long-term debt |
150 | — | — | — | 150 | |||||||||||||||
| Total current liabilities |
679 | 280 | 895 | (219 | ) | 1,635 | ||||||||||||||
| Payable to affiliate |
(125 | ) | 52 | 223 | (150 | ) | — | |||||||||||||
| Long-term debt, less current portion |
400 | 504 | — | — | 904 | |||||||||||||||
| Deferred income taxes, net |
19 | 431 | 162 | — | 612 | |||||||||||||||
| Pension and postretirement |
238 | — | — | — | 238 | |||||||||||||||
| Claims and other liabilities |
106 | 4 | 242 | — | 352 | |||||||||||||||
| Commitments and contingencies |
||||||||||||||||||||
| Shareholders’ equity |
2,172 | 3,619 | 772 | (4,287 | ) | 2,276 | ||||||||||||||
| Total liabilities and shareholders’ equity |
$ | 3,489 | $ | 4,890 | $ | 2,294 | $ | (4,656 | ) | $ | 6,017 | |||||||||
14
| December 31, 2006 (in millions) |
Parent | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Cash and cash equivalents |
$ | 20 | $ | 21 | $ | 35 | $ | — | $ | 76 | ||||||||||
| Intercompany advances receivable |
— | (68 | ) | 68 | — | — | ||||||||||||||
| Accounts receivable, net |
5 | 11 | 1,193 | (18 | ) | 1,191 | ||||||||||||||
| Prepaid expenses and other |
22 | 193 | 109 | — | 324 | |||||||||||||||
| Total current assets |
47 | 157 | 1,405 | (18 | ) | 1,591 | ||||||||||||||
| Property and equipment |
1 | 3,258 | 583 | — | 3,842 | |||||||||||||||
| Less – accumulated depreciation |
(1 | ) | (1,461 | ) | (110 | ) | — | (1,572 | ) | |||||||||||
| Net property and equipment |
— | 1,797 | 473 | — | 2,270 | |||||||||||||||
| Investment in subsidiaries |
3,372 | 254 | 5 | (3,631 | ) | — | ||||||||||||||
| Receivable from affiliate |
(563 | ) | 426 | 137 | — | — | ||||||||||||||
| Goodwill and other assets |
262 | 1,869 | 310 | (350 | ) | 2,091 | ||||||||||||||
| Total assets |
$ | 3,118 | $ | 4,503 | $ | 2,330 | $ | (3,999 | ) | $ | 5,952 | |||||||||
| Intercompany advances payable |
$ | 402 | $ | (548 | ) | $ | 355 | $ | (209 | ) | $ | — | ||||||||
| Accounts payable |
15 | 321 | 71 | (9 | ) | 398 | ||||||||||||||
| Wages, vacations and employees’ benefits |
15 | 338 | 61 | — | 414 | |||||||||||||||
| Other current and accrued liabilities |
18 | 135 | 171 | — | 324 | |||||||||||||||
| Asset backed securitization borrowings |
— | — | 225 | — | 225 | |||||||||||||||
| Total current liabilities |
450 | 246 | 883 | (218 | ) | 1,361 | ||||||||||||||
| Payable to affiliate |
(101 | ) | 28 | 223 | (150 | ) | — | |||||||||||||
| Long-term debt, less current portion |
550 | 508 | — | — | 1,058 | |||||||||||||||
| Deferred income taxes, net |
18 | 430 | 161 | — | 609 | |||||||||||||||
| Pension and postretirement |
350 | — | — | — | 350 | |||||||||||||||
| Claims and other liabilities |
12 | 38 | 332 | — | 382 | |||||||||||||||
| Commitments and contingencies |
||||||||||||||||||||
| Shareholders’ equity |
1,839 | 3,253 | 731 | (3,631 | ) | 2,192 | ||||||||||||||
| Total liabilities and shareholders’ equity |
$ | 3,118 | $ | 4,503 | $ | 2,330 | $ | (3,999 | ) | $ | 5,952 | |||||||||
| Condensed Consolidating Statements of Operations | ||||||||||||||||||||
| For the three months ended June 30, 2007 (in millions) |
Parent | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Operating revenue |
$ | 11 | $ | 2,100 | $ | 466 | $ | (91 | ) | $ | 2,486 | |||||||||
| Operating expenses: |
||||||||||||||||||||
| Salaries, wages and employees’ benefits |
9 | 1,199 | 257 | — | 1,465 | |||||||||||||||
| Operating expenses and supplies |
8 | 419 | 127 | (84 | ) | 470 | ||||||||||||||
| Purchased transportation |
— | 209 | 67 | (3 | ) | 273 | ||||||||||||||
| Depreciation and amortization |
— | 46 | 14 | — | 60 | |||||||||||||||
| Other operating expenses |
— | 94 | 20 | — | 114 | |||||||||||||||
| (Gains) losses on property disposals, net |
— | (5 | ) | 2 | — | (3 | ) | |||||||||||||
| Reorganization and settlements |
1 | 1 | (3 | ) | — | (1 | ) | |||||||||||||
| Total operating expenses |
18 | 1,963 | 484 | (87 | ) | 2,378 | ||||||||||||||
| Operating income (loss) |
(7 | ) | 137 | (18 | ) | (4 | ) | 108 | ||||||||||||
| Nonoperating (income) expenses: |
||||||||||||||||||||
| Interest expense |
8 | 9 | 5 | — | 22 | |||||||||||||||
| Other, net |
3 | 58 | (60 | ) | 1 | 2 | ||||||||||||||
| Nonoperating (income) expenses, net |
11 | 67 | (55 | ) | 1 | 24 | ||||||||||||||
| Income (loss) before income taxes |
(18 | ) | 70 | 37 | (5 | ) | 84 | |||||||||||||
| Income tax provision (benefit) |
(5 | ) | 23 | 13 | (2 | ) | 29 | |||||||||||||
| Net income (loss) |
$ | (13 | ) | $ | 47 | $ | 24 | $ | (3 | ) | $ | 55 | ||||||||
15
| For the three months ended June 30, 2006 (in millions) |
Parent | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Operating revenue |
$ | 12 | $ | 2,173 | $ | 482 | $ | (101 | ) | $ | 2,566 | |||||||||
| Operating expenses: |
||||||||||||||||||||
| Salaries, wages and employees’ benefits |
12 | 1,235 | 227 | (14 | ) | 1,460 | ||||||||||||||
| Operating expenses and supplies |
7 | 416 | 127 | (82 | ) | 468 | ||||||||||||||
| Purchased transportation |
— | 210 | 75 | (4 | ) | 281 | ||||||||||||||
| Depreciation and amortization |
— | 60 | 15 | — | 75 | |||||||||||||||
| Other operating expenses |
— | 91 | 14 | — | 105 | |||||||||||||||
| Gains on property disposals, net |
— | (2 | ) | (1 | ) | — | (3 | ) | ||||||||||||
| Reorganization and settlements |
1 | 6 | 1 | — | 8 | |||||||||||||||
| Total operating expenses |
20 | 2,016 | 458 | (100 | ) | 2,394 | ||||||||||||||
| Operating income (loss) |
(8 | ) | 157 | 24 | (1 | ) | 172 | |||||||||||||
| Nonoperating (income) expenses: |
||||||||||||||||||||
| Interest expense |
2 | 4 | (11 | ) | 28 | 23 | ||||||||||||||
| Other, net |
9 | 38 | (18 | ) | (30 | ) | (1 | ) | ||||||||||||
| Nonoperating (income) expenses, net |
11 | 42 | (29 | ) | (2 | ) | 22 | |||||||||||||
| Income (loss) before income taxes |
(19 | ) | 115 | 53 | 1 | 150 | ||||||||||||||
| Income tax provision (benefit) |
(5 | ) | 43 | 19 | 1 | 58 | ||||||||||||||
| Net income (loss) |
$ | (14 | ) | $ | 72 | $ | 34 | $ | — | $ | 92 | |||||||||
| For the six months ended June 30, 2007 (in millions) |
Parent | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Operating revenue |
$ | 24 | $ | 4,089 | $ | 886 | $ | (184 | ) | $ | 4,815 | |||||||||
| Operating expenses: |
||||||||||||||||||||
| Salaries, wages and employees’ benefits |
20 | 2,372 | 494 | — | 2,886 | |||||||||||||||
| Operating expenses and supplies |
15 | 815 | 252 | (170 | ) | 912 | ||||||||||||||
| Purchased transportation |
— | 406 | 129 | (10 | ) | 525 | ||||||||||||||
| Depreciation and amortization |
— | 92 | 27 | — | 119 | |||||||||||||||
| Other operating expenses |
— | 193 | 37 | — | 230 | |||||||||||||||
| (Gains) losses on property disposals, net |
— | (4 | ) | 4 | — | — | ||||||||||||||
| Reorganization and settlements |
4 | 7 | 3 | — | 14 | |||||||||||||||
| Total operating expenses |
39 | 3,881 | 946 | (180 | ) | 4,686 | ||||||||||||||
| Operating income (loss) |
(15 | ) | 208 | (60 | ) | (4 | ) | 129 | ||||||||||||
| Nonoperating (income) expenses: |
||||||||||||||||||||
| Interest expense |
16 | 16 | 10 | — | 42 | |||||||||||||||
| Other, net |
14 | 107 | (122 | ) | 1 | — | ||||||||||||||
| Nonoperating (income) expenses, net |
30 | 123 | (112 | ) | 1 | 42 | ||||||||||||||
| Income (loss) before income taxes |
(45 | ) | 85 | 52 | (5 | ) | 87 | |||||||||||||
| Income tax provision (benefit) |
(13 | ) | 28 | 18 | (3 | ) | 30 | |||||||||||||
| Net income (loss) |
$ | (32 | ) | $ | 57 | $ | 34 | $ | (2 | ) | $ | 57 | ||||||||
16
| For the six months ended June 30, 2006 (in millions) |
Parent | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Operating revenue |
$ | 30 | $ | 4,206 | $ | 906 | $ | (202 | ) | $ | 4,940 | |||||||||
| Operating expenses: |
||||||||||||||||||||
| Salaries, wages and employees’ benefits |
23 | 2,427 | 433 | (21 | ) | 2,862 | ||||||||||||||
| Operating expenses and supplies |
19 | 829 | 240 | (170 | ) | 918 | ||||||||||||||
| Purchased transportation |
— | 406 | 136 | (8 | ) | 534 | ||||||||||||||
| Depreciation and amortization |
— | 118 | 30 | — | 148 | |||||||||||||||
| Other operating expenses |
— | 180 | 32 | — | 212 | |||||||||||||||
| Gains on property disposals, net |
— | (2 | ) | — | — | (2 | ) | |||||||||||||
| Reorganization and settlements |
1 | 6 | 1 | — | 8 | |||||||||||||||
| Total operating expenses |
43 | 3,964 | 872 | (199 | ) | 4,680 | ||||||||||||||
| Operating income (loss) |
(13 | ) | 242 | 34 | (3 | ) | 260 | |||||||||||||
| Nonoperating (income) expenses: |
||||||||||||||||||||
| Interest expense |
17 | 15 | 12 | — | 44 | |||||||||||||||
| Other, net |
3 | 69 | (70 | ) | (4 | ) | (2 | ) | ||||||||||||
| Nonoperating (income) expenses, net |
20 | 84 | (58 | ) | (4 | ) | 42 | |||||||||||||
| Income (loss) before income taxes |
(33 | ) | 158 | 92 | 1 | 218 | ||||||||||||||
| Income tax provision (benefit) |
(8 | ) | 59 | 35 | (2 | ) | 84 | |||||||||||||
| Net income (loss) |
$ | (25 | ) | $ | 99 | $ | 57 | $ | 3 | $ | 134 | |||||||||
Condensed Consolidating Statements of Cash Flows
| For the six months ended June 30, 2007 (in millions) |
Parent | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||
| Operating activities: |
|||||||||||||||||||
| Net cash provided by (used in) operating activities |
$ | (75 | ) | $ | 316 | $ | (78 | ) | $ | — | $ | 163 | |||||||
| Investing activities: |
|||||||||||||||||||
| Acquisition of property and equipment |
— | (198 | ) | (44 | ) | — | (242 | ) | |||||||||||
| Proceeds from disposal of property and equipment |
— | 13 | 15 | — | 28 | ||||||||||||||
| Other |
— | — | — | — | — | ||||||||||||||
| Net cash used in investing activities |
— | (185 | ) | (29 | ) | — | (214 | ) | |||||||||||
| Financing activities: |
|||||||||||||||||||
| Asset backed securitization borrowings, net |
— | — | 25 | — | 25 | ||||||||||||||
| Proceeds from exercise of stock options |
7 | — | — | — | 7 | ||||||||||||||
| Intercompany advances / repayments |
63 | (129 | ) | 66 | — | — | |||||||||||||
| Net cash provided by (used in) |
70 | (129 | ) | 91 | — | 32 | |||||||||||||
| Net increase (decrease) in cash and cash equivalents |
(5 | ) | 2 | (16 | ) | — | (19 | ) | |||||||||||
| Cash and cash equivalents, beginning of period |
20 | 21 | 35 | — | 76 | ||||||||||||||
| Cash and cash equivalents, end of period |
$ | 15 | $ | 23 | $ | 19 | $ | — | $ | 57 | |||||||||
17
| For the six months ended June 30, 2006 (in millions) |
Parent | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||
| Operating activities: |
|||||||||||||||||||
| Net cash provided by (used in) operating activities |
$ | (111 | ) | $ | 235 | $ | 34 | $ | — | $ | 158 | ||||||||
| Investing activities: |
|||||||||||||||||||
| Acquisition of property and equipment |
— | (220 | ) | (30 | ) | — | (250 | ) | |||||||||||
| Proceeds from disposal of property and equipment |
— | 24 | — | — | 24 | ||||||||||||||
| Acquisition of companies |
(15 | ) | — | — | — | (15 | ) | ||||||||||||
| Other |
— | 4 | (6 | ) | — | (2 | ) | ||||||||||||
| Net cash used in investing activities |
(15 | ) | (192 | ) | (36 | ) | — | (243 | ) | ||||||||||
| Financing activities: |
|||||||||||||||||||
| Asset backed securitization borrowings, net |
— | — | 75 | — | 75 | ||||||||||||||
| Issuance of long-term debt |
10 | — | — | — | 10 | ||||||||||||||
| Proceeds from exercise of stock options |
2 | — | — | — | 2 | ||||||||||||||
| Intercompany advances / repayments |
146 | (52 | ) | (94 | ) | — | — | ||||||||||||
| Net cash provided by (used in) financing activities |
158 | (52 | ) | (19 | ) | — | 87 | ||||||||||||
| Net increase (decrease) in cash and cash equivalents |
32 | (9 | ) | (21 | ) | — | 2 | ||||||||||||
| Cash and cash equivalents, beginning of period |
20 | 18 | 44 | — | 82 | ||||||||||||||
| Cash and cash equivalents, end of period |
$ | 52 | $ | 9 | $ | 23 | $ | — | $ | 84 | |||||||||
18
| 12. | Guarantees of the Senior Notes Due 2008 |
In connection with the senior notes due 2008, the Company assumed by virtue of the Roadway merger agreement, and in addition to the primary obligor, Roadway LLC, YRC Worldwide and its following 100% owned subsidiaries have issued guarantees in favor of the holders of the senior notes due 2008: Roadway Next Day Corporation, New Penn Motor Express, Inc., Roadway Express, Inc., Roadway Reverse Logistics, Inc. and Roadway Express International, Inc. Each of the guarantees is full and unconditional and joint and several.
The condensed consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantors and issuer because management does not believe that separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of YRC Worldwide or any guarantor subsidiary to obtain funds from its subsidiaries by dividend or loan.
The following represents condensed consolidating financial information of YRC Worldwide and its subsidiaries as of June 30, 2007 and December 31, 2006 with respect to the financial position, and for the three and six months ended June 30, 2007 and 2006 for results of operations and for the six months ended June 30, 2007and 2006 for cash flows. The primary obligor column presents the financial information of Roadway LLC. The Guarantor Subsidiaries column presents the financial information of all guarantor subsidiaries of the senior notes due 2008 including YRC Worldwide, the holding company. The Non-Guarantor Subsidiaries column presents the financial information of all non-guarantor subsidiaries, including those subsidiaries that are governed by foreign laws and Yellow Roadway Receivables Funding Corporation, the special-purpose entity that is associated with our ABS agreement.
Condensed Consolidating Balance Sheets
| June 30, 2007 (in millions) |
Primary Obligor |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Cash and cash equivalents |
$ | — | $ | 32 | $ | 25 | $ | — | $ | 57 | ||||||||||
| Intercompany advances receivable |
— | (15 | ) | 15 | — | — | ||||||||||||||
| Accounts receivable, net |
— | (44 | ) | 1,272 | (13 | ) | 1,215 | |||||||||||||
| Prepaid expenses and other |
— | 29 | 265 | — | 294 | |||||||||||||||
| Total current assets |
— | 2 | 1,577 | (13 | ) | 1,566 | ||||||||||||||
| Property and equipment |
— | 1,075 | 2,913 | — | 3,988 | |||||||||||||||
| Less – accumulated depreciation |
— | (228 | ) | (1,386 | ) | — | (1,614 | ) | ||||||||||||
| Net property and equipment |
— | 847 | 1,527 | — | 2,374 | |||||||||||||||
| Investment in subsidiaries |
97 | 3,888 | 201 | (4,186 | ) | — | ||||||||||||||
| Receivable from affiliate |
172 | (577 | ) | 405 | — | — | ||||||||||||||
| Goodwill and other assets |
651 | 1,255 | 1,021 | (850 | ) | 2,077 | ||||||||||||||
| Total assets |
$ | 920 | $ | 5,415 | $ | 4,731 | $ | (5,049 | ) | $ | 6,017 | |||||||||
| Intercompany advances payable |
$ | — | $ | 69 | $ | 140 | $ | (209 | ) | $ | — | |||||||||
| Accounts payable |
— | 134 | 277 | (4 | ) | 407 | ||||||||||||||
| Wages, vacations and employees’ benefits |
— | 182 | 260 | — | 442 | |||||||||||||||
| Other current and accrued liabilities |
11 | 114 | 264 | (3 | ) | 386 | ||||||||||||||
| Asset backed securitization borrowings |
— | — | 250 | — | 250 | |||||||||||||||
| Current maturities of long-term debt |
— | 150 | — | — | 150 | |||||||||||||||
| Total current liabilities |
11 | 649 | 1,191 | (216 | ) | 1,635 | ||||||||||||||
| Payable to affiliate |
— | 524 | 126 | (650 | ) | — | ||||||||||||||
| Long-term debt, less current portion |
232 | 400 | 272 | — | 904 | |||||||||||||||
| Deferred income taxes, net |
(5 | ) | 238 | 379 | — | 612 | ||||||||||||||
| Pension and postretirement |
— | 238 | — | — | 238 | |||||||||||||||
| Claims and other liabilities |
— | 108 | 244 | — | 352 | |||||||||||||||
| Commitments and contingencies |
||||||||||||||||||||
| Shareholders’ equity |
682 | 3,258 | 2,519 | (4,183 | ) | 2,276 | ||||||||||||||
| Total liabilities and shareholders’ equity |
$ | 920 | $ | 5,415 | $ | 4,731 | $ | (5,049 | ) | $ | 6,017 | |||||||||
19
| December 31, 2006 (in millions) |
Primary Obligor |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Cash and cash equivalents |
$ | — | $ | 38 | $ | 38 | $ | — | $ | 76 | ||||||||||
| Intercompany advances receivable |
— | (14 | ) | 14 | — | — | ||||||||||||||
| Accounts receivable, net |
— | (20 | ) | 1,222 | (11 | ) | 1,191 | |||||||||||||
| Prepaid expenses and other |
(2 | ) | 83 | 243 | — | 324 | ||||||||||||||
| Total current assets |
(2 | ) | 87 | 1,517 | (11 | ) | 1,591 | |||||||||||||
| Property and equipment |
— | 1,019 | 2,823 | — | 3,842 | |||||||||||||||
| Less – accumulated depreciation |
— | (199 | ) | (1,373 | ) | — | (1,572 | ) | ||||||||||||
| Net property and equipment |
— | 820 | 1,450 | 2,270 | ||||||||||||||||
| Investment in subsidiaries |
— | 3,377 | 208 | (3,585 | ) | — | ||||||||||||||
| Receivable from affiliate |
155 | (552 | ) | 397 | — | — | ||||||||||||||
| Goodwill and other assets |
651 | 1,257 | 1,033 | (850 | ) | 2,091 | ||||||||||||||
| Total assets |
$ | 804 | $ | 4,989 | $ | 4,605 | $ | (4,446 | ) | $ | 5,952 | |||||||||
| Intercompany advances payable |
$ | — | $ | 87 | $ | 122 | $ | (209 | ) | $ | — | |||||||||
| Accounts payable |
— | 114 | 286 | (2 | ) | 398 | ||||||||||||||
| Wages, vacations and employees’ benefits |
— | 165 | 249 | — | 414 | |||||||||||||||
| Other current and accrued liabilities |
2 | 76 | 246 | — | 324 | |||||||||||||||
| Asset backed securitization borrowings |
— | — | 225 | — | 225 | |||||||||||||||
| Total current liabilities |
2 | 442 | 1,128 | (211 | ) | 1,361 | ||||||||||||||
| Payable to affiliate |
— | 549 | 101 | (650 | ) | — | ||||||||||||||
| Long-term debt, less current portion |
234 | 550 | 274 | — | 1,058 | |||||||||||||||
| Deferred income taxes, net |
(5 | ) | 234 | 380 | — | 609 | ||||||||||||||
| Pension and postretirement |
— | 350 | — | — | 350 | |||||||||||||||
| Claims and other liabilities |
— | 26 | 356 | — | 382 | |||||||||||||||
| Commitments and contingencies |
||||||||||||||||||||
| Shareholders’ equity |
573 | 2,838 | 2,366 | (3,585 | ) | 2,192 | ||||||||||||||
| Total liabilities and shareholders’ equity |
$ | 804 | $ | 4,989 | $ | 4,605 | $ | (4,446 | ) | $ | 5,952 | |||||||||
Condensed Consolidating Statements of Operations
| For the three months ended June 30, 2007 (in millions) |
Primary Obligor |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Operating revenue |
$ | — | $ | 881 | $ | 1,706 | $ | (101 | ) | $ | 2,486 | |||||||||
| Operating expenses: |
||||||||||||||||||||
| Salaries, wages and employees’ benefits |
— | 504 | 961 | — | 1,465 | |||||||||||||||
| Operating expenses and supplies |
— | 175 | 389 | (94 | ) | 470 | ||||||||||||||
| Purchased transportation |
— | 88 | 192 | (7 | ) | 273 | ||||||||||||||
| Depreciation and amortization |
— | 18 | 42 | — | 60 | |||||||||||||||
| Other operating expenses |
— | 39 | 75 | — | 114 | |||||||||||||||
| (Gains) losses on property disposals, net |
— | (5 | ) | 2 | — | (3 | ) | |||||||||||||
| Reorganization and settlements |
— | 1 | (2 | ) | — | (1 | ) | |||||||||||||
| Total operating expenses |
— | 820 | 1,659 | (101 | ) | 2,378 | ||||||||||||||
| Operating income |
— | 61 | 47 | — | 108 | |||||||||||||||
| Nonoperating (income) expenses: |
||||||||||||||||||||
| Interest expense |
3 | 8 | 11 | — | 22 | |||||||||||||||
| Other, net |
(13 | ) | 42 | (27 | ) | — | 2 | |||||||||||||
| Nonoperating (income) expenses, net |
(10 | ) | 50 | (16 | ) | — | 24 | |||||||||||||
| Income before income taxes |
10 | 11 | 63 | — | 84 | |||||||||||||||
| Income tax provision |
4 | 5 | 22 | (2 | ) | 29 | ||||||||||||||
| Net income |
$ | 6 | $ | 6 | $ | 41 | $ | 2 | $ | 55 | ||||||||||
20
| For the three months ended June 30, 2006 (in millions) |
Primary Obligor |
Guarantor Subsidiaries |
Non- Guarantor |
Eliminations | Consolidated | |||||||||||||||
| Operating revenue |
$ | — | $ | 929 | $ | 1,736 | $ | (99 | ) | $ | 2,566 | |||||||||
| Operating expenses: |
||||||||||||||||||||
| Salaries, wages and employees’ benefits |
— | 537 | 937 | (14 | ) | 1,460 | ||||||||||||||
| Operating expenses and supplies |
— | 173 | 372 | (77 | ) | 468 | ||||||||||||||
| Purchased transportation |
— | 97 | 190 | (6 | ) | 281 | ||||||||||||||
| Depreciation and amortization |
— | 24 | 51 | — | 75 | |||||||||||||||
| Other operating expenses |
— | 36 | 69 | — | 105 | |||||||||||||||
| Gains on property disposals, net |
— | (3 | ) | — | — | (3 | ) | |||||||||||||
| Reorganization and settlements |
— | 3 | 5 | — | 8 | |||||||||||||||
| Total operating expenses |
— | 867 | 1,624 | (97 | ) | 2,394 | ||||||||||||||
| Operating income |
— | 62 | 112 | (2 | ) | 172 | ||||||||||||||
| Nonoperating (income) expenses: |
||||||||||||||||||||
| Interest expense |
3 | (11 | ) | (7 | ) | 38 | 23 | |||||||||||||
| Other, net |
(13 | ) | 47 | 5 | (40 | ) | (1 | ) | ||||||||||||
| Nonoperating (income) expenses, net |
(10 | ) | 36 | (2 | ) | (2 | ) | 22 | ||||||||||||
| Income before income taxes |
10 | 26 | 114 | — | 150 | |||||||||||||||
| Income tax provision |
5 | 12 | 40 | 1 | 58 | |||||||||||||||
| Net income |
$ | 5 | $ | 14 | $ | 74 | $ | (1 | ) | $ | 92 | |||||||||
| For the six months ended June 30, 2007 (in millions) |
Primary Obligor |
Guarantor Subsidiaries |
Non- Guarantor |
Eliminations | Consolidated | |||||||||||||||
| Operating revenue |
$ | — | $ | 1,713 | $ | 3,294 | $ | (192 | ) | $ | 4,815 | |||||||||
| Operating expenses: |
||||||||||||||||||||
| Salaries, wages and employees’ benefits |
— | 1,002 | 1,884 | — | 2,886 | |||||||||||||||
| Operating expenses and supplies |
— | 333 | 756 | (177 | ) | 912 | ||||||||||||||
| Purchased transportation |
— | 172 | 369 | (16 | ) | 525 | ||||||||||||||
| Depreciation and amortization |
— | 37 | 82 | — | 119 | |||||||||||||||
| Other operating expenses |
— | 77 | 153 | — | 230 | |||||||||||||||
| (Gains) losses on property disposals, net |
— | (4 | ) | 4 | — | — | ||||||||||||||
| Reorganization and settlements |
— | 5 | 9 | — | 14 | |||||||||||||||
| Total operating expenses |
— | 1,622 | 3,257 | (193 | ) | 4,686 | ||||||||||||||
| Operating income |
— | 91 | 37 | 1 | 129 | |||||||||||||||
| Nonoperating (income) expenses: |
||||||||||||||||||||
| Interest expense |
7 | 16 | 19 | — | 42 | |||||||||||||||
| Other, net |
(26 | ) | 84 | (59 | ) | 1 | — | |||||||||||||
| Nonoperating (income) expenses, net |
(19 | ) | 100 | (40 | ) | 1 | 42 | |||||||||||||
| Income (loss) before income taxes |
19 | (9 | ) | 77 | — | 87 | ||||||||||||||
| Income tax provision |
7 | — | 26 | (3 | ) | 30 | ||||||||||||||
| Net income (loss) |
$ | 12 | $ | (9 | ) | $ | 51 | $ | 3 | $ | 57 | |||||||||
21
| For the six months ended June 30, 2006 (in millions) |
Primary Obligor |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Operating revenue |
$ | — | $ | 1,778 | $ | 3,355 | $ | (193 | ) | $ | 4,940 | |||||||||
| Operating expenses: |
||||||||||||||||||||
| Salaries, wages and employees’ benefits |
— | 1,040 | 1,843 | (21 | ) | 2,862 | ||||||||||||||
| Operating expenses and supplies |
— | 341 | 736 | (159 | ) | 918 | ||||||||||||||
| Purchased transportation |
— | 179 | 365 | (10 | ) | 534 | ||||||||||||||
| Depreciation and amortization |
— | 46 | 102 | — | 148 | |||||||||||||||
| Other operating expenses |
— | 70 | 142 | — | 212 | |||||||||||||||
| Gains on property disposals, net |
— | (2 | ) | — | — | (2 | ) | |||||||||||||
| Reorganization and settlements |
— | 3 | 5 | — | 8 | |||||||||||||||
| Total operating expenses |
— | 1,677 | 3,193 | (190 | ) | 4,680 | ||||||||||||||
| Operating income (loss) |
— | 101 | 162 | (3 | ) | 260 | ||||||||||||||
| Nonoperating (income) expenses: |
||||||||||||||||||||
| Interest expense |
7 | 17 | 20 | — | 44 | |||||||||||||||
| Other, net |
(27 | ) | 53 | (25 | ) | (3 | ) | (2 | ) | |||||||||||
| Nonoperating (income) expenses, net |
(20 | ) | 70 | (5 | ) | (3 | ) | 42 | ||||||||||||
| Income before income taxes |
20 | 31 | 167 | — | 218 | |||||||||||||||
| Income tax provision |
8 | 16 | 62 | (2 | ) | 84 | ||||||||||||||
| Net income |
$ | 12 | $ | 15 | $ | 105 | $ | 2 | $ | 134 | ||||||||||
| Condensed Consolidating Statements of Cash Flows | ||||||||||||||||||||
| For the six months ended June 30, 2007 (in millions) |
Parent | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Operating activities: |
||||||||||||||||||||
| Net cash provided by operating activities |
$ | 15 | $ | 61 | $ | 87 | $ | — | $ | 163 | ||||||||||
| Investing activities: |
||||||||||||||||||||
| Acquisition of property and equipment |
— | (72 | ) | (170 | ) | — | (242 | ) | ||||||||||||
| Proceeds from disposal of property and equipment |
— | 17 | 11 | — | 28 | |||||||||||||||
| Other |
— | — | — | — | — | |||||||||||||||
| Net cash used in investing activities |
— | (55 | ) | (159 | ) | — | (214 | ) | ||||||||||||
| Financing activities: |
||||||||||||||||||||
| Asset backed securitization borrowings, net |
— | — | 25 | — | 25 | |||||||||||||||
| Proceeds from exercise of stock options |
— | 7 | — | — | 7 | |||||||||||||||
| Intercompany advances / repayments |
(15 | ) | (19 | ) | 34 | — | — | |||||||||||||
| Net cash provided by (used in) financing activities |
(15 | ) | (12 | ) | 59 | — | 32 | |||||||||||||
| Net decrease in cash and cash equivalents |
— | (6 | ) | (13 | ) | — | (19 | ) | ||||||||||||
| Cash and cash equivalents, beginning of Period |
— | 38 | 38 | — | 76 | |||||||||||||||
| Cash and cash equivalents, end of period |
$ | — | $ | 32 | $ | 25 | $ | — | $ | 57 | ||||||||||
22
| For the six months ended June 30, 2006 (in millions) |
Primary Obligor |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||
| Operating activities: |
||||||||||||||||||||
| Net cash provided by operating activities |
$ | 18 | $ | 15 | $ | 124 | $ | 1 | $ | 158 | ||||||||||
| Investing activities: |
||||||||||||||||||||
| Acquisition of property and equipment |
— | (90 | ) | (160 | ) | — | (250 | ) | ||||||||||||
| Proceeds from disposal of property and equipment |
— | 7 | 17 | — | 24 | |||||||||||||||
| Acquisition of companies |
— | (15 | ) | — | — | (15 | ) | |||||||||||||
| Other |
4 | — | (6 | ) | — | (2 | ) | |||||||||||||
| Net cash provided by (used in) investing activities |
4 | (98 | ) | (149 | ) | — | (243 | ) | ||||||||||||
| Financing activities: |
||||||||||||||||||||
| Asset backed securitization borrowings, net |
— | — | 75 | — | 75 | |||||||||||||||
| Issuance of long-tern debt |
— | 10 | — | — | 10 | |||||||||||||||
| Proceeds from exercise of stock options |
— | 2 | — | — | 2 | |||||||||||||||
| Intercompany advances / repayments |
(22 | ) | 100 | (77 | ) | (1 | ) | — | ||||||||||||
| Net cash provided by (used in) financing activities |
(22 | ) | 112 | (2 | ) | (1 | ) | 87 | ||||||||||||
| Net increase (decrease) in cash and cash equivalents |
— | 29 | (27 | ) | — | 2 | ||||||||||||||
| Cash and cash equivalents, beginning of period |
— | 34 | 48 | — | 82 | |||||||||||||||
| Cash and cash equivalents, end of period |
$ | — | $ | 63 | $ | 21 | $ | — | $ | 84 | ||||||||||
23
| 13. | Guarantees of the Senior Notes Due 2009 and 2010 |
In connection with the senior notes due 2009 and 2010 that YRC Worldwide assumed by virtue of its merger with USF, and in addition to the primary obligor, USF, YRC Worldwide and its following 100% owned subsidiaries have issued guarantees in favor of the holders of the senior notes due 2009 and 2010: USF Sales Corporation, USF Holland Inc., USF Bestway Inc., USF Bestway Leasing Inc., USF Reddaway Inc., USF Glen Moore Inc., YRC Logistics Services, Inc., and IMUA Handling Corporation. Each of the guarantees is full and unconditional and joint and several.
The condensed consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantors and issuer because management does not believe that such separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of Yellow Roadway or any guarantor subsidiary to obtain funds from its subsidiaries by dividend or loan.
The following represents condensed consolidating financial information of YRC Worldwide and its subsidiaries as of June 30, 2007 and December 31, 2006 with respect to the financial position and for the three and six months ended June 30, 2007 and 2006 for results of operations and for the six months ended June 30, 2007 and 2006 for the statement of cash flows. The primary obligor column presents the financial information of Regional Transportation (formerly USF Corporation). The Guarantor Subsidiaries column presents the financial information of all guarantor subsidiaries of the senior notes due 2009 and 2010 including YRC Worldwide, the holding company. The Non-Guarantor Subsidiaries column presents the financial information of all non-guarantor subsidiaries, including those subsidiaries that are governed by foreign laws and Yellow Roadway Receivables Funding Corporation, the special-purpose entity that is associated with our ABS agreement.
Condensed Consolidating Balance Sheets
| June 30, 2007 (in millions) |
Primary Obligor |
Guarantor Subsidiaries |
Non- Guarantor |
Eliminations | Consolidated | |||||||||||||||
| Cash and cash equivalents |
$ | — | $ | 18 | $ | 39 | $ | — | $ | 57 | ||||||||||
| Intercompany advances receivable, net |
— | (11 | ) | 11 | — | — | ||||||||||||||
| Accounts receivable, net |
— | 1 | 1,217 | (3 | ) | 1,215 | ||||||||||||||
| Prepaid expenses and other |
3 | 49 | 242 | — | 294 | |||||||||||||||
| Total current assets |
3 | 57 | 1,509 | (3 | ) | 1,566 | ||||||||||||||
| Property and equipment |
2 | 874 | 3,112 | — | 3,988 | |||||||||||||||
| Less – accumulated depreciation |
(1 | ) | (133 | ) | (1,480 | ) | — | (1,614 | ) | |||||||||||
| Net property and equipment |
1 | 741 | 1,632 | — | 2,374 | |||||||||||||||
| Investment in subsidiaries |
334 | 3,865 | 5 | (4,204 | ) | — | ||||||||||||||
| Receivable from affiliate |
489 | (949 | ) | 460 | — | — | ||||||||||||||
| Goodwill and other assets |
798 | 380 | 1,249 | (350 | ) | 2,077 | ||||||||||||||
| Total assets |
$ | 1,625 | $ | 4,094 | $ | 4,855 | $ | (4,557 | ) | $ | 6,017 | |||||||||
| Intercompany advances payable |
$ | 65 | $ | 114 | $ | 21 | $ | (200 | ) | $ | — | |||||||||
| Accounts payable |
9 | 101 | 300 | (3 | ) | 407 | ||||||||||||||
| Wages, vacations and employees’ benefits |
3 | 115 | 324 | — | 442 | |||||||||||||||
| Other current and accrued liabilities |
27 | 76 | 286 | (3 | ) | 386 | ||||||||||||||
| Asset backed securitization borrowings |
— | — | 250 | — | 250 | |||||||||||||||
| Current maturities of long-term debt |
— | 150 | — | — | 150 | |||||||||||||||
| Total current liabilities |
104 | 556 | 1,181 | (206 | ) | 1,635 | ||||||||||||||
| Payable to affiliate |
— | (53 | ) | 203 | (150 | ) | — | |||||||||||||
| Long-term debt, less current portion |
262 | 400 | 242 | — | 904 | |||||||||||||||
| Deferred income taxes, net |
79 | 115 | 418 | — | 612 | |||||||||||||||
| Pension and postretirement |
— | 238 | — | — | 238 | |||||||||||||||
| Claims and other liabilities |
1 | 106 | 245 | — | 352 | |||||||||||||||
| Commitments and contingencies |
||||||||||||||||||||
| Shareholders’ equity |
1,179 | 2,732 | 2,566 | (4,201 | ) | 2,276 | ||||||||||||||
| Total liabilities and shareholders’ equity |
$ | 1,625 | $ | 4,094 | $ | 4,855 | $ | (4,557 | ) | $ | 6,017 | |||||||||
24
| December 31, 2006 (in millions) |
Primary Obligor |
Guarantors | Non- Guarantors |
Eliminations | Consolidated | |||||||||||||||
| Cash and cash equivalents |
$ | — | $ | 23 | $ | 53 | $ | — | $ | 76 | ||||||||||
| Intercompany advances receivable |
— | (10 | ) | 10 | — | — | ||||||||||||||
| Accounts receivable, net |
— | 1 | 1,192 | (2 | ) | 1,191 | ||||||||||||||
| Prepaid expenses and other |
(17 | ) | 96 | 245 | — | 324 | ||||||||||||||
| Total current assets |
(17 | ) | 110 | 1,500 | (2 | ) | 1,591 | |||||||||||||
| Property and equipment |
2 | 836 | 3,004 | — | 3,842 | |||||||||||||||
| Less – accumulated depreciation |
(1 | ) | (115 | ) | (1,456 | ) | — | (1,572 | ) | |||||||||||
| Net property and equipment |
1 | 721 | 1,548 | — | 2,270 | |||||||||||||||
| Investment in subsidiaries |
247 | 3,373 | 6 | (3,626 | ) | — | ||||||||||||||
| Receivable from affiliate |
399 | (714 | ) | 315 | — | — | ||||||||||||||
| Goodwill and other assets |
809 | 380 | 1,252 | (350 | ) | 2,091 | ||||||||||||||
| Total assets |
$ | 1,439 | $ | 3,870 | $ | 4,621 | $ | (3,978 | ) | $ | 5,952 | |||||||||
| Intercompany advances payable |
$ | — | $ | 193 | $ | 7 | $ | (200 | ) | $ | — | |||||||||
| Accounts payable |
3 | 97 | 300 | (2 | ) | 398 | ||||||||||||||
| Wages, vacations and employees’ benefits |
(1 | ) | 105 | 310 | — | 414 | ||||||||||||||
| Other current and accrued liabilities |
6 | 55 | 263 | — | 324 | |||||||||||||||
| Asset backed securitization borrowings |
— | — | 225 | — | 225 | |||||||||||||||
| Total current liabilities |
8 | 450 | 1,105 | (202 | ) | 1,361 | ||||||||||||||
| Payable to affiliate |
— | (29 | ) | 179 | (150 | ) | ||||||||||||||