Yellow Ceases Operations, Likely to Liquidate

Trucking company Yellow Corp., one of the longest-serving American trucking companies, ceased operations over the weekend. Analysts say the remaining players in the less-than-truckload market will pick up business, and possibly assets such as freight service facilities.

The 99-year-old company stopped taking new shipment orders Friday and announced it is filing for bankruptcy. Operations ended Sunday.

Yellow sent out notices to customers and employees saying it was ceasing all operations at midday Sunday, reported the Wall Street Journal. The Teamsters Union said the company notified the union it intends to file for bankruptcy.

Yellow and the Union

Yellow, according to the company’s 2022 Annual Report, employed approximately 30,000 people at the end of December 2022. The same annual report indicates that of that number, 24,000 were union employees. Salaries, wages, and employee benefits for both the union and non-union workers comprised more than half of the company’s operating costs, the company stated in the annual report.

“Today’s news is unfortunate but not surprising," said Teamsters General President Sean O’Brien in a press release. "Yellow has historically proven that it could not manage itself despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government. This is a sad day for workers and the American freight industry,”

Trucking company Yellow did not agree with his assessment. In a mid-July press release, the company stated, “Teamsters General President Sean O’Brien has blamed Yellow for failing its workers, but it is the Teamsters’ leadership who has failed the 22,000 Teamsters employed by Yellow as well as the 8,000 non-union employees who may soon become the Teamsters’ collateral damage.

"For many months, Teamsters’ leadership has steadfastly refused to negotiate the company’s long-planned and necessary modernization effort that would enable Yellow, a 100-year-old company, to streamline and strengthen its operations to compete against non-union carriers.”

According to investment advisory firm Stifel, in an email to the investment community, the unresolved dispute with the Teamsters Union meant Yellow was unable to refinance nearly $1.5 billion in debt with “significant maturities” next year. Stifel said, in a press release, that the bankruptcy filing likely will be a liquidation filing and not a reorganization.

Fox Business reported $729.2 million of that $1.5 billion in debt is owed to the federal government.

Yellow Corp. (then YRC Worldwide) received a $700 million loan in 2020 through the Coronavirus Aid, Relief, and Economic Security Act, under the reasoning that its military moves were a matter of national security. The Treasury provided national security loans to 11 businesses, totaling $735.9 million — and Yellow received about 95% of the value of those loans.

The CARES Act loan also outlined that the U.S. Treasury would get a 29.6% equity stake in the company.

That loan raised some eyebrows, especially given the troubled financial history of the company, and led to questions from the Congressional Oversight Commission, as HDT reported in 2021.

YRC Freight Canada

According to an announcement by Unifor Local 4209, union members were told not to report to work at YRD+C Freight Canada, part of Yellow. Unifor Local 4209 said it represents 58 owner-operator truck drivers and 70 company linehaul drivers.

“The news is devastating for our members,” said Don Lajoie, president of Local 4209. “While the bankruptcy process focuses on moving numbers around a page, we have to remember the human impact. There are hundreds of families who are left with very little information right now. The Local and National union are working to keep them informed as the process continues.” 

Bankruptcy Outlook for Yellow

Stifel reports of the LTL companies that have filed for bankruptcy since 1980, they know of none that did so as a reorganization. In each case, the bankruptcy was a liquidation.

Stifel attributes their expectation that the Yellow bankruptcy will be a liquidation to:

1. It is unlikely there will be LTL buyers
2. The potential pool of buyers outside LTL would be small
3. The company is “deeply distressed and its value as a going concern would be less than the asset liquidation value.”

Market

Stifel predicts Yellow’s freight, which is reported at more than 40,000 fills per day, will be redistributed within the trucking industry with other LTL carriers picking up the bulk.

The Stifel analysts report most carriers have 20% space capacity and the Yellow closure means more freight will move to competitively-priced carriers. Some of Yellow’s business has been long-haul, and that portion will be absorbed by long-haul trucking companies.

Yellow Assets

At the end of 2022, according to the company’s annual report, Yellow was operating 308 transportation service facilities across North America.

Some, 166, were owned by Yellow and others, 142, were leased. Combined, those facilities provided 19,100 freight servicing doors. The smallest facility featured just three freight doors, while the largest had 426. The top 10 service facilities, ranked by number of doors, collectively had 2,520 freight doors. Of those top-10 facilities, seven were owned and three leased.

The Stifel analyst reported there will be “opportunities for competitors to upgrade into larger and better facilities, and for some well-capitalized LTLs to acquire terminals.”

The annual report also stated that Yellow’s fleet was comprised of 12,700 tractors and approximately 42,000 trailers.

The company owned 11,700 tractors at the end of 2022, according to the annual report, and leased 1,000. A majority of the trailers,34,800, were owned by Yellow and 7,200 were leased.

In April 2021, according to HDT, Yellow updated its fleet by placing an order for 1,222 Peterbilt Model 579s. That, at that point, was the largest single-year order Peterbilt had ever received for trucks with the Paccar powertrain, the Paccar MX engine and the TX-12 transmission.

The first quarter of that same year marked growth for Yellow as it took delivery of more than 1,100 tractors, 1,600 trailers, and 140 containers.

Yellow's Track Record of Struggles

Yellow, which previously operated as YRC, has faced operational and financial struggles for more than a decade, as illustrated by these reports from the HDT archives:

• 2010: YRC Worldwide prevented a possible bankruptcy filing through a debt-for-equity exchange with bondholders. In the deal, the company received approximately $470 million in par value.
• 2011: YRC Worldwide completed restructuring a $500-million plan to inject new capital, create liquidity, and reduce debt. As part of the 2011 restructuring, the company installed both a new chief executive officer and a new board of directors.
• 2012: Bloomberg Businessweek in March said YRC had “an 87% chance of default.”
• 2013 (August): YRC Worldwide posted a quarterly loss, only had $219 million in cash and cash equivalents, and was $1.3 billion in debt.
• 2013 (December): YRC tried to raise almost $29 million by selling 3 million shares of stock so it could repay more than $69 million that was coming due soon.
• 2014 (January) YRC Worldwide tried to borrow $1.15 billion to refinance debt.
• 2017 (May:) HDT Earnings Watch: YRC Worldwide 1st Quarter Loss Doubles
• 2017 (November): HDT Earnings Watch: YRC Plummets
• 2019 (December): YRC Hit by Industrial Slowdown, Makes Leadership Changes.

Yellow Tries to Sell Logistics Arm

Last week, in a July 27 press release, Yellow Corp. said it was exploring opportunities to divest Yellow Logistics, Inc., the company’s third-party logistics broker. The company reported it was engaged with multiple interested parties and discussions were active.

The company described Yellow Logistics as “a customer-specific logistics solution provider that specializes in truckload, residential, contract logistics, engineered solutions, distribution, and warehousing and is operated through an independent, non-union subsidiary of Yellow.”