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"Because
we are a service William
D. Zollars |
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CHAIRMAN'S
LETTER Dear Shareholder, After 2000, the most successful year in our history, 2001 proved to
be an extremely challenging year for Yellow and our industry. We met
that challenge successfully with solid financial performance, our
highest service quality ever, and a 23 percent increase in shareholder
value. Of course, the real story of 2001 was the economy. We began to see signs of an economic downturn late in 2000, and we expected business levels to soften in 2001. But the economic downturn moved into recession, and continued to deteriorate in each successive quarter. In spite of that, we remained profitable, and generated positive cash flow through aggressive cost management, improved yield, mix management, and growth in our high-margin, value-added services. This performance was a direct result of the professionalism and dedication of our people. The experience and insight gained will serve us very well in 2002 and beyond. Despite the economic challenges we faced, investment in technology remained a top priority. For the third consecutive year, Yellow was named to the prestigious CIO-100. The award, by CIO Magazine, recognizes companies that use technology to gain operational and strategic advantage. We also were named to the InformationWeek 500, based on our technology-related accomplishments. MyYellow.com™, our world-class web site, continued to add powerful applications that enable customers to conduct their transportation business online. We passed a milestone in 2001 when the number of registered MyYellow users surpassed 60,000. Unlike many companies, our commitment to technology remains strong even in a weak economy. This commitment has given us an edge in the marketplace, and the opportunity to capture even greater rewards from our technology investment. We also made significant progress in managing our portfolio to improve shareholder value: • We changed the name of Yellow Freight System, our largest subsidiary, to Yellow Transportation. • We created SCS Transportation, Inc. to serve as a holding company for Saia and Jevic. • We launched Meridian IQ, a new transportation management solutions company. Let’s look at each operating subsidiary in more detail.
Yellow Transportation Our brand identity saw a subtle but important evolution this past year. Early in our history, we were named Yellow Transit, a regional provider. We evolved into Yellow Freight System in 1963, reflecting our status as a transportation services provider with national coverage. "Yellow Transportation continues to be a leader in service quality, reliability and safety - which represent the most important indicators of future success" In each case, we changed the part of the name that helps describe what we do, while retaining the part of the name that has become our brand. Our new name – Yellow Transportation – is consistent with that approach, because it better defines the comprehensive nature of our service portfolio, while leveraging the brand equity established since the company was formed in 1924. Yellow Transportation continues to be a leader in service quality, reliability and safety – which represent the most important indicators of future success. The promise of that brand still is delivered by our people, who focus on exceeding customer expectations through our "Yes We Can" attitude. We also made significant progress on a major network re-engineering effort that improved our competitive position versus regional providers in the two- and three-day service markets. The network enhancements enabled us to reduce transit times and improve service quality for our industry-leading Standard Ground™ national service, and led to the introduction of Standard Ground Regional Advantage™ service. Thanks to this re-engineering, the average time a shipment is in our system continued to decline while, at the same time, service reliability improved. Exact Express™, our guaranteed, expedited, time-definite service, has grown every year since its introduction in 1998. Exact Express revenue grew 6 percent in 2001, while most competitors in the expedited services market reported declines in volume. We made significant system upgrades, resulting in a faster and more convenient process to arrange expedited shipments. These enhancements are in keeping with our commitment to continuously improve and grow value-added segments of our business. We also continue to reap the benefits of our ISO certification. We were the first transportation services provider to receive ISO 9001 certification of our operating system company wide. Certification is granted by the International Organization for Standardization, an independent accrediting body that is considered the world’s foremost authority on quality. More and more, customers are requiring ISO certification of their transportation services providers as a condition of doing business.
SCS Transportation In March of 2001, we completed the integration of our western subsidiaries into Saia, our largest regional company. These transitions have proven difficult for many "Saia did a great job and had the strongest financial performance for the year of all our operating companies." companies. However, this integration was virtually seamless to customers, due primarily to effective planning in the areas of technology, operations and customer communication. As a result, Saia improved service in terms of on-time performance and reduced transit times. Saia did a great job and had the strongest financial performance for the year of all our operating companies. Operating income was up about 50 percent in a dismal economy. Jevic faced a difficult year in 2001, with the economy and stronger competition having an impact on earnings. However, despite these factors, Jevic improved service performance, while also aggressively managing variable costs. Because of these efforts, Jevic is well positioned to improve performance as the economy rebounds. Also, as part of our strategy to separate the regional companies, we formed a new holding company for Jevic and Saia. The new company is SCS Transportation, Inc. SCS stands for supply chain solutions, recognizing the roles these companies play in helping customers meet their distribution challenges. Both Jevic and Saia will continue to do business under their well-established brand names. Assuming favorable market conditions, we expect to spin off SCS Transportation to shareholders in 2002.
Meridian IQ Over the last few years, we have continued to expand our non-asset transportation services, including unique technology and capabilities at Transportation.com and Yellow Transportation. As part of our effort to better meet our customers’ needs, we have taken the next logical step by combining this technology and these capabilities into a single business – Meridian IQ. This alignment allows us to offer our customers one source for their global shipment management and execution needs. The services offered by Meridian IQ include domestic and international forwarding, and multi-modal brokerage – growing businesses within the Yellow family of companies. In addition, Meridian IQ will offer a unique new service called Transportation Solutions Management. This service consists of three core capabilities – web-native technology, transportation consulting, and network management – providing our customers a portfolio of capabilities that are flexible, fast, and easy to implement.One of the most important elements of our non-asset strategy is its complementary relationship with Yellow Transportation. Meridian IQ provides services to existing Yellow Transportation customers, while using the Yellow Transportation network to deliver many of those services. In turn, Meridian IQ will bring new business opportunities to Yellow Transportation. We expect Meridian IQ to become a substantial part of the Yellow portfolio in the next few years, with our national longhaul network providing a unique competitive advantage.
The Future The theme of this annual report is our core purpose – Making global commerce work by connecting people, places, and information. On these pages, you will see examples of how our people bring those words to life. Because we are a service company, our people are the business. They provide our customers the positive experiences that keep them coming back to the family of Yellow Companies for solutions to their transportation needs. Our forecast for 2002 calls for a return to a more normal growth rate in the second half of the year. We are well positioned, and even a modest improvement in the economy will make us a stronger and much more profitable company. Finally, it is important that we continue to differentiate our company in the marketplace by demonstrating to our customers that we provide superior value. Going forward, our job will be to concentrate on the fundamentals of providing service that is on-time and defect-free. We believe that the best thing we can do to ensure our success is to not just meet customer expectations but exceed them each and every day – one customer at a time.
Chairman of the Board, President and Chief Executive Officer Yellow Corporation |
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