YRC Reports Loss, Names Wicks President
This story appears in the Nov. 9 print edition of Transport Topics.
YRC Worldwide Inc. said it is making financial progress on two fronts by reporting sequential earnings improvement and launching a debt-for-equity swap that could lower costs.
YRC also announced another organizational change, promoting Tim Wicks to president and chief operating officer from executive vice president and chief financial officer.
The earnings results showed that YRC lost $158.7 million in the third quarter, compared with a loss of $255 million from operations in the second quarter. Revenue dipped to $1.31 billion from $1.33 billion on a sequential basis.
“We gained significant momentum in the third quarter as we executed on our comprehensive plan to improve operating efficiencies, restore financial strength and position our company for future success,” said Bill Zollars, chairman and CEO of YRC Worldwide, citing profitable quarters for regional less-than-truckload and logistics units. “We achieved significant sequential improvement from the first half of the year.”
YRC was not alone in reporting better results on a sequential basis. Other less-than-truckload operators such as Arkansas Best Corp., Con-way Inc., Old Dominion Freight Line and Saia Inc. also reported that the third quarter was better than the second quarter. In total, those companies compiled about $55 million in profit.
YRC’s third quarter operating loss companywide was $118 million, compared with $299.7 million in the second quarter. Per-share losses were $2.67 in the third quarter, $3.53 in the second quarter.
The third-quarter loss last year, with a pretax impairment charge of $823 million, was $720.9 million, or $12.58 a share. Excluding the charge for writing down the value of trade names, YRC had a profit of $36.6 million. Revenue last year was $2.38 billion in the 2008 third quarter.
Consultant Satish Jindel, who heads SJ Consulting Group Inc., Sewickley, Pa., said comparisons with the third quarter last year were inappropriate because the company’s structure changed. Since then, YRC combined Roadway and Yellow Transportation’s less-than-truckload networks, closed hundreds of terminals and cut more than 10,000 jobs. He urged comparisons with second-quarter measurements such as revenue, tonnage and revenue per hundredweight.
YRC’s third-quarter 2009 operating loss was confined to its national LTL service, which lost $122 million in the third quarter and $239.5 million in the second quarter as revenue fell to $849.3 million from $873.4 million.
The regional LTL unit’s profit was $293,000, compared with a second-quarter loss of $48.3 million.
From the second quarter to the third, regional LTL revenue rose slightly — to $338.8 million from $337.9 million. Tonnage rose 0.4%, and revenue per hundredweight slipped 0.2%.
Logistics operating income reached $6.3 million, compared with an $8 million second-quarter loss.
“YRC is out of intensive care and is now in the recovery room,” Jindel told Transport Topics.
Meanwhile, the exchange offer, if the note holders accept it by Dec. 16, would save YRC $25 million per quarter in lender fees and interest and would allow the company to use $106 million in a revolving credit reserve account. The offer announced on Nov. 2 covers $536.8 million in notes.
It covers $150 million worth of notes that were used to pay part of the cost to buy regional trucker USF Corp. in 2005 and so-called contingent convertible notes that would be exchanged for stock.
Analyst Jon Langenfeld estimated that successful completion of the exchange offerings would approximately double the number of outstanding shares and could result in issuing up to 20 shares for every one outstanding now.
That share total excludes the potential issuance of additional shares if the Teamsters union chooses to exercise stock options that were granted in exchange for wage and pension concessions. Under the terms of those agreements, the union could hold 35% of the company’s shares if all options were exercised.
The financial changes to which lenders agreed, contingent on the note exchange, won praise from the union.
“YRCW Teamster members did their part,” General President James Hoffa said. “The other YRCW stakeholders recognized our members’ sacrifices and responded in kind to do their part in ensuring YRC’s survival.”
Wicks was elevated to president, a position that Zollars held, only 24 days after he was also promoted to chief operating officer. He was chief financial officer of YRC from September 2008, when he joined the company, until the Oct. 5 promotion. Zollars remains chairman and CEO.
“The company is not completely out of the danger zone,” Dahlman Rose analyst Jason Seidl said in a report. “The company still has to contend with a challenging macro-environment and competition that is less than rational.”
