YRC Says It Will Post Profit During Second Half of 2011

YRC Worldwide Inc. expects to earn its first profit from operations since 2007 in the second half of 2011, the less-than-truckload carrier said.

Meanwhile, creditors and lenders awaited confirmation that the carrier’s financial restructuring has been completed.

YRC’s July 14 filing said the company will have profit before interest and taxes of $4.22 million in the second half compared with a loss of $48.4 million in the year-earlier period. The last time YRC made a profit on that basis was the $87.7 million earned in the third quarter of 2007.

As of press time, YRC had not announced completion of the restructuring that had to be done by July 22 under the terms of an agreement with lenders and creditors. The restructuring is meant to generate up to $240 million in cash from a debt-for-equity swap with creditors that are slated to wind up owning a majority of the company’s stock.

Restructuring talks have been continuing for at least six months.

YRC is seeing improved financial results along with other less-than-truckload carriers because their fortunes are tied to growing capital investment in the manufacturing sector, an analyst said.

“LTL carriers tend to be more exposed to industrial trends and do well when corporate capital spending is on the rise,” said Thom Albrecht, BB&T Capital Markets analyst, in a July 18 report. He expects an 8% YRC tonnage increase in the second quarter.

Albrecht stated that a recent survey of more than 500 companies found that they planned to increase capital spending 18% this year, more than three times faster than in 2010.

The completion of YRC’s financial restructuring also could bring the retirement of William Zollars, the current president and CEO, who has been in charge since 1999, and an announcement of new leaders for the company.

Zollars announced his intent to retire late last year, contingent on successful completion of the restructuring process. Chief Financial Officer Sheila Taylor left earlier this year, and board member William Trubeck is holding that post on an interim basis.

In the days leading up to the restructuring deadline, the company has made no comments about the process other than a one-sentence July 11 statement by Lead Director John Lamar that “the restructuring process is on track for a successful completion.”

One key component of the restructuring — a $400 million asset-based loan facility, which gives YRC the ability to borrow money from lenders, using its equipment and facilities as collateral — was announced on July 11.

Other terms that needed to be finalized include the sale of two groups of notes bearing 10% interest and the details of the equity that lenders will receive in exchange for their debt.

After completion of the restructuring, the Teamsters union will own about 25% of YRC’s stock. Current shareholders other than the union could see their equity diluted by as much as 97.5%, according to an April 29 announcement.

YRC’s July 14 filing said that it was disclosing the projections that were made available to lenders and financial advisors in April, when the carrier said it had reached an agreement with lenders and creditors on the restructuring plan. However, the projections weren’t released to investors or the public at that time.

The financial projections included an expected revenue increase of nearly 15% to $2.55 billion in the last six months of this year, compared with $2.23 billion a year earlier.

The latest filing also cautioned that “there can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than projected.” The reasons for results that could be different than the forecast included industry, regulatory, business and market conditions.

Compared with the first half of this year, YRC is expected to boost revenue by $167.1 million in the second half and overtake an operating loss of $69.1 million.

YRC’s financial outlook also listed more than $50.5 million in second half 2011 expenses for restructuring fees, letter of credit costs and stock compensation not paid in cash.