Tuesday, January 29, 2008

YRC Worldwide plans to announce restructuring

YRC Worldwide will restructure its regional trucking operations in the face of its worst financial quarter in 15 years, but analysts were told Monday the announcement is a couple of weeks away.

Cost-saving plans that YRC did reveal did not boost investor confidence. The stock of the Overland Park company plunged following the release of its quarterly results.

YRC’s stock fell to $16.08 in Nasdaq trading Monday, down 14.7 percent from Friday’s close and reversing a steady climb in the stock price since Jan. 4. The stock decline came after the company reported a fourth-quarter net loss of $735.77 million, or $12.99 a share. That compared with earnings of $46.46 million, or 80 cents a share, during the same period in 2006.

Two analysts at Bear Stearns & Co. and Merrill Lynch & Co. last week predicted YRC would announce the closing of some of its regional operations at USF Reddaway and USF Holland in its presentation Monday.

Bill Zollars, YRC’s chairman and chief executive, said: “The restructuring plan is pretty much on schedule, but it’s not quite ready to roll out.”

YRC performed below analyst expectations for the quarter, earning 1 cent a share before taking charges totaling $13 a share. Analysts on average expected YRC to earn 53 cents a share before charges, according to a Bloomberg News survey.

The biggest charge was $782 million, taken mainly due to the YRC regional carriers declining in value and the sharp drop in stock price through 2007. Revenues for the fourth quarter fell to $2.35 billion, a 2.4 percent drop from the 2006 fourth quarter. The weight of freight moved by YRC’s national carriers, Yellow Transportation and Roadway, fell by 8 percent compared with the 2006 fourth quarter.

Zollars said the economic downturn has continued into the normally slow first quarter, but he was hopeful that the company’s fortunes would improve as the year proceeded.

“It feels like we’re at the bottom” of the economic cycle, he said. “I’m not sure how long the bottom’s going to last, but at least it doesn’t look like much further deterioration.”

Zollars discussed some integrational changes that will be occurring at YRC this year, including combining the corporate sales force that up to now has been separate for the company’s various brands.

The company last year formed its Enterprise Solutions Group to provide a single contact for its biggest customers. Now all customers will have that same type of service.

YRC also will combine the technological operating platforms of Yellow and Roadway to create more seamless service and better manage all of the company’s freight, he said.

YRC said another positive development recently is the tentative five-year contract with the Teamsters union, which represents about 50,000 YRC employees. The proposed agreement is being voted on by the work force, and it will provide greater operational flexibility for the company, said Mike Smid, president of YRC North American Transportation.

In addition to providing increases in wages and benefits, YRC was able to get the Teamsters to agree to allow the company to use utility employees as well as temporary overnight dockworkers for four-hour stretches during busy times. The agreement also allows YRC to take more of its freight off rails and use other trucking alternatives, such as other truckload carriers.

“It’s no fun on the downturn, but it’s a lot of fun on the way back up,” Zollars said. “We didn’t like 2007 at all, but we expect to get back on track sooner rather than later.”

Jason Seidl, analyst for Credit Suisse Holdings in New York, agreed that the new Teamsters contract would help the company, but many challenges remain. USF Corp., the regional trucking firm YRC bought in 2005, was having problems even before the acquisition. Those difficulties were masked at the time by a strong economy, Seidl said.

Zollars “would seem to be the most optimistic of all the truckers right now,” he said.

For the year, YRC lost $638.38 million, or $11.17 a share, on $9.62 billion in sales. In 2006, the company earned $276.63 million, or $4.74 a share, on $9.92 billion in sales.

1 comment:

Skye @ operational restructuring said...

Yes, it is no joke to be on the downturn situation. The only challenging thing is getting up and going back on the top again.

Management must work together to in order to get back to business as soon as possible.