YRC says it could face impairment charges

The beating YRC Worldwide Inc. stock took on Tuesday, when share values plunged about 30 percent, has the potential to take more air out of the trucking company’s value.

In a Wednesday filing with the Securities and Exchange Commission, the Overland Park-based carrier said that because of its current market capitalization — $285.3 million before the markets opened on Wednesday — and current economic conditions, it may face a goodwill and trade name impairment for its National Transportation division, trade name impairment for its Regional Transportation division and goodwill impairment for its YRC Logistics division.

YRC is conducting tests of the assumptions and expects to determine any impairment charges when reporting its third-quarter financials, the filing said. Any impairment would be noncash and not be included in YRC’s credit facility and asset-backed securitization facility leverage ratio calculations, the filing said.

Jon Langenfeld, an analyst with Milwaukee-based R.W. Baird & Co., said in a research note Tuesday that “bankruptcy concerns are mounting” for YRC “with the stock down 44 percent over the past week.”

“Bankruptcy is not imminent, but deteriorating trends could force changes,” the note said. “While (fourth-quarter) covenant violation is possible, several quarters of worsening trends are needed to force an outright bankruptcy. Further, a covenant violation would likely precipitate a short-term waiver from lenders.”

YRCW has a $4 billion off-balance sheet liability for the Teamsters’ Multi-Employer Central States Pension, Langenfeld said in the note.

“Bankruptcy would likely be a low priority for lenders given the potential claim on assets by the Teamsters,” the note said. “Tangible book value is only $360 million.”

Just after the markets closed on Tuesday, YRC tried to reassure shareholders by releasing a statement emphasizing that the company would have positive free cash flow in the third and fourth quarters, pay off “significant” debt this year and probably remain in “full compliance” with credit agreement terms.

YRC shares closed at $4.98 on Tuesday after having opened at $7.14. A month ago, share prices were close to $19.

On Wednesday, the stock closed at $6.32, up $1.34, or 27 percent, on volume of 7.1 million shares, according to Yahoo Finance. The stock’s average daily volume the past three months is 2.2 million shares.

“With more than $9 billion in annual revenue and comprehensive networks in the national and regional markets, we continue to provide excellent service to our customers each and every day,” Chairman and CEO Bill Zollars said in the Tuesday release. “Despite the continuing unrest in the broad financial markets, our current financial position is solid, and we remain well-positioned to weather this economic environment.”

YRC already has had to write down values of some assets.

In January, YRC reported one-time goodwill impairment charges of $782 million in the fourth quarter, stemming mostly from a drop in the estimated value of the former USF Corp. companies, which YRC bought for $1.5 billion in 2005. They make up most of the Regional Transportation unit.