YRC Worldwide is in talks to put up real estate as collateral in place of pension contributions

YRC Worldwide Inc. is negotiating with the Teamsters union and its lending group about putting up real estate as collateral in place of monthly pension contributions.

In a regulatory filing, YRC said it makes $34 million to $45 million in monthly pension payments depending on employment levels at three trucking subsidiaries, YRC Inc., USF Holland Inc. and New Penn Motor Express Inc.

The company said any agreement would not affect the current or future benefits of those participating in the pension plans.

YRC Worldwide said it has asked it lending group to release some of the $1.5 billion in assets put up as collateral last fall following a credit-rating downgrade. The company said further details will be released once an agreement is reached.

The Overland Park-based trucking company has thousands of current workers and retirees who belong to the Central States Pension Fund, run by the Teamsters. YRC Worldwide is the biggest contributor to the multi-employer plan.

Teamsters officials declined to comment on YRC’s disclosure.

However, an internal Teamsters memo to locals nationwide said YRC was seeking payment deferrals to pension funds for several months, according to a report on the Journal of Commerce’s Web site.

In its annual report, the Central States fund reported $17.3 billion in pension assets at the end of 2008, down from $26.8 billion a year earlier. Much of that loss was blamed on the stock-market collapse last year.

The report of YRC Worldwide’s talks with the union comes a week after Bill Zollars, YRC’s chairman and chief executive, told analysts that freight demand remained very weak.

Analyst lowers forecast for YRC Worldwide

An analyst cut his earnings estimates for YRC Worldwide Inc. following a presentation last week in which YRC detailed accelerating shipping volume declines.

In a Monday note reacting to the presentation, New York City-based analyst Lee Klaskow of Longbow Research cut his first-quarter earnings-per-share estimates, excluding nonrecurring items, from a loss of $1.40 to a loss of $1.70. He cut his full-year earnings estimate from a loss of $2.31 to a loss of $2.71, and cut the 2010 estimate from earnings of 18 cents to earnings of 4 cents.

YRC shipping volumes in the first quarter dropped 29 percent compared with the same period of 2008 as the economy weighed on customers, the Overland Park-based trucking company (Nasdaq: YRCW) said in the presentation, filed Monday with the Securities and Exchange Commission. The company attributed 15 percent of that to the economy, 3 percent to business mix changes and 11 percent to volume diversion due to integration and financial concerns.

Volumes had fallen 15 percent in the fourth quarter and 9 percent in the third quarter compared with the respective prior-year periods.

“The biggest negative surprise for us was the magnitude in tonnage decline during the (first quarter),” Klaskow wrote, attributing drops primarily to increasingly competitive pricing in the sector.

Klaskow wrote that several of YRC’s largest customers were at the presentation and seemed to be standing by the company. Despite slashing earnings estimates, Klaskow maintained a neutral rating for YRC.

“We believe the restructuring and network integration are steps in the right direction, but were a long time coming,” he wrote. “Assuming we see some modest (gross domestic product) growth in 2010, we believe YRC will be able to weather the current economic storm; however, it will emerge a much smaller entity.”

A better business mix is beginning to improve revenue trends, YRC said in the presentation. In addition, YRC has made internal cost savings and integrated two subsidiaries, measures expected to save about $500 million in operating expenses this year. YRC expects to cut capital expenditures from about $249 million last year to about $130 million this year.

Falling fuel prices have led to the lowest fuel surcharge since 2005, making it difficult to compare first-quarter revenue per hundred pounds of goods with the year-ago period, the presentation said. The fuel surcharge was 12.8 percent in the first quarter, compared with 25.8 percent in the same period of 2008.

The integration of Yellow and Roadway prompted some technical issues, but service has improved and is close to prior-integration levels, the company said in the presentation, and productivity has made major gains.

The economy continues to be very weak with no major signs that improvement will come soon, according to the presentation. However, YRC — a large player in an industry that leads economic downturns and recoveries — has seen some indications of hitting the bottom, though YRC said it’s too early for those signs to be conclusive.

YRC Seeks Millions in Pension Payment Deferrals

Carrier offers real estate as collateral in lieu of contributions

YRC Worldwide is looking to defer millions of dollars worth of payments into Teamster union pension funds to help prop up the company’s cash reserves as it struggles to improve its finances in the ailing economy.

In an April 13 filing with the Securities and Exchange Commission, YRC, along with USF Holland and New Penn Motor Express, said they are seeking an agreement with the Teamsters and YRC’s banks to use real estate as collateral to the multi-employer pension funds in lieu of making contributions.

“Depending on employment levels (which, in turn, are driven by freight levels and seasonal changes in those levels), the company makes multi-employer pension contributions of $34 million to $45 million per month,” according to the SEC filing.

An internal Teamster memo from Teamster Chairman James P. Hoffa to local unions participating in the National Master Freight Agreement said YRC management was seeking “several months” worth of payment deferrals from the pension funds.

YRC’s latest move to stay afloat in the brutal freight environment comes a week after management told Wall Street analysts that tonnage at its national and regional less-than-truckload operations declined 29 percent and 27 percent respectively, year-over-year in the first quarter.

“It’s certainly not a positive sign,” said David G. Ross of Stifel Nicolaus. “The only reason they would have to do this is that they don’t have the cash, and that means things aren’t good. They said they’re not buying any new equipment, they’ve cut wages 10 percent – anything they can get out of paying, they’re doing. They wouldn’t be thinking about deferring pensions if things were improving.”