YRC's Spin May Be Positive, But the Operating Numbers Are Not

Summary

YRC Worldwide, the nation's largest trucking company by volume, reported a $158.7 million loss in the third quarter on sharply declining revenue of $1.3 billion, compared with a net loss of $720 million on $2.38 billion revenue in the year-ago quarter. Despite the huge losses, YRC Chairman and CEO Bill Zollars says the company "gained significant momentum" in the third quarter and some progress in new credit agreements with its consortium of lenders.

Analysis

Despite Bill Zollars' rosy scenarios, this latest quarterly loss from YRC Worldwide is troubling, and exceeded most analysts' expectations.

The worst news first:

- YRC National's total shipments per day were off 39.9 percent, an indication that some big shippers are bolting the nation's largest trucking company in favor of UPS Freight, FedEx Freight and, to a lesser degree, Arkansas Best's ABF Freight unit.

Full Story.........

YRC Worldwide posts 3rd-quarter loss

YRC Worldwide Inc. reported another loss in the third quarter, but the struggling trucking company also extended a lending agreement to October 2010.

Overland Park-based YRC lost $158.7 million, or $2.67 a share, on $1.3 billion in revenue. That was an improvement from the same period last year, when the company lost $720.9 million, or $12.58 a share. Quarterly revenue fell by more than $1 billion in year-over-year comparisons, however.

YRC's latest loss also was about one-half the losses posted in the 2009 second quarter. Full Story.....

YRC Worldwide Reports Significant Sequential Improvement in Its Third Quarter 2009 Results

*YRC Regional and YRC Logistics Profitable
*ABS Facility Renewed Early; Extended through October 2010
*New Long-Term Bank Amendment Provides for Deferral of Interest and Fees
*Update on Proposed Exchange Offer

YRC Worldwide Inc. today reported its results for the third quarter and provided an update on its comprehensive plan. For the quarter, the company announced a loss per share of $2.67 that included a net gain on property disposals of $.18 per share, severance charges of $.08 per share due to further headcount reductions and lease termination charges of $.11 per share related to further optimizing the networks. By comparison, the company reported a loss per share in the third quarter of 2008 of $12.58 that included impairment charges on goodwill and intangible assets of $13.20 per share, a curtailment gain of $.84 per share, and a net gain on property disposals of $.21 per share.

"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," stated Bill Zollars, Chairman and CEO of YRC Worldwide. "We achieved significant sequential improvement from the first half of the year. In fact, YRC Regional Transportation and YRC Logistics were profitable for the quarter, and our operating cash flow trends improved sequentially during the quarter despite the continued economic downturn."

YRC Worldwide also reported aggregated cash and available unused capacity under the credit facilities of $171 million at September 30, 2009, including $163 million of cash and cash equivalents. In addition, the revolver reserve under the company's credit agreement was $102 million at September 30, 2009. The company expects to commence an exchange offer for its outstanding USF 8-1/2% notes and its contingent convertible notes. The successful completion of this exchange would allow the company to access this revolver reserve under its recently amended credit agreement, therefore providing a significant source of new liquidity. More information regarding the exchange offer and credit agreement is provided below. The company also completed $21 million of sale and financing leaseback transactions and sold $68 million of excess property during the third quarter, including $10 million in pension deferral debt pay downs from these proceeds. Full Report......

Trucking Executive:Push To Target YRC Hurting Freight Prices

Cut-throat pricing in the trucking sector is being exacerbated by what appear to be efforts of some competitors to drive struggling YRC Worldwide Inc. out of business, an industry executive said Wednesday.

David Congdon, chief executive of Old Dominion Freight Line Inc. cited the economic downturn and trucking overcapacity as culprits behind "the worst pricing environment we've ever experienced."

But he also said in an interview that some of the pricing trends likely stem from deliberate moves to undercut YRC, a top but financially teetering player in the less-than-truckload, or LTL, shipping market. Less-than-truckload shippers consolidate freight from multiple customers onto single trucks.

A spokesman for YRC, which reports third-quarter results Friday, declined to comment, citing proximity to the earnings report. The debt-laden company also faces a deadline Friday to meet some covenants of its credit agreements, although it has won repeated leniency over the past year as its lenders have hesitated to push it into bankruptcy. Full Story........

YRC Worldwide Salutes Bi-Partisan Legislation Designed to Protect Jobs and Pensions

YRC Worldwide Inc., one of the largest transportation service providers in the world, expresses strong support for legislation introduced this week in the United States Congress that will save large and small businesses and protect the jobs and pensions of hundreds of thousands of Americans.

The Preserve Benefits and Jobs Act of 2009, sponsored by Rep. Earl Pomeroy (D-ND) and Rep. Pat Tiberi (R-OH), seeks to repair and resolve some unintended consequences of The Motor Carrier Act of 1980, the Multiemployer Pension Plan Amendments Act of 1980, and the Pension Protection Act of 2006. The Motor Carrier Act deregulated the trucking industry, while the Multiemployer Pension Plan Amendments Act required companies in these plans to pay for the benefits of retirees who never worked for them. Approximately 40 to 50% of pension contributions made by employers in many of these plans go to fund these non-sponsored participants.

"On behalf of nearly 40,000 YRC Worldwide employees, we wish to thank Representatives Pomeroy and Tiberi for recognizing that these costs represent a huge, hidden tax on large and small businesses that are unfairly shouldering this burden," said Bill Zollars, Chairman, President and CEO of YRC Worldwide. "We are hopeful that Congress will take swift action to resolve this inequity and protect the jobs and pensions of hard working Americans, retirees and their families."

Teamsters Commend Decision to Fix Hours of Service Rule

Teamsters General President Jim Hoffa today said he is pleased that federal regulators agreed to reform the hours of service rule for truck drivers.

The Federal Motor Carrier Safety Administration (FMCSA) signed an agreement with safety advocates and the Teamsters Union to revise the hours of service rule issued last November. The rule, a "midnight regulation" made final in the waning days of the Bush administration, extended the hours truckers can drive from 10 hours to 11 hours.

"We will continue to push for a rule that protects truck drivers, instead of the greed of the trucking industry," Hoffa said. "Longer hours behind the wheel are dangerous for our members and the driving public."

The rule was struck down twice by the U.S. Court of Appeals for the D.C. Circuit Court.

But in defiance of the court and in subservience to the trucking industry, the FMCSA reinstated it as an interim final rule in late 2007 and as a final rule about a year later.

The percentage of fatal crashes that result from driver fatigue rose 20 percent in 2005 from 2004 -- the first year in which the longer hours of driving were allowed.

"It's time for FMCSA to do what Congress has told it to do all along -- protect drivers' health and safety," Hoffa said.

The Bush rule raised the number of hours truckers can drive from 10 to 11 consecutive hours each shift, and from 60 to 77 hours of driving each week. The rule cut off-duty rest and recovery time at the workweek's end from 50 or more hours off-duty to as little as 34 hours off-duty.

The Federal Motor Carrier Safety Administration (FMCSA) first promulgated the 11-hour rule in 2003, increasing the number of hours truckers can drive. The Court of Appeals for the D.C. Circuit struck down the rule in 2004, but Congress reinstated it as part of the Surface Transportation Extension Act of 2004.

FMCSA issued a new Notice of Proposed Rulemaking in January 2005, proposing a rule that was little changed from the 2003 rule that had been struck down.

On July 24, 2007, the U.S. District Court of Appeals for the D.C. Circuit for the second time threw out the rule that increased driving time to 11 hours from 10 hours and allowed drivers to go back to work after being off-duty for only 34 hours.

In the 39-page opinion, Judge Merrick Garland called the rule "arbitrary and capricious."

The International Brotherhood of Teamsters was a party in the case, joining Public Citizen and the Owner-Operator Independent Driver's Association.

The deadline for the court's July decision to go into effect was Sept. 14. But legal challenges pushed that deadline back. FMCSA issued the interim final rule on Dec. 11, 2007.

The court declined on Jan. 23 to enforce its order to strike the rule, and the Bush administration issued it as a final rule on Nov. 19.

The Teamsters -- along with Public Citizen, Advocates for Highway and Auto Safety and the Truck Safety Coalition -- challenged the rule in the U.S. Court of Appeals for the District of Columbia.

YRC Worldwide: Pump Up the Volume

YRC Worldwide shares surged Monday on a pickup in volume after reports the trucking giant landed a long-term financing agreement.

YRC Worldwide shares jumped shortly before noon EDT after Briefing.com attributed the strength to reports of a long-term financing agreement that will alleviate the transportation company's liquidity needs. In recent months, the company has struggled while trying to stave off bankruptcy, resorting to massive job cuts and selling real estate.

Earlier this month, YRC Worldwide said its lenders had agreed to extend certain provisions under certain credit facilities until Oct. 30. "By extending the revolver reserve, we retain the flexibility needed to reach an agreement with the lenders that will fully support our comprehensive plan," Bill Zollars, YRC Worldwide's chairman and CEO, said in a statement on Oct. 12. Full Story.......

YRC Worldwide sector is 18% over capacity

YRC Worldwide Inc.’s sector of the trucking industry remains about 18 percent over capacity because carriers have not been going out of business as quickly as expected and are scrambling to get freight, analysts said.

Overcapacity in the less-than-truckload (LTL) sector, which hauls consolidated small shipments, means fierce price competition and probably lackluster third-quarter earnings, St. Louis-based Stifel Nicolaus & Co. Inc. said in a note Tuesday.

“Unless YRC shuts down or other carriers exit, we believe pricing should remain difficult through at least (the first quarter),” the note said.

YRC is in a mandated quiet period before earnings and declined comment. The trucking giant reports third-quarter earnings Oct. 30.

YRC continues to lose market share and sales employees, but the company still is operating, keeping price competition strong and margins low, the Stifel note said. However, publicly traded competitors keep taking market share from YRC, which Stifel has given a sell rating.

The future of some of those companies may be partly hitched to YRC’s fate, Dahlman Rose & Co. LLC said in a Thursday note. Arkansas Best Corp. based in Fort Smith, Ark., on Wednesday reported a loss of $5.57 million and a 22 percent drop in revenue to nearly $370 million. Freight industry volumes seem to be stabilizing, with drops slowing down steadily during the last few months, the note said, but Dahlman Rose has a sell rating on Arkansas Best shares because of YRC’s persistence, and a hold rating on YRC shares.

“While we believe ABFS to be a well-run company, its fate continues to be linked to both the economy and the survival of long-haul competitor YRC Worldwide,” the note said. “Given our belief that a strong recovery in the trucking industry is unlikely in the foreseeable future and that YRCW could survive longer than most believe, we continue to maintain our sell rating on the (Arkansas Best’s) shares.”

All the price competition is good news for shippers — for now. In a Monday note, Longbow Research analyst Lee Klaskow said about a third of the shippers he surveyed were most worried about higher transportation pricing, including the effect a potential YRC bankruptcy might have on rates.

Holland Next-Day Service Accelerates Shipments Moving Between Markets in Chicago and Southwest Missouri

Company introduces next-day transit times between Chicagoland and Springfield, Mo. service centers

Holland, a subsidiary of YRC Worldwide Inc. announced today the availability of next-day delivery service to and from the greater Springfield, Mo., area and its Chicago, Joliet, Rockford and Wheeling, Ill. service centers. The transit time reductions provide customers with even more next-day delivery options within the Holland network which already has more next-day lanes than any other carrier in its service territory.

"We're committed to being the best next-day carrier in the markets we serve," said Jeff Rogers, president - Holland. "We know we can bring value to our Springfield and Chicago area customers by providing them with next-day delivery along with Holland reliability that currently exceeds 97 percent and is one of the lowest claim ratios in the industry."

The accelerated service became available on Oct. 19 and features more than 124,000 ZIP code lane pairs. Only a few LTL carriers provide next-day delivery service between these markets today, with most providing delivery in two days. Holland also allows customers the option to guarantee delivery by 9 a.m., noon, 3:30 p.m. or within a specified time-window for a small, additional fee.

Customers can check service availability, transit times and schedule pickups online by visiting www.hollandregional.com. For additional information, please contact your local Holland account executive or call Holland customer service at (866) 465-5263.

‘Choppy’ recovery predicted for national economy, trucking industry

The choppy recovery theory for the U.S. trucking industry gained more credence with Friday’s (Oct. 23) report from the American Trucking Associations’ that showed a 0.3% dip in the September truck tonnage index.

The September declines comes after increasing 2.1% in July and August. The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 107.9 in September, up 2% from August.

Compared with September 2008, seasonally-adjusted tonnage fell 7.3%, which was the best year-over-year showing since November 2008. In August, the index was down 7.5% from a year earlier.

“The trucking industry should not be alarmed by the very small decrease in September,” ATA Chief Economist Bob Costello, said in a statement, noting that the latest reading fits with the premise that a national economic recovery will be moderate and choppy. “We took two steps forward in July and August and this was a miniscule step backward.”

Costello said the trucking industry should be prepared for ups and downs in the months ahead, but the general trend should be modest improvement.

“Between most economic indicators recovering and less of an overhang in inventories, I’m confident that the industry is still on the road to recovery,” he said.

Executives with the two trucking companies based in the Fort Smith/Van Buren region are likely hopeful Costello’s confidence converts to reality.

Van Buren-based USA Truck Inc. announced Oct. 22 a net loss of $1.6 million in the third quarter, compared to a gain of $2.4 million in the second quarter. Total revenue for the quarter was $96.171 million, down 34.1% from the same period in 2008.

Arkansas Best Corp. announced Oct. 21 a third quarter 2009 net loss of $5.6 million, compared to net income of $15.4 million in the third quarter of 2008. The Fort Smith-based transportation holding company has lost $50.17 million in the past four quarters.

Both companies said the national freight recession is largely to blame for the poor financial figures.

“We are now entering the fourth year of a severe freight decline that is unprecedented in our company’s history. It is unclear when business levels will benefit from a significant improvement in our nation’s economy,” Robert A. Davidson, Arkansas Best president and CEO, said in a statement.

Trucking serves as a barometer of the U.S. economy, representing nearly 69% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods, according to the ATA.

ATA Truck Tonnage Index Slipped 0.3 Percent in September

Don't Panic. This Trucking Recovery May Be Two Steps Ahead, One Step Back

Summary

The American Trucking Associations' closely watched advanced seasonally adjusted for-hire Truck Tonnage Index fell 0.3 percent in September. This came after it increased 2.1 percent in both July and August.

Analysis

It's easy to get caught up in 30- and 90-day windows in America's short-term vision approach to nearly all aspects of U.S. business.

Who's up, who's down, who's coming up at the plate?

But given the notoriously cyclical U.S. trucking market place, it's better to step back and take a slightly wider window of observation. So don't panic over the 0.3 percent decline in truck tonnage in September, as reported by the American Trucking Associations. Keep in perspective this index rose 2.1 percent in both July and August, so it's a net gain for the summer, really. Full Story.......