NOL Carryforward Nightmare

A tax rule designed to apply to M&A events snares YRC, limiting its use of financial losses to offset future gains

This is the fourth in a series of six articles about the volatile financial misfortunes and turnaround of trucking company YRC Worldwide.

Terry Gerrond is like all employees of YRC Worldwide: each time the company completed another refinancing, staving off bankruptcy or worse, he got to keep his job.

But Gerrond has a special perspective. As vice president of taxation, he frowns at one side effect of the refinancings: a limitation on using YRC’s net operating losses (NOLs) to mitigate future tax liabilities.

Each of the company’s debt restructurings in 2009, 2011, and 2014 was subject to IRS rules that limit the amount of NOLs that can be carried forward at any point in time when there’s been greater than a 50% change in company ownership compared with three years prior. Each restructuring was marked by enough new equity investment, lenders’ conversion of convertible notes from debt to equity, or both to reach that threshold. (Interestingly, YRC also reached the threshold in 2013, simply because of significant investors buying or selling the stock, and convertible debt holders exercising their conversion rights.)

The rules — which have been part of the tax code for many decades, as most recently amended in the Tax Reform Act of 1986 — have a meritorious purpose: to prevent profitable companies from buying money-losing companies at bargain prices and using the latter’s NOLs to mitigate their own tax liabilities. But the rules are written broadly enough that they apply to other scenarios as well.

Full story here...............

Hoffa Statement on USTR Trade Deficit Claims

The following is the official statement from Teamsters General President Jim Hoffa in response to United States Trade Representative Michael Froman’s claims that the U.S. has a trade surplus with its free trade agreement partners, contradicting U.S. International Trade Commission data showing a large trade deficit.

“The U.S. Trade Representative has made recent statements claiming that the U.S. has a trade surplus with its free trade agreement partners. The problem is this simply is not true.

“We see firsthand the devastating impact that free trade agreements, like the South Korea trade deal, have on American workers and our economy. The South Korea agreement had its third anniversary recently, but this was little cause for celebration. This trade deal resulted in the loss of 84,000 good U.S. jobs and caused the trade deficit to soar to 84 percent.

“Mr. Froman believes this agreement has been great for the U.S. auto industry. In reality, the vehicle trade deficit with South Korea has grown by 43 percent under the agreement, which resulted in a $21.1 billion automotive trade deficit with South Korea last year. This means lost jobs and wages for American workers.

“What’s even scarier is the South Korea trade agreement is the template for the 12-nation Trans-Pacific Partnership (TPP).

“Americans oppose fast-track trade promotion authority to pass the TPP, which threatens jobs, wages, food safety and environmental protections. It’s important for our elected leaders to keep the impact of the trade deficit in mind when considering agreements like the TPP and its impact on workers.”

YRC's top executives earn big increases in total compensation in 2014

YRC Worldwide Inc.'s top executives received large increases in total compensation in 2014, according to the company's annual proxy statement.

On Tuesday afternoon, the Overland Park-based less-than-truckload carrier filed its annual proxy statement with the Securities and Exchange Commission. The filing disclosed the amount paid to YRC's top executives and directors in 2014.

In 2014, the following executives received greater compensation than in 2013:

• CEO James Welch earned $10,795,025, an increase of more than $8.6 million over the $2,170,630 Welch received in 2013

• CFO Jamie Pierson earned $6,985,251, an increase of more than $4.9 million over the $1,999,223 Pierson received in 2013

• Michelle Friel, executive vice president, general counsel and secretary at YRC Worldwide, earned $1,881,929, an increase of $915,769 over the $966,160 Friel received in 2013. She left YRC in January

Full story here..............

Teamster lawsuit little threat to US-Mexico truck trade even if successful

Even if the Teamsters fail to overturn a recent federal decision to allow Mexican motor carriers to haul loads past the border region, the impact of the new program may be negligible anyway.

The majority of U.S.-Mexico cross-border trade is shuttled over the border region, and interest from Mexican trucking companies in hauling goods farther inland and back to Mexico has received scant interest. To date, the Federal Motor Carrier Safety Administration has received just four applications from Mexican trucking firms after the agency announced in January that Mexican drivers could apply to move loads into the U.S. and back to their home country. The move brought the United States into compliance with the North American Free Trade Agreement that's been in effect for two decades.

The four applications is a paltry sum compared to the number of qualified motor carriers in Mexico that could participate, given the program is open to all interested parties. It’s also considerably less than the 15 motor carriers that previously participated in a FMCSA three-year pilot — a pilot meant to test the stability of the very program now in dispute.

Nevertheless, the Teamsters Union has refused to back down. The International Brotherhood of Teamsters, alongside the Advocates for Highway and Auto Safety and the Truck Safety Coalition, filed a joint suit March 10 against the U.S. Department of Transportation, aiming to keep Mexican trucks out.  Full Story........