Analyst predicts YRC bankruptcy

An industry analyst is raising strong doubts about whether trucking company YRC Worldwide Inc. will be able to avoid bankruptcy, even with the latest labor contract concessions from its 35,000 Teamsters employees.

''Bankruptcy, in our view, is not imminent, but we do believe it is becoming increasingly likely,'' wrote transportation analyst David Ross of Baltimore-based Stifel Nicolaus. Other industry analysts have also said YRC could file for bankruptcy.

In the report issued Wednesday, Ross downgraded YRC shares from ''hold'' to ''sell,'' saying company stock is basically worthless. It is likely that the first quarter of 2010 — typically the industry's weakest time of the year — will be the company's last, he said.

Company employees now own ''35 percent of zero,'' Ross said in an interview.

Shares of YRC on Wednesday fell 25 cents to $2.05. Shares are down 28.6 percent since Jan. 1 and are down 89.5 percent from a year ago.

YRC executives have been saying that they are cutting costs and making other changes to improve company finances. Chief Executive Officer Bill Zollars called the Teamsters vote on the latest concessions ''game changing.''

The company issued a statement Wednesday in response to the analyst report:

''YRC Worldwide continues to report significant progress on its comprehensive plan to manage through the economic recession. Through the ongoing support of its key stakeholders including its lender group, union and non-union employees and pension funds, the company is moving forward with its strategic plans to restore financial strength and position its operating companies for future success.

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YRC CEO: Volume May Be Bottoming; Rules Out Bankruptcy

Trucking giant YRC Worldwide Inc. weighed in on the steep slump in freight volumes Friday, with Chief Executive Bill Zollars voicing some optimism that the industry-wide trend at least may be bottoming.

"The percentage declines year-over-year have started to stabilize" in the early weeks of 2009, Zollars said in an interview. "Believe me, we're looking really hard for any sign of improvement."

Meanwhile, Zollars reiterated that bankruptcy isn't being considered as an option for debt-laden YRC. He said talks aimed at relaxing some debt covenants have been proceeding well with lenders and should be successfully completed by mid-February.

YRC shares were trading recently at $3.01, off 3.8%, after falling about 20% Thursday.

Shipping volumes have been on the wane for some time industry wide, but freight haulers - including fellow trucking companies J.B. Hunt Transport Services Inc. and Con-way Inc., as well as top U.S. railroads - have reported that the trend accelerated in the fourth quarter, in line with the deteriorating economy. Most have been hesitant to call a bottom.

Zollars concurred that the overall economy "definitely decelerated" in the fourth quarter, noting that YRC's freight volumes "progressively weakened" each month. Per-day tonnage for YRC's national segment dropped 15% in the quarter, with its regional business seeing a 14% drop when adjusted for network changes that took place early this year.

But Zollars said the trend "looks like it has stabilized" since the end of the year, particularly when adjusted for poorer weather conditions this winter.

Still, he said YRC isn't planning for an economic recovery in 2009 and still assumes freight volumes will be down overall from 2008 levels. YRC has been experiencing pricing pressure as well - with prices down an average 1.5% in the fourth quarter - although Zollars said he expects YRC to do better on pricing than the trucking sector overall this year.

Additional insight on the outlook for industry freight volumes likely will come Tuesday, when United Parcel Service Inc. (UPS), the largest U.S. package shipper, posts fourth-quarter earnings.

The UPS results are coming on the heels of a report Thursday indicating that international air cargo fell 23% in December from a year earlier, signaling a broader slump in global trade. The report from the International Air Transport Association includes freight on both passenger carriers and all-cargo carriers.

YRC, created through a 2003 combination of the Yellow and Roadway trucking brands, logged fourth-quarter results late Thursday, posting a narrower net loss on fewer write-downs.

The company's net loss came in at $244.4 million, or $4.14 a share, compared with a year-earlier net loss of $735.8 million, or $12.99 a share. Excluding write-downs, which in the latest quarter included charges related to the Roadway trade name, the loss was $1.63 a share.

Revenue dropped 18% to $1.93 billion.

On average, analysts surveyed by Thomson Reuters projected a 66-cent-a-share loss and revenue of $2.04 billion.

YRC has $1.36 billion in debt, a portion of which it has been struggling to refinance. But because of a sinking bottom line, the company is at risk of falling out of compliance with credit lines and has been working to renegotiate covenant