Wednesday, January 26th, 2011 in Blog : by Admin YRC Worldwide Inc. (Nasdaq: YRCW) shares spiked 12.5% to $4.24 on January 25,after the American Trucking Associations (ATA) revealed that Truck Tonnage Index jumped 2.2% last month hitting the highest level since September 2008 and posting positive signs that freight volumes could recover. Moreover, the Association reported that trucking tonnage increased 4.2% in December 2010, compared to December 2009 and predicted that freight levels could grow moderately during the first half of 2011, increasing the speed after that. YRCW shares lost 82% during 2010 due to challenging conditions in the trucking industry that caused the company to lose money in every quarter over the last years. The company is currently struggling to avoid bankruptcy under a heavy debt load and tough competition. It negotiated with its lenders to soften the terms of its debt, asked workers to accept pay cuts and sold real estate to continue operations. As a part of the recovery plan, YRCW has been selling assets, reducing costs through layoffs, while working to recapitalize and reduce debt levels. For the first 9 months of 2010, it succeeded to shrink the debt by $73 million. However, the debt balance of $1.1 billion, as of September 30, 2010, threatens severely the company’s ability to continue as going concern. Moreover, YRCW has recently finished the 19th renegotiation of its loan obligations to its bankers, ensuring the banks that it would use any future operating cash flows primarily to service the debt. Additionally, YRCW achieved a deal with the Teamsters union to maintain 15% wage cuts, representing $35o million a year in labor concessions, which were accepted last year through 2015. The Teamsters union has also agreed to provide additional time for the company and its key stakeholders to finalize plans to recapitalize the company’s balance sheet. YRCW now has until March 15 to enter into an agreement and May 13 to get it completed. The trucking industry was struck exceptionally hard during the economic crisis with nearly 2,000 companies wiped out of business and others reducing the size of their fleets. Only in 2010 demand volume begun to rise, giving truckers improved fundamentals. For 2010, the trucking tonnage was up 5.7% compared with 2009, according to ATA. In recent quarters, reports from major trucking companies suggest that shipment weights and load count are both increasing as various markets recover. Truck freight volume, however, remains quite unpredictable. Over the last quarters, YRCW has begun to show signs of stabilizing. Revenue for Q3 2010 fell slightly to $1.14 billion from $1.2 billion a year earlier. Shipments per day at the company’s National unit fell 12.2% in Q3 2010 over Q3 2009. At its Regional unit, shipments were up 2.5%. However, sequentially the company reported an improvement in shipments per day tonnage of 1.2% at the National unit and 2.1% at its regional unit. Moreover, during Q3 2010, the company reported a dramatic reduction in its losses as it benefited from lower costs as well as a modest recovery in freight. YRCW posted a loss of $61.7 million, or $1.33 per share, compared with a year-ago loss of $158.7 million, or $66.66 per share. Going forward, YRCW plans consolidation of facilities in 2011 to further pare down expenses and optimize the fleet management to create greater density moving to and from its delivery terminals. However, the huge indebtedness remains the biggest challenge for the company. Favorable industry trends, combined with an optimized cost structure and highly leveraged balance sheet, positions YRCW well to generate significant returns to its shareholders if it succeeds to breakeven. However, the company failed to catch the tailwind of trucking tonnage recovery in 2010 losing market share to its direct competitors, which reported growing daily tonnage levels and revenues in 2010. As the freight levels are expected to keep up the same growth pace in 2011, YRCW has another opportunity to capture the industry’s expansion and turn it into shareholder’s value. http://www.microstockprofit.com/2011/01/26/...s-in-trucking-industry/ |