Trucking Freight

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Overland Park, KS-based YRC Worldwide has made Moody’s Bottom Rung list. The list contains 283 companies most likely to default on their debts.

Companies from Chrysler to Rite Aid are listed. Moody’s told Reuters, “about 45 percent of companies on the list will default on debt in the next year which could include anything from filing for bankruptcy to missing debt payments.”

The Wall Street Journal writes, “The dominant industries on this at-risk list include much of the U.S. auto industry, the casino sector, and many retail chains, newspapers and broadcast-TV and radio-station networks. Energy firms, airlines and restaurant chains appear often on the list.”

Last year, Moody’s Bottom Rung list had 157 companies, according to ZDnet.

YRC’s stock opened at $1.88 on Tuesday. The company that consists of Yellow Transportation and Roadway Trucking has been issuing layoffs, and cutting employee compensation to save money.

Moody’s lists the probability of default rating for YRC as Ca. The corporate family rating is listed as Caa3. Both are at the low end of Moody’s rating system.

The Moody’s rating system is from excellent to poor: AAA, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, C.

YRC Worldwide Inc. has asked its union and lender for permission to defer certain pension fund payments if it offers company real estate as collateral.

The Overland Park-based trucking company YRC, merged Yellow Transportation and Roadway Trucking said in a Monday filing with the Securities and Exchange Commission that it is working to finalize discussions with the Teamsters and Chase Bank. YRC wants to offer its real estate as collateral in lieu of making pension fund payments for certain months, to be agreed upon. Payments can be $34 million to $45 million a month depending on employment levels, which vary by freight levels and the season.

YRC’s lenders must approve releasing specific real estate to secure deferred payments instead of selling the property.

“The company believes these alternatives can allow the company to utilize the real estate to its maximum benefit as opportunities arise,” the filing said. “These potential transactions are part of the company’s ongoing plans to address its financial performance and improve cash flow amid freight volume reductions in the recessionary environment.”

YRC doesn’t expect the deal to affect current or future benefits of employees participating in the pension funds, the filing said.

YRC, which has been struggling in a prolonged downturn, said last week that freight volume drops had accelerated during the first quarter. The company recently has been arranging sale-leasebacks of its real estate to improve cash flow.

This year, YRC expects an additional $100 million in proceeds from excess property, as well as significant sale-leaseback deals, including more than $270 million finalized or under contract.

YRC Worldwide hauls about one third of all the manufactured and retail goods in the country. So it’s not a good sign that it foresees doom and gloom for the U.S. economy in the near term.  YRC said it expects to post a third-quarter loss from core operations as further economic weakness drags down volume and prices.  YRC Worldwide also expects to incur reorganization costs of about 6 to 8 cents per share primarily related to employee severance.  It will also declare a one-time gain of 70 cents per share related to a streamlining of non-union employees retirement plans.

Nonetheless, it expects to be in full compliance with all terms of its credit agreement and to have borrowing capacity in excess of $600 million.

“The economy has softened further impacting both volume levels and pricing across our operating companies,” said chairman Bill Zollars. “After a solid second quarter, the third quarter started slowly and has progressively weakened.”YRC said its earnings have also been impacted by investments in combining its national companies, Yellow Transportation and Roadway. In 2003, Yellow acquired Roadway Express to become Yellow Roadway. Then in 2005, Yellow Roadway purchased USF and in 2006 became YRC Worldwide. “We do not see signs of the economy improving in the near term, but as we merge Yellow and Roadway, we expect operating results to show meaningful improvement,” said Zollars.

Some reasons why Yellow Freight and Roadway are losing money

“I have worked for Yellow Transportation for ten years now”, says Shawn. I worked my way up from the dock to management. Since being a part of the YRC management team, I am shocked to see how poorly our company operates. We also have another account at the terminal I work for, in which the pricing is so bad, we are losing six figures a month. That is more than a million dollars a year loss just from this one account. When the issue of how much money was being lost on the account is brought to anyone’s attention in corporate, the response is ‘We don’t care about the money, we need to service this client.’”

Like many companies these days, YRC Worldwide, Yellow Transportation and Roadway Freight, is finding that the debt that helped it grow in good times is now a potentially fatal albatross around its neck as the freight industry navigates tumultuous times.

Earlier in this decade, the former Yellow Freight acquired competitors such as Roadway Express and US Freightways to become the giant of the less-than-truckload industry.

Now, however, it struggles to survive, with its ability to service its debt and meet so called “covenants” attached to that debt is in real doubt.

The company recently bought some time when it renegotiated the terms of its debt agreements that extended some credit lines that were to have expired in April. But the leash isn’t long.
According to Ed Wolfe of Wolfe Research, an analyst firm that covers the transportation industry, with the new agreement “YRCW won a lifeline from its banks but seemingly only for another few quarters, as the new terms require a major operating turnaround by 2Q:09 with even further improvement in 2H:09 despite few signs of such improvement in the market place.”

YRC, however, is making lots of moves. It finished its operational integration of the former Yellow Freight and Roadway networks in December of 2009, which should allow it to slash costs. That will be, in part, by reducing redundant capacity and getting higher utilization on the routes that remain for the integrated network.

Yellow Transportation has said that, independently, each of the networks was lately running at only 75% utilization.
The integration will also allow YRC to eliminate more jobs to save money. It let go 12% of its workforce in 2008, and more layoffs are to come in 2009.

Earlier this year, the company also achieved an unprecedented wage reduction of 10% with the Teamsters union, which will save it as much as $250 million annually.

YRC Worldwide Inc. will close 27 service centers and eliminate 1,100 jobs this month in an effort to cut costs by $50 million.

The closings affect sectors of subsidiary YRC Regional Transportation, Overland Park-based YRC Worldwide (Nasdaq: YRCW) said in a Thursday filing with the Securities and Exchange Commission. YRC Regional Transportation has performed poorly in recent months, contributing to its parent company’s $735.8 million fourth-quarter loss.

USF Holland will close six centers on the fringe of its territory in Albany, Ga.; Jackson, Miss.; Lumberton, N.C.; Little Rock, Ark.; Mobile, Ala.; and Metter, Ga.

USF Reddaway will close 21 centers in Louisiana, New Mexico, Oklahoma and Texas.

The closings will cost the company about $10 million, split between one-time lease termination and employee severance charges, probably in the first quarter. YRC still will serve the areas through its other brands, the filing said.

Savings from the action will make up a “significant” piece of the $50 million in costs YRC pledged to cut from YRC Regional Transportation, the filing said.

YRC Worldwide bought the former USF Corp. companies, which make up most of its regional transportation unit, for $1.5 billion in 2005. The company took a $782 million charge in the fourth quarter mostly because of a drop in those companies’ value. Yellow Transport and Roadway merged earlier.

YRC is a subsidiary of YRC Worldwide Inc., a Fortune 500 company and one of the largest transportation service providers in the world. YRC Worldwide is a holding company for several successful companies, including YRC, Yellow Transport, Roadway Express, Reimer Express, YRC Logistics, New Penn, Holland, Reddaway and Glen Moore. YRC Worldwide companies provide global transportation services, transportation management solutions and logistics management. The companies represent a comprehensive array of services for the shipment of industrial, commercial and retail goods domestically and internationally. With headquarters in Overland Park, Kan., YRC Worldwide employs 55,000 people.

YRC Worldwide Inc. expects significant improvement in the second quarter as internal cost-saving initiatives, such as the integration of two subsidiaries, Yellow Transportation and Roadway Express, take effect.

The integration of Yellow Transport and Roadway is expected to mean about 1,000 more job cuts in the middle of the year.

Bill Zollars, CEO of the Overland Park-based trucking company (Nasdaq: YRCW), presented the information at a JPMorgan Aviation and Transportation Conference on Wednesday. YRC’s stock closed on Wednesday at $2.89, up 89 cents, or 44.5 percent, on volume of 3.4 million shares, according to Yahoo Finance. The stock’s average daily volume the past three months is 2.1 million shares.

Beginning in March and concluding in the fourth quarter of 2009, YRC offer the largest transportation network in North America with approximately 450 service centers — more than 100 additional service centers compared to the individual Yellow and Roadway networks. For you, this means more direct points, improved service, fewer handlings, and increased responsiveness to your business needs.

We know our service center locations are important to you. Here is a way for you to see, by state/province/country, our complete network of approximately 450 service centers.

Roadway Express and Yellow Transport merged in March to form YRC.