Sunday, January 30, 2011

YRC Worldwide Inc. (NASDAQ: YRCW): Q4 Earnings Preview 2010

YRC Worldwide Inc. (NASDAQ: YRCW) is scheduled to release its fourth-quarter earnings before the opening bell on Friday, February 4, 2011. Analysts, on average, expect the company to post a loss of $1.37 per share on revenue of $1.07 billion. In the year ago period, the company posted a loss of $24.00 per share on revenue of $1.15 billion.

YRC Worldwide Inc., through its subsidiaries, provides various transportation services worldwide. YRC Worldwide, through wholly owned operating subsidiaries offers its customers a range of transportation services.

During the economic downturn, YRC lost more than $2.2 billion, and annual revenues fell by nearly one-half in 2009 compared with 2006. However, the company has now begun to show signs of stabilizing. In the third quarter,  the company reported a dramatic reduction in its losses as it benefited from lower costs as well as a continued upswing in freight. In the preceding third quarter, the Overland Park, Kansas-based company's net loss was $62 million, or $1.33 per share, compared to a loss of $159 million, or $66.66 per share, in the year-earlier quarter. Operating revenues dropped to $1.14 billion from $1.20 billion. Analysts, on average, expected the company to post a loss of $1.31 per share on revenue of $1.14 billion. At its last earnings call in November, the company said that it expects fourth quarter 2010 adjusted EBITDA in excess of the amount required to meet its rolling-three-quarter covenant level of $100 million.

After falling off a cliff in 2009, truck tonnage still remains below healthy historical levels and freight rates still have room to recover. The trucking industry growth is measured by the American Trucking Association Tonnage Index, which is a survey of a wide variety of trucking and shipping companies. The improved economy has lifted truck tonnage levels to the highest point since mid 2008, and according to the American Trucking Association (ATA), the seasonally adjusted advance index of for hire truck tonnage surged 2.2% last month. The ATA also said that trucking tonnage increased 4.2% in December 2010 compared to December 2009. ATA's Chief Economist Bob Costello said he expects truck freight tonnage to grow modestly during the first half of 2011 before accelerating in the latter half of the year into 2012. In recent months, remarks from major trucking companies suggest that shipment weights and load count are both increasing as various markets recover.

The company has been through a massive restructuring and downsizing over the past two years while enduring huge losses. In addition to closing hundreds of terminals, laying off about one-half its work force and sharply cutting compensation, YRC avoided bankruptcy in late 2009 when most of its bondholders agreed to convert debt to equity and gain ownership of most of the company.

Looking ahead, 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.  The key word is to “right size” the business by closing about 40 terminals across the U.S., representing 12% of the company’s 334 facilities.

Last month, the company announced amendments to its credit agreement and asset-backed securitization facility. Both amendments are intended to provide additional time for the company and its key stakeholders to finalize plans to recapitalize the company's balance sheet.

Early in January, YRC Worldwide announced that the Teamster negotiating committee for the International Brotherhood of Teamsters has agreed to provide additional time for the company and its key stakeholders to finalize plans to recapitalize the company's balance sheet. The conditional extension is until March to reach an agreement on key timelines and until May to complete a deal.

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