- Credits
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This will be coming out in this weeks Traffic World Magazine....KK
Value Plunge
10/20/2008
John Gallagher
Associate Editor
YRC Worldwide's struggle to avoid the center of the economy's downward spiral is getting more difficult as quarterly losses seem inevitable for the nation's largest trucker.
The latest blow came in a warning of impairment charges that may result from current economic trends. YRC filed the warning with the Securities and Exchange Commission Oct. 8, a day after Chairman, President and CEO William D. Zollars reassured customers the company's balance sheet was stable.
"The possibility of impairment exists in connection with goodwill and trade names for the National Transportation segment, trade names for the Regional Transportation segment and goodwill for the YRC Logistics segment," the company said in the filing. YRC said it will include any non-cash charges in its third quarter results.
The filing hit the streets as YRC prepared to shut down an office in St. Louis that supports its YRC Logistics subsidiary, a move that would result in 47 layoffs. YRC had already cut 1,100 union jobs in the first quarter and 400 management jobs in August.
More job cuts are likely to follow as the $9.6 billion company attempts to pull off one of the biggest trucking integrations ever - merging its two long-haul networks, Yellow Transportation and Roadway, into a single business unit. Smaller LTL integrations have led to large financial losses for the companies that attempted them.
"We believe the company has a Herculean task ahead of it in the midst of a freight depression," said David G. Ross, an analyst with Stifel Nicolaus. "The likelihood of the company successfully downsizing its way to prosperity by integrating systems, sales forces, labor seniority rosters, line haul, pick-up and delivery, and terminal operators while maintaining two separate brands remains slim, in our view."
Ross said YRC has already told analysts that it won't be profitable in the third quarter. "We believe (fourth quarter 2008) and (first quarter 2009) will be even more challenging," he said.
A write down would be the second such charge over the last 10 months against the company's value. Last December YRC recalculated the fair market value of its Roadway long-haul and USF regional subsidiaries that led to an estimated $700-$800 million non-cash charge to write down assets in the fourth quarter of 2007. That contributed to a $735.8 million loss for the period.
There's evidence that YRC's financial struggles are compounded by an inability to raise rates in an LTL environment that still favors shippers. Independent transportation analyst Ed Wolfe said a major manufacturer is considering moving business away from YRC after YRC attempted to raise rates in June.
"He has not done so yet because Yellow has been a long-term core carrier of this shipper, but he and others in his organization have been concerned about the company's future for some time and the recent sharp decline in its share price has intensified those concerns," Wolfe said. "This shipper also told us 'you could hear a pin drop' in his dispatch department at the end of September, typically one of the busiest times of the year."
FedEx Freight, one of YRC's biggest competitors, claims to be taking market share at time when many carriers are focused on trying to survive.
"We just ended our last public earnings end of August and we're still growing year over year," said FedEx Freight President and CEO Douglas G. Duncan.
"We had 4 percent volume growth and 10 percent revenue growth, but I don't think that's indicative of the - clearly our customers are having challenging times from a volume standpoint. But I think our value proposition is such that we've been able to grow market share."
FedEx Freight rival UPS Freight has the same concern that freight volumes could be severely challenged by customers' ability to maintain credit.
"Access to credit is our biggest concern," said Jack Holmes, president of UPS Freight, at this month's meeting of the Council of Supply Chain Management Professionals.
"UPS has a very strong (debt) rating, so it doesn't impact us directly. But certainly the impact it has had our customers is a concern."
Smaller carriers such as Oak Harbor Freight Lines are watching shipments decline as well. The Auburn, Wash.-based carrier is struggling to maintain network density while dealing with a driver strike at several terminals.
"Instead of shipping two or three times a week, we're seeing people ship once a week," said David Vander Pol, Oak Harbor's co-president. "We see people going back to the old system of pool car distribution. We see customers that traditionally shipped LTL looking at truckload."
Value Plunge
10/20/2008
John Gallagher
Associate Editor
YRC Worldwide's struggle to avoid the center of the economy's downward spiral is getting more difficult as quarterly losses seem inevitable for the nation's largest trucker.
The latest blow came in a warning of impairment charges that may result from current economic trends. YRC filed the warning with the Securities and Exchange Commission Oct. 8, a day after Chairman, President and CEO William D. Zollars reassured customers the company's balance sheet was stable.
"The possibility of impairment exists in connection with goodwill and trade names for the National Transportation segment, trade names for the Regional Transportation segment and goodwill for the YRC Logistics segment," the company said in the filing. YRC said it will include any non-cash charges in its third quarter results.
The filing hit the streets as YRC prepared to shut down an office in St. Louis that supports its YRC Logistics subsidiary, a move that would result in 47 layoffs. YRC had already cut 1,100 union jobs in the first quarter and 400 management jobs in August.
More job cuts are likely to follow as the $9.6 billion company attempts to pull off one of the biggest trucking integrations ever - merging its two long-haul networks, Yellow Transportation and Roadway, into a single business unit. Smaller LTL integrations have led to large financial losses for the companies that attempted them.
"We believe the company has a Herculean task ahead of it in the midst of a freight depression," said David G. Ross, an analyst with Stifel Nicolaus. "The likelihood of the company successfully downsizing its way to prosperity by integrating systems, sales forces, labor seniority rosters, line haul, pick-up and delivery, and terminal operators while maintaining two separate brands remains slim, in our view."
Ross said YRC has already told analysts that it won't be profitable in the third quarter. "We believe (fourth quarter 2008) and (first quarter 2009) will be even more challenging," he said.
A write down would be the second such charge over the last 10 months against the company's value. Last December YRC recalculated the fair market value of its Roadway long-haul and USF regional subsidiaries that led to an estimated $700-$800 million non-cash charge to write down assets in the fourth quarter of 2007. That contributed to a $735.8 million loss for the period.
There's evidence that YRC's financial struggles are compounded by an inability to raise rates in an LTL environment that still favors shippers. Independent transportation analyst Ed Wolfe said a major manufacturer is considering moving business away from YRC after YRC attempted to raise rates in June.
"He has not done so yet because Yellow has been a long-term core carrier of this shipper, but he and others in his organization have been concerned about the company's future for some time and the recent sharp decline in its share price has intensified those concerns," Wolfe said. "This shipper also told us 'you could hear a pin drop' in his dispatch department at the end of September, typically one of the busiest times of the year."
FedEx Freight, one of YRC's biggest competitors, claims to be taking market share at time when many carriers are focused on trying to survive.
"We just ended our last public earnings end of August and we're still growing year over year," said FedEx Freight President and CEO Douglas G. Duncan.
"We had 4 percent volume growth and 10 percent revenue growth, but I don't think that's indicative of the - clearly our customers are having challenging times from a volume standpoint. But I think our value proposition is such that we've been able to grow market share."
FedEx Freight rival UPS Freight has the same concern that freight volumes could be severely challenged by customers' ability to maintain credit.
"Access to credit is our biggest concern," said Jack Holmes, president of UPS Freight, at this month's meeting of the Council of Supply Chain Management Professionals.
"UPS has a very strong (debt) rating, so it doesn't impact us directly. But certainly the impact it has had our customers is a concern."
Smaller carriers such as Oak Harbor Freight Lines are watching shipments decline as well. The Auburn, Wash.-based carrier is struggling to maintain network density while dealing with a driver strike at several terminals.
"Instead of shipping two or three times a week, we're seeing people ship once a week," said David Vander Pol, Oak Harbor's co-president. "We see people going back to the old system of pool car distribution. We see customers that traditionally shipped LTL looking at truckload."
....Hey, wait a minute....
