YRC Worldwide chief still has “many levers to pull”
| Zollars |
“While the company does not have any specific transactions planned, it believes it is advisable to have an effective shelf registration statement on file with the Securities and Exchange Commission to be able to take advantage of opportunities as they may arise,” the firm said.
The action came a day after William Zollars, chairman and chief executive officer, said the company still had “many levers to pull” in its attempt to regain profitability. Zollars was speaking at the annual transportation conference of Wolfe Research.
YRC, built out of the merger of Yellow and Roadway, had a first quarter net loss of $257 million, following losses of $974 million in the full year 2008, and $638 million in 2007.
Last week the Wall Street Journal reported that the company might seek $1 billion in federal assistance under the troubled asset relief program (TARP) for pension obligations.
On Tuesday, Zollars called multiemployer pension funds “the ultimate penalty for success. As companies go out of business in these multiemployer plans the remaining companies have the liability for those employees,” he said, adding that the company would like to see reform of the system.
Last Friday YRC also said its lenders had agreed to eliminate a loan covenant that had required the company to have a minimum of $45 million in earnings before interest, taxes, depreciation and amortization in the second quarter.
“We have had really good support from our bank group,” Zollars said.
Speaking about the loan covenant, Zollars said, “We have not given up on the target we had,” but that the covenant “was becoming a distraction to our customers.”
Wolfe Research had published a research note on Monday headlined “YRCW’s Cash Burn Accelerates,” and Zollars said Tuesday he wanted to “clear the air.' “Our cash burn is going down, not up,” he said and added the company’s operating loss in April was “$60-ish” million rather than $139 million some analysts had reported.
Zollars said the company expected to do about $200 million in sales and leasebacks of in the second quarter and sell another $100 million in property. He also said the company is negotiating with unions to defer multiple months of union pension payments which amount to about $40 million per month.
He said the integration of Roadway and Yellow has dramatically reduced the need for capital expenditures and will reduce annual costs by about $250 million. Combined with other actions at those two companies and the other regional trucking companies YRCW owns, including compensation reductions, the company expects to save about $665 million by the end of the year, he said.
The merger of Roadway and Yellow has improved productivity and service and that the company’s regional trucking companies have also grown and improved their efficiency, he said.
“We’ve lowered our breakeven point substantially, business that didn’t look attractive to us in the past now looks very attractive,” he said. “Service is always a great leading indicator for growth.”
In the trucking industry, Zollars said, “the first half of the year is historically the part of the year when you burn cash and the second half is when you get cash flow positive. ' Chris Dupin
