Troubled trucking company YRC Worldwide is on the road to recovery, according to its Chairman Bill Zollars, who said operations improved in May and were expected to gain more ground in the coming months.
After a brush with bankruptcy last year, business has stabilized and YRC has streamlined costs and set its multiple divisions on a growth path that should translate to positive EBITDA for the second quarter, Zollars told investors Tuesday at the Wolfe Trahan & Co 3rd Annual Global Transportation Conference.
The company expects a reverse stock split within the next couple of months, Zollars said. “We bottomed out and the business is starting to grow again.”
YRC, one of the nation’s largest trucking concerns, had a break-even April in terms of EBITDA (earnings before interest, taxes, depreciation and amortization expenses), and saw better-than-expected gains in shipping volume in May, Zollars said.
At the same time, YRC continues to take costs out of the business through employee reductions and various efficiency gains, including streamlining operations and improving on-road safety. That was up from a $5 million EBITDA loss in March and a $21 million loss in February.
Zollars said the company continued to look for ways to cut back, including headcount from the approximately 33,000 employees on the payroll at the end of the first quarter.
YRC expects to be at a $300 million run rate in terms of costs taken out of the business by the end of 2010. That compares with about $200 million in March.
“A lot of cost has been taken out, still more to do there,” he said.
YRC expects to make real estate sales of some $25 million to $50 million in 2010, with sale and financing lease-backs of up to $50 million primarily in the second half of the year.
One of the most significant cost pressures facing YRC is its pension fund obligations, notably its “multi-employer” fund obligations. Multi-employer pension programs fund the retirements of nearly 1 million workers and retirees in the trucking industry, but put companies like YRC in a position of funding benefits not only to their own workers but also those of failed rivals.
Zollars said roughly 40 percent of its pension costs are assigned to “orphan” workers—those who never worked for YRC. He said the company is actively lobbying Congress to provide legislative relief and is confident it will be obtained, although the timing remains unclear.
“It is a matter we think of when, not if,” he said.
Zollars said the company planned to proceed with a reverse stock split in the “next couple of months,” with the split ratio ranging from 1.25 and 1.5, or 50 million to 200 million shares.
Last December, YRC narrowly averted bankruptcy by negotiating a debt-for-equity exchange that wiped out $470 million in debt and opened up credit lines for restructuring moves. The exchange gave noteholders 94 percent of the equity in YRC. (Reuters)