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YRC Worldwide Inc (NASDAQ: YRCW)

YRC Worldwide Inc. (YRCW) is a holding company operating through its wholly owned operating subsidiaries to offer customers a range of transportation services. The Company’s operating subsidiaries includes YRC National Transportation (National Transportation), YRC Regional Transportation (Regional Transportation), YRC Logistics, and YRC Truckload (Truckload). National Transportation is the reporting unit for the transportation service providers focused on business opportunities in regional, national and international services. Regional Transportation is the reporting unit for the transportation service providers focused on business opportunities in the regional and next-day delivery markets. YRC Logistics plans and coordinates the movement of goods worldwide to provide customers a single source for logistics management solutions. Truckload reflects the results of Glen Moore, a provider of truckload services throughout the United States.

As of December 31, 2008, National Transportation had 14,327 owned tractors, 2,348 leased tractors, 59,682 owned trailers, and 2,802 leased trailers. YRC Regional Transportation unit’s service portfolio comprise regional delivery that includes next-day local area delivery and second-day services, consolidation/distribution services, protect-from-freezing and hazardous materials handling, and other specialized offerings; expedited delivery, including day-definite, hour-definite, and time definite capabilities; inter-regional delivery; cross-border delivery; and operation of USFNet.com and NewPenn.com e-commerce Web sites offering customized online resources to manage transportation activity.

The Company was founded in 1924 and is headquartered in Overland Park, Kansas.

Source: https://trading.scottrade.com/quotesresearch/ScottradeResearch.aspx?symbol=YRCW , http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=INT&symbol=YRCW.O , http://www.yrcw.com/

Financial Summary

YRCW’s consolidated operating revenue decreased 44.6% during the three months ended June 30, 2009, versus the same period in 2008 due to decreased revenue at all of its operating companies. This decline is attributed to both declines in volume over the comparable prior year quarter and declines in yield or price. YRCW’s volumes were impacted by multiple factors, most notably the economy and business diversion due to customer concerns surrounding the Company’s financial stability. The declines in yield are a factor of excess capacity in the transportation sector resulting in increased competition for lower freight volumes. Additionally, revenue was also negatively impacted by lower fuel surcharge revenue in the three months ended June 30, 2009, as compared to the same period in 2008.

Consolidated operating revenue includes fuel surcharge revenue. Fuel surcharges are common throughout the industry and represent an amount that YRCW charges to customers that adjusts with changing fuel prices. YRCW base its fuel surcharges on a published national index and adjust them weekly. Rapid material changes in the index or the Company’s cost of fuel can positively or negatively impact the Company’s revenue and operating income versus prior periods as there is a lag in the Company’s adjustment of base rates in response to changes in fuel surcharge. Fuel surcharge is an accepted and important component of the overall pricing of YRCW’s services to its customers. Without an industry accepted fuel surcharge program, the Company’s base pricing for transportation services would require changes. YRCW believes the distinction between base rates and fuel surcharge has blurred over time, and it is impractical to clearly separate all the different factors that influence the price that customers are willing to pay. In general, under the Company’s present fuel surcharge program, it believes rising fuel costs are beneficial to YRCW and falling fuel costs are detrimental, in the short term.

Consolidated operating loss increased significantly during the three months ended June 30, 2009, as compared to the operating income for the same period in 2008 and is reflective of decreased operating revenue at all of its operating companies. Significant volume declines within its National Transportation and Regional Transportation segments resulted in an operating loss of $299.7 million for the second quarter of 2009, a significantly larger reduction from the prior year’s comparable quarter operating income. Operating expenses for the 2009 quarter decreased $699.7 million as compared to the same period in 2008 and were comprised of a $319.8 million decrease in salaries, wages and benefits, a $229.3 million decrease in operating expenses and supplies, a $117.9 million decrease in purchased transportation, which is attributable to declining volumes and improved carrier pricing due to the depressed economy, and a $27.3 million decrease in other operating expenses. These expense reductions however did not keep pace with the significant revenue decline resulting in the operating loss for the second quarter of 2009. Additionally, in 2008 the Company recorded reorganization and settlement charges of $2.4 million primarily related to the closure of 27 service centers in its Regional Transportation segment. Similar closure costs occurred in 2009 within both National Transportation (primarily a result of the YRC integration) and Regional Transportation.

The decrease in salaries, wages and benefits in the second quarter of 2009 is largely due to a 10% wage reduction for most union and non-union employees resulting in approximately a $72.1 million expense reduction in 2009 offset by increased workers’ compensation expense of $40.4 million due to unfavorable development of prior year claims and a higher frequency of claims in the current period. Additionally, the decrease in salaries and benefits is a result of lower headcount in the current year due to lower volumes and the YRC integration efforts. The decrease in operating expenses and supplies is a result of lower fuel costs of 69.8%, due to lower diesel prices and reduced miles driven, lower vehicle maintenance of 33.4% partially offset by an increase in bad debt expense of $4.7 million or 50.3%, an increase in professional services of $22.6 million or 88.5% related to additional financial advisory services and costs associated with lease terminations of $12.5 million resulting from integration activities. Finally, the decrease in other operating expenses is due to the decrease in discretionary spend for travel and employee activities.

YRCW’s consolidated operating loss during the second quarter of 2009 was offset by $1.0 million of net gains from the sale of property and equipment and the fair value adjustments for property held for sale versus $3.1 million of losses for the same period in 2008.

Non-operating expenses consisted primarily of interest expense which continued to increase significantly in the second quarter of 2009 over 2008. This increase is due to increased borrowings under the Company’s asset-backed securitization facility and credit facility as well as an increase in interest rates based on its amended credit facility terms all of which resulted in additional interest of $14.3 million. The increase in interest expense is also attributable to increased net deferred debt cost amortization of $5.3 million and additional interest related to its lease financing obligations of $3.7 million and deferred pension obligations of $1.4 million for the three months ended June 30, 2009. Offsetting these 2009 increases was the reduction in interest expense of $4.9 million related to notes redeemed in November 2008. Non-operating expenses in 2009 also included an impairment charge of $30.4 million related to the Company’s equity investment in Jiayu. This adjustment was required as the estimated current fair value, using a discounted cash flow model, was less than the Company’s investment. This was primarily a result of updated assumptions in the current model reflecting current depressed economic conditions primarily related to lower revenue growth rates versus that used in similar models at the time of the investment.

The current economic recession and the lingering tight credit market resulting from the global financial crisis continue to have a dramatic effect on YRCW’s industry. The current recessionary environment continues to negatively impact its customers’ needs to ship and, therefore, negatively impacts the volume of freight YRCW services and the price it receives for its services. As a result, YRCW continues to experience lower year-over-year revenue (primarily a function of declining volume) and significant operating losses. In addition, the Company believes that some of its customers have reduced their shipments with YRCW to mitigate the risks of integration of our Yellow Transportation and Roadway networks. The Company experienced these reduced shipment levels to a greater extent in March 2009 and for a longer period extending into the second quarter than it anticipated when planning the integration of its networks. As a result, the Company’s financial results for the second quarter have fallen short of its previous expectations. As its service has improved from the March 2009 integration, YRCW’s shipment volumes has stabilized, it has added new customers to its networks and has increased its volumes with certain existing customers during the second quarter. Although many of YRCW’s customers have returned their business, this business has not returned as quickly as the Company had anticipated. In addition, YRCW believes that many of its existing customers have reduced their business with the Company during the last couple of quarters due to the uncertainty regarding YRCW’s financial condition.

Source: http://investors.yrcw.com/sec.cfm

Analyst Consensus

This is the consensus forecast amongst 11 polled investment analysts. Against the YRC Worldwide Inc company.

The 3 analysts offering 12-month price targets for YRCW have a median target of 0.00, with a high estimate of 2.00 and a low estimate of 0.00. The median estimate represents a -100.00% decrease from the last price of 1.32.

Source: Financial Times.com

Source: http://www.reuters.com/finance/stocks/estimates?symbol=YRCW.O

Investment Highlights

YRCW last week announced the availability of next-day delivery service to and from the greater Springfield, Mo., area and its Chicago, Joliet, Rockford and Wheeling, Ill. service centers. The transit time reductions provide customers with even more next-day delivery options within the Holland network which already has more next-day lanes than any other carrier in its service territory. The accelerated service became available on Oct. 19 and features more than 124,000 ZIP code lane pairs. Only a few LTL carriers provide next-day delivery service between these markets today, with most providing delivery in two days. Holland also allows customers the option to guarantee delivery by 9 a.m., noon, 3:30 p.m. or within a specified time-window for a small, additional fee.

YRCW last month announced enhancements to its innovative Preferred Pricing Program, established to provide customers with simple, predictable and highly reliable solutions. Effective Oct. 1, 2009, Preferred Pricing shipments can easily be guaranteed to insure the highest reliability at no additional charge.  Although it is available to any customer, Preferred Pricing is designed to help small- to mid-sized companies looking for a competitive and easy-to-understand pricing program. Preferred Pricing was piloted to YRCW customers (formerly Yellow Transportation and Roadway) in 2008. Based on that initial acceptance and success, YRCW made the decision to offer the program widely so that more companies could take full advantage of the program benefits and now provides a full service guarantee.

YRCW placed first in the annual safety contest sponsored by the Safety Management Council of the American Trucking Associations (ATA). The nationwide truckload services provider also earned two awards for most improved safety performance. The competition ranked carriers’ performance for 2008 in truck and industrial safety. In the national truck safety category, YRC Glen Moore won the Safe Fleet Award in the general commodities truckload category for fleets traveling between 50 and 100 million miles annually. In addition, YRC Glen Moore received awards for best safety improvement in both the national truck safety and national industrial safety categories. The Safety Management Council recognized the winners of the 2008 ATA National Truck and Industrial Safety Contest at its annual conference in Baltimore Sept. 16-18.

Source: Scottrade.com, Reuters.com, http://www.yrcw.com/

Technical Analysis

Source: www.stockcharts.com

Moving Average Price Compare

No current signals.

Bollinger Bands

YRCW’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, YRCW is trading below its lower Bollinger Band. Relative to recent price action, the stock is currently overextended to the downside and due for either a pause or retracement.

MACD

The MACD for YRCW currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

Comparative Analysis

Source: Reuter.com, Nasdaq.com

Insider Trading Activity

Net Share Purchase Activity

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