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YRC admits bankruptcy near; ABF stands to benefit

The death watch continues for a national trucking company that is a primary competitor with Fort Smith-based ABF Freight System.

Overland Park, Kan.-based YRC noted in its 10K annual report filed Monday (Mar. 14) that it may be at the end of its financial rope. YRC is the largest less-than-truckload carrier in the nation, and ABF is considered the second largest LTL.

YRC narrowly avoided bankruptcy in January 2010 through a complex bond swap agreement with creditors. The less-than-truckload company had piled up a mountain of debt with the $1.07 billion acquisition of Roadway Corp. in 2003 and the $1.23 billion acquisition of USF Corp. in 2005.

In early March, YRC reached an agreement with its creditors and the International Brotherhood of Teamsters that essentially provide the lenders with equity share and convertible debt provisions that place regular shareholders at the back of the line in the event of a bankruptcy. Shares of YRC (NASDAQ: YRCW) have fallen from a post Oct. 1, 2010 stock split price of $5.39 to $2.05 as of Tuesday.

YRC for the first time provided greater detail on the possibility of a bankruptcy in the Monday 10K filing with the federal Securities and Exchange Commission.

“The Pension Fund Condition has not been satisfied. As a result, a Milestone Failure has occurred and the Required Lenders have the right, but not the obligation, to declare an event of default under the Credit Agreement. We cannot provide any assurance that the Required Lenders will not declare an event of default under the Credit Agreement. If the Required Lenders declare an event of default under the Credit Agreement, we anticipate that we would seek protection under the Bankruptcy Code,” explained the YRC document.

Without more concessions from lenders and labor — and the Teamsters have already agreed to more than $350 million in labor cuts through 2013 — YRC admits that bankruptcy is the next step. Making the point even finer, the company outlined several outcomes of a bankruptcy filing. Those included:
• Our customers would likely cease or substantially reduce their use of our services to avoid the possibility of stranded freight in our network in the event we cease to operate or substantially reduce our operations;

• Our suppliers may attempt to cancel our contracts or restrict ordinary credit terms, require financial assurances of performance or refrain entirely from providing goods or services to us;

• Our employees may become distracted from performance of their duties or more easily attracted to other career opportunities;
We may have difficulty continuing to obtain and maintain contracts necessary to continue our operations and at affordable rates with competitive terms;

• Transactions outside the ordinary course of business would be subject to the prior approval of the bankruptcy court, which may limit our ability to respond timely to certain events or take advantage of certain opportunities; and,

• We may be unable to retain and motivate key executives and employees through the process of a Chapter 11 reorganization, and we may have difficulty attracting new employees.

It has been estimated that a YRC bankruptcy would result in earnings of $76 million for ABF in the first 12 months following the bankruptcy. This would be much-needed cash for the Fort Smith trucking company that has also struggled during the previous 3-5 years to make ends meet.

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Arkansas Best, the parent company of ABF, reported Feb. 3 a fourth-quarter net loss of $3.11 million, an improvement of the $22.1 million in the 2009 period. The fourth quarter per share loss of 12 cents missed the consensus 9 cent per share loss among 18 analysts surveyed by Thomson Financial.

Arkansas Best, which employs about 9,500 nationwide, posted a 2010 net loss of $32.421 million, an improvement compared to a $127.522 million net loss in 2009. The 2009 income loss included a non-cash accounting charge of $64 million for the impairment of goodwill.

Total revenue in 2010 was $1.657 billion, a 12.55% gain over 2009 revenue of $1.472 billion, but still less than the $1.833 billion total revenue in 2008.

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Company Takedown

I am saddened for all the Families that will be impacted by the failure of YRC if it does happen. However,I am not surprised it has come to this. I did suggest in an earlier post that this would happen and I still think it will. I would submit this is yet another example of yet another business that has been brought to its knees by the Teamsters union. The unions and its members will of course blame management as always. The Unions as a whole have a great track record that includes the failure of GM,Dodge, and USPS(which the US Tax Payers are currently keeping afloat) to name a few. While we can argue on whether it is the Teamsters, SEIU, Teachers Unions etc., the commom problem is the greed that is rampant in the unions in todays world. **It is true what the Union leader said in a national speech, "its not because they care, its because they have the power". I would submit that the Tax Payers will pick up the Tab as the Unions leave destruction in their wake, as they roll across this country.I firmly believe and predict that this is only the tip of the iceberg. I do have some questions for the Union "members"......Have you checked to see who really got all the money? Maybe you could check the donations to the DNC? It wasn't the Union Members, that you can be sure of......Have you checked to see if "Union management" will lose their jobs and benefits? I really doubt that will happen, don't you? I have compared the unions to a large Anaconda, they get their teeth buried in a company, squeeze the life out of it and swallow the remains, and what is left is waste. R Odom
I am saddened for all the Families that will be impacted by the failure of YRC if it does happen. However,I am not surprised it has come to this. I did suggest in an earlier post that this would happen and I still think it will. I would submit this is yet another example of yet another business that has been brought to its knees by the Teamsters union. The unions and its members will of course blame management as always. The Unions as a whole have a great track record that includes the failure of GM,Dodge, and USPS(which the US Tax Payers are currently keeping afloat) to name a few. While we can argue on whether it is the Teamsters, SEIU, Teachers Unions etc., the ...>> Read the entire comment.

Yellow fever

YRC was the best in the industry until they bit off more than they could chew by buying a trucking company bigger, but not better, than they were. ABF will be the first to tell you they almost made that same mistake. Luckily, they know how to squeeze a dollar and have an industry giant, Robert Young III, at its helm.

ABF Benefit

I too would be saddned to see YRC go under with all the families and jobs at stake. One of the big issues is the teamster pension payments and the Multi-empoyer pension fund. In 1980 congress passed a bill that stated if one union company went under then the remaining companies would need to pick up the pension payments. Since 1980 hundreds of unionized companies have gone down and each time the pension payments are rolled to those companies still operationing. If yrc went out of busienss , Would ABF have to pick up the YRC pension payment? If so what would that payment be? ht

ABF Benefit

That is what you call the "COMMUNIST EFFECT" take from the hav's and give to the have nots or you can say that the law requires you to replace what the other guy lost even tho you had no part in what caused the loss. Redistribution of wealth is the term. (your wealth) sorry........

Unions had nothing to do with it?

20 years ago, the LTL trucking industry made money hand over fist. Yellow and Roadway (and CF at the time) were all under the NMFA contract. While it worked back then, when companies made $300 to move a single pallet 300 miles, specialized labor and over paying employees does not when you move that same pallet from New York to LA for $80. Mind you, 20 years ago, a gallon of diesel was about $1.25, along with all other costs, being inflated 400 % over the past two decades. You want to save YRC? Get rid of the NMFA contract and re write it so a driver can actually work for their money the entire time, including loading his own freight if need be, and you don't need 3 jockey's to hook one set.

Unions and YRC

The "unions" had nothing to do with YRC failure. The 1.2 billion in debt to buy Roadway. The 1.4 billion in debt to buy USF Holland. All these companys made tons of profit till YRC took on all this debt and couldnot service it. The workers or the union had NO say in any of these dealings. Now somehow we are to blame? Greed at YRC is the cause of this failure. We took a 15% pay cut, no pension payments and gave up a week vaction to help save this company. Somehow we are still to blame. Non union carriers now pay more then a union workers and have better benifits.

Absurd !!

As much as I dislike Hillary Clinton, I must use her words and say that it would reuire the "supension of disbelief" to somehow suggest that the Unions had nothing at all to do with the failure of YRC.That statement is on its face absurd and shows that Union members as a whole operate everyday on the basis that the Union leadership is always telling them the whole truth, nothing but the truch so help them God. Give me a break! I stated in my earlier post that the Unions and its membership would blame the management for this and "Hello" I was right. I do not suggest that management is without some responsibility. However,until such time as you have been in the seat of management (which I have)do not pretend to believe that you understand how to operate a business. The most pressure placed on a company is its labor cost and when you add in a Union with the power to bankrupt the company because they can't get paid overtime for their afternoon nap, the pressure is intense to say the least. I can assure you that most Trucking companies operate on a small margin at best and depend heavily on volume. In my earlier post I suggested that you follow the money and if you do I think you will find your 15% pay cut and your weeks vacation money went to the Bank account of Union management. After having said all that, it is the Families that lose. The union managers never lose, they just find their next Target and tell you they "feel your pain" while they get on their private Jets paid for with your union dues and wave goodbye.......Reminds me of Bernie Madoff.... R Odom
As much as I dislike Hillary Clinton, I must use her words and say that it would reuire the "supension of disbelief" to somehow suggest that the Unions had nothing at all to do with the failure of YRC.That statement is on its face absurd and shows that Union members as a whole operate everyday on the basis that the Union leadership is always telling them the whole truth, nothing but the truch so help them God. Give me a break! I stated in my earlier post that the Unions and its membership would blame the management for this and "Hello" I was right. I do not suggest that management is without some responsibility. However,until such time as you have been in the seat ...>> Read the entire comment.

The Facts

First, there is only one union for the trucking industry, and that is the Teamsters. Of which ABF, YRC, UPS, and UPS freight, among others, are members. Yes, UPS, the biggest company in the world, are teamsters. Now, because you can't, or won't, do any research for yourself, let me help you with the real reason YRC MAY fail. In case you hadn't noticed, they're still in business. July 2003, Yellow Corp. said that it will acquire LTL rival Roadway Corp. for approximately $966 million. Yellow said it would also assume an expected $140 million in net Roadway debt, bringing the enterprise value of the acquisition to approximately $1.1 billion. March 2005 YRC purchased GPS Logistics Group, the asian freight forwarding operations for GPS Logistics, for 27.6 million. May 2005 YRC completed the acquisition of USF for a total price of 1.3 billion. Sept 2005 YRC purchased a 50% equity interest in JHJ International Transportation Co, in Shanghai, for 46 million. And in dec 2007, YRC Logistics will buy 65 percent of Jiayu stock for $44.7. The deal would close in the second quarter of 2008. In the third quarter of 2008, the economy tanked. In 2007, YRC's reported operating revenue for the year was $9,621,316 down from $9,918,690 in 2006. Sounds pretty good doesn't it. Unfortunately, they were operating at a 99.2%. Which means they were only making a .8% profit. So just like most every other person in the country, the money stopped coming in, but the bills didn't. They needed 9.6 BILLION dollars a year, just to break even! Ok, after reading all of that, can you point out where the union is at fault for the trouble this company is in now? I didn't think so. I don't know what company you were ever in management for, but obviously it was tiny. YRC operates in all 50 states and Canada. Their labor costs are but a fraction of their total expenditure. All you are doing is spouting off things you've seen in bad movies. You don't know anything about the union or how it's run. If you really wanted to know where the 15% went, YOU'D LOOK IN TO IT!! But that's too much for you. Way easier to just type what you "think" is going on. That's one thing bad about free speech. Anyone can say anything, if you know what you're talking about, or not. I challenge you to find some facts that support your opinion.

umm....what annual report are you looking at?

CONSOLIDATED BALANCE SHEETS YRC Worldwide Inc. and Subsidiaries (in thousands except per share data) December 31, 2010 December 31, 2009 Assets Current Assets: Cash and cash equivalents $ 143,017 $ 97,788 Accounts receivable, less allowances of $14,499 and $32,005 442,500 442,814 Fuel and operating supplies 16,463 18,407 Deferred income taxes, net 118,273 106,997 Prepaid expenses and other 47,779 117,236 Current assets of discontinued operations — 75,578 Total current assets 768,032 858,820 Property and Equipment: Land 317,091 363,690 Structures 962,922 1,022,666 Revenue equipment 1,488,383 1,643,698 Technology equipment and software 258,871 259,598 Other 210,704 239,931 Total cost 3,237,971 3,529,583 Less – accumulated depreciation (1,687,397 ) (1,708,371 ) Net property and equipment 1,550,574 1,821,212 Intangibles, net 139,525 160,407 Other assets 134,802 170,176 Noncurrent assets of discontinued operations — 21,459 Total assets $ 2,592,933 $ 3,032,074 Liabilities and Shareholders’ Equity (Deficit) Current Liabilities: Accounts payable $ 147,112 $ 154,671 Wages, vacations and employees’ benefits 196,486 213,754 Claims and insurance accruals 176,631 170,138 Other current and accrued liabilities 275,595 222,254 Asset backed securitization borrowings 122,788 146,285 Current maturities of long-term debt 100,085 50,842 Current liabilities of discontinued operations — STATEMENTS OF CONSOLIDATED OPERATIONS YRC Worldwide Inc. and Subsidiaries For the years ended December 31 (in thousands except per share data) 2010 2009 2008 Operating Revenue $ 4,334,640 $ 4,871,025 $ 8,318,674 Operating Expenses: Salaries, wages and employees’ benefits 2,671,468 3,561,069 5,096,286 Equity based compensation expense 31,205 31,290 10,499 Operating expenses and supplies 949,224 1,136,636 1,835,103 Purchased transportation 455,800 486,429 807,748 Depreciation and amortization 198,508 241,648 248,382 Other operating expenses 248,142 310,448 399,137 (Gains) losses on property disposals, net 5,572 (6,121 ) (13,131 ) Impairment charges 5,281 — 866,395 Total operating expenses 4,565,200 5,761,399 9,250,419 Operating loss (230,560 ) (890,374 ) (931,745 ) wages look to be a pretty big factor to me, actually the biggest single item...you might want to research a tick more before saying they are not....
CONSOLIDATED BALANCE SHEETS YRC Worldwide Inc. and Subsidiaries (in thousands except per share data) December 31, 2010 December 31, 2009 Assets Current Assets: Cash and cash equivalents $ 143,017 $ 97,788 Accounts receivable, less allowances of $14,499 and $32,005 442,500 442,814 Fuel and operating supplies 16,463 18,407 Deferred income taxes, net 118,273 106,997 Prepaid expenses and other 47,779 117,236 Current assets of discontinued operations ...>> Read the entire comment.

unions and YRC

I don't believe I will ever understand how any Man could ever decide to go to work for another man, and somehow believe that if he pays his Dues$$$$$$ to a third party (The unions) he is somehow going to be protected for life and in effect places his entire life and that of his Family, in the hands of a "third party" who has no skin in the game and when the third party has extracted all he can from the game he decides to cash out and leave everybody at the table broke. I suggest this could be compared to playing with an "empty" gun. I think I would rather define my own destiny keep my hard earned money and as my Father always said, "if you are working for another man, you are making two people a living". While I feel bad for the Families of YRC workers, the workers have themselves and the union management to blame. I am betting Union Management has left the Table...with the money of course. TJ
I don't believe I will ever understand how any Man could ever decide to go to work for another man, and somehow believe that if he pays his Dues$$$$$$ to a third party (The unions) he is somehow going to be protected for life and in effect places his entire life and that of his Family, in the hands of a "third party" who has no skin in the game and when the third party has extracted all he can from the game he decides to cash out and leave everybody at the table broke. I suggest this could be compared to playing with an "empty" gun. I think I would rather define my own destiny keep my hard earned money and as my Father always said, "if you are working for another ...>> Read the entire comment.

Maybe I can help you understand

Do you have any idea what paying your dues provides? Evidently not. The dues you are paying helps negotiate the contract you are working under, in case your not aware, most professionals work under a contract a third party has negotiated for them, including all the top executives at corporations. This will relieve you from crawling in the office every six months begging for a raise, begging for time off due to a death in the family or other emergency, spells out the vacation timed earned for the years of service you provide, it will guarantee you will not be worked into the ground for sub standard wages, it will outline the insurance benefits you will receive, etc, etc. All of these things are laid out for you and you will also understand your end of the contract, you will also understand what the company must provide for your services, also, what you have to provide on your end, that usually means you have to work hard and give the company a days work for a days pay, Most educated people are more than willing to work under an organized contract for a few dollars a month. Something else you may not understand, many will not even qualify for the chance to pay dues, when you apply for a job with a major carrier such as Yellow, ABF Roadway etc., only about 3 % of applicants even qualify, because those with poor driving records, bad background checks, no proof of their past 10 years where-abouts and GOOD STEADY employment record will be rejected. While a lot of good applicants are turned down, so are the ones that have no idea about what paying dues and working under a professional contract is all about, it's a two way street, it's protects everyone. And the ones that don't want, or don't understand about paying dues, well that's just as well, that leaves good jobs open for those that do understand.

Company takedown

I have worked for both the individual companies (yellow and roadway) when they were in their prime. Both had good productive UNION labor forces, vast modern fleets of equipment and PROFITs. Roadway was the envy of the industry profit wise. Profits brought about by the unionized workforce and the strictly busienss management. Was a no nonsense place to work, and we thrived made a good living and large operating margins for the company. Then in the fairly recent history of the two companies the umbrella corporation of Yellow Freight got the ridiculous idea to "buy" Roadway Express, the bankers, accountants, union officals should have known the eventual never have worked. The warning signs were there within months of the acqusition. Both should have been pinched off at that time and maybe they would have survived on their own. However, Zollars (YRC) elected to try to merge the two giants into one system, merged seniority lists, work rules, computer systems, and on and on. It just didnt work. Investors and and employees have suffered greatly because of the circumstances caused by the merger of YELLOW/Roadway. It is not the fault of the unionized work force that the company has got to the current sad state of affairs, it is from the top down, the upper management, not the lower tiers, and certainly not the workers. The union however should never have allowed the merger to take place (i honestly doubt they had the legal power to stop it anyway.) Again, for all you union haters, the fact that these folks who are working for YrC does not make them any less a person or a lazier worker than you. I have worked the union docks, office, and garage, and I assure you you have to perform. YRC is on thin ice, but you never can tell, they might get through this and be really on top again, and the non-union guys will again be lined up begging for work on the YRC docks.
I have worked for both the individual companies (yellow and roadway) when they were in their prime. Both had good productive UNION labor forces, vast modern fleets of equipment and PROFITs. Roadway was the envy of the industry profit wise. Profits brought about by the unionized workforce and the strictly busienss management. Was a no nonsense place to work, and we thrived made a good living and large operating margins for the company. Then in the fairly recent history of the two companies the umbrella corporation of Yellow Freight got the ridiculous idea to "buy" Roadway Express, the bankers, accountants, union officals should have known the eventual never ...>> Read the entire comment.

you missed the big picture

with out more give back from labor we are going under .did you miss that part

You're not seeing the big

You're not seeing the big picture. The union workers have given back 15% of their wages and agreed to no cost of living increases for five years. They also agreed to no pension contributions for two years. They have given until they can't give any more. Yes, salaries and wages is a big cost in the trucking industry. Please keep in mind, however, that this figure includes so much more than just the union workers. Management and other non-union employees are also a big part. Restructuring can be successful if everyone does their part. Union employees have. Now is the time for management to find efficiency gains and other savings. They were running too close to break even before the economy took a dive. More than just the unions need to give.

YRC Bankrupcy- ABF#2 ltl carrier incorrect.

Greetings, in your article on YRC's impending bankruptcy there is a reference to ABF being the #2 LTL carrier,this information is incorrect. ABF is not even in the TOP 5. 2009 rank was #6 Transport Topics. While ABF will certainly benefit from a YRC closing they will not be the only large carrier to do so. FEDEX, CONWAY and UPS FREIGHT will gobble up the lions share of the business YRC gives up as these carriers offer far superior service than does ABF. FYI

RE: Anonymous on YRC

Anonymous, I believe the article meant to state that ABF is the 2nd largest LTL carrier with unionized labor. As for your statement on whose service is more superior, that's not quite as accurate when you look at transit times, claim ratios, and safety records. FYI