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YRC Worldwide (Nasdaq: YRCW ) is traversing difficult terrain. The trucking giant's CFO left the company in early March, even as a restructuring plan endeavored to shore up its finances. When that deal fell through, the company hit rock bottom, warning that the possibility of bankruptcy loomed large.
YRC clearly is feeling the heat following the economic crisis. Businesses have curtailed their activity and curbed their need for transportation. But while these factors drag down the company right now, do better times lie ahead for YRC Worldwide? Let's peer into the company's financials to see where it stands.
Finances running on fumes
YRC's total revenue went into a skid in 2007 and hasn't yet pulled out. Revenue dropped 11% in 2010, after a harrowing 41% plunge in 2009. Although the company has been able to contain that decline a bit, the business clearly still finds itself entangled in a web of uncertainty.
As the company tries to figure out how to service a heavy $1 billion in debt, YRC is is struggling hard to cut down on its costs and improve cash flow. In fact, last year it slashed the wages of its union and non-union employees by 10% to get a grip on costs. However, rising fuel prices could prove to be a permanent nail in the company's coffin.
One silver lining, if you're willing to see it, could be the gross profit margin. It's improved to 6.2% from a negative 5%, indicating that YRC is managing its costs somewhat more efficiently than it previously did.
The road ahead
Unfortunately for YRC, its gloomy days are not over yet. Industry competition could further batter the company, as opponents such as Arkansas Best (Nasdaq: ABFS ) and Con-Way (NYSE: CNW ) fight for their share of the trucking pie. When companies compete viciously for customers, shareholders -- and profit margins -- often suffer.
There's light at the end of the tunnel, though. As business activities pick up, freight tonnage will likely see an improvement. The U.S. Truck Tonnage Index, which estimates the total amount of goods the industry hauls, surged 4.2% year over year in February. The American Trucking Association, which tracks the index, also sounds optimistic about the future. And as the economy shows signs of improvement, and demand from different sectors picks up, the trucking industry should see increased business and a possible boost to its bottom line.
YRC Worldwide has quite a tough drive ahead. The company needs to shore up its balance sheet if it expects to be a serious opportunity for Foolish investors.