YRC Worldwide: Trucking Through Difficult Times

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.

Fool contributor Bibhudutta Subhasish does not own shares of any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (12)

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  • Report this Comment On April 26, 2011, at 11:25 PM, masterwallstreet wrote:

    Yes they is lot work that have to be done but .We

    know that the banks is playing with this . lower the shock is more shares the bank get .the bank wants more shares .

  • Report this Comment On April 28, 2011, at 12:24 PM, easygoer4u wrote:

    Its hard to believe anybody would invest in YRC's stock. Yellow has never made money.They never had any business buying anybody. Roadway and Yellow used to haul over 70% of the nations freight. Now they haul less than 25%. I just don't know where they think this stock is going. All the other stocks out there and they buy this one. You've got to be kidding me. What are these people thinking? YRC is one pathetic sink hole of a company. Find something else. You have a better chance of making money at a casino than investing in YRC.

  • Report this Comment On April 28, 2011, at 11:44 PM, holleywood2 wrote:

    the artical says employees took a 10% pay cut-well they took a 15% pay cut and there retirement match/pay from the company which is about 1.2-3% was also cut for the last two years!!Plus alot of employees who were NOT UNION were placed on part time status which means they lost there employer paid medical,dental,vision(1200-1500 per month)plus these(non union)workers didnt get there $85.00 per month safety bonus, plus no holiday pay (8 per year) so add the numbers,the employees made real sacrifices for the company,and most of us feel its worth it if it helps us survive!!How many other companys have gone through this much and have survived this far??Also thanks to the Union for getting our bonds released from the banks!!this was the biggest help!!!so sad america is betting against our own companys!!(banks and stock speculators!!)

  • Report this Comment On April 29, 2011, at 4:18 PM, Mustang6147 wrote:

    BallZ!

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