YRC recovery banks on new leadership, economic rebound

YRC Worldwide Inc. has spent the last several years like a truck turned on its side, with everyone pushing and pulling at the colossal mass to set it back on its wheels.

The Kansas-based conglomerate of regional and national trucking companies has been reeling from the recession and the consequences of past leadership decisions that left YRC heavily in debt, diffuse in its focus and with fast-sinking stock prices.

But with a new board of directors and a new CEO, as well as a rebounding economy that has many trucking companies hiring, YRC and its subsidiaries could be facing better times ahead. Although, some analysts warn the company isn’t yet on all 18 wheels.

YRC’s regional trucking company, Lebanon-based New Penn Motor Express Inc., is seeing the same trends that have other midstate companies hiring, New Penn President Steve Gast said.

The economy is rebounding, which means people are returning to work and spending more, he said. Companies also are starting to ramp up hiring for the spring and summer months when work increases and more drivers are taking vacations. That means companies need temporary workers to cover, Gast said. Add the late summer and fall run-up to the holidays, and it’s nearly a perfect storm for hiring, he said.

“You’ve got three roads merging into one lane,” Gast said. “These three factors are converging for increased demand, and the result is that you need to hire more people.”

New Penn employs about 800 people and hires on a continual basis, he said.

It and other regional trucking firms fare better for attracting drivers, said Peter Swan, an assistant professor of logistics and operations management at Penn State Harrisburg. More drivers want to be home every night to be with their families, he said.

“One of the things the truck companies had a problem with was long-distance drivers,” he said.

Other companies have cut their long-haul divisions for that reason, he said.

YRC’s regional transportation division, which includes New Penn, Holland and Reddaway companies, was the only segment that didn’t have an operating loss for the third quarter. Regional transportation posted $12.4 million, while national transportation, corporate divisions and truckload services lost a combined $36 million for the quarter.

YRC trades its shares on the Nasdaq under the ticker symbol YRCW.

YRC has undergone several shifts that could improve its situation. It completed a restructuring in July with new credit agreements from its banks and other institutional investors. In 2010, YRC’s 25,000 workers represented by the Teamsters approved contract modifications that gave back $350 million a year in benefits and wages.

In July, the company replaced its board of directors and CEO; James Welch, a 30-year veteran of the trucking industry, filled the seat vacated by William Zollars.

In December, the company sold its only truckload subsidiary, Carlisle-based YRC Glen Moore, to Indianapolis-based Celadon Trucking Services Inc. for an undisclosed price.

At the end of January, YRC also renamed its logistics arm YRC Freight and said it planned to focus solely on transportation between 500 miles and 3,500 miles, leaving short hauls to its regional brands.

“When the company starts making money and doesn’t have to borrow anymore, then we think they’ll be OK,” said David Ross, an analyst with St. Louis-based investment firm Stifel Nicolaus. “All of this work is yet to be seen in numbers.”

Some changes should keep YRC’s companies from competing with each other, he said. It could push some freight to regional companies such as New Penn, but it’s more likely YRC will lose customers to its competition, he said. YRC’s new leadership is slowly moving in the right direction, he said.

Still, YRC’s balance sheets can’t be ignored, Ross said. Excessive debt and operating losses means there’s no equity in the company, he said. At one time, the company’s stock was worth $125,000 a share, he said. After diluting the stock down to just pennies per share last year, and a reverse stock split, prices have leveled off around $11 a share, according to Google Finance.

“These are very small moves,” Ross said. “Even if the price goes from $10 to $13, the company’s still not worth anything.”

New Penn’s Gast said all YRC divisions bring value to their customers, but the restructuring has helped pave a new road for the company.

“I think the benefit from restructuring and the new leadership is that there’s now a healthy amount of confidence in the lending plan with investors, and in the new leadership,” Gast said. “There’s not a dark cloud of uncertainty hanging over the entire corporation.”

Jim T. Ryan

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