Is YRC Freight Closing Down? Not Right Now, But Situation is Tough!
YRC is considered to be one of the largest trucking or transportation companies in the world. From 2002 to 2006, YRC revenue sales went from over $2 billion to $9.9 billion. These were quite impressive and needed results considering the company is in charge of at least 20% of the LTL market. Yet in 2009, the company was not producing these same results.
Part of the reason is because they needed the demand for their services to pick up or capacity to be lost. Analyst Morgan Keegan predicted that the company would go out of business in the coming years, and it would impact the LTL market in a positive way. Not only would demand and supply be more in balance, but the bleeding of the pricing would stop.
YRC is cutting more of their costs and depending on lenders and unions to have their back. Do they have enough time to win the race? A researcher from Longbow, Lee Klaskow believes that if the volume of freight picks up, YRC just might make it. Yet, the predictions for 2010 were not looking so good for the transportation company.
According to Morningstar analyst Keith Schoonmaker, YRC always knows what to do when things are looking good, but it is in the trying times that they need to step up their game. When the recession took place, YRC had more facilities than was needed, too many employees and a lot of debt that needed to be taken care of. Eventually they closed down some facilities and let some workers go, but they found themselves sinking deeper into the water.
According to Business week of 2012, Teamsters union and Goldman Sachs Group Inc. worked endlessly to keep YRC from falling into bankruptcy. Now the economy is getting stronger, and YRC may have a chance. However, they are still expected to lose over $68 million. When YRC avoided bankruptcy in 2009, its competitors stepped in and started lowering prices.
YRC will find themselves in even more of a stressful situation should the lenders start demanding repayment. They simply do not have enough cash to take care of all the debt they have incurred. According to KPMG LLP, YRC’s auditor, the company has over $45 million in lease obligations to take care of the current year and over $170 million in pension payments.
As their market share continues to decline over the years, their competitors have been able to come in and grab share. According to a filing that was done in February, YRC has over $1 billion in debt, and the sad part is that this amount will grow larger. Why? YRC is incurring more debt to take care of the interest on existing debt. Unfortunately, YRC will not be able to survive without the help from a number of resources.
While it is has been said by several analysts, if the company should fail, the economy would benefit tremendously. However, YRC is not backing down without a fight.