YRCW’s operating performance
In fiscal 2015, YRC Worldwide (YRCW) reported an operating income of $93.0 million, which more than doubled from the previous year. Since 2012, the restructuring program adopted by YRCW started showing results. For the first time, after five years, it reported operating profits in 2012. In a span of four years, the operating profits almost doubled. An analysis of the peer group’s operating income growth for 2015 reveals that:
- YRC Worldwide (YRCW) reported a rise of 104%.
- ArcBest Corporation (ARCB) reported a 9% rise.
- Old Dominion Freight Line (ODFL) reported a 13% rise.
- SAIA Inc. (SAIA) reported a 5% rise.
- XPO Logistics (XPO) reported a 30% decline in an operating loss.
Investors who would like to invest in the transportation sector can consider the iShares Transportation Average ETF (IYT). This ETF holds about 11.5% in major trucking companies. The SPDR S&P Transportation ETF (XTN) holds 24.9% in major trucking companies and 12.6% in major US railroads.
YRC Worldwide (YRCW) had an operating profit of $545.4 million in 2006. However, things turned bad for the company starting in fiscal 2007. In that fiscal year, the company incurred impairment charges of $781.8 million. The weak market conditions in 2007 resulted in an impairment charge of the company’s National Transportation and Regional Transportation operating segments.
YRCW wrote off the goodwill associated with Regional Transportation segment along with reductions in the trade name values related to USF. In 2005, YRCW acquired USF Corporation, a well-known name in the North American transportation industry.
In response to the grave recession in the US in 2008, the company wrote off goodwill linked with its National Transportation and YRC Logistics segments. In the same year, the company introduced its YRC brand and wrote off the trade name related to Roadway and the USF brand. From the beginning of 2009, the company executed a 10% wage reduction for union and non-union employees until March 2013. The company suspended its employer match provision in its defined contribution plans. In addition, it terminated its post-retirement healthcare plan.
As a result, operating revenues came down, and the salaries, wages, and employees’ benefits expenses reduced from $5.2 billion in 2008 to $2.6 billion in 2010. Since then, these expenses have been range bound.
In the next part of this series, we will look at YRCW’s ability to cover its debts through core operating earnings.