subject: Could YRC Worldwide (NASDAQ:YRCW) be in crisis ? [print this page]
YRCW is currently traded at $0.2519 with the trading volume of 72,825,800 with no change from its previous close. The current market capitalization is 298.09 million shares. YRC Worldwide Inc., through its subsidiaries, provides various transportation services worldwide. The company's YRC National Transportation unit offers a range of services for the transportation of industrial, commercial, and retail goods, such as apparel, appliances, automotive parts, chemicals, food, furniture, glass, machinery, metal, metal products, non-bulk petroleum products, rubber, textiles, wood, and other manufactured products.
YRCW serves manufacturing, wholesale, retail, and government customers. Its YRC Regional Transportation unit's service portfolio includes regional delivery, which comprises next-day local area delivery and second-day services, consolidation/distribution services, protect-from-freezing and hazardous materials handling, and various specialized offerings; expedited delivery, that comprises day-definite, hour-definite, and time definite capabilities; inter-regional delivery; cross-border delivery; and operation of my.yrcregional.com and NewPenn.com, which are e-commerce Websites offering online resources to manage transportation activity.
YRCW is amongst the most active stock on NASDAQ and it fell 5.6 percent to $.25 with 20,153,600 shares traded. YRCW swung to a fourth-quarter profit, although the number got help from a one-time gain tied to the company's successful debt-for-equity swap
The fourth quarter results included a $193.9 million gain on debt redemption on the equity swap, which eliminated about a third of YRC's debt from its books. The same period in 2008 included $200 million in impairment charges.Revenue during the quarter declined by more than 40 percent to $1.15 billion, reflecting a 40 percent drop in daily shipments for YRC's national division and a 20 percent decline in its regional division.
Clearly, investors don't have much faith in YRC's ability to convert sales to profits. Of course, even during good times, YRC doesn't trade for anywhere near sales. That's because the nature of the trucking industry is that profit margins can't come close to those of a company like Apple. It hasn't turned a full year's worth of profit since 2006 and it faces real bankruptcy risk. For those with the ability and the cast-iron stomach to vet YRC's prospects, there may be opportunity here.
YRC worldwide is facing a major financial challenge. The company is having a problem with sustaining liquidity, dilution of preferred stock, loss of customers and a weak LTL market. The company is trying its best to steady its finances in every possible way. Despite the prudent actions taken by YRC Worldwide to manage its liquidity, the company will require additional cash for its business operations. In its second quarter, the company managed to save $85 million expenses in relation to pensions. However, this will lead to increase in the pension liability for the company in Jan. 2011 to more than $300 million.
Company's management is desperately trying to renegotiate the agreement with the union, failing which YRC worldwide will face a severe liquidity crunch. Since last year, YRC worldwide securitized a portion of its debt. The company has done this by issuing 1.2 billion common shares.
Massive dilution of equity significantly reduced the stock value of the company. Their now considering a reverse stock split by the conversion ratio and conversion date is yet to be finalized.
Therefore, to consider investing in YRCW for anything longer than a few months, investors should absolutely understand that risk which is neither obvious nor easy to grasp.
Happy trading,
Chris Wick
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