Monday, YRC Worldwide Inc. (YRCW), a leading trucking company, said it expects a slight loss from core operations in the third quarter due to further weakness in the economy and some early investments in the integration of the national networks.
The Overland Park, Kansas-based company also expects to incur reorganization costs of about $0.06 - $0.08 per share primarily related to employee severance.
The company, however, expects to report a "solid profit" in the third quarter of 2008, helped by a curtailment gain of approximately $0.70 per share related to the harmonization of its retirement plans for nonunion employees. Analysts, on average, polled by First Call/Thomson Financial expect earnings of $0.38 per share for the third quarter.
In July, YRC Worldwide had said it expects to earn $1.05 - $1.15 per share in the third quarter, including a curtailment gain of about $0.70 per share and increased union health and pension costs of about $0.15 per share. The company had reported a profit of $36.27 million or $0.62 per share for the second quarter, down from $55.37 million or $0.95 per share reported for the same period last year.
Commenting on the developments, Bill Zollars, chief executive officer, said, "The economy has softened further impacting both volume levels and pricing across our operating companies. After a solid second quarter, the third quarter started slowly and has progressively weakened. Our earnings have also been impacted by early investments in combining our national companies."
YRC Worldwide also said it is accelerating its integration strategy, focusing on the corporation's two largest operating subsidiaries, Yellow Transportation and Roadway. Since acquiring Roadway, the company has reduced duplicate back-office functions, shared technology applications, formed common management teams and, most recently, combined corporate sales.
With today's announcement, the companies are taking steps to combine the local sales teams and offer a comprehensive portfolio of services through one operating network. The company said that Yellow Transportation and Roadway brands will remain in the marketplace represented by a combined sales force of over 1,000 account executives. The company expects to save in excess of $200 million a year from the effort, which is expected to extend through 2009.
When asked about the impact on employees, Mike Smid, president and chief executive officer of YRC North American Transportation, said, "Our employees understand the challenges of the marketplace and are excited to improve the way we do business."
Commenting on the integration, Zollars said, "Given the positive customer response from our recent combination of the corporate sales teams and the increasingly dynamic operating environment, we believe now is the right time to take such significant action."
Zollars added, "We do not see signs of the economy improving in the near term, but as we merge Yellow and Roadway, we expect operating results to show meaningful improvement."
In addition, YRC Worldwide expects to remain in full compliance with all terms of its credit agreement and to have borrowing capacity in excess of $600 million.
YRC Worldwide stock is down 78 cents or 4.38% and currently trading at $17.02. For the past 52-weeks, the stock has been trading between $10.99 and $30.20.
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