Nov 14, 2013, 12:27pm CST
YRC Worldwide CFO: No Teamsters deal this week
Jamie Pierson, CFO, YRC Worldwide Inc.
Andrew C. Grumke
Jamie Pierson, CFO, YRC Worldwide Inc.
Reporter- Kansas City Business Journal
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YRC Worldwide Inc.’s negotiations with the International Brotherhood of Teamsters will not be finished by Friday, according to a report filed by Bloomberg.
YRC CFO Jamie Pierson told Bloomberg that he did not expect to see negotiations completed before a Nov. 15 goal the company set when officials met with leaders of the Teamsters Nov. 5 in Dallas. YRC officials have said a deal must be completed soon in order for the Overland Park-based trucking company (Nasdaq: YRCW) to refinance before its debts begin to come due in February.
YRC formally acknowledged it is in “discussions” with the labor union that represents more than 25,000 of the company’s 32,000 employees but has not commented further on the situation. CEO James Welch did not take analysts’ questions on the subject during the company's quarterly earnings conference call.
Representatives of the Teamsters’ national office in Washington have also declined to comment on the negotiations.
YRC is seeking an extension or an amendment to its current contract with the Teamsters. The two parties current contract runs through March 2015. YRC has told the union it needs to extend the life of that contract into 2019. The company says an agreement is necessary for it to pay $1.4 billion in debts that were incurred under the watch of former CEO Bill Zollars which will come due in 2014 and 2015.
The existing labor agreement is based on three rounds of concessions the company and the union agreed on between 2008 and 2010. In those concessions, the union consented to a 15 percent cut in wages, suspension of pension payments and reduced vacation time for members. YRC began to make pension payments again in early 2012 at 25 percent of the rate paid in 2009.
The deal saves YRC an estimated $350 million in labor costs annually. It also gave the Teamster employees stock in the company and granted the labor union the right to nominate two members to the YRC board.
Thomas Albrecht of BB&T Capital wrote in a note Wednesday that he thinks the odds of the Teamsters approving the contract are at least 70-30 because of the number of jobs at stake. “While we don’t know for sure, we believe an extension will be similar to the current contract, which has provided small annual wage increases in each April since 2010 and has avoided a large wage snapback,” he added.
Mr. Welch said extending the contract at competitive terms is a must for the company’s survival during the call on Tuesday.
“The path is clear. In order for us to more holistically refinance the capital structure, we need a more competitive contract,” Mr. Welch added.
Lingering problems hurt earnings at YRC Worldwide
By MARK DAVIS
The Kansas City Star
Continuing disruptions from a massive reorganization of its network of freight terminals dragged down third-quarter earnings at YRC Worldwide.
The Overland Park-based trucking company said Tuesday that driver shortages at some terminals and freight backups caused its national carrier, YRC Freight, to lose some of its more profitable business temporarily.
YRC Freight had to pay more overtime to the available drivers, and the company hired local cartage firms to help clear freight from its clogged network.
“A lot of this was self-inflicted,” chief executive officer James Welch told Wall Street analysts during a conference call. “We feel better about what we saw in October.”
YRC’s problems with its terminal changes come as its executives openly question the company’s future while asking employees, notably its 26,000 union employees, for help to refinance debts the company can’t repay.
The company said lenders have demanded an extension of YRC’s contract with the International Brotherhood of Teamsters into 2019 before they will extend the due dates on the company’s debts.
During the call with ana- lysts, Welch called the debt refinancing an “incredibly important step” for the company and its employees. He said a new contract with the Teamsters would increase the odds of refinancing the debt.
Welch declined to answer analysts’ questions about the refinancing effort or the talks with the Teamsters. Beyond the call with analysts, YRC officials were not available to discuss the earnings report.
The company essentially said problems that had hurt its financial results in the second quarter played havoc with its operations until recently.
Financially, the added costs contributed to a loss of $44.4 million, or $4.45 a share, in the three months that ended Sept. 30. A year ago, YRC Worldwide reported a profit of $3 million.
Its combined trucking business — YRC Freight and three stronger regional companies — had operated profitably, YRC Worldwide said, though not enough to cover its interest expenses on debt or as profitably as it had a year ago. Operating profits totaled $5.8 million compared with $27.3 million a year ago.
Welch had said in the company’s earnings announcement that its lingering problems led to the company’s “leadership changes in late September.” That’s when YRC Freight president Jeff Rogers left the company. Welch now holds that job as well as YRC Worldwide’s chief executive post.
YRC also said it will slow down its investments in new tractors and other equipment to compensate for the financial setback.
Revenue in the recent quarter rose to $1.25 billion from $1.24 billion a year ago.
YRC had delayed its earnings report from last week, citing its intentions to negotiate a labor contract extension. The Teamsters’ contract, which grants hefty pay and benefits concessions to the company, expires at the end of March 2015.
The company has since said the refinancing must be completed before a $69 million debt payment comes due Feb. 15. YRC owes more than $1 billion in debt over the next two years.
In an open letter to employees at the end of October, Welch said “some companies in our position have simply declared bankruptcy” but said everyone had “worked too hard and sacrificed too much” to do that.
A presentation management made to Teamsters leaders in Dallas a week ago offered two possible outcomes. One was an extended contract that made the company more competitive and allowed it to refinance its debts.
The other outcome was a simple diagram of an 18-wheeler going over a cliff.
YRC’s presentation in Dallas said its share of the less-than-truckload freight business, which combines freight from multiple customers on one truck, had fallen to 17 percent from 42 percent in 1995.
The company’s recent earnings reports have been bellwethers for its stock price. Shares exploded in early May after the company said its trucking business had operated at a profit for 12 months — though interest payments on debt left the company with a net loss.
By mid-July, shares had climbed above $35.
But in early August, the company disappointed markets with a midyear report that included news of the somewhat stumbling reorganization of YRC Freight’s network of terminals.
Shares fell by more than $12 in four days and have continued a long slide.
The stock fell 91 cents Tuesday and closed at $9.73 ahead of the earnings report.
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