YRC Worldwide’s Zollars addresses company’s health

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Responding to recent media and financial analyst speculation regarding YRC Worldwide’s health, Bill Zollars – chairman, president and chief executive officer – said Wednesday, Oct. 29, that the “confusion” about the company’s financial condition stems from a series of recent actions to pay down debt and strengthen its balance sheet.

“We’ve put a number of measures in place over the past year to strengthen our balance sheet and take full advantage of our network assets in the marketplace – actions that will enable us to position future service enhancements and position our business for long-term growth,” Zollars said.

The Overland Park, Kan.-based company is in compliance with its bank debt covenants and has ample liquidity and positive cash flow, he said. “Reducing debt and improving liquidity is not a new concept for us or many other large U.S. companies. Several large firms have taken similar actions by drawing on their revolving credit facilities as well.”

YRCW on Oct. 23 announced third-quarter 2008 earnings of $36.6 million compared with earnings of $40.7 million during the year-ago period; revenue was $2.38 billion, down from $2.46 billion. Zollars said the combination of a weakening economy and the unrest in the credit markets has negatively impacted all financial markets on a historic level. “Unfortunately, YRC Worldwide credit ratings and stock performance have been no exception,” he said. “The noise created by a lack of understanding of our recent actions to pay down debt has amplified this impact.”

Addressing an impairment test YRCW is conducting, Zollars said that because of the recent decline in the company’s stock price, YRCW is required to accelerate its annual impairment review of its intangible assets, reassessing the value of its brand names and goodwill charges associated with its acquisitions. “At this time, we do not have the test completed, but we expect it to be final before filing our 10-Q in early November,” he said. “If we do record an impairment charge, remember that it is a non-cash charge that does not impact our financial condition and will be excluded from our bank leverage ratio calculation.”

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The company said it plans to cut up to 3,750 jobs in a cost-reduction move as part of an accelerated plan to integrate its Roadway and Yellow Transportation units in an effort to enhance service and improve efficiencies. “We’re in the process of combining the operational networks and the local sales teams of these two brands,” Zollars said. “We’re pleased that our valued customers and our employees are supportive. We’re also pleased with the collaboration and support of our Teamsters leadership in these efforts.”

Zollars said YRCW is continuing to evaluate additional opportunities to reduce debt, including additional proceeds from the sales of excess facilities; evaluation of potential sale/leaseback real estate opportunities; and generation of cash from working capital. “I want to assure you that we are confident about the things we can control and our ability to weather the things we cannot,” he said. “Most importantly, we remain focused on providing exceptional service to our customers.”