YRC Worldwide Inc. is one of the largest transportation service providers in the world is the holding company for a portfolio of successful brands including Yellow Transportation Roadway Express Reimer Express Meridian IQ USF Holland USF Reddaway USF Bestway USF Glen Moore and New Penn Motor Express. The enterprise provides global transportation services transportation management solutions and logistics management. The portfolio of brands represents a comprehensive array of services for the shipment of industrial commercial and retail goods domestically and internationally. YRC Worldwide Inc. has a market cap of $239.7 million; its shares were traded at around $4.04 . YRC Worldwide Inc. had an annual average earning growth of 3.8% over the past 10 years.
Highlight of Business Operations:Consolidated operating loss increased significantly during the three months ended March 31, 2009 as compared to the same period in 2008 and is reflective of decreased operating revenue at all of our operating companies. Significant volume declines within our National Transportation and Regional Transportation segments resulted in an operating loss of $379.2 million for the first quarter of 2009, a significantly larger operating loss from the prior year comparable quarter. Operating expenses for the quarter were down $404.0 million as compared to the same period in 2008 and were comprised of a $186.1 million decrease in salaries, wages and benefits, a $118.9 million decrease in operating expenses and supplies, a $79.1 million decrease in purchased transportation, which is attributable to declining volumes, and an $8.1 million decrease in other operating expenses. These expense reductions however did not keep pace with the significant revenue decline thus resulting in the operating loss for the 2009 quarter. Additionally, in 2008 the Company recorded reorganization and settlement charges of $12.8 million primarily related to the closure of 27 service centers in our Regional Transportation segment. Similar closure costs occurred in 2009 within both National Transportation (primarily a result of the YRC integration) and Regional Transportation and are classified within the various expense captions as discussed below.
The decrease in salaries, wages and benefits in the first quarter of 2009 is largely due to a 10% wage reduction for most union and non-union employees resulting in a $90.0 million expense reduction in 2009 offset by equity consideration of approximately $30.8 million given to those employees affected by the reduction. Additionally, the decrease in salaries and benefits is a result of lower headcount in the current year due to lower volumes partially offset by severance benefits of $34.5 million and pension settlement costs of $5.0 million associated with one of our defined benefit plans and an increase in workers compensation expense of $19.5 million over first quarter 2008 due mostly to unfavorable development of prior year claims. The decrease in operating expenses and supplies is a result of lower fuel costs of 58.7%, due to lower diesel prices and reduced miles driven, lower vehicle maintenance of 17.0% partially offset by an increase in bad debt expense of $11.2 million or 131.2% and a slight increase in professional services. Finally, the decrease in other operating expenses is due to the decrease in fuel and oil tax due to declining volumes.
Operating loss for National Transportation was $299.8 million in the first quarter of 2009 compared to an operating loss of $7.2 million in the prior year. Revenue was lower by $537.2 million while total costs only decreased by $244.6 million. The cost declines consisted primarily of lower salaries, wages and benefits of $137.6 million, lower purchased transportation costs of $55.8 million, lower operating expenses and supplies of $41.5 million and lower other operating expenses of $6.9 million.
Operating loss for Regional Transportation was $74.1 million for the first quarter 2009, an increase of $36.5 million from the first quarter 2008, consisting of a $157.3 million decline in revenue and a $120.8 million decrease in operating expenses. Regional Transportation has reduced most operating expenses in proportion to lower tonnage and shipment volumes. Material expense decreases were in salaries, wages and benefits of $49.8 million, operating expenses and supplies of $49.4 million, purchased transportation of $8.2 million, losses on property disposals of $1.5 million and reorganizations and settlements of $11.1 million.
YRC Logistics first quarter 2009 operating loss was $3.5 million compared to an operating loss of $1.1 million in the first quarter of 2008. YRC Logistics revenue was lower by $37.6 million while total costs only decreased by $35.2 million. As a result of declining business volumes in 2009, headcount was reduced, resulting in first quarter 2009 severance expense of $1.2 million included in salaries, wages and employees benefits. This amount was offset by favorable claim development resulting in a reduction in workers compensation expense of $2.3 million also included in salaries, wages and employees benefits. Operating expenses and supplies collectively trended down 19.1% in the first quarter of 2009 versus the first quarter of 2008 and was primarily comprised of reductions in fuel costs of $2.3 million or 55.5% due to the reduction in both base costs and usage, offset by increases in professional services of $0.7 million or 17.2%, provision for uncollectible accounts of $0.4 million or 61.2% and unfavorable development in accident claims of $0.2 million or 13.7%. Depreciation expense in the first quarter of 2009 was $0.4 million less than the first quarter of 2008 representing an 11.5% decrease.
Operating loss for Truckload was $2.2 million for the first quarter 2009, an improvement of $2.9 million from the first quarter of 2008, consisting of a $0.4 million increase in revenue and a $2.5 million decrease in operating expenses. Expense decreases were primarily in the areas of fuel costs (lower diesel prices partially offset by higher miles driven), driver recruiting costs, purchased transportation costs, equipment depreciation and bodily injury and property damage costs. Increased operating expenses were primarily due to higher wages and benefits costs of $2.2 million.
Read the The complete ReportYRCW is in the portfolios of Arnold Van Den Berg of Century Management.