| Stifel Nicolaus
predicts YRC runs out of cash in November 2009 |
| The following excerpts
were published by Stifel
Nicolaus Transportation & Logistics Research Group's July
31st, 2009 sales and earnings report. Click here
to read all details of the 11 page report in pdf. |
| • YRC's 2Q09 financial losses
were abysmal, but cash flow is what is important at the moment, in
our opinion. Unfortunately for YRC, cash flow remains
significantly negative and could remain so even if wage/pension
concessions go through. |
| • If asset sales don't come
through big, even if the new labor contract is ratified next week,
we estimate the company violates its minimum liquidity covenant
(i.e., runs out of cash) in November (demonstrated in Exhibit 1 on
p. 2). |
| • The theme of at least the
last several YRC quarterly earnings releases and conference calls
has been – "We know the numbers and trends look bad, but
we've got a plan. Things will be better. " And what has
happened? Volumes, margins, and cash flow have sharply declined.
It's not just the economy; it's the company – YRC is performing
worse by far than any of its competitors. |
| • The company did just get
another bank amendment, but the 8-K with the detail has yet to be
released. As expected, the banks waived the prior 3Q09 minimum
EBITDA covenant, which the company had no chance of hitting, and
laid out new covenants for 4Q09-2010 (shown in Exhibit 2 on p. 3).
We do not expect the company to hit the 4Q09 target, even as low
as it is. |
| • Interestingly, the banks
also waived the $100mm minimum liquidity covenant for August and
will allow YRC to retain 100% of up to $50mm in asset sales (under
certain conditions). In our opinion, this was done to give the
banks and YRC more time to explore a sale, restructuring or other
bankruptcy strategy, if the labor concessions do not pass. |
| • We are lowering our EPS
estimates for 2009 and 2010 from ($8.57) and ($6.45) to ($12.73)
and ($10.68), respectively. Our earnings model does not assume the
wage concessions and pension terminations go through. If our model
did assume the concessions pass, the $135mm-$150mm per quarter in
expense savings would add roughly $1.40-$1.60 per share per
quarter, making our 2009 and 2010 EPS assumptions approximately
($6.73) and ($4.68), all else being equal. |
| Click here
to read all details of the 11 page report in pdf.
|
