Yellow Roadway Corporation
2004
Case Study
1
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
1
Overview
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Overview of the Trucking Industry
A brief history of Yellow Roadway
Corporation
EOY 2006
• Mission, Vision, Objectives, Strategies
2007
• New Vision and Mission
External Analysis
• Opportunities & Threats
• CPM
• EFE
Internal Analysis
• Financial Data
• Strengths and weaknesses
• IFE
• Financial ratios
• Financial trending
Strategic Analysis
• SWOT Matrix
• SPACE
• BCG
• IE matrix
• Grand Strategy Matrix
• Matrix Analysis
• QSPM
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Possible alternative strategies
Our Recommendation
• Strategies
• Long range objectives
• EPS/EBIT
Implementation Issues
Proposed annual objectives (goal) and
policies
Proposed procedures for evaluation
Epilogue
Resources Utilized
Questions
2
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Brief History of the Trucking Industry
• 1911-1912 - Trucks first travel coast to coast. The trip takes 46 days
• 1921 - The Federal Aid Highway Program requires state highway
departments to identify a system of connecting rural roads.
• 1930s - U.S. Route 66, the first true highway, is built
• 1933 - The American Trucking Association is created
• 1950s - General Motors, Ford, and Dodge introduce diesel trucks
• 1956 - Federal legislation calls for creation of 41,000 miles of
improved interstate highways.
• 1970 - Hollywood and songwriters focus on truckers with box office
successes such as Smokey and the Bandit, Every Which Way but
Loose, and White Line Fever
• 1980 - The Motor Carrier Act deregulates the industry
• 1982 - The Surface Transportation Act allows for longer combination
vehicles and uniform weights
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Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
History of Yellow Roadway Corp. (Yellow)
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•
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•
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1924: A.J. Harrell founded Yellow Cab and Transit Co. in Oklahoma City, primarily
as a bus and taxi company serving central Oklahoma. The company added
intrastate shipping to its services in 1926 and shortened its name to Yellow Transit
Co.
1944: Harrell sold the shipping operations to a New York-based investment group
headed by New York financier Arlington W. Porter. Yellow changed its name to
Yellow Transit Freight Lines, Inc.
1952: George E. Powell, Sr., of Kansas City and an ownership group that included
Powell's son, George E. Powell, Jr., and Roy Freuhauf, owner of the Freuhauf Trailer
Co., acquired the company. In one year, the Powell family brought the company
from near-bankruptcy to profitable growth.
1965: Yellow acquired Watson-Wilson Transportation System, making the company
a transcontinental carrier with routes extending from the Midwest to the Atlantic
and Pacific coasts. The acquisition allowed Yellow to add more than 21,000 miles
of authorized routes and begin serving 10 more states.
1968: Watson-Wilson merged into Yellow, and Yellow's name changed to Yellow
Freight System, Inc.
4
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
4
History of Yellow Roadway Corp. (Yellow)
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1972: Yellow acquired Adley Corp. and principal subsidiary Adley Express Co.,
providing operating rights along the Eastern Seaboard north to Quebec and south
to Georgia. The acquisition allowed Yellow to extend service into five states.
1975: Yellow bought all Republic Freight System, Inc., outstanding stock. The rights
Yellow acquired from Republic allowed Yellow to expand into the Northwest, giving
Yellow true service coverage throughout the 48 contiguous states.
1977: Yellow and Braswell Motor Freight Lines company owners agreed to allow
Yellow to buy all Braswell capital stock. This acquisition gave Yellow additional
coverage throughout the sunbelt states from Georgia to California.
1980: Congress passed the Motor Carrier Act, deregulating the interstate trucking
industry. Yellow opened 13 general shipping service centers, bringing the total to
248.
1981: Yellow opened 88 new service centers, converting its operations to an allnew, hub-and-spoke shipment-flow system with each of the 17 hubs being a
consolidation and distribution point for a specific territory.
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Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
5
History of Yellow Roadway Corp. (Yellow)
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1982: The hub-and-spoke system provided the base for a rapid increase in the
service center network. At the end of the year, Yellow had 377 service centers,
providing direct service to 48 of the 50 states.
1984: Yellow opened 71 service centers, bringing the number of centers to 508.
1985: Yellow acquired RBS Enterprises, Inc., to expand service between the United
States and Ontario, Canada. RBS and its subsidiaries included International
Carriers, Inc., which had operations in the United States and Canada. The
acquisition significantly increased the presence of Yellow in Ontario and Quebec.
1986: Yellow acquired Custom Courier Services, Ltd., which it renamed Yellow
Freight System of British Columbia, Inc., to expand service into British Columbia. At
year-end 1986, Yellow served more than 650 points in Canada and had 599 service
centers.
1992: Yellow launched less-than-container-load service to Europe.
1994: The effects of federal and state deregulation, combined with industry
overcapacity and intense price competition began to send Yellow's profitability on
a slow, downward spiral.
6
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
History of Yellow Roadway Corp. (Yellow)
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1995: Continuing to expand, Yellow entered the Asia/Pacific market with services to and
from Hong Kong, Singapore and Thailand.
1996: The Yellow board hired A. Maurice Myers as Yellow Corp. president, chairman and
chief executive officer in April. In September, Yellow hired William Zollars as Yellow
Freight System president. Together, Myers and Zollars began improving the company's
performance almost immediately.
1997: Yellow had an operating ratio of 96.5. Yellow realigned its organization into five,
regionally-based business units to enhance operating flexibility and provide customized
services. The company created more than 400 new driver-sleeper teams and expanded
service into South and Central America.
1998: Yellow and the Teamsters reached agreement on a new, 5-year contract 7 weeks
before the 1994 National Master Freight Agreement expired. The first, 5-year contract
in industry history was ratified by 70 percent of Teamsters in April. Midyear, Yellow
introduced an integrated ground and air transportation service, Exact Express®, to
broaden its services.
1999: Yellow celebrated 75 years of service on New Year's Eve with Yellow expecting to
be a new company for a new century. Before the year was over Bill Zollars was named
Chairman, President and CEO of Yellow Corp.
7
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
7
History of Yellow Roadway Corp. (Yellow)
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2000: James Welch became the new president and chief operating officer of
Yellow. The company celebrated one of its strongest performances in its 76-year
history, boasting operating revenue at a record $2.8 billion.
2001: Yellow received ISO 9000:2001 certification, becoming the first
transportation services provider to receive the new classification under the
International Organization for Standardization for continuous quality
improvement. Yellow expanded Standard Ground Regional Advantage—the
company's best-in-class, 2- and 3-day regional service. Almost 70 percent of all
shipments would now deliver in 3 days or less, a 12 percent improvement over the
previous 2 years.
2002: Yellow Freight System, Inc., changed its name to Yellow Transportation, Inc.,
to reflect the company's transformation to a full-service global transportation
provider. The company reorganized into 15 areas to move decision-makers closer
to customers. Yellow international operations announced an alliance with 12
European transportation providers.
2003: Yellow acquired Roadway Corp. to become Yellow Roadway Corp.
8
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
8
Yellow’s Subsidiaries
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Roadway Express - provides seamless transportation throughout Canada, Mexico,
and the U.S., and services for markets worldwide. A leading transporter of
industrial, commercial, and retail goods, Roadway adds value to global supply
chains through innovative combinations of network resources, capabilities, and
technologies to customize services.
Reimer Express - is a leading Canadian provider of industrial, retail, and
commercial transportation services. Through integration of network and
information systems with Roadway, Reimer Express provides seamless service
between Canada, Mexico, the U.S., and global markets.
YRC Regional Transportation – is comprised of USF and New Penn Motor Express
and delivers nationwide service in the next-day , second-day, and time-sensitive
markets, which are among the fastest-growing transportation segments.
New Penn Motor Express - is a YRC Regional Transportation company providing
superior regional, next-day ground services through a network spanning the
Northeastern United States, Quebec, Canada and Puerto Rico. New Penn is
considered an industry leader in tracking technologies and Internet-based shipping
services.
USF Holland - is a YRC Regional Transportation company offering services
throughout the Central and Midwestern United States and Eastern Canada. USF
Holland makes claim-free deliveries a top priority, and its on-time performance has
long been considered an industry standard.
9
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
9
International Presence
10
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
10
Logistics Centers
To manage your existing international shipments, please contact the
YRC Logistics Global Logistics Center in your region.
11
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
11
Yellow’s Subsidiaries
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•
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USF Reddaway - is a YRC Regional Transportation company operating a network
across the Western United States and Canada. The company provides guaranteed
delivery of time-sensitive shipments, a user-friendly Internet-based transportation
management system, and streamlined customs procedures.
USF Bestway – moves goods in a 5-state area of the Pacific Southwest and serves
all major getaways to Mexico
USF Glen Moore - is one of the fastest-growing providers of customized truckload
van services in North America, offering a full range of transportation services.
Meridian IQ – plans and coordinates the movement of goods throughout the
world by offering flexible logistics solutions supported by technology and
management.
YRC Enterprise Services and Yellow Roadway Technologies - global logistics
management company, coordinates the movement of goods worldwide across
multiple modes of the global supply chain. YRC Logistics helps businesses
automate and improve shipment planning, optimization, administration, and
overall supply-chain processes while connecting more efficiently with clients, their
suppliers and the final consumer.
12
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
12
Yellow’s Vision
Yellow will be the leading provider of guaranteed,
time-definite, defect-free, hassle-free
transportation for business consumers
worldwide.
13
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
13
2004 Core Purpose
Making global commerce work by
connecting people, places, and
information .
14
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
2004 Core Values
•Exceed customer expectations
•Value our people
•Work safely
•Demonstrate good citizenship
•Act with integrity
•Embrace teamwork
15
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
2004 Strategies
• Concentrate on gaining cost and purchasing synergies from its recent
mergers before embarking on something new
• “Making global commerce work”
• Focus on overnight and next day markets
• Become a stronger competitor to integrated transportation providers
such as UPS and FedEx
• Acquire Overnight Transportation (9th largest) for $1.25 billion in the
summer of 2005
•Offer overnight service
16
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
2004 Objectives
•Reduce cost base by 100 million run rate
•Pay down debt and strengthen financial position
•Grow all of our brands following the acquisition of Roadway
•Continue to look for acquisitions that complement our
strategy, contribute to our financial performance, and help us
tap opportunities for employees, customers and investors.
17
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
2004 Issues
• Rising fuel costs
• Driver turnover and shortages
• Decreasing manufacturing activity in the
United States
• Decreasing customer spending
• Increases in contractual wages and
benefits and purchased transportation
rates
18
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Yellow’s Vision
Yellow will be the leading provider of guaranteed,
time-definite, defect-free, hassle-free
transportation for consumers worldwide.
19
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
19
A New Mission
Yellow’s mission is to provide international transportation
for express and standard deliveries for businesses and
customers of all sizes. (1,2,3,7) We are willing to meet a variety
of needs that may be specified by our customers. (1,7) We
pride ourselves in our innovative logistics program which makes
sure that the most knowledgeable employee for each individual
industry is assigned to the appropriate transactions. (2,4,7)
Yellow is constantly looking to expand in any and all profitable
areas of the industry internationally to benefit our
shareholders. (3,5) We provide our employees with exceptional
benefits to show our appreciation of their hard work and
dedication. (9) We aim to exceed customer expectations, value
our people, work safely, demonstrate good citizenship, act with
integrity, and embrace teamwork (6,8,9)
20
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
A New Mission
The new mission answers the following questions
1) Customers: Who are the firm’s customers?
2) Products or services: What are the firm’s major products?
3) Markets: Geographically, where does the firm compete?
4) Technology: Is the firm technologically current?
5) Concern for survival, growth, and profitability: Is the firm committed to growth
and financial soundness?
6) Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities
of the firm?
7) Self-concept: What is the firm’s distinctive competence or major competitive
advantage?
8) Concern for public image: Is the firm responsive to social, community, and
environmental concerns?
9) Concern for employees: Are employees a valuable asset of the firm?
21
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
External Audit: Opportunities
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•
•
•
Trucking industry expected to grow significantly
Acquire FedEx/UPS/DHL market share
Global market
Position to be a regional carrier by the Roadway
merger
• Increase in rail/intermodel and air transport
tonnages
22
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
External Audit: Threats
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•
•
•
Alternate forms of transportation/shipping
Shortage of long haul drivers
High fuel prices
Increased regulation of working hours for truck
drivers
• Increase in the number of toll road and rates on
existing ones
• Competition
• Antitrust
23
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Competitive Profile Matrix
Yellow
Critical Success factors
Weights
Rating
0.0 to 1.0
1 to 4
FedEx
Weighted
Score
Rating
1 to 4
UPS
Weighted
Score
Rating
1 to 4
Weighted
Score
Size of Fleet
0.07
4
0.28
3
0.21
4
0.28
Name Recognition
0.10
3
0.30
4
0.40
4
0.40
Global Presence
0.10
2
0.20
3
0.30
4
0.40
Domestic Presence
0.10
3
0.30
3
0.30
4
0.40
Revenues
0.08
3
0.24
3
0.24
4
0.32
Small Shipping
0.15
1
0.15
3
0.45
4
0.60
Large Shipping (TL / LTL)
0.15
4
0.60
2
0.30
1
0.15
Customer Loyalty
0.07
4
0.28
3
0.21
3
0.21
Shipment Tracking
0.10
3
0.30
4
0.40
4
0.40
Service Quality
0.08
4
0.32
3
0.24
4
0.32
Totals
1
2.97
3.05
24
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
3.48
External Factor Evaluation Matrix
Key External Factors
Weights
Rating
0.0 to 1.0
1 to 4
Weighted Score
Opportunities
Trucking industry expected to grow significantly
0.10
3
0.30
Acquire FedEx/UPS/DHL market share
0.07
2
0.14
Global market
0.08
3
0.24
Position to be a regional carrier by the Roadway merger
0.09
4
0.36
Increase in rail/intermodal and air transport tonnages
0.08
2
0.16
Alternate forms of transportation/shipping
0.07
2
0.14
Shortage of long haul drivers
0.06
2
0.12
High fuel prices
0.12
3
0.36
Increased regulation of working hours for truck drivers
0.08
3
0.24
Increase in the number of toll road and rates on existing ones
0.08
3
0.24
Competition
0.10
3
0.30
Antitrust
0.07
2
0.14
Threats
Totals
1
25
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
2.74
Net Worth
(December 31, 2004, in Thousands of Dollars Except Per Share)
1. Stockholders’ Equity + Goodwill = $1,214,191 + $632,141
2. Net Income x 5 = $184,327 x 5=
$ 1,846,332
$ 921,635
3. Share price = *$55.71 /EPS(3.83) = 14.55 x Net Income $184,327 =
$ 2,681,958
4. Number of Shares Outstanding x Share Price = 48,869 x $55.71 =
$ 2,722,492
Method Average
$ 2,043,104
*Stock price is based on a closing price at 12/31/2004 from finance.yahoo.com
Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEETS
Yellow Roadway Corporation and Subsidiaries
December
31,
2004
(in thousands except per share data)
Assets
Current Assets:
Cash and cash equivalents
Accounts receivable, less allowances of $22,371 and $20,839
Fuel and operating supplies
Deferred income taxes, net
Prepaid expenses
Total current assets
Property and Equipment:
Land
Structures
Revenue equipment
Technology equipment and software
Other
$
106,489
778,596
20,916
66,496
80,944
December
31,
2003
$
75,166
699,142
16,452
23,614
70,062
1,053,441
884,436
336,613
916,550
1,067,663
181,444
170,019
351,969
906,434
968,742
154,688
156,781
Less – accumulated depreciation
2,672,289
(1,249,571)
2,538,614
(1,135,346)
Net property and equipment
1,422,718
1,403,268
632,141
468,310
50,559
617,313
467,114
91,098
$ 3,627,169
$ 3,463,229
Goodwill
Intangibles
Other assets
Total assets
27
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Consolidated Balance Sheet
Liabilities and Shareholders’ Equity
Current Liabilities:
Checks outstanding in excess of bank balances
Accounts payable
Wages, vacations and employees’ benefits
Claims and insurance accruals
Other current and accrued liabilities
Asset backed securitization (“ABS”) borrowings
Current maturities of contingently convertible notes
Current maturities of other long-term debt
Total current liabilities
Other Liabilities:
Long-term debt, less current portion
Deferred income taxes, net
Claims and other liabilities
Commitments and Contingencies
Shareholders’ Equity:
Common stock, $1 par value per share – authorized 120,000
shares, issued 51,303 and 50,146 shares
Preferred stock, $1 par value per share – authorized 5,000 shares, none
issued
Capital surplus
Retained earnings
Accumulated other comprehensive loss
Unamortized equity awards
Treasury stock, at cost (2,066 and 2,359 shares)
Total shareholders’ equity
Total liabilities and shareholders’ equity
$ 112,917 $ 101,395
194,172
158,780
427,731
351,287
124,060
112,005
86,459
66,473
71,500
250,000
4,400
1,757
1,199,739
863,197
403,535
319,839
489,865
836,082
298,256
463,609
51,303
50,146
-
-
694,504
550,484
(33,159)
(10,479)
(38,462)
1,214,191
653,739
366,157
(23,167)
(567)
(44,223)
1,002,085
$3,627,169 $3,463,229
28
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Consolidated Statement of Operations
STATEMENTS OF CONSOLIDATED OPERATIONS
Yellow Roadway Corporation and Subsidiaries
For the years ended December 31
(in thousands except per share data)
Operating Revenue
Operating Expenses:
Salaries, wages and employees’ benefits
Operating expenses and supplies
Operating taxes and licenses
Claims and insurance
Depreciation and amortization
Purchased transportation
Losses (gains) on property disposals, net
Acquisition, spin-off and reorganization charges
Total operating expenses
Operating income
2004
2003
2002
$ 6,767,485
$ 3,068,616
$ 2,624,148
4,172,144
1,011,864
169,374
132,793
171,468
752,788
(4,547)
-
1,970,440
449,825
83,548
67,670
87,398
318,176
(167)
3,124
1,717,382
385,522
75,737
57,197
79,334
253,677
425
8,010
6,405,884
2,980,014
2,577,284
361,601
88,602
46,864
Nonoperating (Income) Expenses:
Interest expense
ABS facility charges
Interest income
Write off debt issuance costs
Other
43,954
(2,080)
18,279
3,785
20,606
(1,706)
2,888
7,211
2,576
(843)
334
Nonoperating expenses, net
63,938
21,788
9,278
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Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Consolidated Statement of Operations
Income from Continuing Operations Before Income Taxes
Income Tax Provision
297,663
113,336
66,814
26,131
37,586
13,613
Income from Continuing Operations
Income (loss) from discontinued operations, net
184,327
-
40,683
-
23,973
(117,875)
Net Income (Loss)
$ 184,327 $
40,683 $
(93,902)
Average Common Shares Outstanding - Basic
48,149
30,370
28,004
Average Common Shares Outstanding - Diluted
49,174
30,655
28,371
Basic Earnings (Loss) Per Share:
Income from continuing operations
Income (loss) from discontinued operations
$
3.83 $
-
1.34 $
-
0.86
(4.21)
Net income (loss)
$
3.83 $
1.34 $
(3.35)
Diluted Earnings (Loss) Per Share:
Income from continuing operations
Income (loss) from discontinued operations
$
3.75 $
-
1.33 $
-
0.84
(4.15)
Net income (loss)
$
3.75 $
1.33 $
(3.31)
30
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Internal Audit: Strengths
•
•
•
•
•
•
Large scale of operation
Operating leverage
#3 ground transport provider
#1 single LTL (less-than-truckload) provider
Wide range of assets and non assets
Ranked #1 “America’s Most Admired Companies”
by Fortune for 3 consecutive years in early 2000s
• Joint venture with China’s conglomerate (Jin
Jiang)
• Cost and purchasing synergies by merger
31
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Internal Audit: Weaknesses
• High driver turnover and driver shortages
• Various brand names resulting in decreased name
recognition
• Low operating margin
• High wages paid to Teamster drivers
• $12 million increase in claims and insurance accruals
• Increase in multi-employer health, welfare and pension
plans
• Lost productivity from unused capital (underutilized trucks)
• 15 % overlap of customers by the Yellow-Roadway merger
32
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Internal Factor Evaluation Matrix
Key Internal Factors
Weights
Rating
0.0 to 1.0
1, 2, 3 or 4
Internal Strengths
Weighted
Score
3 or 4
Large scale of operation
0.06
4
0.24
Operating leverage
0.06
3
0.18
#3 ground transport provider
0.04
3
0.12
#1 single LTL (less-than-truckload) provider
0.06
4
0.24
Wide range of assets and non assets
0.04
3
0.12
Ranked #1 “America’s Most Admired Companies” by Fortune for 3 consecutive years in early 2000s
0.08
4
0.32
Joint venture with China’s conglomerate (Jin Jiang)
0.12
4
0.48
Cost and purchasing synergies by merger
0.10
4
0.40
Internal Weaknesses
1 or 2
High driver turnover and driver shortages
0.08
1
0.08
Various brand names resulting in decreased name recognition
0.02
2
0.04
Low operating margin
0.06
1
0.06
High wages paid to Teamster drivers
0.06
1
0.06
$12 million increase in claims and insurance accruals
0.04
2
0.08
Increase in multi-employer health, welfare and pension plans
0.06
2
0.12
Lost productivity from unused capital (underutilized trucks)
0.08
1
0.08
15 % overlap of customers by the Yellow-Roadway merger
0.04
2
0.08
Totals
1
33
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
2.7
Financial Ratios: Time Comparison
LIQUIDITY RATIOS
Current Ratio
Quick Ratio
FY 2004
1.2 times
1.1 times
FY 2003
1.0 times
0.9 times
LEVERAGE RATIOS
Debt to Total Assets
Times Interest Earned
50.8%
11.7 times
53.3%
-9.5 times
ACTIVITY RATIOS
Inventory Turnover
Ave. Collection Period
Fixed Assets Turnover
Total Assets Turnover
372.0 times
47.0 days
1.8 times
1.4 times
26.4 times
888.4 days
0.1 times
0.1 times
2.9%
4.0%
8.2%
-3.2%
-0.2%
-0.4%
PROFITABILITY RATIOS
Profit Margin on Sales
Return on Total Assets
Return on Net Worth
34
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Financial Ratios: Competitor Comparison
LIQUIDITY RATIOS
Current Ratio
Quick Ratio
LEVERAGE RATIOS
Debt to Total Assets
Times Interest Earned
ACTIVITY RATIOS
Inventory Turnover
Ave. Collection Period
Fixed Assets Turnover
Total Assets Turnover
PROFITABILITY RATIOS
Profit Margin on Sales
Return on Total Assets
Return on Net Worth
Yellow
1.2 times
1.1 times
UPS
1.9 times
1.9 times
FedEx
1.1 times
1.1 times
50.8%
11.7 times
50.4%
34.0 times
53.0%
15.5 times
47.0 days
1.8 times
1.4 times
51.4 days
1.8 times
1.1 times
41.0 days
1.9 times
1.4 times
2.9%
4.0%
8.2%
9.1%
10.1%
20.3%
4.9%
7.1%
15.1%
35
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Financial Ratios: Industry Comparison
LIQUIDITY RATIOS
Current Ratio
Quick Ratio
LEVERAGE RATIOS
Debt to Total Assets
Times Interest Earned
ACTIVITY RATIOS
Inventory Turnover
Ave. Collection Period
Fixed Assets Turnover
Total Assets Turnover
PROFITABILITY RATIOS
Profit Margin on Sales
Return on Total Assets
Return on Net Worth
Yellow
1.2 times
1.1 times
Truck
Transportation
1.4 times
1.1 times
50.8%
-
63.5%
-
372.0 times
1.4 times
86.0 times
2.3 times
2.9%
4.0%
8.2%
3.6%
11.6%
22.5%
36
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Financial Trends
(December 1998 - December 2004)
12/04
12/03
12/02
12/01
12/00
12/99
12/98
12/04
12/03
12/02
12/01
12/00
12/99
12/98
Avg P/E
10.90
20.70
31.40
49.80
6.80
8.40
12.40
Book Value/
Share
$24.66
$20.97
$12.17
$19.75
$19.32
$16.44
$14.46
Price/ Sales
0.40
0.36
0.27
0.25
0.18
0.13
0.18
Debt/
Equity
0.63
1.01
0.52
0.45
0.59
0.84
0.64
Price/ Book
2.26
1.72
2.07
1.27
1.05
1.02
1.32
Return on
Equity (%)
15.2
4.1
6.7
2.2
13.4
12.4
10.8
Net Profit Margin (%)
2.7
1.3
0.9
0.4
2.2
1.6
1.4
Return on
Assets (%)
5.1
1.2
2.3
0.8
4.7
3.8
3.6
37
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Interest
Coverage
7.8
4.3
6.5
4.5
12.5
7.0
7.1
Yellow Stock Performance
Source: moneycentral.msn.com
Dividends (
)
38
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
SWOT Matrix
YRC
SWOT Matrix
Opportunities – O
1. Growing Truck Industry
2. Penetrate FedEx / UPS / DHL
market
3. Global market
4. In Position to be regional carrier
after Roadway merger
5. Increase in rail / intermodal and air
transport tonnages
1.
2.
3.
4.
5.
6.
7.
Threats – T
Alternate shipping methods
Shortage of long haul drivers
High fuel prices
Regulation of trucker hours
Increasing toll rates
Competition
Antitrust
1.
2.
3.
4.
5.
6.
7.
Strengths – S
Large scale of operations
Operating leverage
# 3 in ground transport / #1 in LTL
Large range of assets / non assets
# 1 “Most Admired Company
Joint venture in China
Cost of purchasing synergies by
merger
1.
2.
3.
4.
5.
6.
Weaknesses – W
Driver turnover
Various brand names
Low operating margin
High wages to Teamster drivers
Underutilized trucks
Overlap due to mergers
SO Strategies
1. International Expansion (S1, S2,
S5, S6, O1, O3, O5)
2. Expand services to parcel, pallet,
and less than pallet (S1, S3, S5, O2,
O4)
3. Do larger loads / larger trailers (S1,
S2, S3, S4, S5, O1, O4, O5)
4. Acquire Conway (S1, S2, O1, O5)
WO Strategies
1. Expand Internationally (W6, O1,
O3, O5)
2. Ocean Shipping (W1, W4, W6, O5)
3. Put underutilized trucks to work in
alternative ways – i.e. hauling
wood / wood chips (W5, W6, O1)
4. Driver Retention Programs (W1,
O1)
ST Strategies
Ocean shipping (S1, S2, S5, T1,
T2, T4, T5)
Air shipping (S1, S2, S5, T1, T2,
T4, T5)
Expand services to parcel, pallet,
and less than pallet (S1, S3, S5, O2,
O4)
Acquire Conway (S1, S2, T6)
WT Strategies
1. Put underutilized trucks to work in
alternative ways – i.e. hauling
wood / wood chips (W5, W6, T2,
T6)
2. Air Shipping (W1, W4, T1, T2, T4,
T5, T6)
3. Ocean Shipping (W1, W4, T1, T2,
T4, T5, T6)
4. Driver Retention Programs (W1,
T2)
1.
2.
3.
4.
39
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Space Matrix
Financial Strength
rating is 1 (worst) to 6 (best)
1 Operating revenue
2 Operating income
3 Net income
4 Debt-asset ratio
5 Cash flows
Industry Strength
rating is 1 (worst) to 6 (best)
1 Growth Potential
2 International expansion
3 Wages
4 Insurances and benefits
Environmental Stability
rating is -1 (best) to -6 (worst)
1 Competitive Pressure
2 Increase in Fuel Prices
3 Rate of Inflation
4 Exchange rates
5 Antitrust
6 Increased regulation of working hours for truck drivers
7 Increase in the number of toll road and rates on existing ones
8 Technological advance
Competitive advantage
rating is -1 (best) to -6 (worst)
1 Large scale of operation
2 #3 ground transport provider
3 #1 single LTL (less-than-truckload) provider
4 Ranked #1 “America’s Most Admired Companies” by Fortune for
3 consecutive years in early 2000s
5 Joint venture with China’s conglomerate (Jin Jiang)
6 Cost and purchasing synergies by merger
40
Ratings
5.0
5.0
5.0
4.0
5.0
24.0
5.0
5.0
3.0
3.0
16.0
-5.0
-5.0
-3.0
-3.0
-3.0
-3.0
-3.0
-2.0
-27.0
-2.0
-2.0
-1.0
ES average
CA average
IS average
FS average
X Coordinate
Y Coordinate
-3.57
-1.67
4.00
4.80
2.33
1.23
Strategy ->>>>
Aggressive
-1.0
-2.0
-2.0
-10.0
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Space Matrix
SPACE Matrix
FS
Conservative
Aggressive
+6
+5
+4
+3
+2
(2.3,
+1
1.23)
CA
IS
-6
-5
-4
-3
-2
-1
+1
-1
+2 +3
+4
+5
+6
-2
-3
-4
Defensive
-5
Competitive
-6
ES
Copyright 2007 Prentice Hall
41
Ch 6 -75
Yellow has achieved moderate competitive advantages and financial strength in a
growing and stable industry.
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
BCG
Division
Revenues
% Revenues
Profits
% Profits
Yellow
Transportation
3,180.6
47%
191.5
49%
Roadway
Express
3,119.9
46%
158.3
41%
New Penn
260.6
4%
33.9
9%
Meridian IQ
213.2
3%
3.7
1%
42
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
42
BCG
43
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
43
Grand Strategy Matrix
Quadrant I
1. Market development
2. Market penetration
3.Product development
4.Forward integration
5.Backward integration
6.Horizontal integration
7.Related
diversification
44
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
IE Matrix
Division
Revenues
%
Revenues
Profits
%
Profits
IFE
Score
EFE
Score
Yellow
Transportation
3,180.6
47%
191.5
49%
2.99
2.83
Roadway Express
3,119.9
46%
158.3
41%
2.89
2.85
New Penn
260.6
4%
33.9
9%
2.61
2.50
Meridian IQ
213.2
3%
3.7
1%
2.47
3.01
45
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
IE Matrix
46
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Matrix Analysis
Alternative Strategies
BCG
IE
SPACE
GRAND
COUNT
Forward Integration
X
X
X
X
4
Backward Integration
X
X
X
X
4
Horizontal Integration
X
X
X
X
4
Market Penetration
X
X
X
X
4
Market Development
X
X
X
X
4
Product Development
X
X
X
X
4
X
X
2
Related Diversification
Unrelated Diversification
X
X
Joint Venture
2
0
Retrenchment
0
Divestiture
0
Liquidation
0
47
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
QSPM
Key factors
Opportunities
Trucking industry expected to grow significantly
Acquire FedEx/UPS/DHL market share
Global market
Position to be a regional carrier by the Roadway merger
Increase in rail/intermodal and air transport tonnages
Acquire
Buy Logging
Driver
Conway
Trucks
Retention
Weight
AS
TAS
AS
TAS
AS
TAS
1 to 4
1 to 4
1 to 4
0.1
4
0.4
3
0.3
2
0.2
0.07
4
0.28
1
0.07
1
0.07
0.08
3
0.24
2
0.16
2
0.16
0.09
4
0.36
2
0.18
3
0.27
0.08
1
0.08
1
0.08
3
0.24
0.07
0.06
2
3
0.14
0.18
1
2
0.07
0.12
2
4
0.14
0.24
0.12
4
0.48
4
0.48
3
0.36
0.08
3
0.24
2
0.16
3
0.24
0.08
2
0.16
1
0.08
2
0.16
0.1
2
0.2
2
0.2
3
0.3
0.07
1
2
0.14
2.9
3
0.21
2.11
2
0.14
2.52
Threats
Alternate forms of transportation/shipping
Shortage of long haul drivers
High fuel prices
Increased regulation of working hours for truck drivers
Increase in the number of toll road and rates on existing ones
Competition
Antitrust
total should be 1.0
48
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
QSPM
Key factors
Strengths
Acquire
Buy Logging
Driver
Conway
Trucks
Retention
Weight
AS
TAS
AS
TAS
AS
TAS
1 to 4
1 to 4
1 to 4
0.06
4
0.24
3
0.18
3
0.18
Large scale of operation
Operating leverage
0.06
3
0.18
2
0.12
#3 ground transport provider
0.04
3
0.12
1
0.04
#1 single LTL (less-than-truckload) provider
0.06
3
0.18
1
0.06
Wide range of assets and non assets
0.04
2
0.08
3
0.12
Ranked #1 “America’s Most Admired Companies” by Fortune for0.08
3 consecutive
3
0.24
years in2 early0.16
2000s
Joint venture with China’s conglomerate (Jin Jiang)
0.12
1
0.12
1
0.12
Cost and purchasing synergies by merger
0.1
4
0.4
1
0.1
2
0.12
3
0.12
2
0.12
2
0.08
2
0.16
1
0.12
2
0.2
Weaknesses
High driver turnover and driver shortages
Various brand names resulting in decreased name recognition
Low operating margin
High wages paid to Teamster drivers
$12 million increase in claims and insurance accruals
Increase in multi-employer health, welfare and pension plans
Lost productivity from unused capital (underutilized trucks)
15 % overlap of customers by the Yellow-Roadway merger
total should be 1.0
0.08
3
0.24
4
0.32
4
0.32
0.02
1
0.02
2
0.04
2
0.04
0.06
3
0.18
2
0.12
4
0.24
0.06
3
0.18
3
0.18
2
0.12
0.04
4
0.16
4
0.16
3
0.12
0.06
2
0.12
3
0.18
4
0.24
0.08
4
0.32
4
0.32
4
0.32
0.04
1
3
0.12
2.9
5.8
2
0.08
2.3
4.41
2
0.08
2.58
5.51
49
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Possible alternative Strategies
Market Development: We can look to increase more
hauls over North America increasing the amount of
deliveries that will be made.
Market Penetration: Go after UPS, Fed Ex market share
Product Development: If the logging goes through than
we can look to buy chip trailers to haul wood chips.
50
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
1st Recommendation
Acquire Conway
Acquire trucking company Conway
By acquiring Conway, this will give us a greater presence in US and North
America. This will also give us a presence in Asia/Pacific, Europe, South
America, and the Caribbean. By acquiring Conway, we will also be acquiring
more than 500 operating locations across North America and additional
services to 17 countries across 5 continents.
Estimated Cost: $200,000,000
51
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
2nd Recommendation
Buying Logging Trucks
We will buy 50 new Tractor trailer trucks and 50 new logging trailers
We will take 50 of the older trucks and use them to haul wood out west. The
50 new trucks will take the place of the old 50 trucks that will be hauling
wood out west.
We should be able to find drivers easily as they will only be hauling for short
distances.
Estimated Cost: approximately $10,000,000
52
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
3rd Recommendation
Driver Retention
We will be increasing the load size, and combining the number of loads being
delivered to one area (using triple trailers where it’s possible) will decrease
the number of trips that will be made.
Maximizing current truck loads to full capacity will improve time
management, and improve worker productivity.
In order to satisfy the needs of our drivers, closer relationships with unions
will be established, and outsource insurance and other benefits. This will help
us satisfy our current work force, and help attract potential drivers.
Estimated Cost: approximately $2,000,000
53
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
EPS/EBIT
EPS /
EBIT
Ammount Needed
$
Low Normal
200.00
High
EBIT Range
149
Interest Rate
Tax Rate
Stock Price
# Shares
Outstanding
$
298
596
5%
37%
55.00
In
Millions
49
54
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
54
EPS/EBIT
EBIT
Interest
EBT
Tax
EAT
# Shares
EPS
EBIT
Interest
EBT
Tax
EAT
# Shares
EPS
Common Stock
Low Normal High
149.00 298.00 596.00
149.00 298.00 596.00
55.13 110.26 220.52
93.87 187.74 375.48
Low
149.00
10.00
139.00
51.43
87.57
53.00
53.00
53.00
1.77
3.54
7.08
70% Stock - 30% Debt
Low Normal High
149.00 298.00 596.00
3.00
3.00
3.00
146.00 295.00 593.00
54.02 109.15 219.41
91.98 185.85 373.59
49.00
49.00
49.00
1.79
3.70
7.53
30% Stock - 70% Debt
Low Normal
High
149.00 298.00
596.00
7.00
7.00
7.00
142.00 291.00
589.00
52.54 107.67
217.93
89.46 183.33
371.07
51.80
1.78
51.80
3.59
51.80
7.21
50.20
1.78
Debt
Normal
298.00
10.00
288.00
106.56
181.44
50.20
3.65
High
596.00
10.00
586.00
216.82
369.18
In Millions
50.20
7.39
55
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Implementation Issues
•Would need to form contracts would logging
outfits.
•Rapidly increasing fuel prices
•Difficulties recruiting drivers
•Regulations specific to the logging industry and
expansions (buying out Conway)
•Environmental issues and regulations
•Hostile takeover
−Hesitancy of Conway to sell
56
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Proposed Annual Objectives and Policies
•Increase operating revenue by 100% annually for the next 3 years
−1st year 25%, 2nd year 25%, 3rd year 50%
−Assign each subsidiary a goal to achieve gains
•Reduce operating expenses by 20% annually for the next 3 years
−Better loading management
−Better time management
−Improve worker productivity
−Work closely with unions
•Provide functional improvements to transportation management systems
−Provide adequate funding to R&D and adaptation of information technology
−Assign technicians to further develop the management system
57
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Proposed Procedures For Evaluation
•Check current industry information
—Traffic World
—Logistics Today
•Monthly reports from subsidiaries
•Quarterly & annual financial reports
•Quarterly & annual meetings to evaluate current plan and respond
necessary changes
58
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Current Stock Performance
www.moneycentral.msn.com
59
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Epilogue
2005: Yellow Roadway Corp. acquired USF, which it has subsequently
renamed YRC Regional Transportation.
2006: Yellow Roadway Corp. changed its name to YRC Worldwide Inc. to
better reflect its capabilities today as a global entity, and to be consistent with
its continuing aspirations and core purpose: Making global commerce work by
connecting people, places and information. Included in global services are:
Supply chain, distribution and transportation management
Transportation services
Global resource for U.S.-focused operating companies
Technology services
Operations in more than 70 countries worldwide
Offices in North America, South America, Europe and Asia
2007: Jan. 31: James Welch resigns as president and chief executive officer of
Yellow Transportation; Maynard F. Skarka is named new president.
2008: March 31: Maynard Skarka retires as president of Yellow Transportation;
Michael J. Smid is named new president.
60
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Resources
YellowRoadway.com
MyYellow.com
Yellow Roadway’s 2004 10k
www.truckpaper.com/listings/forsale/list.asp?bcatid=2
8&catid=17&ParentCategoryID=28&pdcl=1
www.selectyourtruckdeal.com/About-Me.htm
61
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Questions
62
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher