Transcript Yellow Roadway Corporation 2004 Case Study 1
Yellow Roadway Corporation
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2004 Case Study
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher 1
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• • • • • • •
Overview
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 • • • • • • • • 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 Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
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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 Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
History of Yellow Roadway Corp. (Yellow)
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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.
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History of Yellow Roadway Corp. (Yellow)
• • • • • 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 all new, 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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History of Yellow Roadway Corp. (Yellow)
• • • • • • 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.
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.
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History of Yellow Roadway Corp. (Yellow)
• • • • 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.
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Yellow’s Subsidiaries
• • • • • 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
International Presence
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Logistics Centers
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To manage your existing international shipments, please contact the YRC Logistics Global Logistics Center in your region.
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Yellow’s Subsidiaries
• • • • • 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
Yellow’s Vision
Yellow will be the leading provider of guaranteed, time-definite, defect-free, hassle-free transportation for business consumers worldwide.
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2004 Core Purpose
Making global commerce work by connecting people, places, and information .
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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
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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 (9 th summer of 2005 largest) for $1.25 billion in the •Offer overnight service
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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.
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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
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Yellow’s Vision
Yellow will be the leading provider of guaranteed, time-definite, defect-free, hassle-free transportation for consumers worldwide.
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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) Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
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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?
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
External Audit: 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/intermodel and air transport tonnages
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External Audit: 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
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Competitive Profile Matrix
Critical Success factors
Size of Fleet Name Recognition Global Presence Domestic Presence Revenues Small Shipping Large Shipping (TL / LTL) Customer Loyalty Shipment Tracking Service Quality
Totals Weights 0.0 to 1.0
0.07 0.10 0.10 0.10 0.08 0.15 0.15 0.07 0.10 0.08
1 Yellow Rating 1 to 4
4 3 2 3 3 1 4 4 3 4
Weighted Score
0.28 0.30 0.20 0.30 0.24 0.15 0.60 0.28 0.30 0.32
2.97
Rating 1 to 4
3 4 3 3 3 3 2 3 4 3
FedEx Weighted Score
0.21 0.40 0.30 0.30 0.24 0.45 0.30 0.21 0.40 0.24
3.05
Rating 1 to 4
4 4 4 4 4 4 1 3 4 4
UPS Weighted Score
0.28 0.40 0.40 0.40 0.32 0.60 0.15 0.21 0.40 0.32
3.48
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External Factor Evaluation Matrix
Key External 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
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 Totals
Weights 0.0 to 1.0
Rating 1 to 4 Weighted Score
0.07
0.06
0.12
0.08
0.08
0.10
0.07
1
0.10
0.07
0.08
0.09
0.08
3 2 3 4 2 2 2 3 3 3 3 2 0.30
0.14
0.24
0.36
0.16
0.14
0.12
0.36
0.24
0.24
0.30
0.14
2.74
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
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= 3. Share price = * $55.71 /EPS(3.83) = 14.55 x Net Income $184,327 = 4. Number of Shares Outstanding x Share Price = 48,869 x $55.71 =
Method Average
*Stock price is based on a closing price at 12/31/2004 from finance.yahoo.com
$ 1,846,332 $ 921,635 $ 2,681,958 $ 2,722,492
$
2,043,104
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Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEETS Yellow Roadway Corporation and Subsidiaries (in thousands except per share data) December 31, 2004
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 $ 106,489 $ 778,596 20,916 66,496 80,944 December 31, 2003 75,166 699,142 16,452 23,614 70,062 Total current assets Property and Equipment: Land Structures Revenue equipment Technology equipment and software Other 1,053,441 336,613 916,550 1,067,663 181,444 170,019 884,436 351,969 906,434 968,742 154,688 156,781 Less – accumulated depreciation Net property and equipment Goodwill Intangibles Other assets 2,672,289 2,538,614 (1,249,571 ) (1,135,346 ) 1,422,718 632,141 468,310 50,559 1,403,268 617,313 467,114 91,098
Total assets
$ 3,627,169 $ 3,463,229 Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
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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 - 250,000 4,400 71,500 - 1,757 1,199,739 863,197 403,535 836,082 319,839 298,256 489,865 463,609 51,303 50,146 - - 694,504 653,739 550,484 366,157 (33,159 ) (23,167 ) (10,479 ) (567 ) (38,462 ) (44,223 ) 1,214,191 1,002,085 $ 3,627,169 $ 3,463,229 Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
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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) 2004
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 4,172,144 1,011,864 169,374 132,793 171,468 752,788 (4,547 ) - 2003 1,970,440 449,825 83,548 67,670 87,398 318,176 (167 ) 3,124 $ 6,767,485 $ 3,068,616 $ 2,624,148 2002 1,717,382 385,522 75,737 57,197 79,334 253,677 425 8,010 Total operating expenses Operating income
Nonoperating (Income) Expenses:
Interest expense ABS facility charges Interest income Write off debt issuance costs Other Nonoperating expenses, net 6,405,884 361,601 43,954 - (2,080 ) 18,279 3,785 63,938 2,980,014 88,602 20,606 - (1,706 ) - 2,888 21,788 2,577,284 46,864 7,211 2,576 334 (843 ) - 9,278 Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
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Consolidated Statement of Operations
Income from Continuing Operations Before Income Taxes
Income Tax Provision
Income from Continuing Operations
Income (loss) from discontinued operations, net
Net Income (Loss)
297,663 113,336 184,327 - $ 184,327 $
Average Common Shares Outstanding - Basic Average Common Shares Outstanding - Diluted Basic Earnings (Loss) Per Share:
Income from continuing operations Income (loss) from discontinued operations $ 48,149 49,174 3.83 $ - Net income (loss)
Diluted Earnings (Loss) Per Share:
Income from continuing operations Income (loss) from discontinued operations $ $ 3.83 $ 3.75 $ - Net income (loss) $ 3.75 $ 66,814 26,131 37,586 13,613 40,683 - 23,973 (117,875 ) 40,683 $ (93,902 ) 30,370 30,655 1.34 $ - 28,004 28,371 0.86 (4.21 ) 1.34 $ 1.33 $ - 1.33 $ (3.35 ) 0.84 (4.15 ) (3.31 ) Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
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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
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
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Internal Factor Evaluation Matrix
Key Internal Factors Internal 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
Internal 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 Totals
Weights 0.0 to 1.0
0.06 0.06 0.04 0.06 0.04 0.08 0.12 0.10 0.08 0.02 0.06 0.06 0.04 0.06 0.08
1
0.04
Rating 1, 2, 3 or 4
3 or 4 4 3 3 4 3 4 4 4 1 or 2 1 1 2 2 1 2 1 2
Weighted Score
0.08 0.04 0.06 0.06 0.08 0.12 0.08 0.08
2.7
0.24 0.18 0.12 0.24 0.12 0.32 0.48 0.40 Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
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Financial Ratios: Time 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
FY 2004
1.2 times 1.1 times 50.8% 11.7 times 372.0 times 47.0 days 1.8 times 1.4 times 2.9% 4.0% 8.2% Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
FY 2003
1.0 times 0.9 times 53.3% -9.5 times 26.4 times 888.4 days 0.1 times 0.1 times -3.2% -0.2% -0.4%
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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 50.8% 11.7 times - 47.0 days 1.8 times 1.4 times 2.9% 4.0% 8.2%
UPS
1.9 times 1.9 times 50.4% 34.0 times - 51.4 days 1.8 times 1.1 times 9.1% 10.1% 20.3%
FedEx
1.1 times 1.1 times 53.0% 15.5 times - 41.0 days 1.9 times 1.4 times 4.9% 7.1% 15.1% Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
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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 50.8% - 372.0 times - - 1.4 times 2.9% 4.0% 8.2%
Truck Transportation
1.4 times 1.1 times 63.5% - 86.0 times - - 2.3 times 3.6% 11.6% 22.5% Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
Financial Trends (December 1998 - December 2004)
12/04 Avg P/E Price/ Sales Price/ Book Net Profit Margin (%)
10.90
12/03 20.70 12/02
31.40 0.40
0.36
0.27 2.26
1.72
2.07 2.7
1.3
0.9
12/01 12/00 12/99 12/98
49.80 6.80 8.40 12.40 0.25 0.18 0.13 0.18 1.27 1.05 1.02 1.32 0.4 2.2 1.6 1.4
37 12/04 12/03 12/02 12/01 12/00 12/99 12/98 Book Value/ Share
$24.66 $20.97 $12.17 $19.75 $19.32 $16.44 $14.46
Debt/ Equity
0.63 1.01 0.52 0.45 0.59 0.84 0.64 15.2 4.1 6.7 2.2
Return on Equity (%)
13.4 12.4 10.8 5.1 1.2 2.3 0.8 4.7 3.8 3.6
Return on Assets (%)
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher 7.8
Interest Coverage
4.3 6.5 4.5 12.5 7.0 7.1
Yellow Stock Performance
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Source: moneycentral.msn.com
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SWOT Matrix
1.
2.
3.
4.
5.
6.
7.
YRC SWOT Matrix
Threats – T High fuel prices Increasing toll rates Competition Antitrust 1.
2.
3.
4.
5.
Opportunities – O Growing Truck Industry Penetrate FedEx / UPS / DHL market Global market In Position to be regional carrier after Roadway merger Increase in rail / intermodal and air transport tonnages Alternate shipping methods Shortage of long haul drivers Regulation of trucker hours 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 1.
2.
3.
4.
SO Strategies International Expansion (S1, S2, S5, S6, O1, O3, O5) Expand services to parcel, pallet, and less than pallet (S1, S3, S5, O2, O4) Do larger loads / larger trailers (S1, S2, S3, S4, S5, O1, O4, O5) Acquire Conway (S1, S2, O1, O5) 1.
2.
3.
4.
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) 1.
2.
3.
4.
WO Strategies Expand Internationally (W6, O1, O3, O5) Ocean Shipping (W1, W4, W6, O5) Put underutilized trucks to work in alternative ways – i.e. hauling wood / wood chips (W5, W6, O1) Driver Retention Programs (W1, O1) 1.
2.
3.
4.
WT Strategies Put underutilized trucks to work in alternative ways – i.e. hauling wood / wood chips (W5, W6, T2, T6) Air Shipping (W1, W4, T1, T2, T4, T5, T6) Ocean Shipping (W1, W4, T1, T2, T4, T5, T6) Driver Retention Programs (W1, T2) Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
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Space Matrix
Financial Strength 1 2 Operating revenue Operating income 3 4 5 Cash flows Industry Strength 1 Net income Debt-asset ratio Growth Potential rating is 1 (worst) to 6 (best) 2 3 International expansion Wages 4 Insurances and benefits Environmental Stability rating is -1 (best) to -6 (worst) 1 Competitive Pressure 2 3 Increase in Fuel Prices Rate of Inflation 4 5 6 1 Exchange rates Antitrust Increased regulation of working hours for truck drivers 7 8 Increase in the number of toll road and rates on existing ones Technological advance Competitive advantage rating is -1 (best) to -6 (worst) Large scale of operation 2 3 4 #3 ground transport provider #1 single LTL (less-than-truckload) provider Ranked #1 “America’s Most Admired Companies” by Fortune for 5 3 consecutive years in early 2000s Joint venture with China’s conglomerate (Jin Jiang) 6 rating is 1 (worst) to 6 (best) Cost and purchasing synergies by merger 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
-1.0
-2.0
-2.0
-10.0
ES average CA average IS average FS average X Coordinate Y Coordinate Strategy ->>>> Aggressive
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
-3.57
-1.67
4.00
4.80
2.33
1.23
Space Matrix
41 CA -6 Conservative -5 -4 -3 Defensive -2 SPACE Matrix FS +6 +5 +4 +3 +2 +1 Aggressive
(
2.3, 1.23) IS -1 -1 -2 -3 +1 +2 +3 -4 -5 -6 ES
Copyright 2007 Prentice Hall
+4 +5 Competitive +6
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
42
BCG
Division
Yellow Transportation
Revenues % Revenues
3,180.6 47%
Profits
191.5 Roadway Express 3,119.9 46% 158.3
% Profits
49% 41% New Penn 260.6 4% 33.9 9% Meridian IQ 213.2 3% 3.7 1% 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
45
New Penn Meridian IQ 260.6 213.2 4% 3% 33.9 3.7 9% 2.61 2.50 1% 2.47 3.01 Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
IE Matrix
46
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
47
Alternative Strategies Forward Integration Backward Integration Horizontal Integration Market Penetration Market Development Product Development Related Diversification Unrelated Diversification Joint Venture Retrenchment Divestiture Liquidation X X X X BCG X X X
Matrix Analysis
X X X X IE X X X X X X X X X SPACE X X X X X X X GRAND X 2 0 0 0 0 4 2 4 4 4 4 COUNT 4 Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
48
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 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
Weight Acquire Buy Logging Conway AS TAS
1 to 4
AS Trucks
1 to 4
TAS Driver Retention AS
1 to 4
TAS
0.1
0.07
0.08
0.09
0.08
0.07
0.06
0.12
0.08
0.08
0.1
0.07
1 4 4 3 4 1 2 3 4 3 2 2 2 0.4
0.28
0.24
0.36
0.08
0.14
0.18
0.48
0.24
0.16
0.2
0.14
2.9
3 1 2 2 1 1 2 4 2 1 2 3 0.3
0.07
0.16
0.18
0.08
0.07
0.12
0.48
0.16
0.08
0.2
0.21
2.11
2 1 2 3 3 2 4 3 3 2 3 2 0.2
0.07
0.16
0.27
0.24
0.14
0.24
0.36
0.24
0.16
0.3
0.14
2.52
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
QSPM
49 Key factors
Strengths
Weight Acquire Buy Logging Conway AS
1 to 4
TAS AS Trucks
1 to 4
TAS Driver Retention AS
1 to 4
TAS
Large scale of operation Operating leverage $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
0.06
0.06
4 3 0.24
0.18
3 2 #3 ground transport provider #1 single LTL (less-than-truckload) provider 0.04
0.06
3 3 0.12
0.18
1 1 0.04
0.06
Wide range of assets and non assets 0.04
0.08
2 3 0.08
0.24
3 2 0.12
0.16
Joint venture with China’s conglomerate (Jin Jiang) 0.12
1 0.12
1 0.12
Cost and purchasing synergies by merger Weaknesses High driver turnover and driver shortages 0.1
0.08
4 3 0.4
0.24
1 4 0.1
0.32
Various brand names resulting in decreased name recognition Low operating margin High wages paid to Teamster drivers 0.02
0.06
0.06
1 3 3 0.02
0.18
0.18
2 2 3 0.04
0.12
0.18
0.04
0.06
0.08
0.04
1 4 2 4 3 0.16
0.12
0.32
0.12
2.9
5.8
4 3 4 2 0.18
0.12
0.16
0.18
0.32
0.08
2.3
4.41
3 2 3 2 2 2 1 2 4 2 4 2 3 4 4 2 0.18
0.12
0.12
0.12
0.08
0.16
0.12
0.2
0.32
0.04
0.24
0.12
0.12
0.24
0.32
0.08
2.58
5.51
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
50
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.
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
1
st
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
2
nd
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
53
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 Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
54
EPS/EBIT
EPS / EBIT
Ammount Needed EBIT Range Interest Rate Tax Rate Stock Price # Shares Outstanding $ 200.00 Low Normal High 149 298 596 5% 37% $ 55.00 49
In Millions
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher 54
55
EPS/EBIT
EBIT Interest EBT Tax EAT # Shares
Low
Common Stock
Normal High Low
Debt
Normal High 149.00 298.00 596.00 149.00 298.00 596.00 - - - 10.00 10.00 10.00 149.00 298.00 596.00 139.00 288.00 586.00 55.13 110.26 220.52 51.43 106.56 216.82 93.87 187.74 375.48 87.57 181.44 369.18
EPS EBIT Interest EBT Tax EAT # Shares
53.00 53.00 53.00 49.00 49.00 49.00 1.77 3.54 7.08 1.79 3.70 7.53
70% Stock - 30% Debt
Low Normal High
30% Stock - 70% Debt
Low Normal High 149.00 298.00 596.00 149.00 298.00 596.00 3.00 3.00 3.00 7.00 7.00 7.00 146.00 295.00 593.00 142.00 291.00 589.00 54.02 109.15 219.41 52.54 107.67 217.93 91.98 185.85 373.59 89.46 183.33 371.07
EPS
51.80 51.80 51.80 50.20 50.20 50.20 1.78 3.59 7.21 1.78 3.65 7.39
In Millions
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
57
•Increase operating revenue by 100% annually for the next 3 years − 1 st year 25%, 2 nd year 25%, 3 rd 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 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
59
www.moneycentral.msn.com
Takifumi Kawahara, Matt Bouchard, Darius Parker, Danielle Boucher
60
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.
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