Mike
Well-Known Member
More than once on its second-quarter financial call, less-than-truckload (LTL) carrier YRC Worldwide’s (NASDAQ: YRCW) management team used the words “once in a lifetime” to describe the opportunity afforded them through a controversial $700 million Treasury loan the company received in early July.
The excitement largely centered on Tranche B of the agreement granted under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act): a $400 million loan allowing it to refresh its rolling stock. Management plans to start replacing the oldest tractors and trailers across all of its separate companies first. They provided a rough savings estimate of $10,000 per tractor annually. Maintenance costs on some of the older equipment the company is operating can range from $11,000 to $12,000 a year, a far cry from the $1,000 to $2,000 spent to keep first-year tractors moving.
Management believes cost headwinds from leasing equipment versus owning amount to approximately 300 basis points. Other factors include improved fuel mileage and vehicle up time. Also, a good portion of the company’s assets don’t have the newest technology and lack sophisticated collision-avoidance features, which management believes will lower insurance expense over time.
The excitement largely centered on Tranche B of the agreement granted under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act): a $400 million loan allowing it to refresh its rolling stock. Management plans to start replacing the oldest tractors and trailers across all of its separate companies first. They provided a rough savings estimate of $10,000 per tractor annually. Maintenance costs on some of the older equipment the company is operating can range from $11,000 to $12,000 a year, a far cry from the $1,000 to $2,000 spent to keep first-year tractors moving.
Management believes cost headwinds from leasing equipment versus owning amount to approximately 300 basis points. Other factors include improved fuel mileage and vehicle up time. Also, a good portion of the company’s assets don’t have the newest technology and lack sophisticated collision-avoidance features, which management believes will lower insurance expense over time.
YRC ready to use ‘once-in-a-lifetime’ loan to replenish fleet
YRC management believes it will take four to six quarters to complete $400 million worth of equipment replacement.
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