As Chief Financial Officer Sheila Taylor prepares to leave YRC Worldwide, pressure mounts on the company’s board to find a successor to William D. Zollars.
Zollars, the troubled company’s chairman, president and CEO, said last September he would leave YRC Worldwide once its financial restructuring is complete.
Six months later, no successor to Zollars is in sight and the clock is ticking on a complex restructuring the company is expected to complete in July, when shareholders will vote on a plan that is likely to further dilute the value of their stock.
“This company is literally hanging by a thread,” John Larkin, investment analyst at Stifel Nicolaus, told The Journal of Commerce’s 11th Annual Trans-Pacific Maritime conference last week. “I don’t know how you restructure when you lose your CFO.” Larkin is one of a growing number of analysts speculating about YRC’s viability.
YRC’s immediate answer was to replace Taylor with a member of its board, William Trubeck, the retired CFO of H&R Block, who will become interim executive vice president and CFO of the $4.3 billion company on March 31.
Trubeck has more than 30 years of financial experience at H&R Block, Waste Management and International Multi-Foods, YRC Worldwide said in a statement. He also has led a variety of restructuring efforts during his career.
But the departure of Taylor, CFO since 2009 and a YRC Worldwide executive since 2002, drove YRC’s stock price down on March 7 from $2.45 per share to $2.27, before it recovered to $2.32 by the end of that day. That followed a 27 percent plunge in share value the previous week, as news of the company’s Feb. 28 restructuring agreement with the Teamsters union and its lenders hit Wall Street.
The upcoming financial restructuring is a do-or-die moment for YRC Worldwide, which has lost more than $2.5 billion since 2006 and seen its revenue drop by more than half, from nearly $10 billion that year to $4.3 billion in 2010.
The restructuring, a key plank in a labor pact the Teamsters approved last October, would lock in wage cuts and employee benefit reductions and new terms with YRC’s lenders.
The company’s national less-than-truckload subsidiary, YRC, and its regional operations are handling more freight. Average daily bill count figures supplied by SJ Consulting Group show year-over-year increases of 4.4 percent, 2.9 percent and 4.6 percent in January, February and early March at YRC.
Despite improving business, the carrier’s financial state remains perilous. The restructuring not only would lock in favorable contract terms and lending terms, but also would help YRC Worldwide chip away at more than $1 billion in long-term debt.
YRC and its labor and banking partners agreed in principle on Feb. 28 to a “term sheet” for the restructuring that left many details to be hammered out by April 29, including how much new common stock YRC’s lenders will buy.
The less-than-truckload carrier group narrowly avoided bankruptcy in 2009 through a $464 million debt-for-equity swap. Now it wants its lenders, or other parties, to purchase a large number of new shares and notes, a move that would further reduce the value of the stock owned by its current shareholders.
It’s time for YRC Worldwide to find a full-time replacement not only for Taylor but Zollars, said Satish Jindel, president of SJ Consulting Group.
“The uncertainty is damaging,” he said. “Why are they (the board) not making a decision?”
What YRC Worldwide customers and investors need is a clear line of succession to build confidence that a replacement will be ready when Zollars leaves, Jindel said.
“The YRC board needs to hire another player, rather than send coaching staff onto the field,” he said. “If they keep doing that, the fans will exit the stadium.”
But finding an external CEO candidate won’t be easy. “No one wants to preside over a company where you may have to close the doors,” Jindel said.
“If the board thinks Bill is still the best person for the job, and want him to stay, then they should just say that,” he said. “That would be better than the uncertainty.”
Contact William B. Cassidy at email@example.com.