Yellow Roadway Corporation

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Yellow Roadway Corporation
2004 Case Study
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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

• 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

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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

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History of Yellow Roadway Corp. (Yellow)

• 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. 

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History of Yellow Roadway Corp. (Yellow)

• 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 90002001
  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 Advantagethe 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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Yellows 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.

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International Presence
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Logistics Centers
To manage your existing international shipments, p
lease contact the YRC Logistics Global Logistics
Center in your region.
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Yellows 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.

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Yellows 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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2004 Core Values

• Exceed customer expectations
• Value our people
• Work safely
• Demonstrate good citizenship
• Act with integrity
• Embrace teamwork

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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

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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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Yellows 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

• Yellows 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)

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A New Mission

• The new mission answers the following questions
• Customers Who are the firms customers?
• Products or services What are the firms major
  products?
• Markets Geographically, where does the firm
  compete?
• Technology Is the firm technologically current?
• Concern for survival, growth, and profitability
  Is the firm committed to growth and financial
  soundness?
• Philosophy What are the basic beliefs, values,
  aspirations, and ethical priorities of the firm?
• Self-concept What is the firms distinctive
  competence or major competitive advantage?
• Concern for public image Is the firm responsive
  to social, community, and environmental concerns?
• Concern for employees Are employees a valuable
  asset of the firm?

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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
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External Factor Evaluation Matrix
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Net Worth (December 31, 2004, in Thousands of
Dollars Except Per Share)
Stock price is based on a closing price at
12/31/2004 from finance.yahoo.com
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Consolidated Balance Sheet
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Consolidated Balance Sheet
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Consolidated Statement of Operations
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Consolidated Statement of Operations
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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 Americas Most Admired Companies by
  Fortune for 3 consecutive years in early 2000s
• Joint venture with Chinas conglomerate (Jin
  Jiang)
• Cost and purchasing synergies by merger

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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
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Financial Ratios Time Comparison
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Financial Ratios Competitor Comparison
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Financial Ratios Industry Comparison
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Financial Trends(December 1998 - December 2004)
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Yellow Stock Performance
Source moneycentral.msn.com Dividends (
)
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SWOT Matrix
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Space Matrix
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Space Matrix
Yellow has achieved moderate competitive
advantages and financial strength in a growing
and stable industry.
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BCG
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BCG
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Grand Strategy Matrix

• Quadrant I
• Market development
• Market penetration
• Product development
• Forward integration
• Backward integration
• Horizontal integration
• Related diversification

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IE Matrix
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IE Matrix
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Matrix Analysis
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QSPM
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QSPM
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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.

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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

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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

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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 its
  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

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EPS/EBIT
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EPS/EBIT
In Millions
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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

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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 RD and adaptation of
  information technology
• Assign technicians to further develop the
  management system

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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

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Current Stock Performance
www.moneycentral.msn.com
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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.
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Resources

• YellowRoadway.com
• MyYellow.com
• Yellow Roadways 2004 10k
• www.truckpaper.com/listings/forsale/list.asp?bcati
  d28catid17ParentCategoryID28pdcl1
• www.selectyourtruckdeal.com/About-Me.htm

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Questions
?