YRC Worldwide Inc., the nation's largest less-than-truckload carrier, said two of its subsidiaries will close a combined 27 service centers and take $10 million in charges related to the move, according to a Securities and Exchange Commission filing Thursday.
YRC's USF Holland unit will close six service centers located in Albany, Ga., Jackson, Miss., Lumberton, N.C., Little Rock, Ark., Mobile, Ala., and Metter, Ga.
The company's USF Reddaway division will close 21 service centers located in Louisiana, New Mexico, Oklahoma and Texas. Both divisions are units of USF Corp., which YRC purchased in May 2005. But last month it took a $782 million write-down on the value of the two companies, citing various operating issues and overall slumping demand
Service will still be available to these areas through other branches of its North American Transportation division.
The Feb. 22 closures are a "significant component" of a previously announced $50 million profit improvement plan for the regional transportation unit, YRC said.
YRC expects to take a $5 million charge for lease terminations and another $5 million charge for employee severance. The majority of these charges are expected be taken in the first quarter of 2008.
The Holland closings will affect 300 workers and the Reddaway closings will affect an additional 800, said Michael Smid, president and chief executive of YRC North American Transportation, which oversees the two subsidiaries.
Smid said the centers were among the least efficient of the two companies
"We feel both of those carriers are better off a little smaller, but much more capable," Smid told The Associated Press.
Smid said the company would work with customers who use the centers to either ship their freight through other YRC-owned carriers in their area or use other YRC network points if they want to stay with Holland or Reddaway.
Stifel, Nicolaus & Co. Inc. analyst David G. Ross applauded the move
We believe this is a step in the right direction for the regional companies that were once solid operators in their respective legacy territories but were stretched too thin (after being acquired by YRC Worldwide) when trying to expand into other regions and/or integrate another lesser carrier into their network," Ross said.
"When these two carriers expanded coverage, pricing became more difficult, less disciplined, and yields and margins suffered, as a result."
The company may close other centers as it continues to examine its regional business, he added.
"These shutdowns should be good for the less-than-truckload industry, as it removes a poor pricer from some Southern and Southwestern regional markets," Ross said
He maintained his "Hold" rating on the stock, saying he sees "evidence that the recovery plan is working."
Less-than-truckload, or LTL carriers, usually fill their trucks with freight from a variety of sources and might re-sort and redistribute it at a company terminal along their route.
Shares of YRC retreated from a surge after the announcement to close up 11 cents to $17.57 Thursday.
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