2. Proposal
• Sell 47.359 shares of UPS @ 83.00
• Originally bought for $71.52 per share
• 8.527% of portfolio
• Buy 300 shares of YRCW @ $8.62
• $2,586
• 5.60% of portfolio
3. Overview of UPS
• Global transportation company
• Involved in the LTL business with YRC
• Main competitor is FedEx and the US Postal
Service
5. Reasons to Sell UPS
• Realize our 19% gain
• US Postal Service will keep Saturday deliveries
– Lost an opportunity for UPS to steal market share
• Opportunity cost
– YRCW is a better opportunity in the same industry
SELL! SELL! SELL!
6. YRC Overview
• Founded in 1924
• Overland Park, KS
• 32,000 Employees
• 4th largest LTL Carrier by Revenue
• Customers include Wal-
Mart, Perrigo, and large
manufacturers
• Ships freight for companies that
lead the U.S. economic recovery
8. Less-Than-Truckload (LTL)
• Ships product from
Point A, to Point B, to
Point C, to Point D
• Product is transferred
at each terminal
Truckload (TL)
• Ships product from
Point A to Point B
Trucking Industry
YRC is an LTL Carrier
10. Industry Comparison
• Undervalued compared to the industry
• Financial liquidity is near industry average
• Institutions are selling, insiders are buying
11. Industry Comparison
• Why are the total NET Assets (Assets – Debt)
worth 10 times more than the total value of
the company?
• Cash and earnings from operations worth over
2 times more than the value of the company?
12. YRC in the Past
• Revenues dropped from $9.6B to $4.8B
• Net Income dropped from $275M to - $140M
• Known for poor customer service
13. Revenue USD (Billions) Last 6 Years
• Industry leader in 2007
• Revenue decreased during recession
• 3rd in 2012
14. Net Income USD (Million) Last 7 Years
• Industry leader in 2007
• Last in 2012
• Room to improve in cutting costs
15. • The market thinks YRC will fail
• We don’t blame them
• But here is why they are wrong
16. YRC in the Future
• Cutting costs
– Consolidating terminals
– Reducing workforce
• Restructuring executive
management team
• Improving customer service
– Intensive training
17. Net Income USD (Million)
• Is YRC finally turning the corner?
• How will they get there?
18. YRC in the Future
• Hired consulting firm MAVEA to help turn
around the company
• CEO of MAVEA, Larry Wilson, bought shares
of YRC a few weeks before the contract was
signed
• Larry Wilson is also on the
Board of Directors of another
company that has seen a
50%+ increase in share price
during its turnaround, Yahoo
19. Earnings Call Takeaways
• Beat analysts estimates for the first time in
4 years
• Positive operating income for the first time
in 6 years
20. Earnings Call Takeaways
• Verbal offers to lease almost 100% of
revenue equipment purchases in 2013
– Operating leases
– Decrease in CapEx, increase in FCF
• New company culture to reduce workers
compensation claims (injuries on the job)
– Injury frequency improved by 20%
• Reducing work force to improve efficiency
23. Earnings Call Takeaways
• New management team
– Marketing and sales focused
– Sales and operations driven
• Decreased cargo claims
ratios by focusing on
better freight handling
24. Balance Sheet
• Convertible Bonds when stock price hits $14
and $36
• Will lower Interest Expense if
converted, which will raise EBITDA, but also
dilute shares
• Neutral effect on EPS
25. News
• WalMart named YRC the LTL carrier of the year
• Announced job cuts of almost 500 employees
on Monday
– Price jumped 15% that day
• Trading volume trending upwards
• Will analysts raise price targets?
33. Risks
• Earnings don’t increase like we are projecting
• Share dilution
• US economy does not recover, which is driving
growth in the trucking industry
34. • Backbone of the U.S. economy
• Very undervalued with 0.08 P/B
– Failure is priced into the stock
• IPO needs to take on more risk
than just UPS, Home Depot, etc.
• High risk, high reward
Investment Thesis
BUY! BUY! BUY!
35. Proposal
• Sell 47.359 shares of UPS @ 83.00
• Originally bought for $71.52 per share
• 8.527% of portfolio
• Buy 300 shares of YRCW @ $8.62
• $2,586
• 5.60% of portfolio
