YRC Worldwide Inc (YRCW)

[MagicCap]

Everyone needs to listen to this presentation:
http://wsw.com/webcast/bbt24/yrcw/

A little less than 28 minutes in Jeff Rogers was asked about margin expansion and profitable customer mix. He said he doesn't see any reason why they don't return to historical averages. If I look at the 10ks from 2005/4 they were operating at a 6 to 7% operating margin. With all of the cuts in overhead expenses and proposed line haul / network cuts, I bet they can at least achieve this in the next year or so. That would result in $300 million in operating income on $5 billion in sales. Back out $150 million in interest expenses and you have $150 million in Net Income. on a fully diluted share count of 21 million shares (assuming 13 million shares convert at $14 and $34, respectively) that's over $7.00 EPS. Slap a 12 p/e on that and you get $85/share.

Let's look at it this way though...from the top down and using 2012 numbers as a guide:

SALES:
$4.86 billion in sales in 2012 x 3% growth
=$5.01 billion



GROSS MARGINS:
margins were 67% avg for Q2 to Q4 2012. Let's use that:
$5.01 * 0.67 = $3.354 billion operating income



EXPENSES:
SG&A expenses went down from 59% of revenues in Q1 to 56.2% in Q4. Let's assume they average 55.7% in 2013.

Dep Exp went down from 4.1% of revenues in Q1 to an average of 3.69% in Q2-Q4. Let's assume they stay at 3.69% in 2013.

Other expenses went down from 6.37% of revenues in Q1 to 4.02% in Q4. Let's assume they go down to 3.82% in 2013.

If I add up all expenses I get 63.21%. 63.21% of $5.01 billion results total expenses of $3.164 billion.



NET INCOME (LOSS):
Take gross income less total expenses and you get $189 million. Interest expense in 2012 was $151 million. Back that out and you get $38 million in net profit in 2013. On a current share count of roughly 8 million shares that results in EPS of $4.80. On a fully diluted basis that yields EPS of $1.85 (although with $24 million less in interest expense (as a result of the convertible bonds being converted and therefore resulting in lower interest expense) it would then boost EPS by over $1.20 to bring the total to around $3.00).



END RESULT:
Either way I'm getting to $3 to $7.00 in EPS in 2013 / 2014. On a fully diluted basis. Anyone think this is priced into the stock at $7.90?