Activist Investor Seeks Changes To YRC Board

In an amended 13D filing with the U.S. Securities and Exchange Commission, activist investor Barna Capital Group stated that it was moving forward with previously announced plans to make changes to the YRC Worldwide YRCW board.

Barna Capital is seeking to "replace three members of the board who have not provided the needed guidance for the company to achieve decent operating results." The firm wants to replace current board seats with "individuals who possess extensive experience in running a successful transportation company."

In the filing, Barna Capital stated shares of YRCW have fallen more than 90% during the tenure of the unnamed board members that the group is seeking to replace. Additionally, the firm noted that the board was seeking to be paid in cash versus equity-based compensation and that total compensation for board seats has increased more than 200% since those individuals joined the board.

Further, the firm stated that it "would like to see some changes in middle and lower management who will drive better operational results."

Lastly, Barna Capital reiterated its confidence in the YRC's executive management team. "We have complete trust in the executive management team and believe that they are on the right track to turn the company towards a brighter future."

The filing showed that Barna Capital increased its stake in the less-than-truckload carrier to 5.4%, up from 5.2% at the time of the original filing on March 17.

The date of Barna Capital's original filing was shortly after YRC provided a lackluster intra-quarter update on March 13. In that press release, the carrier announced that tonnage per day had declined 0.7% year-over-year during January and February and that revenue per hundredweight, or yield, was 4.2% lower. The firm noted that YRC's results, which included both "softer pricing while volumes fell at the same time," were not as strong as results reported by other carriers.   

The original filing also called out management and the board for failing to "motivate employees, optimize operations and guide the company to strong financial results."

The proposed board changes do not impact the two seats held by the Teamsters Workers Union.

In an 8-k filing on April 8, YRC disclosed that it had amended its credit agreement. A key provision in the amendment is the waiver of a financial covenant for the remainder of 2020, requiring last 12 months' consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) of $200 million.

YRC's fourth quarter financial release showed the carrier generated $210.6 million in 2019 adjusted EBITDA, ending the year with $902.8 million in debt. The carrier closed the books on 2019 with $80.4 million in liquidity compared to $203.8 million at the end of 2018.

YRCW's shares are up more than 10% in midday trading on the news.