LTL news: YRCW looks for positive second quarter EBITDA

Less-than-truckload (LTL) transportation services provider YRC Worldwide Inc. said earlier today that it expects to achieve positive adjusted EBITDA on a consolidated basis and positive operating income for its Regional Transportation unit for the second quarter of this year.

If this were to occur, it would be welcome news for the carrier, whom has incurred losses of more than $2 billion over the past 11 quarters. YRCW added that it also expects working capital expenditures, cash interest, advisor fees and other payments to produce a net cash usage from operating activities.

YRCW also announced it has amended its asset-backed securitization (ABS) facility as part of an effort to reduce the impact of negative effects that the 2009 integration of Yellow Transportation and Roadway has had on the ability of the company to borrow under the facility. With this amendment, YRCW said it will now be able to borrow additional amounts under the facility for the rest of this quarter. The previous amount it was able to borrow under the old ABS was $22 million, and an updated figure was not made available by the company.

“We continue to see positive developments in our business as our June volume trends are exceeding our May volume trends,” said YRCW Chairman, President and CEO Bill Zollars in a statement. “The incremental liquidity from the ABS amendment helps to support our working capital needs as we grow our revenues.  With the operating momentum we are experiencing, we are confident in our ability to generate positive adjusted EBITDA in the second quarter of 2010.”

Like many other LTL players, YRCW appears to be benefiting from the economic revival occurring in the LTL industry, according to Satish Jindel, president of Pittsburgh-based SJ Consulting. Almost all LTL carriers, according to Jindel, are experiencing high single/low double digit gains, adding that it is good to see YRCW get a share of that.

“The thing that is cautionary for me is that…YRCW needs to grow at a faster rate than other LTL carriers just because the company has lost a lot of business in the last several months and needs to regain that,” said Jindel. “And because they are still in difficult financial condition—but not as bad as 2009—they need to strengthen their operating business and the outlook for the second half of 2010 in our view may or may not be as good as the first half.”

Reasons for this cited by Jindel include how some sectors that contributed to first half tonnage growth may not be as active in the second half, as well as consumers tightening spending again, which could mean that the economic recovery may ultimately lack momentum throughout the rest of the year.

With a need to fund working capital for business growth, YRC said the expected net cash usage from operating activities creates liquidity pressure for the company. And it added that along with the liquidity that the ABS facility amendment provides, YRCW is taking steps to address its short-term liquidity needs through various measures, including:
-implementing further cost actions and efficiency improvements;
-seeking additional and return business from customers;
-engaging in discussions with the company’s lending group under its credit agreement;
-pursuing the sale of non-strategic assets or business lines;
-actively managing receipts and disbursements, including amounts and timing, focusing on reducing day’s sales outstanding and managing day’s payables outstanding;
-pursuing the company’s litigation against the trustee under the indenture related to the company’s 5% contingent convertible notes; if the company is successful in its litigation and meets the closing conditions under a note purchase agreement to sell and issue additional 6% convertible notes, the company can utilize the remaining $20.2 million of proceeds held in an escrow for general corporate purposes; and
-considering the sale of additional equity or pursuing other capital market transactions.