LTL news: YRCW says it is on track for positive Q2 EBITDA
July 13, 2010
Following a June announcement in which it said it expects to achieve positive EBITDA on a consolidated basis for the second quarter, less-than-truckload (LTL) transportation services provider YRC Worldwide Inc. said it expects second quarter EBITDA within a range of $35 million to $45 million.
YRCW officials said this does not include its YRC Logistics business, which it recently sold to Austin Ventures and will be reported as discontinued operations. And when including the expected adjusted EBITDA loss from discontinued operations of $9 million to $11 million, YRCW said it expects second quarter EBITDA to be within a range of $24 to $36 million.
And as of June 30, YRCW said its cash and cash equivalents were $142 million, compared to $130 million at the end of the first quarter. This is a positive sign for the company, which has incurred losses of more than $2 billion over the last 11 quarters.
In terms of tonnage for the second quarter, YRCW said tonnage per day for YRC National was 27,000, and 26,900 at YRC Regional, which were up 11.0 percent and 15.2 percent, respectively, compared to the first quarter.
YRCW announced in June it 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.
YRCW also said last month that with a need to fund working capital for business growth, the expected net cash usage from operating activities creates liquidity pressure for the company. And it 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.
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.
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