YRCW says it is on track for positive Q3 EBITDA
October 18, 2010
Editor’s note: This story was updated on October 20.
With its third quarter earnings announcement roughly three weeks away, less-than-truckload transportation services provider YRC Worldwide (YRCW) issued an update on its expected results for the quarter.
Looking at tonnage, YRCW officials said that third quarter tonnage per day at YRC National and YRC Regional was up 1.2 percent and 2.1 percent, respectively, compared to the second quarter. And revenue per shipment for the third quarter at YRC National and YRC Regional was up 1.9 percent and 3.7 percent, respectively, compared to the third quarter of 2009.
These sequential and annual increases represent an improving LTL marketplace, as well as the face that YRCW has paired down assets, terminals, and headcount in recent years to improve yield and margins.
In the second quarter, YRCW showed some sequential and annual gains, although the company posted quarterly net and revenue losses. YRCW recorded a quarterly net loss of $9.5 million and $.01 per share, which is ahead of a net loss of $309 million and a $5.20 loss per share during the second quarter of 2009. Operational revenue at $1.12 billion was down 8.7 percent year-over-year, and total operating expenses at $1.1 billion were off by about 30 percent. Operating income for the quarter at $48.3 million was up significantly compared to a $294 million loss a year ago.
YRCW’s financial condition has been closely watched by industry observers, due to the extensions leading up to its debt-for-equity exchange, as well as difficult LTL market conditions caused in large part by excess capacity, decreased fuel surcharge revenues, and pricing issues, although the LTL sector is showing some signs of improvement in the form of improved pricing and revenue gains in recent months.
Industry analysts have told LM that YRCW’s performance compared to other publicly-traded LTL players on a sequential basis in terms of tonnage increases and shipment increases was as good or better in some cases that its public competitors.
“This is an indication that YRCW is not losing market share anymore to competitors like they did three months ago or a year ago, which is positive,” said an analyst. “They are also focusing on pricing rather than pushing for volume gains, and it is an important message that they needed to convey from a customer and competitor point of view as a price war hurts everyone and prevents investment into the business for YRCW.”
In today’s announcement, YRCW also said it expects third quarter positive adjusted EBITDA with a range of $42 million to $46 million, and for the second and third quarters YRCW expects cumulative adjusted EBITDA within a range of $82 million-to-$86 million, topping the $50 million covenant level required as part of its credit agreement.
YRCW said it expects a quarterly operating loss in the $18-to-$22 million range, which would be an improvement over a loss of roughly $35 million in the second quarter.
At the end of September, YRCW said that its board of directors has approved a tentative agreement with the Teamsters.
YRCW officials said that the Teamsters approved submitting the tentative agreement, which is designed to improve YRCW’s competitive position in the LTL sector, to the company’s Teamster employees for ratification.
Last year, YRCW won concessions from its 40,000 or so Teamsters on a 15 percent wage give-back and an 18-month freeze on pension contributions which was set to expire in January. And according to an 8-K filing with the Securities and Exchange Commission, YRCW said the temporary cessation of the payment of pension contributions to the multi-employer pension funds (the “Funds”) in which the Employers participate would continue until June 1, 2011, at which time the Employers would contribute to those Funds until the end of the extended term of the company’s National Master Freight Agreement (NMFA) at the rate of 25% of the contribution rate in effect on July 1, 2009.
In the 8-K Filing, YRCW said the tentative labor agreement would amend to and extend the company’s National Master Freight Agreement (NMFA) to March 31, 2015 upon ratification by its Teamster employees.
As part of the tentative agreement, YRCW is required by the Teamsters to raise $300 million in new equity by December 31, 2010 and close the deal by March 31, 2011. Under these terms, YRCW is required to obtain a definitive agreement with an equity player, and failing that equity requirement, require that lenders convert a portion of their debt to equity in order to keep Teamster concessions in place.
Ballots for the concession plan were mailed out to YRCW Teamsters on or about Thursday, October 7, with ballots scheduled to be counted on or about October 28 and 29.
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