YRCW reports $102 million net loss in first quarter

Earlier today, less-than-truckload (LTL) transportation services provider YRC Worldwide (YRCW) reported a $102 million net loss in the first quarter and a $2.14 loss per share. Despite the losses, company officials said this represented an improvement over the first quarter of 2011, which saw a net loss of $274 million and $13.15 per share.

YRCW, which has lost nearly $3 billion over the last four years, also reported that first quarter consolidated operating revenue for the quarter was $1.1 billion, with a consolidated operating loss of $68 million, which were impacted by harsh winter weather and other expenses such as $8 million in restructuring fees and a $17 million charge related to workers’ compensation claims. This was better than last year’s first quarter, which saw consolidated operating revenue of $987 million (13.8 percent less than this year’s first quarter) and an operating loss of $233 million.

This earnings release follows a recent announcement by YRCW in which it stated that it reached definitive agreements with its senior secured lender groups, shareholders, pension funds, the Teamsters union for the company’s restructuring plan, which is scheduled to be completed in July.

YRCW Chairman, President, and CEO Bill Zollars said on a conference call that this agreement enhances the company’s liquidity and improves the health of its balance sheet. Under the restructuring plan, YRCW gets an immediate infusion of $100 million in new capital to help it stay afloat. YRCW says it also will receive “increased liquidity” from a new asset-based loan (ABL) facility, replacing the current ABS facility.  In addition, the restructuring plan contemplates that a portion of the company’s existing loans and other obligations will be exchanged for new securities, including the exchange of some obligations for equity.

YRCW also said it has engaged Morgan Stanley to arrange a $400 million Asset-Based Loan facility as part of its overall restructuring plan.

In addressing YRCW’s first quarter performance, Zollars said that despite the severe winter weather the company is encouraged by the year-over-year improvement in its operating performance, as customers continue to return and the company remains focused on its three main operational initiatives: disciplined pricing, customer risk management, and costs improvement.

“Industry pricing is firming as economic growth and seasonality absorb industry capacity,” said Zollars. Our year-over-year volume comparisons improved every quarter of 2010 as we narrow the year-over-year gap and turned positive year-over-year in January 2011.”

Tons per day at YRC National Transportation were up 7.9 percent year-over-year, and revenue per shipment was up 3.3 percent, with annual volume increases up each month during the quarter. Total quarterly shipments for YRC National were up 7.1 percent annually and 3.4 percent compared to the fourth quarter.

At YRC Regional, tons per day were up 16.9 percent and revenue per shipment was up 7.7 percent. Total shipments were up 9.8 percent year-over-year and 5.3 percent compared to the third quarter.

Pricing also saw first quarter gains throughout the quarter, with contractual increases tracking ahead of last year. Zollars noted that YRCW remains focused on efforts to improve customer mix management, noting that it hired additional local sales representatives to support its growth initiatives in this channel.

“Changes in weight per shipment and customer mix affected pricing metrics for National and Regional in the quarter,” said Zollars. “National increased its weight per shipment by 1.5 percent…Regional’s weight per shipment was up 5.8 percent.”

The first quarter marked the sixth consecutive quarter of year-over-year EBITDA improvement.

Satish Jindel, principal of SJ Consulting in Pittsburgh, said recently that YRC’s survival hinges on support from at least three of four constituencies: shippers, employees, debt holders, and stockholders.
 
Lenders have been uncharacteristically patient with YRC, largely because they must feel that they would not be sufficiently compensation in a Chapter 7 liquidation. That’s because of the decline recently in used truck valuations. YRCW has closed terminals and reduced its geographic footprint, which has resulted in a company about one-half the size it was about four years ago. But the company has survived an industry price war led by some of its major competitors, including Con-way and FedEx Freight.
 
Recently, RBC Capital Markets analyst John Barnes called YRCW a “case study in how to survive a downturn.” Already, in losing more than $2.7 billion, YRC has become the biggest money-losing trucking company ever to remain in business.

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