YRCW reports net income gain for fourth quarter

Less-than-truckload (LTL) transportation services provider YRC Worldwide (YRCW) reported net income of $23.1 million—of $0.49 per share—for the fourth quarter of 2010.

This falls short of the fourth quarter of 2009, when YRCW reported net income of $119.5 million, which included a $177 million after-tax gain on debt redemption.

Despite the quarterly gain in net income, YRCW reported a net loss of $322 million and $8.13 per share for all of 2010.

Fourth quarter consolidated operating revenue of $1.092 billion was up 3.9 percent compared to $1.050 billion for the fourth quarter of 2009, and the company had a consolidated operating loss of $27 million for the quarter, which was better than a $91 million operating loss for the same timeframe a year ago. Full year consolidated operating revenue at $4.3 billion was down compared to 2009’s $4.9 billion, while YRCW’s 2010 operating loss of $231 million was improved over 2009’s operating loss of $890 million.

The fourth quarter marked the fifth consecutive quarter of year-over-year earnings improvement, according to YRCW. And its consolidated results included positive EBITDA for the third straight quarter and positive operating cash flow for the second half of 2010.

“We are encouraged with the continued year-over-year improvement in our operating performance, as we remain focused on our three key initiatives: disciplined pricing, customer mix management, and cost improvement,” said YRCW Chairman, President, and CEO Bill Zollars on an earnings conference call.

Zollars also said that YRCW is in active discussions, regarding the company’s balance sheet recapitalization.

Tons per day at YRC National Transportation were down 7.7 percent year-over-year, and revenue per hundredweight was up 4.2 percent. And compared to the third quarter daily tonnage was down 5.2 percent, with revenue per hundredweight up 2.9 percent. At YRC Regional, tons per day were up 13.9 percent and revenue per hundredweight was up 1.6 percent. YRC Regional tons per day were down 1.9 percent compared to the third quarter, and revenue per hundredweight was up 2.4 percent during the same period.

“The general economic outlook reflects modest growth prospect for 2011 while the LTL industry dynamics continue to improve,” said Zollars. “Industry pricing actions are more disciplined than last year’s trends, industry actions are addressing capacity. As we move into the second quarter, industry volume increases are expected to further absorb excess capacity.”

Taking a look at 2010, Zollars pointed out that volumes stabilized in the first quarter and then began to grow sequentially during the latter part of that quarter. And as YRCW’s customer base was stabilizing and returning shipments to YRCW, he said YRCW regained customers and further expanded its revenue base to include new customers. This inflection point helped YRCW annual volume comparisons to gain traction as it moved through the year.

Despite some promising signs in this earnings release, YRCW still has work to do to fully regain its financial footing.

In December, it made amendments to its credit agreement and asset-backed securitization facility (ABS) in order to provide additional time to finalize plans to recapitalize its balance sheet. This marks the 19th amendment to the company’s credit agreement. Company officials said at the time that YRCW is also working with its lenders and the Teamster negotiating committee for the International Brotherhood of Teamsters (TNFINC) in order to get back on solid financial footing.

In November, YRCW ratified its labor agreement with the Teamsters for the third time, which is expected to result in an annual savings of $350 million through 2015. A key provision of that agreement is for the company 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 agreement require that lenders convert a portion of their debt to equity in order to keep their concessions in place).

YRCW said that the amended credit facilities extend the deferral of credit agreement interest and fees through mid-May 2011 and interest fees under the ABS facility through May 31. And the amendment requires the company to reach an agreement in principal to recapitalize its balance sheet by February 28, complete final documentation by March 15 and close by May 13, with the effectiveness of the credit agreement and ABS facility amendments subject to the consent of TNFINC and a supermajority agreement of the multi-employer pension funds party to the company’s contribution deferral agreement to an extension of the deferral of interest and principal payments under that agreement through May 31, 2011.

A Wall Street analyst said that this news does not significantly change anything regarding YRCW’s financial condition.

“Nothing about the company has significantly changed from this release, in our view, and no new CEO or equity investor ($300mm of new money required in the current restructuring plan) has been identified, leaving us still skeptical of this plan’s probability of success,” wrote Stifel Nicolaus analyst David Ross in a December research note.

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