News Release Details

Results include Operating Income of $50.9 million and Adjusted EBITDA of $100.8 million

OVERLAND PARK, Kan., Aug. 02, 2018 (GLOBE NEWSWIRE) -- YRC Worldwide Inc. (NASDAQ:YRCW) reported consolidated operating revenue for second quarter 2018 of $1.326 billion and consolidated operating income of $50.9 million, which included a $2.2 million net loss on property disposals. As a comparison, for the second quarter 2017, the Company’s results included operating revenue of $1.261 billion and consolidated operating income of $53.2 million, which included a $1.0 million net gain on property disposals.

Financial Highlights

• In second quarter 2018, net income was $14.4 million compared to net income of $19.0 million in second quarter 2017.
   
• On a non-GAAP basis, the Company generated consolidated Adjusted EBITDA of $100.8 million in second quarter 2018, an increase of $9.7 million compared to $91.1 million for the same period in 2017 (as detailed in the reconciliation below). Last twelve month (LTM) consolidated Adjusted EBITDA was $286.4 million compared to $277.5 million a year ago.
   
• The total debt-to-Adjusted EBITDA ratio for second quarter 2018 improved to 3.18 times compared to 3.61 times for second quarter 2017.
   
• Purchased transportation expense increased $17.6 million in second quarter 2018 when compared to the same period last year. The increase was primarily due to a $10.2 million increase in equipment lease expense of which $8.4 million was attributable to long-term rentals in conjunction with the Company’s strategy to reinvest in its fleet. The purchased transportation results also include a $9.1 million increase in third-party costs for customer specific logistics solutions. These increases were partially offset by a $2.7 million decrease from reduced usage of local purchased transportation.
   
• Reinvestment in the business continued with $23.0 million in capital expenditures and new operating leases for revenue equipment with a capital value equivalent of $38.6 million, for a total of $61.6 million, which is equal to 4.6% of operating revenue for second quarter 2018. The total represents a $32.0 million increase over the $29.6 million investment in second quarter 2017. The majority of the investment was in tractors, trailers and technology.             

Operational Highlights

• The consolidated operating ratio for second quarter 2018 was 96.2 compared to 95.8 in second quarter 2017. The operating ratio at YRC Freight was 96.8 compared to 96.1 for the same period in 2017. The Regional segment’s second quarter 2018 operating ratio improved by 50 basis points to 94.1 compared to 94.6 a year ago.
   
• Second quarter 2018 tonnage per day decreased 1.0% at YRC Freight and decreased 2.4% at the Regional segment compared to second quarter 2017.
   
• At YRC Freight, including fuel surcharge, second quarter 2018 revenue per hundredweight increased 5.4% and revenue per shipment increased 9.1% when compared to the same period in 2017.  Excluding fuel surcharge, revenue per hundredweight increased 2.9% and revenue per shipment increased 6.6%.
   
• At the Regional segment, including fuel surcharge, second quarter 2018 revenue per hundredweight increased 7.6% and revenue per shipment increased 11.4% when compared to the same period in 2017. Excluding fuel surcharge, revenue per hundredweight increased 5.2% and revenue per shipment increased 8.9%.
   
• In second quarter 2018, third-party liability claims expense and workers’ compensation expense decreased by $7.0 million compared to the second quarter 2017, primarily due to favorable development of prior year claims.             

Liquidity Update

• At June 30, 2018, the Company had cash and cash equivalents and Managed Accessibility (as defined in the Company’s most recently filed periodic reports on Forms 10-K and 10-Q) under its ABL facility totaling $190.8 million compared to $253.4 million as of June 30, 2017.
   
• For the six months ended June 30, 2018, cash provided by operating activities was $71.5 million compared to cash provided by operating activities of $40.7 million for the six months ended June 30, 2017, an improvement of $30.8 million.
   
• At June 30, 2018, the Company’s outstanding debt was $910.7 million, a decrease of $90.1 million compared to approximately $1.0 billion as of June 30, 2017.

“Continued industry pricing discipline, favorable demand trends and limited excess capacity provide a positive outlook for the trucking industry,” stated Darren Hawkins, chief executive officer of YRC Worldwide. “The broader U.S. economy appears poised to remain in the current strong and durable cycle. We made solid progress in the second quarter and remain confident that YRCW is positioned for improved performance in the second half of 2018 compared to a year ago.

“During the second quarter we maintained our focus on improving yield and securing the right freight from our customers who value the service and capacity that Holland, New Penn, Reddaway and YRC Freight provide. This strategy contributed to solid year-over-year increases in revenue per hundredweight and revenue per shipment that outpaced contractual cost increases. The second quarter results were also positively impacted by a meaningful decrease in third-party liability claims and workers’ compensation expense compared to the same period in 2017.

“We continue to make progress replenishing the fleet and in the second quarter we more than doubled the total capital expenditure equivalent investment compared to a year ago. This follows a substantial year-over-year increase in capital expenditure equivalent investment in the first quarter. During the first half of 2018, we have taken delivery of more than 900 tractors with approximately another 500 expected in the second half of the year. We have also taken delivery of more than 500 trailers in the first half of 2018, with approximately another 3,300 expected the rest of the year. As we position the fleet to ensure the networks are operating efficiently, we expect the use of short-term rentals to decrease over time,” concluded Hawkins.

Key Segment Information – second quarter 2018 compared to second quarter 2017

^(a) Percent change based on unrounded figures and not the rounded figures presented

Review of Financial Results

YRC Worldwide Inc. will host a conference call with the investment community today, Thursday, August 2, 2018, beginning at 9:30 a.m. ET. 

A live audio webcast of the conference call and presentation slides will be available on YRC Worldwide Inc.’s website www.yrcw.com. A replay of the webcast will also be available at www.yrcw.com.

Non-GAAP Financial Measures

EBITDA is a non-GAAP measure that reflects the company’s earnings before interest, taxes, depreciation, and amortization expense. Adjusted EBITDA: a non-GAAP measure that reflects EBITDA, and further adjusts for net gains or losses on property disposals, letter of credit expenses, restructuring charges, transaction costs related to issuances of debt, nonrecurring consulting fees, permitted dispositions and discontinued operations, equity-based compensation expense, non-union pension settlement charges, and expenses associated with certain lump sum payments to our union employees, among other items, as defined in our credit facilities. EBITDA and Adjusted EBITDA are used for internal management purposes as a financial measure that reflects the company’s core operating performance. In addition, management uses Adjusted EBITDA to measure compliance with financial covenants in the company’s credit facilities and to pay certain executive bonus compensation. We believe our presentation of EBITDA and Adjusted EBITDA is useful to investors and other users as these measures represent key supplemental information our management uses to compare and evaluate our core underlying business results both on a consolidated basis and across our business segments, particularly in light of our leverage position and the capital-intensive nature of our business. Further, EBITDA is a measure that is commonly used by other companies in our industry and provides a comparison for investors to evaluate the performance of the companies in the industry. Additionally, Adjusted EBITDA helps investors to understand how the company is tracking against our financial covenants in our term loan credit agreement as this measure is calculated as prescribed in our term loan credit agreement and serves as a driving component of key financial covenants. However, these financial measures should not be construed as better measurements than net income, as defined by generally accepted accounting principles (GAAP).

EBITDA and Adjusted EBITDA have the following limitations:

• EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or fund principal payments on our outstanding debt;
• Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or fund principal payments on our outstanding debt, letter of credit expenses, restructuring charges, transaction costs related to debt, or nonrecurring consulting fees, among other items;
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will have to be replaced in the future and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
• Equity-based compensation is an element of our long-term incentive compensation program, although Adjusted EBITDA excludes employee equity-based compensation expense when presenting our ongoing operating performance for a particular period;
• Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, our non-GAAP measures should not be considered a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using our non-GAAP measures as secondary measures.  The company has provided reconciliations of its non-GAAP measures to GAAP net income (loss) and operating income (loss) within the supplemental financial information in this release.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Words such as “will,” “expect,” “intend,” “anticipate,” “believe,” “could,” “would,” “should,” “may,” “project,” “forecast,” “propose,” “plan,” “designed,” “enable,” and similar expressions which speak only as of the date the statement was made are intended to identify forward-looking statements. Forward-looking statements are inherently uncertain, are based upon current beliefs, assumptions and expectations of Company management and current market conditions, and are subject to significant business, economic, competitive, regulatory and other risks, uncertainties and contingencies, known and unknown, many of which are beyond our control. Our future financial condition and results could differ materially from those predicted in such forward-looking statements because of a number of factors, including (without limitation): general economic factors; business risks and increasing costs associated with the transportation industry; competition and competitive pressure on pricing; the risk of labor disruptions or stoppages; increasing pension expense and funding obligations; increasing costs relating to our self-insurance claims expenses; our ability to finance the maintenance, acquisition and replacement of revenue equipment and other necessary capital expenditures; our ability to comply and the cost of compliance with, or liability resulting from violation of, federal, state, local and foreign laws and regulations; impediments to our operations and business resulting from anti-terrorism measures; the impact of claims and litigation expense to which we are or may become exposed; failure to realize the expected benefits and costs savings from our performance and operational improvement initiatives; our ability to attract and retain qualified drivers and increasing costs of driver compensation; privacy breach or IT system disruption; risks of operating in foreign countries; our dependence on key employees; seasonality; shortages of fuel and changes in the cost of fuel or the index upon which we base our fuel surcharge and the effectiveness of our fuel surcharge program in protecting us against fuel price volatility; our ability to generate sufficient liquidity to satisfy our cash needs and future cash commitments, including (without limitation) our obligations related to our indebtedness and lease and pension funding requirements, and our ability to achieve increased cash flows through improvement in operations; limitations on our operations, our financing opportunities, potential strategic transactions, acquisitions or dispositions resulting from restrictive covenants in the documents governing our existing and future indebtedness; our failure to comply with the covenants in the documents governing our existing and future indebtedness; fluctuations in the price of our common stock; dilution from future issuances of our common stock; our intention not to pay dividends on our common stock; that we have the ability to issue preferred stock that may adversely affect the rights of holders of our common stock; and other risks and contingencies, including (without limitation) the risk factors that are included in our reports filed with the SEC, including those described under “Risk Factors” in our annual report on Form 10-K and quarterly reports on Form 10-Q.

About YRC Worldwide

YRC Worldwide Inc., headquartered in Overland Park, Kan., is the holding company for a portfolio of less-than-truckload (LTL) companies including YRC Freight, YRC Reimer, Holland, Reddaway, and New Penn. Collectively, YRC Worldwide companies have one of the largest, most comprehensive LTL networks in North America with local, regional, national and international capabilities. Through their teams of experienced service professionals, YRC Worldwide companies offer industry-leading expertise in flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence.

Please visit our website at www.yrcw.com for more information.

Source: YRC Worldwide, Inc.