YRC Worldwide Inc. reported consolidated operating revenue for third quarter 2019 of $1.257 billion and consolidated operating income of $23.8 million, which included a $1.0 million net loss on property disposals. As a comparison, for the third quarter 2018, the Company’s results included operating revenue of $1.304 billion and consolidated operating income of $41.2 million, which included a $1.9 million net loss on property disposals.
Net loss for third quarter 2019 was $16.0 million, or $0.48 per share, compared to net income of $2.9 million, or $0.09 per share, in third quarter 2018. This was impacted by an $11.2 million loss on extinguishment of debt associated with a refinancing of the term loan agreement, which resulted in a negative impact of $0.34 cents per share for the third quarter 2019.
“In September, we announced the completion of the refinancing of our term loan, a critical next step in our multi-year strategy. We continue to increase our efforts with two of our five key strategic initiatives now complete,” said Darren Hawkins, Chief Executive Officer of YRC Worldwide Inc.
The key components of our multi-year strategic roadmap are:
• Labor contract ratification, along with implementation of operational efficiencies to achieve service excellence
• Capital structure improvement
• Network optimization
• Customer growth/engagement initiatives
• Capital investment in equipment and technology
During the quarter and up through this earnings announcement, the Company has commenced implementation of key initiatives that support our strategic plan:
• Completed the consolidation of our New Penn corporate office to scale processes
• Completed a refinancing of our term loan
• Network optimization plans to consolidate service centers, with 12 completed so far and a total of approximately 25 service centers expected to be completed by end of 2019
“We are prioritizing our network optimization initiatives to bolster our longer-term profitability for the Company,” said Hawkins. “With the focus on greater efficiencies, we completed the consolidation of the New Penn corporate offices, as well as the consolidation of 12 service center facilities. The cost savings from lease terminations, sale of properties as well as more efficient asset utilization also contribute to our increased profitability of our best-in-class brands.”
“We have recently deployed a new operations field structure to ensure better customer service and increase operational efficiencies. Our team remains focused on building density in the areas we service, while enhancing the customer experience and value proposition, and ensuring greater efficiency with our equipment, our facilities and our resources.”
“I’m proud of our YRC Freight team for posting the best third quarter operating income in over 10 years. By utilizing some of the operational efficiencies we now have in place from our labor agreement through the addition of box trucks, reduction of local purchase transportation as well as other cost control initiatives, we were able to expand operating margin despite sluggish volumes,” concluded Hawkins.
Financial Highlights
• In third quarter 2019, net loss was $16.0 million compared to net income of $2.9 million in third quarter 2018.
• On a non-GAAP basis, the Company generated consolidated Adjusted EBITDA of $65.9 million in third quarter 2019, a decrease of $18.3 million compared to $84.2 million for the same period in 2018 (as detailed in the reconciliation below). Last twelve month (LTM) consolidated Adjusted EBITDA was $240.8 million compared to $288.8 million a year ago.
• Investment in the business continued with $40.9 million in capital expenditures and new operating leases for revenue equipment with a capital value equivalent of $35.3 million, for a total of $76.2 million, which is equal to 6.1% of operating revenue for third quarter 2019. The majority of the investment was in tractors, trailers and technology.
Operational Highlights
• The consolidated operating ratio for the third quarter 2019 was 98.1 compared to 96.8 in third quarter 2018. The operating ratio at YRC Freight was 96.1 compared to 97.0 for the same period in 2018. The Regional segment’s third quarter 2019 operating ratio was 100.9 compared to 96.2 a year ago.
• At YRC Freight, third quarter 2019 less-than-truckload (LTL) revenue per hundredweight, including fuel surcharge, increased 1.7% and LTL revenue per shipment increased 1.2% when compared to the same period in 2018. Excluding fuel surcharge, LTL revenue per hundredweight increased 2.8% and LTL revenue per shipment increased 2.3%.
• At the Regional segment, third quarter 2019 LTL revenue per hundredweight, including fuel surcharge, decreased 0.8% and LTL revenue per shipment decreased 0.4% when compared to the same period in 2018. Excluding fuel surcharge, LTL revenue per hundredweight was flat and LTL revenue per shipment increased 0.3%.
• Third quarter 2019 LTL tonnage per day decreased 4.0% at YRC Freight and decreased 3.6% at the Regional segment compared to third quarter 2018.
• Total shipments per day for the third quarter 2019 declined 3.5% at YRC Freight and 3.9% at the Regional segment.
Liquidity Update
• At September 30, 2019, the Company’s outstanding debt was $906.3 million, an increase of $41.3 million compared to $865.0 million as of June 30, 2019.
• The Company completed a refinancing of its term loan in September, which provides for additional liquidity, less restrictive financial covenants, a lower interest rate, and extends the maturity of the facility to June 2024. The new term loan agreement eliminates annual principal amortization, and permits reinvestment of the first $40.0 million in net cash proceeds earned from the sale of certain owned properties.
• The Company’s available liquidity, which is comprised of cash and cash equivalents and Managed Accessibility (as detailed in the supplemental information provided below) under its ABL facility totaled $150.1 million compared to $225.2 million as of September 30, 2018, a decrease of $75.1 million.
• For the nine months ended September 30, 2019, cash provided by operating activities was $13.4 million compared to $157.9 million for the nine months ended September 30, 2018.
