YRC Worldwide Reports Positive Annual Operating Income for the First Time in Six Years

YRC Worldwide Inc today reported financial results for the fourth quarter and full year 2012

 

Consolidated operating revenue for the year ended December 31, 2012 was $4.851 billion, 0.4% lower than 2011, but consolidated operating income increased $162.3 million to $24.1 million, which included a $9.7 million gain on asset disposals. This is the first time in six years that the company has reported positive annual consolidated operating income. Comparatively, the company reported consolidated operating revenue of $4.869 billion for the year ended December 31, 2011 and a consolidated operating loss of $138.2 million, which included an $8.2 million gain on asset disposals. 

 

The company reported, on a non-GAAP basis, adjusted EBITDA for the year ended December 31, 2012 of $241.2 million, an $82.0 million improvement over the $159.2 million adjusted EBITDA during 2011 (as detailed in the reconciliation below).

 

"Our year-over-year operating improvement is primarily due to our focus on customer mix management, pricing discipline, productivity improvements, and a decrease in safety related costs," stated James Welch, chief executive officer of YRC Worldwide.  "In just 18 months after a complete restructuring of the senior leadership team, the company posted positive consolidated operating income for the first time in six years and exceeded our forecast for the year. Obviously, 2012 was a year of significant progress for the organization.  We eliminated all distractions that have been keeping this company from focusing on what we do best, which is providing premium services to both the regional and long-haul segments of the LTL market.  In 2013, we must continue to build on this momentum and execute against our strategic and operational objectives.  Our dedicated employees are driven to provide high-quality, consistent service to our customers and they are working hard to regain our position as one of the leading North American LTL carriers," said Welch.

 

"Our system-wide employee safety initiatives showed tremendous progress in 2012.  Collaborating with employee safety committees at terminals to drive cultural change from drivers to dockworkers, we are working more safely than ever before," stated Welch.  "We are continuing to experience a decline in the frequency of our workers' compensation claims while simultaneously settling more claims than are filed. The net result is the lowest number of claims on record since the company started tracking this information in 2000. With fewer claims, the associated liability has decreased, as have the letters of credit supporting those programs. It all started with a simple commitment to be the safest company we can be and our team is delivering in a big way," Welch said.

 

Key Segment Informationyear-to-date 2012 compared to year-to-date 2011

 

 

 

YRC Freight

 

 

2012

 

 

2011

 

Percent

Change

 

Operating revenues (in millions)

 

$   3,206.9

 

$   3,203.0

 

0.1%

 

Total tonnage per day (in thousands)

 

27.04

 

27.75

 

(2.5)%

 

Total shipments per day (in thousands)

 

46.79

 

47.91

 

(2.3)%

 

Revenue per hundredweight

 

$      23.38

 

$      22.67

 

3.1%

 

Revenue per shipment

 

$         270

 

$         263

 

2.9%

 

 

 

Regional Transportation

 

 

2012

 

 

2011

 

Percent

Change

 

Operating revenues (in millions)

 

$   1,640.6

 

$   1,554.3

 

5.6%

 

Total tonnage per day (in thousands)

 

29.05

 

28.39

 

2.3%

 

Total shipments per day (in thousands)

 

39.69

 

39.17

 

1.3%

 

Revenue per hundredweight

 

$      11.21

 

$      10.86

 

3.2%

 

Revenue per shipment

 

$         164

 

$         157

 

4.2%

Fourth Quarter Results

Consolidated operating revenue for the fourth quarter of 2012 was $1.169 billion, 3.6% lower than 2011, but consolidated operating income increased $68.1 million to $30.0 million, which included a $9.2 million gain on asset disposals. This is the third consecutive quarter that the company has reported income from operations. As a comparison, the company reported consolidated operating revenue of $1.212 billion for the fourth quarter of 2011 and a consolidated operating loss of $38.1 million, which included a $12.9 million loss on asset disposals. 

 

The company reported, on a non-GAAP basis, adjusted EBITDA for the fourth quarter of 2012 of $77.0 million, a $35.7 million improvement over the $41.3 million adjusted EBITDA during 2011 (as detailed in the reconciliation below). 

 

 

Key Segment Informationfourth quarter 2012 compared to the fourth quarter of 2011

 

 

 

YRC Freight

 

 

2012

 

 

2011

 

Percent

Change

 

Operating revenues (in millions)

 

$      777.2

 

$      804.5

 

(3.4)%

 

Total tonnage per day (in thousands)

 

26.12

 

27.64

 

(5.5)%

 

Total shipments per day (in thousands)

 

44.74

 

47.29

 

(5.4)%

 

Revenue per hundredweight

 

$      23.76

 

$      23.03

 

3.2%

 

Revenue per shipment

 

$         277

 

$         269

 

3.1%

 

 

 

 Regional Transportation

 

 

2012

 

 

2011

 

Percent

 Change

 

Operating revenues (in millions)

 

$      391.4

 

$      381.7

 

2.5%

 

Total tonnage per day (in thousands)

 

27.83

 

28.25

 

(1.5)%

 

Total shipments per day (in thousands)

 

38.47

 

38.82

 

(0.9)%

 

Revenue per hundredweight

 

$      11.44

 

$      11.08

 

3.3%

 

Revenue per shipment

 

$         166

 

$         161

 

2.7%

YRC Freight recorded $21.1 million in positive operating income in the fourth quarter which was a $47.8 million year-over-year increase and the second consecutive positive operating income quarter.  The operating ratio improved 600 basis points over the comparable prior year period to a six-year, fourth quarter low of 97.3. "The improvement in profitability is the result of intense focus on productivity improvements at each individual terminal and the continuation of our strategy to improve our customer mix," stated Jeff Rogers, president of YRC Freight.  "We have made solid gains in customer service, safety and freight handling efficiencies, and now our financial results are starting to tell the story.  We are entering 2013 from a position of strength, and we will continue building on our momentum by executing on our operational plans and strategies this year.  I can feel the confidence of our team, and it is bolstered by the positive feedback we have received from our customers," Rogers said.

 

"During the fourth quarter of 2012, our Regional group continued to deliver solid results," stated Welch.  "Our Regional group consistently produces results that are competitive within the industry and each successive quarter they continue to build on their profitability with operational improvements and efficiencies.  Through the dedication of its employees, our Regional group delivered full-year operating income of $70.0 million and a 95.7 operating ratio, which led the way for our company and is one of the best operating ratios in the public LTL industry.  I'm very proud of the accomplishments of the Holland, Reddaway and New Penn teams," Welch said.

 

Liquidity

 

At December 31, 2012, the company's liquidity, including cash, cash equivalents and availability under its $400 million multi-year asset-based loan facility (ABL), was $251.3 million.  The ABL borrowing base was $369.8 million as of December 31, 2012 as compared to $375.9 million as of September 30, 2012. As a comparison, the company's liquidity, including cash, cash equivalents and availability under its ABL, was $237.5 million at September 30, 2012.  For the year ended December 31, 2012, cash used in operating activities was $25.9 million as compared to $26.0 million for the year ended December 31, 2011, an improvement of $0.1 million.  This improvement in cash used in operations in 2012 was inclusive of a year-over-year increase of $53.0 million of cash paid for interest, $21.3 million of cash paid for letter of credit fees, $39.3 million of cash paid to multi-employer pension plans and $45.0 million of cash paid to single-employer pension plans that was not paid in the prior comparable period.

 

"Total liquidity increased approximately $14 million since the end of last quarter to end the year at $251 million, which is a great joint accomplishment of operational improvement and good balance sheet governance. It is the highest level of liquidity we've had during 2012 and close to the highest level over the most recent four-year period," stated Jamie Pierson, chief financial officer of YRC Worldwide. 

 

Review of Financial Results

 

YRC Worldwide Inc. will host a conference call with the investment community today, Friday, February 8, 2013, beginning at 9:30 a.m. ET, 8:30 a.m. CT.  The call will be available to listeners as a live webcast and as a replay via the YRC Worldwide website yrcw.com.

 

Non-GAAP Financial Measures

 

Adjusted EBITDA is a non-GAAP measure that reflects the company's earnings before interest, taxes, depreciation, and amortization expense, and further adjusted for letter of credit fees, equity-based compensation expense, net gains or losses on property disposals and certain other items, including restructuring professional fees and results of permitted dispositions and discontinued operations as defined in the company's credit facilities. Adjusted EBITDA is 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.  However, this financial measure should not be construed as a better measurement than operating income, as defined by generally accepted accounting principles (GAAP).

 

Adjusted EBITDA has the following limitations:

 

  • Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to fund restructuring professional fees, letter of credit fees, service interest or principal payments on our outstanding debt;
  •  
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will have to be replaced in the future, and adjusted EBITDA does 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 certain 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 their usefulness as a comparative measure.
  •  

Because of these limitations, adjusted EBITDA 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 adjusted EBITDA as a secondary measure.  The company has provided reconciliations of its non-GAAP measure, adjusted EBITDA, to GAAP operating income within the supplemental financial information in this release.

 

comments powered by Disqus