YRC Worldwide Reports Second Quarter Results

OVERLAND PARK, Kan., Aug. 7, 2013 /PRNewswire/ -- YRC Worldwide Inc. (NASDAQ: YRCW) today reported financial results for the second quarter 2013.

Consolidated operating revenue for the second quarter ending June 30, 2013 was $1.243 billion, or 0.7% lower than the $1.251 billion reported in the second quarter of 2012 and consolidated operating income decreased slightly from $15.5 million to $14.3 million, or by $1.2 million.  Operating income in 2013 included a $1.3 million loss on asset disposals compared to $6.5 million gain on asset disposals in 2012.

The company reported, on a non-GAAP basis, adjusted EBITDA for the second quarter of 2013 of $74.7 million, a $4.6 million improvement over the $70.1 million adjusted EBITDA reported for the second quarter of 2012 (as detailed in the reconciliation below).  Included in adjusted EBITDA for the second quarter of 2013 is a $6.3 million charge related to the network optimization that was implemented at YRC Freight in May 2013.

"As we move through 2013, we continue to make steady progress on our long-term objective of regaining a leadership position in the LTL industry.  In the second quarter, we paved the way for future success by making investments in newly leased tractors and trailers, completing the rollout of mobile handheld productivity devices for our city drivers, and completing the second largest network optimization in YRC Freight history," said YRC Worldwide CEO James Welch.  "While the Regionals continue to excel in their markets, YRC Freight faced some headwinds during the implementation of the network optimization plan.  We recorded a one-time charge of $6.3 million related to the network optimization, which is a small investment in what we anticipate will be approximately $25 to $30 million in annual savings," added Welch.

"As we have said before, 2012 was a year of progress and 2013 is the year of performance, and we continue to deliver on that performance.  Going forward, we remain focused on delivering incremental productivity improvements, consistent service and equally strong operational results.  We are confident in the position of our company and believe we have opportunity to grow the business, improve profitability and deliver high-quality service for our customers," stated Welch. 

"Additionally, we continue to see positive results from the safety initiatives we started in late 2011. The overall frequency of our workers' compensation claims is continuing to decline while we also continue to settle more claims than are filed. The net result is a reduction in the number of open claims and a reduction in our associated liabilities and outstanding letters of credit supporting these programs.  In the second quarter alone, we were able to decrease our outstanding letters of credit by $43 million or 10% from $429 million to $386 million," said Welch.

Key Segment Information– second quarter 2013 compared to second quarter 2012

YRC Freight reported an operating loss of $8.5 million in the second quarter of 2013 and reported an operating ratio of 101.1, which is a slight decrease over the second quarter of 2012.  "In May 2013, we implemented the second largest network optimization plan in the history of our company," stated Jeff Rogers, president of YRC Freight.  "During implementation, our execution was hampered due to increased shipment volumes we were experiencing at the time.  Service, operations and financial results were adversely affected as a consequence.  The good news is, the optimization will increase density in the network, result in fewer touches of shipments, increase load averages and reduce linehaul miles.  The great news is, the change is complete, service is moving back to pre-change levels, and this is absolutely in the best interest of our customers and our long-term success," said Rogers.

"Our Regional carriers continue to perform at market levels," stated Welch.  "For the second quarter of 2013, our Regional group reported operating income of $25.2 million, a 10.0% increase over the same period in 2012, and delivered a 94.3 operating ratio for the quarter.  With each passing quarter, they continue to execute on their long-term strategies by growing top-line revenue, providing industry-leading customer service, increasing their operational efficiencies, and increasing profitability and operating income as a result.  Once again, Holland, Reddaway and New Penn employees delivered exceptional performance, and I applaud them for their efforts," Welch said.

Liquidity

At June 30, 2013, the company's liquidity, including cash, cash equivalents and availability under its $400 million asset-based loan facility (ABL), was $218.7 million.  The ABL borrowing base was $378.9 million as of June 30, 2013.  As a comparison, the company's liquidity, including cash, cash equivalents and availability under its ABL, was $248.7 million of cash, cash equivalents and ABL availability at June 30, 2012.  For the six months ended June 30, 2013, cash used in operating activities was $18.2 million as compared to $16.6 million for the six months ended June 30, 2012. 

"We were able to slightly improve liquidity during the second quarter despite increased cash outflows for capital expenditures, non-union pension payments, and unemployment tax payments. Our operational improvements and focus on working capital management continue to provide us with sufficient liquidity," stated Jamie Pierson, chief financial officer of YRC Worldwide.    

Other

"As everyone is aware, we have a couple of debt maturities in early and late 2014 and then again in early 2015.  Even though the bulk of the maturities are literally over a year away, we recently retained Credit Suisse, in combination with our financial advisor, The MAEVA Group, to assist us in developing a broad range of refinancing and recapitalization options.  In order to accomplish any such transaction, we have a number of constituents to consider and we are currently in the process of evaluating all alternatives," said Pierson.

Review of Financial Results

YRC Worldwide Inc. will host a conference call with the investment community today, Wednesday, August 7, 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.  Free cash flow and adjusted free cash flow are non-GAAP measures that reflect the company's operating cash flow minus gross capital expenditures and operating cash flow minus gross capital expenditures, excluding the restructuring professional fees included in operating cash flow, respectively. However, these financial measures should not be construed as better measurements than operating cash flow, net income or earnings per share, 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;
• Adjusted free cash flow excludes the cash usage by the company's restructuring professional fees, debt issuance costs, equity issuance costs and principal payments on our outstanding debt and the resulting reduction in the company's liquidity position from those cash outflows;
• 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, free cash flow and adjusted free cash flow 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, free cash flow and adjusted free cash flow as a secondary measure.  The company has provided reconciliations of its non-GAAP measures, adjusted EBITDA, free cash flow and adjusted free cash flow, to GAAP operating income (loss) within the supplemental financial information in this release.

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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," "project," "forecast," "propose," "plan," "designed," "enable," and similar expressions are intended to identify forward-looking statements. Forward-looking statements are inherently uncertain 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) our ability to generate sufficient cash flows and liquidity to fund operations and satisfy our cash needs and future cash commitments, including (without limitation) our obligations related to our substantial indebtedness and lease and pension funding requirements; the pace of recovery in the overall economy, including (without limitation) customer demand in the retail and manufacturing sectors; the success of our management team in implementing its strategic plan and operational and productivity improvements, including (without limitation) our continued ability to meet high on-time and quality delivery performance standards, and the impact of those improvements to meet our future liquidity and profitability; our ability to finance the maintenance, acquisition and replacement of revenue equipment and other necessary capital expenditures; potential increase in our operating lease obligations resulting from our decision to defer the purchase of new revenue equipment; changes in equity and debt markets; inclement weather; price and availability of fuel; sudden 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; competition and competitive pressure on service and pricing; expense volatility, including (without limitation) volatility due to changes in rail service or pricing for rail service; our ability to comply and the cost of compliance with federal, state, local and foreign laws and regulations, including (without limitation) laws and regulations for the protection of employee safety and health and the environment; terrorist attack; labor relations, including (without limitation) the continued support of our union employees with respect to our strategic plan, the impact of work rules, work stoppages, strikes or other disruptions, our obligations to multi-employer health, welfare and pension plans, wage requirements and employee satisfaction; the impact of claims and litigation to which we are or may become exposed; 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.

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About YRC Worldwide

YRC Worldwide Inc., a Fortune 500 company headquartered in Overland Park, Kan., is the holding company for a portfolio of successful companies including YRC Freight, YRC Reimer, Holland, Reddaway, and New Penn, and provides China-based services through its JHJ joint venture. YRC Worldwide has one of the largest, most comprehensive less-than-truckload (LTL) networks in North America with local, regional, national and international capabilities. Through its team of experienced service professionals, YRC Worldwide offers industry-leading expertise in heavyweight shipments and flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence. Please visit www.yrcw.com for more information.

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SOURCE YRC Worldwide