Item 7.01. Regulation FD Disclosure
On January 24, 2017, YRC Worldwide Inc. (the Company) issued a press release announcing that it has launched an amendment to its Term Loan
Credit Agreement (the Credit Agreement) to revise its leverage ratio covenant from the first quarter of 2017 through the fourth quarter of 2018. For the fourth quarter of 2016, the Company also announced that it anticipates reporting
consolidated operating revenue of approximately $1.143 billion to $1.153 billion, Adjusted EBITDA (defined as Consolidated EBITDA in the Credit Agreement) of approximately $53 million to $63 million, and consolidated operating
income of approximately $10 million to $20 million. For the year ended December 31, 2016, it anticipates reporting consolidated revenue of approximately $4.692 billion to $4.702 billion, Adjusted EBITDA of approximately
$293 million to $303 million, and consolidated operating income of approximately $119 million to $129 million. The Company also announced that it purchased $40.5 million of its term loan during the fourth quarter of 2016.
Further, the Company reported that at December 31, 2016, it had a debt balance of approximately $1.010 billion and had cash and cash equivalents and Managed Accessibility (as defined in the Companys most recently filed periodic
reports on Forms
10-K
and
10-Q)
under its asset based loan facility totaling $181.1 million.
A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.
Cautionary Statement
The preliminary financial and
operational information included in this Item 7.01 and the attached news release reflects managements estimate of results based on currently available information. There can be no assurance that these estimates will be realized, and estimates
are subject to risks and uncertainties, many of which are not within the Companys control. Accordingly, you should not place undue reliance upon this preliminary financial and operational information.
Non-GAAP
Financial Measures
EBITDA is a
non-GAAP
measure that reflects the companys earnings before interest, taxes, depreciation, and
amortization expense. Adjusted EBITDA (defined in our credit facilities as Consolidated EBITDA) is a
non-GAAP
measure that reflects the companys 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, restructuring professional fees, nonrecurring consulting fees, expenses associated with certain lump
sum payments to our union employees and gains or losses from permitted dispositions and discontinued operations, among other items, as defined in the companys credit facilities. EBITDA and Adjusted EBITDA are used for internal management
purposes as a financial measure that reflects the companys core operating performance. In addition, management uses Adjusted EBITDA to measure compliance with financial covenants in the companys credit facilities and to pay certain
executive bonus compensation. 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:
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EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or fund principal payments on our outstanding debt;
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Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to fund restructuring professional fees, nonrecurring consulting fees, letter of credit fees, service interest or principal
payments on our outstanding debt or fund our lump sum payments to our IBT employees required under the ratified Memorandum of Understanding;
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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;
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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;
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Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
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Because of these limitations, EBITDA and 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 EBITDA and Adjusted EBITDA as secondary measures. The company has provided reconciliations of its
non-GAAP
measures,
EBITDA and Adjusted EBITDA, to GAAP net income (loss) and operating income (loss) within the supplemental financial information in this release.
The
following table provides a reconciliation of Operating income to Adjusted EBITDA for the estimated ranges presented above.
Twelve
Months Ended December 31, 2016
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(in thousands)
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Low
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High
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Reconciliation of operating income to Adjusted EBITDA:
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Operating income
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$
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119,000
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$
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129,000
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Depreciation and amortization
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160,000
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160,000
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Gains on property disposals, net
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(14,000
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)
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(14,000
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)
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Letter of credit expense
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7,700
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7,700
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Permitted dispositions and other
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3,000
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3,000
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Amortization of ratification bonus
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4,600
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4,600
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Equity-based compensation expense
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7,300
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7,300
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Other nonoperating, net
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5,400
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5,400
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Adjusted EBITDA
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$
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293,000
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$
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303,000
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Three Months Ended December 31, 2016
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(in thousands)
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Low
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High
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Reconciliation of operating income to Adjusted EBITDA:
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Operating income
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$
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10,000
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$
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20,000
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Depreciation and amortization
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40,000
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40,000
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Gains on property disposals, net
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(3,000
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)
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(3,000
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)
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Letter of credit expense
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1,700
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1,700
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Permitted dispositions and other
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1,200
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1,200
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Equity-based compensation expense
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1,300
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1,300
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Other nonoperating, net
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1,800
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1,800
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Adjusted EBITDA
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$
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53,000
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$
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63,000
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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, 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): our level of
indebtedness; 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 indebtedness, cash interest and lease
and pension funding requirements; the impact of restrictive covenants in the documents governing of existing and future indebtedness; our failure to comply with the covenants in the documents governing our existing and future indebtedness; our
holding company structure that makes us dependent on the ability of our subsidiaries to distribute funds to us; the uncertainty in the overall economy; business risks, including expense volatility, including (without limitation) volatility due to
changes in purchased transportation service or pricing for purchased transportation; competition and competitive pressure on pricing; labor relations; our obligations to multi-employer health, welfare and pension plans; our exposure to
self-insurance claims expense and higher insurance costs; 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
federal, state, local and foreign laws and regulations, including (without limitation) laws and regulations for the protection of employee safety and health, as well as state and federal labor laws; the costs of complying with environmental
regulations and our exposure to liabilities for violations of such laws; terrorist attack; the impact of claims and litigation to which we are or may become exposed; the success of our management team in continuing with its strategic plan and
operational and productivity initiatives; our ability to attract and retain qualified drivers; our dependence on our information technology systems in our network operations and the production of accurate information, as well as the risk of system
failure, inadequacy or security breach; risks associated with doing business in foreign countries; our dependence on the services of key employees; inclement weather and seasonality; fuel shortages, 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; volatility in the price of our common stock; the dilutive effects of future issuances of our common stock; our
intention not to pay dividends; our ability to issue preferred 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.