Item 9.01
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Financial Statements and Exhibits
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Cautionary Statement
Although the third quarter 2017 ended September 30, 2017, the financial and operational information included in this 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
In this Current Report on Form
8-K,
the Company refers to certain financial measures that are not prepared in
accordance with the United States generally accepted accounting principles (GAAP). Adjusted EBITDA, which is defined as Consolidated EBITDA under the Term Loan Agreement, is a
non-GAAP
measure that
reflects Companys earnings before interest, taxes, depreciation, and amortization expense, and further adjusts 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 the Companys union employees and gains or losses from permitted dispositions and discontinued operations, among other items, as defined in the
Companys credit facilities. Adjusted EBITDA is 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. We believe our presentation of Adjusted EBITDA is useful to investors and other users as this measure represents 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. 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 GAAP.
Adjusted EBITDA has the following limitations:
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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 lump sum payments to the Companys union 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 Adjusted EBITDA does not reflect
any cash requirements for such replacements;
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Equity-based compensation is an element of the Companys long-term incentive compensation package, although Adjusted EBITDA excludes employee equity-based compensation expense when presenting the Companys
ongoing operating performance for a particular period; and
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Other companies in the Companys industry may calculate Adjusted EBITDA differently than it does, limiting its usefulness as a comparative measure.
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Because of these limitations, the Companys
non-GAAP
measures, including Adjusted EBITDA, should not be
considered a substitute for performance measures calculated in accordance with GAAP. The Company compensates for these limitations by relying primarily on its GAAP results and using its
non-GAAP
measures as
secondary measures.
Adjusted EBITDA Reconciliations
The following table provides a reconciliation of approximate operating income to approximate Adjusted EBITDA for the three months ending September 30,
2017.
Three Months Ended September 30, 2017
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(in thousands)
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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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40,000
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Depreciation and amortization
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37,000
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Losses on property disposals, net
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1,000
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Letter of credit expense
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2,000
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Permitted dispositions and other
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Equity-based compensation expense
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1,000
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Other, net
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Adjusted EBITDA
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$
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81,000
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The following table provides a reconciliation of projected operating income to projected Adjusted EBITDA for the
twelve months ending December 31, 2017.
Twelve Months Ended December 31, 2017
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Low
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High
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(in thousands)
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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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100,000
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$
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120,000
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Depreciation and amortization
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150,000
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150,000
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Losses on property disposals, net
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5,000
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5,000
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Letter of credit expense
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7,000
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7,000
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Permitted dispositions and other
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1,000
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1,000
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Restructuring professional fees
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2,000
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2,000
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Equity-based compensation expense
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6,000
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6,000
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Other, net
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9,000
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9,000
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Adjusted EBITDA
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$
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280,000
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$
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300,000
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Forward-Looking Statements
This Item 7.01 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, including the Companys
projected financial performance for second quarter 2017 and full-year 2017, 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; 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.