KNX Knight Swift Transportation Holdings Inc

YRC Worldwide Inc. (YRCW) reported mixed financial results for the first quarter of 2011. Quarterly GAAP net loss from continuing operations was $101.8 million or a loss of $2.14 per share compared with a net loss of $274.1 million or $13.2 in the year-ago quarter. However, first-quarter 2011 EPS of a loss of $2.14 was significantly higher than the Zacks Consensus Estimate of a loss of $1.50.

Quarterly operating revenues were $1,122.9 million, up 13.8% year over year, ahead of the Zacks Consensus Estimate of $1,069 million. This was primarily attributable to massive growth at the YRC National and YRC Regional Transportation segments.

Quarterly consolidated operating expense was $1,190.9 million, down 2.4% year over year. Operating loss in first-quarter 2011 was $68 million compared with $233.2 million in the year-ago quarter.  Operating ratio was 106.1% compared with 123.6% in the prior-year quarter. First-quarter adjusted EBITDA was a negative $3.4 million compared with a negative $38.9 million in the year-ago quarter.

During the first quarter of 2011, YRC Worldwide consumed $46.3 million of cash for operations compared with a cash generation of $18.3 million in the prior-year quarter. Free cash flow in the reported quarter was a negative $56.3 million compared with $14.6 million in the year-ago quarter.

At the end of the first quarter of 2011, YRC Worldwide had $156.7 million of cash & cash equivalents compared with $143 million at the end of fiscal 2010. Total debt at the end of the reported quarter was nearly $1,115.5 million compared with $1,060.1 million at the end of fiscal 2010.

YRC National Transportation Segment

Quarterly operating revenues were $730.1 million, up 10.1% year over year. Operating loss was $51.3 million compared with an operating loss of $185.1 million in the prior-year quarter. First-quarter 2011 operating ratio was 107% compared with 127.9% in the year-ago quarter.

YRC Regional Transportation Segment

Quarterly operating revenues were $366.1 million, up 18.4% year over year. Operating loss was $1.2 million compared with $39.6 million in the prior-year quarter. First-quarter 2011 operating ratio was 100.3% compared with 112.8% in the year-ago quarter.

YRC Truckload Segment

Quarterly operating revenues were $25.2 million, down 6.2% year over year. Operating loss was nearly $3.9 million compared with $3.1 million in the prior-year quarter. First-quarter 2011 operating ratio was 115.3% compared with 111.4% in the year-ago quarter.

Outlook

Based on continued operating momentum, the company expects to achieve positive adjusted EBITDA in the second quarter of 2011. For fiscal 2011, management expects gross capital expenditure in the range of $100 million to $125 million. Excess property sales are expected to range from $30 million to $40 million.

Recommendation

The trucking industry is highly competitive. YRC Worldwide is gradually loosing market share to its competitors Arkansas Best Corp. (ABFS), Con-way Inc. (CNW) and Knight Transportation Inc. (KNX). We maintain a long-term Underperform recommendation on YRC Worldwide. Currently, the company holds a short-term Zacks #5Rank (Strong Sell) on the stock.

 
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