KNX Knight Swift Transportation Holdings Inc

YRC Worldwide Inc. (YRCW) reported improved financial results for the third quarter of 2011, beating the Zacks Consensus Estimates. Despite this, the company is still far away from its business turnaround. Management expects to improve its customer services in another six months so that YRC Worldwide can regain those clients which it lost to its competitors.

Furthermore, YRC Worldwide is facing delisting threat from NASDAQ, since the stock price fell significantly below $1. The company should maintain a closing share price higher than $1 for 10 straight days by December 31, 2011. For this, YRC Worldwide will ask for its shareholders’ approval for a reverse stock split and its ratio in the annual general meeting of November 30, 2011. The proposed reverse stock split is expected to be completed by December 15, 2011.

Quarterly GAAP net loss from continuing operations was $177.9 million or a loss of 51 cents per share compared with a net loss of $61.7 million or $1.27 in the year-ago quarter. Third-quarter 2011 adjusted (excluding restructuring charges) EPS of a loss of 38 cents was lower than the Zacks Consensus Estimate of a loss of 39 cents.

Quarterly operating revenues were $1,276.4 million, up 12.3% year over year, slightly ahead of the Zacks Consensus Estimate of $1,272 million. The increase was primarily attributable to massive growth at the YRC National and YRC Regional Transportation segments.

Quarterly consolidated operating expense was $1,300.1 million, up 12.5% year over year. Operating loss in third-quarter 2011 was $23.7 million compared with an operating loss of $18.8 million in the year-ago quarter.  Quarterly consolidated operating ratio was 101.9% compared with 101.7% in the prior-year quarter. Third-quarter adjusted EBITDA was $56 million compared with $45.8 million in the year-ago quarter.

During the first nine months of 2011, YRC Worldwide consumed $52.8 million of cash for operations compared with $9.3 million in the prior-year period. Free cash flow in the reported period was a negative $88.9 million compared with $22.3 million in the year-ago period.

At the end of the third quarter of 2011, YRC Worldwide had $162.8 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 $1,341.1 million compared with $1,060.1 million at the end of fiscal 2010.

YRC National Transportation Segment

Quarterly operating revenues were $841.6 million, up 11.5% year over year. Operating loss was $14.3 million compared with $16.4 million in the prior-year quarter. Third-quarter 2011 operating ratio was 101.7% compared with 102.2% in the year-ago quarter. This division improves on several operating metrics. Tons per day were up 4.2%, shipments per day were up 5.5%, revenue per hundredweight was up 7.5% and revenue per shipment was up 6.2%.

YRC Regional Transportation Segment

Quarterly operating revenues were $404.8 million, up 14.3% year over year. Operating income was $12.4 million compared with $9.9 million in the prior-year quarter. Third-quarter 2011 operating ratio was 96.9% compared with 97.2% in the year-ago quarter. This division also improves on several operating metrics. Tons per day were up 5.6%, shipments per day inched up 3.6%, revenue per hundredweight went up 8.2% and revenue per shipment jumped 10.4%.

YRC Truckload Segment

Quarterly operating revenues were $26 million, down 9.9% year over year. Operating loss was nearly $2.7 million compared with $2.2 million in the prior-year quarter. Third-quarter 2011 operating ratio was 110.3% compared with 107.6% in the year-ago quarter.

Recommendation

The trucking industry is highly competitive. YRC Worldwide is gradually losing market share to its competitors Arkansas Best Corp. (ABFS), Con-way Inc. (CNW) and Knight Transportation Inc. (KNX). We maintain a long-term Neutral recommendation on YRC Worldwide. Currently, the company holds a short-term Zacks #2 Rank (Buy) on the stock.

 
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