YRC Worldwide Inc. (NASDAQ:YRCW) announced that it has updated the
projected financial information for full-year 2017 that was
provided as part of the process to extend the Company’s Term Loan
Credit Agreement. The Company is also providing preliminary
financial results for third quarter 2017.
The primary factors contributing to the update
include:
- The occurrence of significant weather during the third quarter
2017;
- A shortage of revenue equipment;
- Higher than expected purchased transportation expense;
- Higher than anticipated maintenance expense;
- Higher than expected employee overtime; and
- Underperformance by one of the Regional operating
companies.
“We are updating the financial projections now
that we have a preliminary view of our third quarter 2017 results,”
said James Welch, chief executive officer of YRC Worldwide.
“Hurricanes Harvey and Irma impacted operations at YRC Freight and
Holland during the third quarter leading to the temporary closing
or limited operations at 28 terminals. The hurricanes also had a
cascading effect on the networks that delayed the delivery of
shipments and unfavorably impacted productivity over roughly a
five-week period. Additionally, we incurred costs associated with
relocating revenue equipment to the impacted facilities as well as
incurring employee overtime in order to properly initiate recovery
efforts in response to these extraordinary weather events. While it
is difficult to fully quantify the lost revenue and incremental
costs associated with these natural disasters, they have had an
unfavorable impact on our results. As we move into 2018, we expect
the recovery and restoration efforts to contribute to an already
positive economic environment.
“We have also been adversely impacted by higher
than expected purchased transportation expense in the third quarter
primarily attributable to a shortage of revenue equipment. The
impact has been more acute as capacity has tightened more quickly
than anticipated across the trucking sector. The shortage of
revenue equipment has led to higher than expected local purchased
transportation and short-term rental expense and an increase in
maintenance expense on the existing fleet. The onboarding of new
revenue equipment in 2017 has been weighted towards later in the
year as the Company focused on successfully amending and extending
the term loan. We expect to take delivery of more than 800 new
tractors and 2,400 new trailers in fourth quarter 2017 and first
quarter 2018 which we anticipate to help mitigate the increase in
purchased transportation and maintenance expense.
“Finally, we recently named Howard Moshier as
President of New Penn. He most recently served as Senior Vice
President of Operations at YRC Freight and we look forward to
working with him in his new capacity. We continue to believe in the
strength of New Penn and in its reputation for exemplary customer
service,” concluded Welch.
For the three months ended September 30, 2017,
the Company expects to report consolidated operating revenue of
approximately $1.25 billion and consolidated operating income of
approximately $40 million. The Company also expects to report
Adjusted EBITDA of approximately $81 million.
For full-year 2017, the Company continues to
project consolidated operating revenue of approximately $4.8
billion to $5.0 billion. The projected full-year 2017
consolidated projected operating income has been lowered from
approximately $150 million to $170 million to approximately $100
million to $120 million. The Company also lowered the projected
Adjusted EBITDA from approximately $320 million to $340 million to
approximately $280 million to $300 million. Investment in capital
expenditures and new operating leases for revenue equipment
continues to be projected to equal 6% to 8% of operating revenue in
2017.
Cautionary Statement
Although the third quarter 2017 ended September
30, 2017, the financial and operational information included in
this news release reflects management's 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 Company's
control. Accordingly, you should not place undue reliance upon this
preliminary financial and operational information.
Third Quarter 2017 Earnings Conference Call
On Thursday, November 2, 2017, at 4:30 p.m. ET,
company executives will host a conference call with the investment
community to discuss third quarter 2017 financial results.
Third quarter earnings will be released the same day, Thursday,
November 2, 2017, following the close of the market.
The call will be webcast and can be accessed
live or as a replay via YRC Worldwide’s website www.yrcw.com.
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 Company’s 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 Company’s union employees and gains or losses
from permitted dispositions and discontinued operations, among
other items, 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 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. Further,
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:
- 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 Company’s union employees required under the
ratified Memorandum of Understanding;
- 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 the Company’s
long-term incentive compensation package, although Adjusted EBITDA
excludes employee equity-based compensation expense when presenting
the Company’s ongoing operating performance for a particular
period; and
- Other companies in the Company’s industry may calculate
Adjusted EBITDA differently than it does, limiting its usefulness
as a comparative measure.
Because of these limitations, the Company’s 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.
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 |
|
|
(in thousands) |
|
Reconciliation
of operating income to Adjusted EBITDA: |
|
Operating income |
|
$40,000 |
Depreciation and amortization |
|
37,000 |
Losses on
property disposals, net |
|
1,000 |
Letter of
credit expense |
|
2,000 |
Permitted
dispositions and other |
|
- |
Equity-based compensation expense |
|
1,000 |
Other,
net |
|
- |
Adjusted EBITDA |
$81,000 |
|
|
|
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 |
|
|
|
|
Low |
High |
(in thousands) |
|
|
Reconciliation
of operating income to Adjusted EBITDA: |
|
|
Operating income |
$100,000 |
$120,000 |
Depreciation and amortization |
|
150,000 |
|
150,000 |
Losses on
property disposals, net |
|
5,000 |
|
5,000 |
Letter of
credit expense |
|
7,000 |
|
7,000 |
Permitted
dispositions and other |
|
1,000 |
|
1,000 |
Restructuring professional fees |
|
2,000 |
|
2,000 |
Equity-based compensation expense |
|
6,000 |
|
6,000 |
Other,
net |
|
9,000 |
|
9,000 |
Adjusted EBITDA |
$280,000 |
$300,000 |
|
|
|
|
|
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):
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.
About YRC Worldwide
YRC Worldwide Inc., headquartered in Overland
Park, Kan., is the holding company for a portfolio of
less-than-truckload (LTL) companies including YRC Freight, YRC
Reimer, Holland, Reddaway, and New Penn. Collectively, YRC
Worldwide companies have one of the largest, most comprehensive LTL
networks in North America with local, regional, national and
international capabilities. Through their teams of experienced
service professionals, YRC Worldwide companies offer
industry-leading expertise in flexible supply chain solutions,
ensuring customers can ship industrial, commercial and retail goods
with confidence.
Please visit our website at www.yrcw.com for
more information.
Investor Contact: Tony
Carreño913-696-6108investor@yrcw.com
Media Contact: Mike
Kelley916-696-6121mike.kelley@yrcw.com
SOURCE: YRC Worldwide
YRC Worldwide (NASDAQ:YRCW)
Historical Stock Chart
From Mar 2024 to Apr 2024
YRC Worldwide (NASDAQ:YRCW)
Historical Stock Chart
From Apr 2023 to Apr 2024