Company Update (NASDAQ:YRCW): YRC Worldwide Inc Reports Fourth Quarter and Full-Year Results for 2015


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YRC Worldwide Inc (NASDAQ:YRCW) reported consolidated operating revenue for the fourth quarter 2015 of $1.143 billion with a consolidated operating loss of $15.3 million, which included a non-union pension settlement charge of $28.7 million and a $0.4 million loss on property disposals. As a comparison, the company reported consolidated operating revenue of $1.218 billion for the fourth quarter 2014 with consolidated operating income of $31.2 million, which included a $5.8 million gain on property disposals.

Consolidated operating revenue for the year ended December 31, 2015 was $4.832 billion with consolidated operating income of $93.0 million, which included a $1.9 millionloss on property disposals and the settlement charge referenced above. This compares to full-year 2014 consolidated operating revenue of $5.069 billion with consolidated operating income of $45.5 million, which included an $11.9 million gain on property disposals.

The fourth quarter 2015 settlement charge was the result of an increase in lump sum benefit payments under YRC Freight’s non-union pension plans. As part of the company’s long-term strategy to continue derisking its balance sheet, YRC Freight amended its domestic pension plans and offered a voluntary lump sum payment option in an effort to reduce its long-term pension obligations and ongoing annual expense. The lump sum benefit payments were funded from existing pension plan assets and thus did not impact the company’s cash balance nor liquidity. The settlement charge is a non-cash expense and is classified in YRC Freight’s salaries, wages and employee benefits in the accompanying statements of consolidated comprehensive income (loss). However, per the terms of the company’s Term Loan Agreement, it is excluded when calculating Adjusted EBITDA.

Financial Highlights

  • On a non-GAAP basis, Adjusted EBITDA for full-year 2015 increased to $333.3 million, an improvement of $88.8 million from the $244.5 million reported in 2014 (as detailed in the reconciliation below). Adjusted EBITDA for the fourth quarter 2015 was $66.0 million compared to $77.0 million in 2014.
  • Full-year 2015 operating income more than doubled to $93.0 million from $45.5 million in 2014. The company reported a fourth quarter 2015 operating loss of $15.3 million compared to operating income of $31.2 million in 2014. The fourth quarter 2015 results were impacted by the $28.7 million non-union pension settlement charge.
  • Improved yield from continued pricing discipline contributed to an operating ratio of 98.1 for full-year 2015 on a consolidated basis. YRC Freight improved its full-year 2015 operating ratio to 99.4 even after including the impact of the non-union pension settlement charge. Excluding the non-union pension settlement charge, YRC Freight’s adjusted operating ratio is 98.5. For 2015, the Regional segment reported an operating ratio of 95.2.
  • Eligible union employees at Holland, Reddaway and New Penn (the Regional carriers) will receive a profit sharing bonus equal to 1% of their 2015 W-2 earnings in conjunction with the improved operating ratio reported for 2015.
  • The total debt-to-Adjusted EBITDA ratio improved from 4.57 times just 12 months ago to 3.25 times in the fourth quarter 2015.
  • Reinvestment in the business continued in 2015 with $108.0 million in capital expenditures and new operating leases for revenue equipment that have a capital value equivalent of $131.7 million, for a total of $239.7 million. This represents a $98.1 million increase over the $141.6 million investment in 2014. The vast majority of the investment was in tractors, trailers and technology.

Operational Highlights

  • The company maintained its strategy of prioritizing freight mix, yield improvements and profitability over market share and tonnage growth.
  • Fourth quarter 2015 tonnage per day decreased 6.8% at YRC Freight and 2.6% at the Regional segment compared to the fourth quarter 2014.
  • For the full-year 2015, tonnage per day decreased 5.8% at YRC Freight and 1.9% at the Regional segment compared to 2014.
  • At YRC Freight, excluding fuel surcharge, fourth quarter 2015 revenue per shipment increased 4.4% and revenue per hundredweight increased by 4.2% when compared to the same period in 2014. Including fuel surcharge, revenue per shipment decreased 1.5% and revenue per hundredweight decreased 1.6%.
  • Excluding fuel surcharge, full-year 2015 revenue per shipment increased 7.7% at YRC Freight and revenue per hundredweight increased by 6.1% when compared to 2014. Including fuel surcharge, revenue per shipment increased 1.7% and revenue per hundredweight increased 0.3%.
  • At the Regional segment, excluding fuel surcharge, fourth quarter 2015 revenue per shipment increased 3.4% and revenue per hundredweight increased by 3.3% compared 2014. Including fuel surcharge, revenue per shipment decreased 2.0% and revenue per hundredweight decreased 2.2%.
  • Excluding fuel surcharge, full-year 2015 revenue per shipment increased 5.6% at the Regional segment and revenue per hundredweight increased by 4.6% compared to 2014. Including fuel surcharge, revenue per shipment increased 0.2% and revenue per hundredweight decreased 0.7%.
  • Workers’ compensation expense decreased by $20.8 million in 2015 when compared to 2014 due to decreased claim frequency driven by safety initiatives and favorable development of prior year claims. The fourth quarter 2015 expense decreased $5.9 million compared to the fourth quarter of 2014.

Liquidity Update

  • At December 31, 2015, the company had cash, cash equivalents and Managed Accessibility under its ABL facility totaling $209.3 million. For comparison, as ofDecember 31, 2014, cash and cash equivalents and amounts able to be drawn totaled $198.2 million.
  • For the full-year 2015, cash provided by operating activities was $140.8 million as compared to cash provided by operating activities of $28.5 million in 2014, an improvement of $112.3 million.

“In 2015, we successfully executed our strategy of improving price, freight mix and profitability over volume and market share while lowering our consolidated operating ratio to 98.1,” said James Welch, chief executive officer of YRC Worldwide. “Despite the challenges of decreasing fuel surcharge revenue and a flattening economy in the second half of the year, our full-year operating income more than doubled prior year results even after the impact of a non-cash pension settlement charge,” stated Welch.

Welch continued, “For the year, our capital expenditures combined with the capital equivalent value of new operating leases for revenue equipment increased to 5.0% of consolidated revenue. We expect continued investments in safety, revenue equipment and technology to enhance operational efficiencies today and into the foreseeable future. We were able to invest back into the business and still improve our liquidity during the year, but we could not have made these investments nor achieved these results without our employees, and I am extremely proud of their support and hard work. Hard work matters, and in this case, so do results, and I am proud of our employees that drove the improved operating performance at the Regional segment and will receive the profit sharing bonus. This bonus not only solidifies our commitment to reward our employees when they perform but also illustrates the fact that the better they perform, the better the company performs, the more they can make.

“We would obviously like for the freight environment to be better and improve throughout 2016. We will stay the course and remain focused on providing our customers excellent service, improving our freight mix and profitability which we believe ultimately drives long-term shareholder value,” concluded Welch. (Original Source)

Shares of YRC Worldwide are dropping nearly 16% in after-hours trading. YRCW has a 1-year high of $21.37 and a 1-year low of $8.13. The stock’s 50-day moving average is $11.95 and its 200-day moving average is $15.14.

On the ratings front, Deutsche Bank analyst Robert Salmon maintained a Buy rating on YRCW, with a price target of $20, in a report issued on January 11. The current price target represents a potential upside of 86.7% from where the stock is currently trading. According to TipRanks.com, Salmon has a total average return of -12.9%, a 25.3% success rate, and is ranked #3477 out of 3612 analysts.

YRC Worldwide Inc offers transportation services. It has a comprehensive less-than-truckload networks in North America with local, regional, national and international capabilities.