YRC Worldwide Inc (YRCW) Announces 3Q:16 Results; Shares Tumble 17%


YRC Worldwide Inc (NASDAQ:YRCW) reported consolidated operating revenue for third quarter 2016 of$1.221 billion and consolidated operating income of $38.8 million, which included a $0.2 million loss on property disposals. As a comparison, the Company reported consolidated operating revenue of $1.245 billion for the third quarter 2015 and consolidated operating income of $47.7 million, which included a $0.9 million loss on property disposals.

Financial Highlights

  • On a non-GAAP basis, the Company generated Adjusted EBITDA of $85.5 million in third quarter 2016 for a consolidated Adjusted EBITDA margin of 7.0% and a$13.6 million decrease compared to the $99.1 million of Adjusted EBITDA reported in the prior year comparable quarter (as detailed in the reconciliation below).
  • Last twelve month (LTM) Adjusted EBITDA is $305.8 million for a consolidated Adjusted EBITDA margin of 6.5%, and a decrease of $38.5 million from the $344.3 million of LTM Adjusted EBITDA in third quarter 2015.
  • The total debt-to-Adjusted EBITDA ratio for third quarter 2016 was 3.45 times compared to 3.15 times for third quarter 2015. This complies with the 3.75 maximum total leverage ratio covenant as of September 30, 2016 under the Company’s term loan credit agreement.
  • Reinvestment in the business continued during third quarter 2016 with $28.1 million in capital expenditures and new operating leases for revenue equipment with a capital value equivalent of $44.1 million. The total of $72.2 million is equal to 5.9% of operating revenue for the quarter and represents a $10.1 million increase over the $62.1 million in third quarter 2015. Tractors, trailers and technology were the primary investments during the quarter.

Operational Highlights

  • The consolidated operating ratio for third quarter 2016 was 96.8 compared to 96.2 for the same period in 2015.  YRC Freight improved its reported operating ratio by 60 basis points to 97.3.  The improvement at YRC Freight was more than offset by a decline of 250 basis points at the Regional segment with a reported operating ratio of 95.1 for third quarter 2016.
  • Third quarter 2016 tonnage per day decreased 1.3% at YRC Freight and 1.5% at the Regional segment compared to third quarter 2015.
  • At YRC Freight, excluding fuel surcharge, third quarter 2016 revenue per shipment increased 1.3% and revenue per hundredweight increased by 0.3% when compared to the same period in 2015. Including fuel surcharge, revenue per shipment decreased 0.4% and revenue per hundredweight decreased by 1.4%.
  • At the Regional segment, excluding fuel surcharge, third quarter 2016 revenue per shipment increased 0.3% and revenue per hundredweight increased by 1.5% compared to the third quarter 2015. Including fuel surcharge, revenue per shipment decreased 0.9% and revenue per hundredweight increased 0.3%.
  • Third quarter 2016 liability claims expense and workers compensation expense were comparable to third quarter 2015.

Liquidity Update

  • At September 30, 2016, the company had cash, cash equivalents and Managed Accessibility (as defined in the company’s most recently filed periodic reports on Forms 10-K and 10-Q) under its ABL facility totaling $290.1 million, an increase of $45.3 million compared to $244.8 million as of September 30, 2015.
  • For the nine months ended September 30, 2016, cash provided by operating activities was $86.0 million compared to $91.5 million for the nine months endedSeptember 30, 2015.

“Our third quarter 2016 financial results were impacted by the soft industrial backdrop and lower fuel surcharge revenue compared to a year ago,” said James Welch, chief executive office at YRC Worldwide. “Year-over-year tonnage per day was down during the quarter although it was the smallest decline at YRC Freight and the Regional segment in several quarters. We continue to believe pricing discipline in the LTL sector remains steady despite the near-term headwinds,” stated Welch.

“We are managing through the current state of the economy by continuing to invest in technology and revenue equipment while focusing on actions that position our Company well for the long-term such as customer service and enhancing safety,” Welch continued. “We recently opened a new terminal in the Atlanta region, adding to our extensive networks. The new YRC Freight facility has strengthened our customer service in the Southeast Region. Following the recent installations of the in-cab safety technology, we are seeing a reduction in the type of accidents at YRC Freight, Holland, Reddaway and New Penn that these investments were designed to prevent. Other significant technology investments that we are making include driver handheld units and Optym load plan and Quintiq route optimization solutions. We plan to continue making disciplined and strategic investments to meet our commitment to be best in class in safety and customer service.

“We believe the investments that we are making in the Company combined with our highly-experienced employees, comprehensive North American coverage and tremendous asset base position us well for a stronger freight environment,” concluded Welch. (Original Source)

Shares of YRC Worldwide are tumbling nearly 17% to $11.20 in after-hours trading Thursday. YRCW has a 1-year high of $18.50 and a 1-year low of $6.25. The stock’s 50-day moving average is $12.12 and its 200-day moving average is $10.32.

On the ratings front, YRCW has been the subject of a number of recent research reports. In a report issued on September 22, Stifel Nicolaus analyst David Ross reiterated a Buy rating on YRCW, with a price target of $16, which implies an upside of 18% from current levels. Separately, on July 21, Deutsche Bank’s Robert Salmon maintained a Buy rating on the stock and has a price target of $13.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, David Ross and Robert Salmon have a yearly average return of 13.3% and 5.0% respectively. Ross has a success rate of 73% and is ranked #350 out of 4188 analysts, while Salmon has a success rate of 56% and is ranked #661.

YRC Worldwide, Inc. operates as a holding company, which through its subsidiaries, engages in the provision of transportation services. It operates through two segments: YRC Freight and Regional Transportation. The YRC Freight segment focuses on longer haul business opportunities with national, regional and international services it provides for the movement of industrial, commercial and retail goods through centralized management. The Regional Transportation segment focuses on business opportunities in the regional and next-day delivery markets. 

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