YRCW Loss Shrinks, Outlook Positive - Analyst Blog

YRC Worldwide Inc. (YRCW) reported its third quarter 2010 results. Quarterly net loss was $61.7 million or a loss of $1.33 per share compared with a huge loss of $158.7 million or a loss of $66.66 per share in the year-ago quarter. Third quarter 2010 adjusted EPS (excluding one-time items) was higher than the Zacks Consensus Estimate of a loss of $1.30 per share.

This was mainly due to losses incurred in the National transport and Truckload segments. The numbers of shares and the per share amounts for all periods presented reflect the 1:25 reverse stock split, which was effective on October 1, 2010.

Quarterly operating revenues were $1,136.8 million, down 5.6% year over year and also below the Zacks Consensus Estimate of $1,150 million. Results were hampered by a decrease in revenues at YRC National Transportation and YRC Truckload segments.

Quarterly consolidated operating expense was $1,155.7 million, down 13.1% year over year. Operating margin in third quarter 2010 was 1.7%. Operating ratio was 101.7% compared with 110.5% in the prior-year quarter. Third quarter adjusted EBITDA was $44.3 million compared with a negative $70.6 million in the year-ago quarter.

During the third quarter, YRCW used $5,147.0 million of cash for operations compared with a cash consumption of $72.3 million in the prior-year quarter. Free cash flow in the reported quarter was a negative $30.4 million compared with a negative $140.8 million in the prior-year quarter.

At the end of the quarter, YRCW had $114.9 million of cash & cash equivalents compared with $97.8 million at the end of fiscal 2009. Total debt at the end of the same quarter was nearly $1,060.3 million compared with $1,132.9 million at the end of fiscal 2009.

YRC National Transportation

Quarterly operating revenues were $755.0 million, down 11.1% year over year. Operating income was $21.6 million compared with an operating loss of $122.0 million in the prior-year quarter. Third quarter 2010 operating ratio was 102.9% compared with 114.4% in the year-ago quarter.

YRC Regional Transportation

Quarterly operating revenues were $354.2 million, up 4.5% year over year. Operating income was $8,590.0 million compared with just $293.0 million in the prior-year quarter. Third quarter 2010 operating ratio was 97.6% compared with 99.9% in the year-ago quarter.

YRC Truckload

Quarterly operating revenues were $28.8 million, down 3.7% year over year. Operating loss was nearly $2,264.0 million compared with an operating loss of $1,416.0 million in the prior-year quarter. Third quarter 2010 operating ratio was 107.8% compared with 104.7% in the year-ago quarter.

Outlook

Based on continued operating momentum, the company expects to achieve positive adjusted EBITDA and be well within credit agreement financial covenants in the fourth quarter of 2010.

For fiscal year 2010, management expects gross capital expenditure to be in the range of $20 million to $30 million. Excess property sales are expected to be in the range of $70 million to $80 million. Sale and financing leasebacks are estimated to be approximately $50 million. Effective income tax rate for continuing operations is expected to be approximately 3%

We maintain our Neutral recommendation on YRC Worldwide. Currently, it carries a Zacks #3 Rank (Hold) stock.