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YRCW has a good operating quarter and year, and solid progress on the balance sheet

Photo: Jim Allen/FreightWaves

YRCW (NASDAQ: YRCW) posted a strong operating quarter and full year 2018. But when looking at that company, one needs to first check out its debt levels, and there was improvement on that front.

The less-than-truckload (LTL) carrier has been burdened with a significant debt level for many years. But according to the company’s prepared statement on its fourth quarter and full year 2018 earnings, there has been progress on turning that debt level into a more manageable liability.

The company’s balance sheet held $854.2 million in the line item described as long-term debt (less current portion) at the end of the year. At the end of 2017, it was $875.5 million. That figure is against a balance sheet of $1.617 billion. By contrast, ArcBest, which announced its earnings Wednesday, reported that line item at $237.6 million on a balance sheet of $1.539 billion.

Total outstanding debt at YRCW at the end of the quarter was $890 million, a drop of $36.1 million from the prior year. But more importantly, the debt to adjusted EBITDA ratio for YRCW was down to 2.64 times, a decline from the 3.38 times a year earlier. Contrast that with what in the middle of 2017 credit rating agency Moody’s said when it raised the YRCW debt rating: “(L)everage remains high, notwithstanding our expectation that debt/EBITDA will decrease to less than 5.5 times, from 5.9 times as of March 31, 2017.”

That increase in debt to EBITDA was helped by the fact that YRCW recorded adjusted EBITDA of $337.5 million for the full 2018, compared to $274.2 million in 2017.

In 2017 Moody’s also warned that capital spending in technology, equipment and other areas are “critically important to maintain YRC’s competitive position and to manage its operations more efficiently, as capital expenditures were severely constrained under the company’s prior capital structure.”

And in those areas, YRCW had a good year. YRCW said that in 2018, it spent $14.54 million on capital expenditures, and secured new operating leases for equipment of $212.6 million to total $358 million. That’s a jump of $121 million from the prior year.

Operationally, the news was good for YRCW as well. Its consolidated operating ratio (OR) for the fourth quarter was 95.2 percent, a 300-basis point improvement from the fourth quarter of last year. At YRC Freight, the company’s LTL segment, the OR was up to 94.4 percent from 98.1 percent for the corresponding quarter of 2017. The Regional segment saw its OR rise to 96 percent from 98 percent.

Net income for the fourth quarter rose to $21.8 million compared to a loss of $7.5 million in the fourth quarter of 2017. And for the full year, net income of $24.5 million was a significant upward move from a net loss of $10.8 million in 2017.

YRCW shareholders have had a tough ride. CFRA, in its summary of the company, said $10,000 invested in YRCW stock 10 years ago would be worth $3,076 now. For the last year, the decline has been about 60 percent.

With the release of the earnings, investors pushed up the price of YRCW stock at approximately 11:00 a.m. by 27 cents, to $6.22 per share, an increase of 4.54 percent.

 Source: SONAR
Source: SONAR

John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.