YRC Worldwide (NASDAQ: YRCW) posted a $31.7 million consolidated operating loss on first-quarter revenue of $1.182 billion, which declined slightly from first-quarter 2018 revenues of $1.215 billion. In first quarter 2019, net loss was $49.1 million compared to a net loss of $14.6 million in first quarter 2018.
Zacks Consensus estimate was for an earnings per share (EPS) loss of $0.73, but the company reported a loss of $1.12 EPS.
The consolidated operating ratio for first quarter of 2019 was 102.7 compared to 100.4 in first quarter 2018. The operating ratio at YRC Freight was 102.8 compared to 100.9 for the same period in 2018. The Regional segment’s first quarter 2019 operating ratio was 101.6 compared to 98.9 a year ago.
Labor uncertainty and severe weather impacted the company’s revenues, CEO Darren Hawkins said. The company recently reached a new labor deal with three of its operating units. The contract covers workers at YRC Freight, YRC’s long-haul LTL unit, and at Holland and New Penn Motor Express, two of its three regional units. Workers at the third YRC regional unit, Reddaway, are governed by a separate contract.
The contract, which will be retroactive to April 1, 2019, calls for a $4 per hour wage increase spread over five years, equal to an 18 percent hike increase over the contract’s life. YRC will increase its contribution to the workers’ health and welfare plan and will return of one week’s paid vacation that had been conceded in 2010.
“Our primary focus during the first quarter was securing a new labor agreement that was scheduled to expire on March 31, 2019. I am pleased to announce that on May 3, 2019, our employees approved the national agreement and 26 of the 27 applicable supplemental agreements,” said Hawkins. “Leading up to the approval of the five-year agreement, we experienced the effects of some customer concerns around the uncertainty of the negotiations process. While we cannot precisely quantify the revenue loss related to the labor agreement, our first-quarter results were adversely impacted.”
Hawkins added that nearly half of the quarter was impacted by weather for its YRC Freight and Holland operations. Holland was significantly impacted during a two-week period in late January, in which more than 25% of its’ network was down or severely limited, he said.
On a non-GAAP accounting basis, YRC Worldwide generated consolidated Adjusted EBITDA of $30.1 million in first quarter 2019, a decrease of $15.6 million compared to $45.7 million for the same period in 2018. Last twelve month (LTM) consolidated Adjusted EBITDA was $321.9 million compared to $276.7 million a year ago.
The total debt-to-Adjusted EBITDA ratio for first quarter 2019 improved to 2.76 times compared to 3.32 times for first quarter 2018.
At YRC Freight, first-quarter 2019 less-than-truckload (LTL) revenue per hundredweight, including fuel surcharge, increased 5.4% and LTL revenue per shipment increased 3.6% when compared to the same period in 2018. Excluding fuel surcharge, LTL revenue per hundredweight increased 5.8% and LTL revenue per shipment increased 3.9%.
At the Regional segment, first-quarter 2019 LTL revenue per hundredweight, including fuel surcharge, increased 3.8% and LTL revenue per shipment increased 3.7% when compared to the same period in 2018. Excluding fuel surcharge, LTL revenue per hundredweight increased 4.2% and LTL revenue per shipment increased 4.1%.
First quarter 2019 LTL tonnage per day decreased 5.8% at YRC Freight and decreased 7.5% at the Regional segment compared to first quarter 2018. Total shipments per day for the first quarter 2019 declined 4.1% at YRC Freight and 7.6% at the Regional segment.
“As we move through 2019, we will continue to prioritize yield over tonnage. We believe the new labor agreement provides both long-term value and opportunity for our employees, our customers, and our shareholders and it will be our number one priority to execute on the new contractual operational capabilities.
“At the very core of our 2019 strategy is network optimization. The initiative has multiple layers – with the primary objectives of enhancing service, creating opportunities for productivity improvements, and streamlining our cost structure as we seek to eliminate inefficiencies across the network, providing the potential for revenue growth and margin expansion,” said Hawkins.
The company spent $32.6 million in capital expenditures in the quarter, primarily for new tractors, trailers and technology. It also invested in new operating leases for revenue equipment with a capital value equivalent of $25.3 million.
An $8.2 million non-cash impairment charge at YRC Freight was taken to reflect the write-down of an intangible asset as a result of a rebranding and discontinued use of a tradename.
YRC Worldwide continues to hold $884.5 million in outstanding debt, down $34.2 million compared to the end of the first quarter of 2018. The company’s available liquidity, which is comprised of cash and cash equivalents and Managed Accessibility under its ABL facility totaled $155.7 million compared to $117.2 million as of March 31, 2018, an increase of $38.5 million.
For the three months ended March 31, 2019, cash used in operating activities was $41.7 million compared to cash used in operating activities of $3.7 million for the three months ended March 31, 2018.