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YRC Worldwide Inc. swung to a profit in the first quarter, but revenue dipped and the less-than-truckload carrier warned that after gaining a waiver this year, it might not be able to stay in compliance with one of its loan covenants a year from now.
The Overland Park, Kan., carrier said it earned $4.3 million in the first quarter compared with a loss of $49.1 million in the same period a year earlier. Diluted earnings per share swung to 12 cents from a loss of $1.48 a year earlier.
Operating income also rebounded to $28 million compared with a loss of $31.7 million in the first quarter of 2019. But much of the gain came from $39.3 million in property sales, the company said.
YRC is working to reduce its terminal count while increasing the density of its network to create efficiencies. The company ended the first quarter with 343 terminals, down from 351 at the end of the fourth quarter
Revenue fell 2.5% to $1.15 billion from $1.18 billion a year earlier.
The company said its less-than-truckload volume has fallen in every month of this year when compared with the same periods a year earlier. It fell 5.3% in January, 2.4% in February, 11.3% in March and 23.9% in April. The declines resulted from plunging economic activity nationally created by states and regions ordering people to shelter in place to stop the spread of COVID-19.
But Chief Financial Officer Jamie Pierson said the market is starting to steady based on results of the most recent three to four weeks
“With states lifting shelter-in-place orders, we are hopeful that we will begin to see some positive sequential moves in the coming weeks, in not months,” Pierson said.
Despite the disruption caused by the coronavirus pandemic, YRC continues to make progress converting its five brands into one service network, CEO Darren Hawkins said.
“Our vision and strategy is to operate as one company with one network and five very proud brands,” Hawkins said on a May 11 conference call with industry analysts.
“The year started out ahead of expectations, and the results reflect that our transformation strategy was really gaining traction and continues to do so,” he said.
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YRC Worldwide owns a portfolio of less-than-truckload companies including Holland, New Penn, Reddaway and YRC Freight, as well as logistics company HNRY Logistics.
The company also is taking steps to shore up liquidity to survive the downturn in business, including furloughing and laying off workers. A YRC spokesman said the company was not disclosing how many employees were affected by the cutback.
In a Securities and Exchange Commission filing, YRC said other cost-cutting measures included the reduction of capital expenditures, temporary deferrals of operating lease payments, union health and welfare payments, and contributions to its nonunion and multiemployer pension plans, among other items.
“The funding to various pension funds is dependent on the economic environment, and as such, we are unable to determine the amount of contributions that will be made during 2020 at this time,” the company said.
YRC ended the quarter with $104 million in cash. The motor carrier also reached an agreement to amend the terms of a major loan “to eliminate the vast majority of interest owed in cash for the first half of 2020,” the company said in the filing. Under the amended agreement, YRC is required to maintain at least $200 million in an important cash flow measure known as adjusted Ebitda. That measure was $215 million in the first quarter.
Based on “current expectations” and the economic effects of the pandemic, YRC said it will fall out of compliance on the cash flow covenant at the end of first quarter of 2021. It said it might also not be compliant with a liquidity covenant.
“As a result, we will need to either seek an extension of the waiver period or otherwise modify the covenant,” the company said.
YRC had $879.9 million of outstanding debt at the end of the first quarter, a decrease of $4.6 million from the same period a year earlier.
YRC Worldwide ranks No. 6 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
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