YRC Worldwide Inc. Reports Operating Results (10-Q)
Yrc Worldwide Inc. has a market cap of $466.48 million; its shares were traded at around $0.457 with and P/S ratio of 0.09. YRCW is in the portfolios of Paul Tudor Jones of The Tudor Group.
Highlight of Business Operations: Operating expenses for the 2010 quarter decreased $582.0 million or 30.9% as compared to the same period in 2009 and were comprised of a $463.1 million decrease in salaries, wages and benefits, a $113.9 million decrease in operating expenses and supplies, a $42.7 million decrease in purchased transportation, which is attributable to declining volumes and improved carrier pricing due to the depressed economy, and a $37.7 million decrease in other operating expenses. The 2010 expense reductions were offset by increased equity based compensation expense of $76.8 million related to certain 2010 awards to our union work force.
Nonoperating expenses increased $7.3 million in the first quarter of 2010 compared to the same period in 2009 which consisted primarily of interest expense. This increase in interest expense is attributable to increased net deferred debt cost amortization of $6.0 million, additional interest expense related to our lease financing obligations of $7.0 million and interest expense on our deferred pension obligations of $2.3 million for the three months ended March 30, 2010. This increase is also due to the increased borrowing rate on our amended credit facility effective February 12, 2009. This resulted in additional interest of $1.6 million for the 2010 period. Included in the three months ended March 31, 2009 was interest expense of $6.5 million related to notes redeemed in December 2009.
Operating loss for National Transportation was $185.1 million in the first quarter of 2010 compared to operating loss of $299.8 million in the comparable prior year period. Revenue in the first quarter of 2010 was lower by $359.5 million while total costs, excluding losses on property disposals and impairment charges, decreased by $481.2 million. The cost declines consisted primarily of lower salaries, wages and benefits of $314.4 million, lower operating expenses and supplies of $98.7 million or 32.7%, lower purchased transportation costs of $34.2 million or 27.2%, and lower other operating expenses of $19.9 million or 19.5%.
The decrease in salaries, wages and benefits (excluding workers compensation expense) of $301.4 million during the first quarter of 2010 is a result of substantial headcount reductions and an additional 5% wage reduction for most union employees which became effective August 2009. Workers compensation expense (included in salaries, wages and benefits in the statement of operations) decreased $13.0 million or 29.8% which is reflective of decreased wages and in turn reduced claims. In addition to volume decreases, a further reduction in benefits expense resulted from the ratification by certain labor unions of a temporary cessation of pension contributions to certain of our multi-employer union pension funds which became effective throughout the second half of 2009. Additionally, the decrease in salaries, wages and benefits is due to a decrease of $20.2 million in severance charges compared to the same period in 2009. These reductions were partially offset by an equity based compensation expense of $83.1 million in the first quarter of 2010 compared to $21.8 million in the first quarter of 2009. The charges relate to equity based consideration awarded in the first quarter 2010 in association with union wage and benefit reductions implemented in 2009.
Operating loss for Regional Transportation was $39.6 million for the first quarter 2010, an improvement of $34.5 million from the first quarter 2009, consisting of a $46.0 million decline in revenue and an $80.5 million reduction in operating expenses. Regional Transportation has reduced most operating expenses in proportion to lower tonnage and shipment volumes and has benefited from our comprehensive recovery plan, including cost reduction initiatives as described below. Material expense decreases were in salaries, wages and benefits of $60.5 million or 21.2%, operating expenses and supplies of $4.1 million or 5.2%, purchased transportation of $1.9 million or 12.4% and other operating expenses of $19.1 million or 58.1%.
YRC Logistics first quarter 2010 operating loss was $7.5 million compared to an operating loss of $3.5 million in the first quarter of 2009. Included in the 2009 amount is operating income of $1.7 million related to the now sold Dedicated Contract Carriage business line. YRC Logistics experienced unfavorable claim development for both workers compensation and bodily injury claims resulting in increased expense of $0.9 million and $2.1 million, respectively, for the three months ended March 31, 2010. Expenses associated with transportation procurement in the first quarter of 2010 were $6.4 million less than the first quarter of 2009 representing a 14.2% decrease.
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