Monday, October 30, 2017
YRC Worldwide Updates 2017 Financial Projections
The Company is also providing preliminary financial results for third quarter 2017.
The primary factors contributing to the update include:
The occurrence of significant weather during the third quarter 2017;
A shortage of revenue equipment;
Higher than expected purchased transportation expense;
Higher than anticipated maintenance expense;
Higher than expected employee overtime; and
Underperformance by one of the Regional operating companies.
"We are updating the financial projections now that we have a preliminary view of our third quarter 2017 results," said James Welch, chief executive officer of YRC Worldwide. "Hurricanes Harvey and Irma impacted operations at YRC Freight and Holland during the third quarter leading to the temporary closing or limited operations at 28 terminals. The hurricanes also had a cascading effect on the networks that delayed the delivery of shipments and unfavorably impacted productivity over roughly a five-week period. Additionally, we incurred costs associated with relocating revenue equipment to the impacted facilities as well as incurring employee overtime in order to properly initiate recovery efforts in response to these extraordinary weather events. While it is difficult to fully quantify the lost revenue and incremental costs associated with these natural disasters, they have had an unfavorable impact on our results. As we move into 2018, we expect the recovery and restoration efforts to contribute to an already positive economic environment.
"We have also been adversely impacted by higher than expected purchased transportation expense in the third quarter primarily attributable to a shortage of revenue equipment. The impact has been more acute as capacity has tightened more quickly than anticipated across the trucking sector. The shortage of revenue equipment has led to higher than expected local purchased transportation and short-term rental expense and an increase in maintenance expense on the existing fleet. The onboarding of new revenue equipment in 2017 has been weighted towards later in the year as the Company focused on successfully amending and extending the term loan. We expect to take delivery of more than 800 new tractors and 2,400 new trailers in fourth quarter 2017 and first quarter 2018 which we anticipate to help mitigate the increase in purchased transportation and maintenance expense.
"Finally, we recently named Howard Moshier as President of New Penn. He most recently served as Senior Vice President of Operations at YRC Freight and we look forward to working with him in his new capacity. We continue to believe in the strength of New Penn and in its reputation for exemplary customer service," concluded Welch.
For the three months ended September 30, 2017, the Company expects to report consolidated operating revenue of approximately $1.25 billion and consolidated operating income of approximately $40 million. The Company also expects to report Adjusted EBITDA of approximately $81 million.
For full-year 2017, the Company continues to project consolidated operating revenue of approximately $4.8 billion to $5.0 billion. The projected full-year 2017 consolidated projected operating income has been lowered from approximately $150 million to $170 million to approximately $100 million to $120 million. The Company also lowered the projected Adjusted EBITDA from approximately $320 million to $340 million to approximately $280 million to $300 million. Investment in capital expenditures and new operating leases for revenue equipment continues to be projected to equal 6% to 8% of operating revenue in 2017.