der text geht noch weiter. sehr interessant finde ich den teil zur liquiditätssituation (ziemlich weit unten). neue pflichtlektüre!!
Valuation and Rating
YRC’s 2Q10 results show, in our view, that assuming the current cost structure
remains, the company is slowly turning the corner to long term sustainability with
market share stabilizing, pricing slowly improving, and liquidity stable.
Keeping the
current cost structure in place is a key hurdle though so while we believe the
company has sufficient liquidity to remain in business for at least a few more
quarters, our sense is that YRCW probably needs to reach an agreement with
Teamsters leadership in the September / October timeframe in order to allow time for
ratification and in order to avoid risk of customer diversion..
We do note that
competitors have talked about finding a firmer ground for industry pricing which
could help YRCW. At this point, we believe that there is a material chance that
YRCW will survive in the medium term.
However, it remains very difficult to have
conviction in the outcome. Lacking visibility to the ultimate outcome we continue to
rate YRCW Neutral.
Key Points
YRC’s 2Q10 EBIT result was better than we expected… On Tuesday (08/03),
before the market open, YRC announced 2Q10 results with a GAAP loss per share of
-$0.01. The Street consensus estimate reported by Bloomberg was about -
$0.09/share and our estimate was -$0.08/share. The GAAP loss per share figure
includes a roughly $81.5 million non-cash reduction in equity compensation expense
related to the company’s March 2010 union equity-based awards, as well as about
$2.2 million of gains on property disposals and a roughly $5.5 million of gain on
foreign currency exchange. On the other hand, the GAAP loss per share figure also
includes about $8.3 million of letter of credit fees, about $9.3 million of restructuring
professional fees, about $7.7 million of other “abnormal” expenses (note: excluded
from the calculation of adjusted EBITDA for purposes of measuring compliance with
the bank loan covenants), a roughly $12.3 million equity investment impairment, and
about $11.4 million of net loss from discontinued operations. Having said all that,
when we adjust EBIT for the reduction in equity compensation expense and gains on
property disposals (i.e., without even adjusting for the restructuring professional fees
and other “abnormal” expenses), YRC National EBIT was better than our estimate at
a loss of $33.9 million in 2Q10 (compared to our -$43.9 million estimate), YRC
Regional EBIT was better than our estimate at $4.5 million of profit (compared to
our $3.6 million estimate), and consolidated EBIT was better than our estimate at a
loss of $36.5 million (compared to our -$43.8 million estimate). Therefore, in our
view, EBITDA was better than expected.
…as sequentially the EBIT margin appeared to improve more than historical
seasonality would suggest. Turning back to the performance on the basis of YRC’s
adjusted EBIT loss calculated as we discussed above, to ensure comparability, YRC
lost $36.5 million compared to our forecast for an adjusted EBIT loss of about $43.8
million. We calculate that the adjusted operating ratio (“OR”) in YRC National in
2Q was near 104.6%, compared to our forecast for the OR in this segment to be
roughly 106.0%. The 104.6% YRC National OR in 2Q10 compares to a 115.4%
OR, which compares to an average 1Q to 2Q sequential improvement in the YRC
National OR over the prior five years of about 160 basis points (and we note that 290
basis points was the best improvement in the five year period). Similarly, we
calculate that the OR in YRC Regional in 2Q was near 98.7%, compared to our
forecast for the OR in this segment to be roughly 99.0%. The 98.7% YRC Regional
OR in 2Q10 compared to a 104.7% YRC Regional OR in 1Q10; or a 600 basis points
sequential improvement in the OR, which compares to an average 1Q to 2Q
sequential improvement in the YRC Regional OR over the prior five years of about
170 basis points (and we note that 470 basis points was the best improvement in the
five year period).
Drilling down into the drivers of the 2Q10 revenue result, tonnage was broadly
better than we expected while base yields were weaker than we expected. YRC
National tons/day were down 18.6% y/y (versus the result in 1Q10 of -34.6% and our
forecast for 2Q10 of -20.0%) while YRC Regional tons/day were up 4.7% y/y
(versus the result in 1Q10 of -9.0% and our forecast for 2Q10 of -3.0%). Meanwhile,
revenue per hundredweight was broadly flat y/y overall (note: YRC National was up
y/y but YRC Regional was down y/y) but weaker than our expectation. In YRC
National, revenue per hundredweight was +3.9% y/y versus our +6.0% estimate, with
revenue per hundredweight excluding fuel-1.4% y/y – and -3.1% sequentially from
1Q10 to 2Q10 – based on our calculation compared to our expectation that revenue
per hundredweight excluding fuel would be +0.5% y/y. On the other hand, in YRC
Regional, revenue per hundredweight was -2.8% y/y versus our +6.0% estimate. As
a result, the combination of tonnage that was above our expectation and revenue per
hundredweight that was below our expectation drove an essentially in line total YRC
National plus YRC Regional revenue result ($1.093 billion versus our forecast for
$1.088 billion).
With respect to YRC’s tonnage, our sense is that the company’s market share
was broadly stable sequentially from 1Q10 to 2Q10. In Figure 1, below, we show
the relationship between YRC’s tons/day and the Cass Shipments index, with both
measured over the same period two years prior which we believe normalizes the
growth rate in any given period for the relative easiness or toughness of the year ago
comparison. We believe this figures demonstrates that until 1Q10, even after
adjusting for year ago comparisons, YRC’s tons/day (especially in YRC National)
was falling at the same pace or a greater pace than the LTL market in general,
represented by the Cass Shipment index. However, we believe that in 1Q10 YRC’s
tons/day was broadly moving at the same pace as the LTL market in general and that
this continued through 2Q10 (note: with YRC Regional doing modestly better than
the LTL market, partially offset by YRC National doing slightly worse than the LTL
market). Our sense is that YRC National tonnage that was down 18.6% y/y in 2Q10
has gotten less worse in July, when it is down 14.3% y/y month-to-date (note: down
0.3% sequentially versus June whereas normal seasonality is down 2.5%, in our
view); and YRC Regional tonnage that was up 4.7% y/y in 2Q10 continued to
improve to up 5.5% y/y month-to-date in July (note: down 2.0% sequentially versus
June whereas normal seasonality is down 3.0%).
YRC’s liquidity appears to be broadly stable or perhaps even modestly
improving depending on when measured. At this point, YRCW’s liquidity - while
obviously driven primarily by the operating results of the company – is still more
important than the operating results themselves. At September 30, 2009, YRCW had
$171 million of aggregated cash and unused and unrestricted credit facilities capacity
and at December 31, 2009, this was down to $98 million equating to a $73 million
reduction in liquidity measured strictly on the basis of unused and unrestricted
borrowing ability. By March 31, 2010, this was back up to $134 million. That said,
at the end of 1Q10 YRCW still had access to $50 million of the revolver reserve for
operational purposes and access to a further $57 million of the revolver reserve
contingent on a two-thirds vote of the lenders. Similarly, at June 30, 2010, YRCW’s
cash and unused and unrestricted credit facilities capacity was $152 million and the
company had access to $50 million of the revolver reserve for operational purposes
and access to a further $79 million of the revolver reserve contingent on a two-thirds
vote of the lenders. So if we were to measure YRCW’s liquidity as cash plus unused
but restricted borrowing capacity under the revolving credit facility, YRC would
have had $277 million of liquidity at the end of 3Q09, $258 million of liquidity at the
end of 4Q09, $241 million of liquidity at the end of 1Q10, and $281 million of
liquidity at the end of 2Q10.
We view YRCW’s roughly -$45 million quarterly change in adjusted operating cash
flow (note: excluding proceeds from asset sales and dispositions and cash tax
refunds) as being better than in 1Q10 ($-67 million on the same basis), 4Q09 (-$65
million) and 3Q09 (-$112 million) especially in light of the fact that 2Q should
typically be seasonally weaker than 1Q and 4Q from a cash perspective, in our view.
Specifically, YRCW achieved this despite cash flow from working capital being a
headwind to 2Q10 (note: about $11 million, in our view, compared to about $109
million in 1Q10). We expect that this measure of operating cash flow can continue
to get less worse on a sequential basis in 3Q10.
Thomas R. WadewitzAC
(1-212) 622-6461
thomas.r.wadewitz@jpmorgan.com
Alexander K. Johnson
(1-212) 622-6513
alexander.k.johnson@jpmorgan.com
Michael R. Weinz, CFA
(1-212) 622-6383
michael.r.weinz@jpmorgan.com
its a 10-page report in PDF format. call any of the above who written the report:) |
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