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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to

Commission file number: 0-12255

 

YRC Worldwide Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

48-0948788

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

10990 Roe Avenue, Overland Park, Kansas

 

66211

(Address of principal executive offices)

 

(Zip Code)

 

(913) 696-6100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value per share

 

YRCW

 

The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

 

 

Accelerated filer

 

 

 

 

 

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at July 30, 2020

Common Stock, $0.01 par value per share

 

53,283,698 shares

 

 

 


 

INDEX

 

Item

 

Page

 

PART I – FINANCIAL INFORMATION

 

1

Financial Statements

3

 

Consolidated Balance Sheets – June 30, 2020 and December 31, 2019

3

 

Statements of Consolidated Comprehensive Loss - Three and Six Months Ended June 30, 2020 and 2019

4

 

Statements of Consolidated Cash Flows - Six Months Ended June 30, 2020 and 2019

5

 

Statements of Consolidated Shareholders’ Deficit - Three and Six Months Ended June 30, 2020 and 2019

6

 

Notes to Consolidated Financial Statements

7

2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

3

Quantitative and Qualitative Disclosures About Market Risk

25

4

Controls and Procedures

25

 

PART II – OTHER INFORMATION

 

1

Legal Proceedings

26

1A

Risk Factors

26

2

Unregistered Sales of Equity Securities and Use of Proceeds

27

3

Not Applicable

 

4

Not Applicable

 

5

Not Applicable

 

6

Exhibits

28

 

Signatures

29

 

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

YRC Worldwide Inc. and Subsidiaries

(Amounts in millions except share and per share data)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

264.2

 

 

$

109.2

 

Restricted amounts held in escrow

 

 

56.0

 

 

 

 

Accounts receivable, net

 

 

496.2

 

 

 

464.4

 

Prepaid expenses and other

 

 

42.9

 

 

 

44.6

 

Total current assets

 

 

859.3

 

 

 

618.2

 

Property and Equipment:

 

 

 

 

 

 

 

 

Cost

 

 

2,716.0

 

 

 

2,761.6

 

Less – accumulated depreciation

 

 

(2,002.3

)

 

 

(1,991.3

)

Net property and equipment

 

 

713.7

 

 

 

770.3

 

Deferred income taxes, net

 

 

0.5

 

 

 

0.6

 

Operating lease right-of-use assets

 

 

319.2

 

 

 

386.0

 

Other assets

 

 

43.9

 

 

 

56.5

 

Total Assets

 

$

1,936.6

 

 

$

1,831.6

 

Liabilities and Shareholders’ Deficit

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

195.7

 

 

$

163.7

 

Wages, vacations and employee benefits

 

 

333.2

 

 

 

195.9

 

Current operating lease liabilities

 

 

114.0

 

 

 

120.8

 

Claims and insurance accruals

 

 

111.0

 

 

 

120.4

 

Other accrued taxes

 

 

25.6

 

 

 

25.8

 

Other current and accrued liabilities

 

 

19.2

 

 

 

21.3

 

Current maturities of long-term debt

 

 

3.6

 

 

 

4.1

 

Total current liabilities

 

 

802.3

 

 

 

652.0

 

Other Liabilities:

 

 

 

 

 

 

 

 

Long-term debt and financing, less current portion

 

 

871.1

 

 

 

858.1

 

Pension and postretirement

 

 

225.9

 

 

 

236.5

 

Operating lease liabilities

 

 

214.0

 

 

 

246.3

 

Claims and other liabilities

 

 

290.2

 

 

 

279.9

 

Commitments and contingencies

 

 

 

 

 

 

Shareholders’ Deficit:

 

 

 

 

 

 

 

 

Cumulative preferred stock, $1 par value per share

 

 

 

 

 

 

Common stock, $0.01 par value per share

 

 

0.3

 

 

 

0.3

 

Capital surplus

 

 

2,335.5

 

 

 

2,332.9

 

Accumulated deficit

 

 

(2,345.2

)

 

 

(2,312.4

)

Accumulated other comprehensive loss

 

 

(364.8

)

 

 

(369.3

)

Treasury stock, at cost (410 shares)

 

 

(92.7

)

 

 

(92.7

)

Total shareholders’ deficit

 

 

(466.9

)

 

 

(441.2

)

Total Liabilities and Shareholders’ Deficit

 

$

1,936.6

 

 

$

1,831.6

 

The accompanying notes are an integral part of these statements.

3


 

STATEMENTS OF CONSOLIDATED COMPREHENSIVE LOSS

YRC Worldwide Inc. and Subsidiaries

For the Three and Six Months Ended June 30

(Amounts in millions except per share data, shares in thousands)

(Unaudited)

 

 

 

 

Three Months

 

 

Six Months

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating Revenue

 

$

1,015.4

 

 

$

1,272.6

 

 

$

2,165.8

 

 

$

2,454.9

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

 

647.9

 

 

 

782.3

 

 

 

1,368.1

 

 

 

1,500.5

 

Fuel, operating expenses and supplies

 

 

162.7

 

 

 

228.3

 

 

 

370.7

 

 

 

464.2

 

Purchased transportation

 

 

126.0

 

 

 

158.0

 

 

 

262.2

 

 

 

304.3

 

Depreciation and amortization

 

 

34.2

 

 

 

38.5

 

 

 

69.9

 

 

 

78.5

 

Other operating expenses

 

 

55.2

 

 

 

57.4

 

 

 

116.8

 

 

 

121.2

 

Gains on property disposals, net

 

 

(6.0

)

 

 

(6.2

)

 

 

(45.3

)

 

 

(4.6

)

Impairment charges

 

 

 

 

 

 

 

 

 

 

 

8.2

 

Total operating expenses

 

 

1,020.0

 

 

 

1,258.3

 

 

 

2,142.4

 

 

 

2,472.3

 

Operating Income (Loss)

 

 

(4.6

)

 

 

14.3

 

 

 

23.4

 

 

 

(17.4

)

Nonoperating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

40.2

 

 

 

28.2

 

 

 

68.5

 

 

 

55.2

 

Non-union pension and postretirement benefits

 

 

(1.6

)

 

 

0.5

 

 

 

(3.2

)

 

 

0.8

 

Other, net

 

 

1.4

 

 

 

0.1

 

 

 

(1.2

)

 

 

(0.1

)

Nonoperating expenses, net

 

 

40.0

 

 

 

28.8

 

 

 

64.1

 

 

 

55.9

 

Loss before income taxes

 

 

(44.6

)

 

 

(14.5

)

 

 

(40.7

)

 

 

(73.3

)

Income tax expense (benefit)

 

 

(7.5

)

 

 

9.1

 

 

 

(7.9

)

 

 

(0.6

)

Net loss

 

 

(37.1

)

 

 

(23.6

)

 

 

(32.8

)

 

 

(72.7

)

Other comprehensive income, net of tax

 

 

3.2

 

 

 

2.0

 

 

 

4.5

 

 

 

5.5

 

Comprehensive Loss

 

$

(33.9

)

 

$

(21.6

)

 

$

(28.3

)

 

$

(67.2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Common Shares Outstanding - Basic

 

 

34,021

 

 

 

33,247

 

 

 

33,906

 

 

 

33,199

 

Average Common Shares Outstanding - Diluted

 

 

34,021

 

 

 

33,247

 

 

 

33,906

 

 

 

33,199

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss Per Share - Basic

 

$

(1.09

)

 

$

(0.71

)

 

$

(0.97

)

 

$

(2.19

)

Loss Per Share - Diluted

 

$

(1.09

)

 

$

(0.71

)

 

$

(0.97

)

 

$

(2.19

)

 

The accompanying notes are an integral part of these statements.

4


 

STATEMENTS OF CONSOLIDATED CASH FLOWS

YRC Worldwide Inc. and Subsidiaries

For the Six Months Ended June 30

(Amounts in millions)

(Unaudited)

 

 

 

2020

 

 

2019

 

Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(32.8

)

 

$

(72.7

)

Adjustments to reconcile net loss to cash flows from operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

69.9

 

 

 

78.5

 

Lease amortization and accretion expense

 

 

83.5

 

 

 

82.3

 

Lease payments

 

 

(55.7

)

 

 

(75.4

)

Paid-in-kind interest

 

 

38.8

 

 

 

 

Equity-based compensation and employee benefits expense

 

 

10.5

 

 

 

9.5

 

Gains losses on property disposals, net

 

 

(45.3

)

 

 

(4.6

)

Impairment charges

 

 

 

 

 

8.2

 

Deferred income tax benefit, net

 

 

0.1

 

 

 

(1.6

)

Other noncash items, net

 

 

4.8

 

 

 

2.1

 

Changes in assets and liabilities, net:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(31.9

)

 

 

(67.2

)

Accounts payable

 

 

22.0

 

 

 

5.3

 

Other operating assets

 

 

8.6

 

 

 

(4.5

)

Other operating liabilities

 

 

141.1

 

 

 

10.6

 

Net cash provided by (used in) operating activities

 

 

213.6

 

 

 

(29.5

)

Investing Activities:

 

 

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(24.1

)

 

 

(70.6

)

Proceeds from disposal of property and equipment

 

 

54.1

 

 

 

8.3

 

Net cash provided by (used in) investing activities

 

 

30.0

 

 

 

(62.3

)

Financing Activities:

 

 

 

 

 

 

 

 

Repayment of long-term debt

 

 

(28.2

)

 

 

(17.5

)

Debt issuance costs

 

 

(3.8

)

 

 

 

Payments for tax withheld on equity-based compensation

 

 

(0.6

)

 

 

(0.8

)

Net cash used in financing activities

 

 

(32.6

)

 

 

(18.3

)

Net Increase (Decrease) In Cash and Cash Equivalents and Restricted Amounts Held in Escrow

 

 

211.0

 

 

 

(110.1

)

Cash and Cash Equivalents and Restricted Amounts Held in Escrow, Beginning of Period

 

 

109.2

 

 

 

227.6

 

Cash and Cash Equivalents and Restricted Amounts Held in Escrow, End of Period

 

$

320.2

 

 

$

117.5

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Interest paid

 

$

(22.1

)

 

$

(50.6

)

Income tax payment

 

 

(0.6

)

 

 

(2.5

)

 

 

The accompanying notes are an integral part of these statements.

 

 

5


 

STATEMENT OF CONSOLIDATED SHAREHOLDERS’ DEFICIT

YRC Worldwide Inc. and Subsidiaries

For the Three and Six Months Ended June 30

(Amounts in millions)

(Unaudited)

 

 

 

Preferred Stock

 

Common Stock

 

Capital Surplus

 

Accumulated Deficit

 

Accumulated Other Comprehensive Loss

 

Treasury Stock, At Cost

 

Total Shareholders' Deficit

 

Balances at December 31, 2019

 

$

 

$

0.3

 

$

2,332.9

 

$

(2,312.4

)

$

(369.3

)

$

(92.7

)

$

(441.2

)

Equity-based compensation

 

 

 

 

 

 

1.8

 

 

 

 

 

 

 

 

1.8

 

Net income

 

 

 

 

 

 

 

 

4.3

 

 

 

 

 

 

4.3

 

Pension, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior net losses

 

 

 

 

 

 

 

 

 

 

3.3

 

 

 

 

3.3

 

Amortization of prior service credit

 

 

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

(0.1

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

(1.9

)

 

 

 

(1.9

)

Balances at March 31, 2020

 

$

 

$

0.3

 

$

2,334.7

 

$

(2,308.1

)

$

(368.0

)

$

(92.7

)

$

(433.8

)

Equity-based compensation

 

 

 

 

 

 

0.8

 

 

 

 

 

 

 

 

0.8

 

Net loss

 

 

 

 

 

 

 

 

(37.1

)

 

 

 

 

 

(37.1

)

Pension, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior net losses

 

 

 

 

 

 

 

 

 

 

2.4

 

 

 

 

2.4

 

Amortization of prior service credit

 

 

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

(0.1

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

0.9

 

 

 

 

0.9

 

Balances at June 30, 2020

 

$

 

$

0.3

 

$

2,335.5

 

$

(2,345.2

)

$

(364.8

)

$

(92.7

)

$

(466.9

)

 

 

 

 

Preferred Stock

 

Common Stock

 

Capital Surplus

 

Accumulated Deficit

 

Accumulated Other Comprehensive Loss

 

Treasury Stock, At Cost

 

Total Shareholders' Deficit

 

Balances at December 31, 2018

 

$

 

$

0.3

 

$

2,327.6

 

$

(2,208.4

)

$

(332.3

)

$

(92.7

)

$

(305.5

)

Equity-based compensation

 

 

 

 

 

 

1.6

 

 

 

 

 

 

 

 

1.6

 

Net loss

 

 

 

 

 

 

 

 

(49.1

)

 

 

 

 

 

(49.1

)

Pension, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior net losses

 

 

 

 

 

 

 

 

 

 

3.2

 

 

 

 

3.2

 

Amortization of prior service credit

 

 

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

(0.1

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

0.4

 

 

 

 

0.4

 

Balances at March 31, 2019

 

$

 

$

0.3

 

$

2,329.2

 

$

(2,257.5

)

$

(328.8

)

$

(92.7

)

$

(349.5

)

Equity-based compensation

 

 

 

 

 

 

1.0

 

 

 

 

 

 

 

 

1.0

 

Net loss

 

 

 

 

 

 

 

 

(23.6

)

 

 

 

 

 

(23.6

)

Pension, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior net losses

 

 

 

 

 

 

 

 

 

 

1.6

 

 

 

 

1.6

 

Amortization of prior service credit

 

 

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

(0.1

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

0.5

 

 

 

 

0.5

 

Balances at June 30, 2019

 

$

 

$

0.3

 

$

2,330.2

 

$

(2,281.1

)

$

(326.8

)

$

(92.7

)

$

(370.1

)

 

 

The accompanying notes are an integral part of these statements.

 

 

6


 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YRC Worldwide Inc. and Subsidiaries

(Unaudited)

1. Description of Business

YRC Worldwide Inc. (also referred to as “YRC Worldwide,” the “Company,” “we,” “us” or “our”) is a holding company that, through its operating subsidiaries, offers its customers a wide range of transportation services. We have one of the largest, most comprehensive less-than-truckload (“LTL”) networks in North America with local, regional, national and international capabilities. Through our team of experienced service professionals, we offer expertise in LTL shipments and flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence.

YRC Worldwide provides for the movement of industrial, commercial and retail goods through our LTL subsidiaries including USF Holland LLC (“Holland”), New Penn Motor Express LLC (“New Penn”), USF Reddaway Inc. (“Reddaway”), YRC Inc. and YRC Freight Canada Company (both doing business as, and herein referred to as, “YRC Freight”). Our LTL companies provide regional, national and international services through a consolidated network of facilities located across the United States, Canada, and Puerto Rico. We also offer services through HNRY Logistics, Inc. (“HNRY Logistics”), our customer-specific logistics solutions provider, specializing in truckload, residential, and warehouse solutions.

At June 30, 2020, approximately 80% of our labor force is subject to collective bargaining agreements, which predominantly expire on March 31, 2024.

 

2. Basis of Presentation

 

The accompanying consolidated financial statements include the accounts of YRC Worldwide and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We report on a calendar year basis. The quarters of Holland and Reddaway consist of thirteen weeks that end on a Saturday either before or after the end of March, June and September, whereas all other companies’ quarters end on the natural calendar quarter end.

 

Segments

 

As noted in our 2019 annual report on Form 10-K, our Chief Operating Decision Maker began evaluating performance and business results, as well as making resource and operating decisions under the single segment view as a result of the business transformation that began during 2019.  As such, a single segment view is presented in this Form 10-Q.  See further details in our 2019 annual report as filed March 11, 2020.

Revenue Disaggregation

We considered the disclosure requirements for revenue disaggregation guidance in ASC Topic 606, Revenue from Contracts with Customers, and noted that our business transformation has led to one consolidated LTL network as we joined our national and regional operations and no longer measure revenues by geographies. The following table presents disaggregated revenue by revenue source between LTL shipments and total. LTL shipments are defined as shipments less than 10,000 pounds that move in our network.

 

 

Three Months

 

 

Six Months

 

Disaggregated Revenue (in millions)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

LTL revenue

 

$

920.5

 

 

$

1,176.1

 

 

 

1,971.2

 

 

$

2,265.9

 

Other revenue

 

 

94.9

 

 

 

96.5

 

 

 

194.6

 

 

 

189.0

 

Total revenue

 

$

1,015.4

 

 

$

1,272.6

 

 

$

2,165.8

 

 

$

2,454.9

 

Fair Value of Financial Instruments

The following table summarizes the fair value hierarchy of our financial assets and liabilities carried at fair value on a recurring basis as of June 30, 2020:

 

 

 

 

 

 

Fair Value Measurement at June 30, 2020