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YRC Worldwide Announces New Term Loan Agreement
September 11, 2019
Source: Globe Newswire
YRC Worldwide Inc. (NASDAQ: YRCW) announced today it has completed a refinancing of its term loan obligations and entered into a term loan agreement (“Term Loan Agreement”) with funds managed by affiliates of Apollo Global Management, LLC (NYSE: APO) acting collectively as the Lead Lender for a $600 million facility which provides additional liquidity and has a less restrictive financial covenant. This is expected to create operational runway as the Company moves forward with its multi-year strategic initiatives designed to achieve sustained profitability.
“The new Term Loan Agreement provides the Company with increased liquidity through the elimination of annual principal amortization and the ability to reinvest cash proceeds from certain property sales back into the business. To successfully execute the Company’s multi-year strategy, it is essential we have a capital structure in place that provides added liquidity to invest in the initiatives we have planned and better positions the Company to navigate through cyclical economic environments,” said Stephanie Fisher, Chief Financial Officer of YRC Worldwide.
Key provisions of the new Term Loan Agreement as compared to the Company’s prior term loan agreement include:
- Full elimination of the annual principal amortization of 3% ($18 million in cash savings per year);
- A reduction in the interest rate to LIBOR + 750 basis points from LIBOR + 850 basis points;
- Replacement of the total leverage covenant with a new covenant to maintain a minimum of $200 million in last-twelve-month Adjusted EBITDA (defined as Consolidated EBITDA in the Term Loan Agreement);
- Ability to reinvest cash proceeds on certain future property sales (first $40 million over loan term); and
- Maturity of June 2024 from July 2022.
“The execution of this refinancing is an important milestone for YRC Worldwide and a critical next step in our journey. This completes two of the five foundational elements of our multi-year strategic roadmap announced earlier this year. We have accelerated our efforts around these initiatives and securing the new financial structure allows us to move rapidly toward the $60 to $80 million in profit expansion we have targeted in 2020,” said Darren Hawkins, Chief Executive Officer of YRC Worldwide.
The strategic roadmap for the Company was designed to achieve sustained profitability. The key components of our multi-year strategic roadmap along with significant progress in each area are:
“I am pleased with the rapid progress we have made in 2019 as critical foundational elements are now in place. Through the remainder of the year, we will be aggressively moving forward with the implementation of our operational flexibilities, the network optimization plan and improving customer engagement, which we believe will lead to improved profitability for the Company,” said Hawkins.
Updated Presentation of Adjusted EBITDA
The Company has included an updated presentation of Adjusted EBITDA, as defined by the new Term Loan Agreement for the first and second quarter of 2019 and 2018, the first half of 2019 and 2018, and the twelve months ended June 30, 2019, March 31, 2019, December 31, 2018 and September 30, 2018. Additionally, presentation slides will be available on YRC Worldwide Inc.’s website at www.yrcw.com.
Non-GAAP Financial Measures
EBITDA is a non-GAAP measure that reflects the company’s earnings before interest, taxes, depreciation, and amortization expense. Adjusted EBITDA is: a non-GAAP measure that reflects EBITDA, and further adjusts for net gains or losses on property disposals, non-cash impairment charges, letter of credit expenses, restructuring charges, transaction costs related to issuances of debt, nonrecurring consulting fees, permitted dispositions and discontinued operations, equity-based compensation expense, union vacation restoration charges, and non-union pension settlement charges, among other items, as defined in our credit facilities. EBITDA and Adjusted EBITDA are used for internal management purposes as a financial measure that reflects the company’s core operating performance. In addition, management uses Adjusted EBITDA to measure compliance with the financial covenant in the company’s credit facilities and to pay certain management and employee bonus compensation. We believe our presentation of EBITDA and Adjusted EBITDA is useful to investors and other users as these measures represent key supplemental information our management uses to compare and evaluate our core underlying business results both on a consolidated basis and across our business segments, particularly in light of our leverage position and the capital-intensive nature of our business. Further, EBITDA is a measure that is commonly used by other companies in our industry and provides a comparison for investors to evaluate the performance of the companies in the industry. Additionally, Adjusted EBITDA helps investors to understand how the company is tracking against our financial covenant in our term loan credit agreement. However, these financial measures should not be construed as better measurements than net income, as defined by generally accepted accounting principles (GAAP).
EBITDA and Adjusted EBITDA have the following limitations:
- EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or fund principal payments on our outstanding debt;
- Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or fund principal payments on our outstanding debt, letter of credit expenses, restructuring charges, transaction costs related to debt, union vacation restoration charges, or nonrecurring consulting fees, among other items;
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will have to be replaced in the future and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
- Equity-based compensation is an element of our long-term incentive compensation program, although Adjusted EBITDA excludes employee equity-based compensation expense when presenting our ongoing operating performance for a particular period;
- Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
- Because of these limitations, our non-GAAP measures should not be considered a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using our non-GAAP measures as secondary measures. The company has provided reconciliations of its non-GAAP measures to GAAP net income (loss) and operating income (loss) within the supplemental financial information in this release.
About YRC Worldwide
YRC Worldwide Inc., headquartered in Overland Park, Kan., is the holding company for a portfolio of less-than-truckload (LTL) companies including Holland, New Penn, Reddaway, and YRC Freight, as well as the logistics company HNRY Logistics. Collectively, YRC Worldwide companies have one of the largest, most comprehensive logistics and LTL networks in North America with local, regional, national and international capabilities. Through their teams of experienced service professionals, YRC Worldwide companies offer industry-leading expertise in flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence.
Please visit our website at www.yrcw.com for more information.