Time was that YRC Worldwide’s regional less-than-truckload (LTL) businesses were the tail that wagged the corporate dog, and its long-haul unit, YRC Freight, was the sick pup. Judging by YRC’s third-quarter results reported on Oct. 31, the roles have been somewhat reversed.
For the company’s three regional operators–New Penn, Holland and Reddaway–the quarter was an across-the-board mess. Operating ratio spiked to nearly 101% from 96.2% in the year-earlier period, meaning the units spent more than they generated in revenue. Daily shipments fell 3.9% year-over-year, daily tonnage fell 3.6%, and revenue for each hundred pounds hauled, a key measure of productivity, fell 0.8%, a figure that included fuel surcharge revenue. Excluding the impacts of fuel surcharges, regional revenue per hundredweight was flat and LTL revenue per shipment increased 0.3%. Operating revenue declined by 5.8%, while operating income swung to a $4.1 million loss from an $18.4 million gain.
The long-haul unit, which has been in business triage for more than a decade, did not fold its tent amid a continued lousy environment for industrial freight demand, though it hardly produced barn-burning numbers. Revenue fell 2.3%, but operating income rose 28%, the best quarterly year-over-year performance in 10 years. Operating ratio declined slightly to 96.1% from 97%. Daily LTL tonnage fell 4% but total tonnage actually rose, a reflection of heavier weighted truckload business being brokered by YRC’s HNRY Logistics unit. Daily shipments fell 3.5% while revenue per hundred pounds hauled increased slightly.
In all, YRC reported a 48 cents per share third quarter net loss, most of which came from an $11.2 million loss associated with the mid-September refinancing of a $600 million term loan. Backing out the 34 cents per share net loss from that event, the per share loss of 14 cents was better than the 17 cents per share net loss expected from the handful of analysts polled by Barchart.
The refinancing agreement extended the original July 2022 maturity date to June 2024, eliminated a 3% annual hit on principal amortization that the company said will save $18 million annually, and cut YRC’s interest rate by 100 basis points.
Operating revenue came in at $1.26 billion, compared to $1.30 billion in the year-earlier quarter. Operating income dropped to $23.8 million from $41.2 million. Both periods included net losses on disposals of property.
The third-quarter total net loss figure compared with $2.9 million net income in the third quarter of 2018, the company said. YRC generated $18.3 million less earnings before interest, taxes, depreciation and amortization (EBITDA) in the 2019 quarter than it did in the prior-year period.
Near the close of trading, YRC shares were priced at $3.34, down 45 cents a share.
On the analyst call following the release of the results, YRC executives tried to frame the regionals’ poor results as situational and transitory. Besides suffering from the weak macro trends impacting all LTL carriers, very weak Midwest traffic, lower auto sales, and the impact of the United Auto Workers’ strike against General Motors Corp., (NYSE:GM), all conspired to undermine results, particularly at Holland, the company’s Midwest regional operation, according to executives.
The regional units have also not been able to adequately leverage the operating efficiencies built into the five-year collective bargaining agreement reached earlier this year with the Teamsters union, whereas the long-haul unit has, Darren Hawkins, YRC’s CEO, said on the company’s call with analysts. Hawkins said the benefits of the contract language for regionals was predicated on a top-line growth environment which has yet to materialize.
All told, operating revenue came in at $1.26 billion, compared to $1.30 billion in the year-earlier quarter. Operating income dropped to $23.8 million from $41.2 million. Both periods included net losses on disposals of property.
The third-quarter total net loss figure compared with $2.9 million net income in the third quarter of 2018, the company said. YRC generated $18.3 million less earnings before interest, taxes, depreciation and amortization (EBITDA) in the 2019 quarter than it did in the prior-year period.
All told, operating revenue came in at $1.26 billion, compared to $1.30 billion in the year-earlier quarter. Operating income dropped to $23.8 million from $41.2 million. Both periods included net losses on disposals of property.
The third-quarter total net loss figure compared with $2.9 million net income in the third quarter of 2018, the company said. YRC generated $18.3 million less earnings before interest, taxes, depreciation and amortization (EBITDA) in the 2019 quarter than it did in the prior-year period.
In an efficiency drive, YRC has consolidated 12 service centers so far this year, and plans to combine or shutter 13 more by year’s end. It plans to close or consolidate 25 more next year, executives said. The company recently expanded its service in Texas by launching one-day deliveries throughout the state.
According to executives, box trucks operated in local cartage service by employees not holding commercial drivers licenses has saved the company $12,600 per month for each truck over the use of more costly outsourced transportation. The ability to insource the operation was part of the recent Teamster labor contract.
YRC said contract renewals rose by 3%, on average, in the quarter for its regional and national units.