On a call with analysts Wednesday, Yellow Corp. (NASDAQ: YELL) CEO Darren Hawkins said he was “not pleased” with the company’s first-quarter results, a net loss of $63.3 million, or $1.26 per share.
The report was well below analysts’ expectations, which called for a loss of roughly half the one the Overland Park, Kansas-based less-than-truckload carrier posted. It was also a reversal from the $4.3 million in net income, or 12 cents per share, the company recorded during the 2020 first quarter.
The 2020 period included gains on property sales of $39.3 million while the line item reflected a $1 million loss in the most recent quarter. Also, weather was a $16 million drag on operating income, according to management.
Revenue was up 4.2% year-over-year to $1.2 billion as tonnage per day ticked 0.4% higher and revenue per hundredweight, excluding fuel surcharges, increased 6.9%. Shipments per day were up 1.7% and revenue per shipment increased 5.6%, excluding fuel surcharges.
Revenue per hundredweight, inclusive of fuel revenue, increased 6.7% year-over-year with the comparisons accelerating as the quarter progressed. Yield was up slightly in January at 1.8% but had surged to up 11.5% by March when compared to the prior year. Management said contractual rates were renewing 7% to 8% higher throughout the quarter with the trend continuing into April.
The company posted an operating ratio of 102.3%, 470 basis points worse year-over-year. The operating loss was $27.6 million.
Headwinds included a 490-bp increase in purchased transportation expense as a percentage of revenue with the swing from a gain to a loss on property disposals being a 350-bp headwind. One of the few offsets was the salaries, wages and benefits line, which declined by 220 bps as a percentage of revenue.
However, holding the gains on sale line constant year-over-year, the OR still deteriorated by 140 bps. February’s winter storms were a 130-bp drag on the quarter as tonnage declined 5.5% year-over-year during the month.
“The severe winter weather, including a generational storm in the southern United States, significantly impacted our first quarter results,” said Hawkins in the press release. “In February, roughly two-thirds of the 322 terminals in our network were either closed or had limited operations for some period. Our linehaul operations were also impacted by suspended service at various times.”
Management said they have increased the number of new-driver academies to 17. The original plan was to open 12 schools and hire 1,500 drivers. Yellow also has “pop-up academies” at facilities where there are a few dockworkers that want to transition to a driver role.
The driver hiring initiative is expected to lower purchased transportation expense as the new drivers will decrease the carrier’s reliance on outside capacity for over-the-road and local cartage moves.
New equipment deliveries should also help in attracting drivers to the company.
The company is using the $400 million second tranche of its $700 million CARES Act loan to update its fleet. Yellow already used $251 million of the tranche to take delivery of new equipment during the fourth and first quarters. Management said it has received the next $130 million from the Treasury, which will allow it to continue buying equipment in the second quarter.
Yellow expects 2021 deliveries through the end of the second quarter to equate to more than 2,400 tractors, 100 box trucks, 2,500 trailers and 500 containers. This is part of the company’s $450 million to $550 million capital expenditures plan.
Improved fuel efficiency, higher uptime and lower maintenance expenses are expected to drive better margin performance. The fleet replacement project began in the fourth quarter.
The $300 million first tranche, which allowed the carrier to catch up on health care and pension contributions among other items, has been exhausted.
Adjusted earnings before interest, taxes, depreciation and amortization fell 61.3% year-over-year to $13.2 million in the quarter. Trailing 12 months’ EBITDA was $171 million, down 20.3% from the prior comparable period, but ahead of the upcoming $100 million covenant, which goes into effect in the fourth quarter.
YRC ended the quarter with liquidity of $423 million and total debt of $1.46 billion.
Shares of YELL were off more than 14% in after-hours trading Wednesday.
