Financially improving YRC makes internal changes for efficiency, safety improvements

YRC Freight and YRC Regional, collectively the second- and seventh-largest less-than-truckload carriers in the nation, have made field operational organizational changes for better efficiency and safety oversight, effective Feb. 1.

The changes are designed “to allow those closest to the revenue generation and operational performance of YRC Freight to be in control of the profitable growth, first class customer service, and service cycle execution for the company moving forward,” according to an internal memo obtained by LM announcing the changes.

  The changes involve layoffs of about 100 middle managers at both YRC’s long-haul and regional carriers, including Holland in its Central States area. In a statement, YRC said the company is making "normal rightsizing adjustments" as a result of advances it has made in processes and technology, and a not a combination of any of the three regional carriers.

“Number one, we have not consolidated anything from a physical network structure to any one of the other companies -- all four companies (YRC Freight, Holland, Reddaway and New Penn) today remain independent,” YRC Worldwide CEO James Welch said on a Feb. 6 conference call.

“What we did do however, was take the opportunity to realize the improvements that we have had from process improvements in technology to rightsize our business, which we consider kind of a normal course of business,” Welch added. He said the changes were “carefully analyzed” to assure efficiency.

“We only made any sort of decision once we knew that we are certainly clear from a cost and service benefit to help our business out,” Welch said. “But there is really no network integration at all.”

He added there “could be some facilities where we have the capacity to share and we will be looking at some things like that, but really just a normal way rightsizing of the business.”

YRC’s changes come at a time of improving financial performance. Its year-end debt balance is the lowest in 11 years. Fourth quarter operating income was $14.9 million compared with a loss of $15.3 million for the 2015 fourth quarter in $1.148 billion revenue. The fourth quarter 2015 results included a $28.7 million non-Teamsters pension settlement charge.

Full-year operating income last year was $124.3 million. YRC Freight’s fourth quarter operating ratio was 98.7, compared with 101.3 OR in the same period of 2015. At YRC Regional, it was the same story as its operating ratio improved by 160 basis points to 96.1 OR.

For all of 2016, YRC Freight improved its OR by 120 basis points to 98.2 while the Regional segment reported a 95.3 OR compared with 95.2 for all of 2015.

“In the fourth quarter 2016, year-over-year tonnage per day was up at YRC Freight and flat the Regional segment,” Welch said. “However, YRC Freight’s  year-over-year revenue   per  hundredweight declined which impacted its ability to offset cost increases during the quarter.

“Our pricing strategy remains focused on profitability  while  delivering  award-winning  customer  service.  Overall, we believe pricing discipline  in  the  LTL  space remains stable.” 

By streamlining its field operations structure, YRC is removing one layer of management. It says this will improve its ability to remain focused on safety yet drive effectiveness to benefit our customers and employees.”

The memo was sent by Howard Moshier and Mitch Lilly. Moshier is senior vice president of operations at YRC. Lilly is senior vice president of operations and labor relations.

According to the changes, YRC division vice president and area Director of Operations roles all be combined into one role titled Area Vice President.  YRC will have 13 U.S. areas plus Canada and Mexico, for a total of 15 areas.  Areas will be organized into two divisions and led by its two existing senior vice presidents, Moshier and Lilly

The leadership team for the new YRC Freight Field Operations organization is as follows:     Moshier will lead the East Division with eight Area Vice Presidents. They are Dan Trotta, Bill Gordon, Dan Renftle, Steve Swarthout, Keith Lilly, Bryan Reifsnyder, Tim McKinstry and Maynard Skarka.

Lilly will lead the West Division with seven Area Vice Presidents. They are Bill Anderson, Paul Lorensen, Mark Troutt, Jim Coupe, Dan Gatta,  Jim Redington and Paul Lorensen.

These Area Vice Presidents (AVP) will be responsible for their areas with distribution center and terminal managers reporting directly to them, according to the changes.

In an effort to improve safety, the jobs of labor manager and safety manager are being combined. They are now being called “safety/labor managers.”

In other fourth quarter LTL earnings of note, segment leader Old Dominion Freight Line reported a 5.4 percent decline in fourth quarter earnings to $68.5 million on a 1.5 percent rise in revenue to $745.7 million, compared with $72.2 million net income on $734.6 million revenue in the 2015 fourth quarter. ODFL’s industry-leading OR was 84.8, just a slight deterioration from the 84.5 OR in the 2016 fourth quarter.

ODFL Vice Chairman and CEO David S. Congdon said he saw “encouraging developments, despite a 2.4 percent drop in earnings per diluted share. Revenue per day was up 3.2 percent, with a 2.6 percent increase in LTL revenue per hundredweight at ODFL, the nation’s fourth largest LTL concern.

Saia, the 10th-largest LTL carrier, saw a 2.4 percent drop in operating income to $17.2 million on   revenues of $300.2 million, a 4.4% increase despite one less workday. Operating income decreased 2.4% to $17.2 million and net income fell 9.1% to $10.3 million. LTL revenue per hundredweight increased 5.1%, the company said.

For full year 2016, Saia saw a 12 % drop in operating income to $79.1 million on essentially flat revenue of $1.2 billion.  Operating income fell by 12.0% to $79.1 million while its net income of $48.0 million was 12.7% lower than 2015. Saia’s operating ratio of 93.5 compares to 92.6 in all of 2015.

Saia reported daily tonnage and shipment growth for the first time since 2014, while maintaining pricing and yield performance. It also had improved service levels (0.74% cargo claims ratio vs. 0.97% in fourth quarter of 2015).