Long-suffering YRC in the black, posts 3Q net income of $1.2 million

It’s small, but senior brass at YRC Worldwide will take it. After nearly seven years of continuing losses in excess of $2.6 billion, the parent of the nation’s second-largest LTL carrier posted a narrow net profit in the third quarter ended Sept. 30.
 
YRC eked out a net gain of $1.2 million on $1.32 billion revenue in the third quarter, compared with a year-ago quarterly net loss of $44.4 million on $1.25 billion revenue.
 
At the same time, consolidated operating income increased from $5.8 million to $26.7 million, a $20.9 million increase from the third quarter of 2013. Operating income in 2014 included a $20,000 loss on asset disposals compared to a $1.3 million loss on asset disposals in 2013.
 
“We are in a better place than any other time in our recent history,” YRC CEO James Welch said in a conference call with analysts.
 
YRC also reported earnings before interest, taxes and debt (EBITDA) of $81.6 million for the third quarter. That is a $19.7 million increase from the $61.9 million of adjusted EBITDA reported for the third quarter last year.
 
“During the third quarter of 2014, we experienced solid yield increases while maintaining tonnage levels at YRC Freight,” Welch said in a statement.  In his conference call, Welch said he was pleased with overall progress of his company since he took over nearly three years ago.
 
“Our No. 1 priority was pricing and volume improvement, which drove profit improvement.” Welch told analysts, adding the improvement is continuing. “It’s encouraging that yield trends continued to improve throughout operating companies in October as well.”
   
YRC Freight (its long-haul division) achieved total revenue per hundredweight increases of 2.8% in July, 3.3% in August and an additional 3.9% increase in September on a year-over-year basis. It also reported tonnage per day increases of 2.4% in July, 0.8% in August and 0.2% in September on a year-over-year basis.
 
YRC Freight posted an operating ratio of 99 in the third quarter, an improvement over the 101.2 OR in the year-ago quarter.
 
In a move that figures to add YRC Freight’s pricing, Welch said the unit would take a 5.9 percent general rate increase (GRI) on Dec. 1. That follows similar, albeit slightly smaller increases, announced by rivals ABF Freight and Con-way. That GRI affects only about 20 to 25 percent of YRC’s overall freight business; the rest is contract freight that gets reviewed separately.
 
“In addition to increases in yield throughout the quarter, YRC Freight continued to perform on their operational initiatives which also increased profitability,” continued Welch. “As we move forward, we will focus on technology investments that we believe will optimize our network freight flow and provide favorable yield improvement opportunities.
 
“Executing on our strategy of improving price and managing our freight mix to ensure that we have the right freight at the right price will continue to be a priority,” stated Welch.
 
YRC’s three regional companies (Holland, New Penn and Reddaway) enjoyed what Welch called “continued momentum” in the quarter. Revenue per hundredweight increases of 1.5% in July, 0.6% in August and 3.8% in September and reported tonnage per day increases of 4.2% in July, 3.7% in August and 2.5% in September, all on a year-over-year basis.
 
“During the quarter, the Regional operating companies focused on pricing improvements to manage capacity and reduce short-term revenue equipment rentals,” Welch said.
 
He said this strategy “decelerated” tonnage growth throughout the third quarter, but increased profitability. “Improving pricing while balancing capacity will continue to be the focus for the Regional segment moving forward,” concluded Welch.   
 
YRC Regional posted a collective 94.5 OR in the quarter, an improvement of 100 basis points over the 95.5 OR a year ago.
 
Welch said all YRC companies are continuing to work on their freight mix to gain favorable pricing. “We want to grow business over time but our priority is growing right freight at right price,” he said.
 
The brightened financial picture is enabling YRC to recapitalize its fleet. It plans on replacing 600 tractors and 2,000 trailers within the next six months, Welch said. The company has 15,000 tractors and 45,000 trailers in all its operating companies. YRC’s regional carriers will be getting slightly more of the new power units while long-haul YRC Freight will get slightly more than half the new trailers, Welch said.
 
YRC Freight has installed 37 of 42 planned dimensional rating machines at its terminals. The company is testing the waters with some shippers on “dimensional pricing,” in order to take advantage of the current tight freight market to pass on higher costs to shippers.
 
“Our priority over the last four or five months has been to get our freight mix correct and pricing straightened out,” Welch said. “Our No. 1 priority is improving our yields and taking advantage of the current freight market.”