“Pretty normal” YRC suffers 2017 loss to $10.8 million compared with $21.5 million gain in 2018

YRC Worldwide, parent of long-haul YRC Freight and three regional LTL carriers, fell back into the red last year as it battled a red-hot freight market with sharply higher costs related to purchased transportation, equipment shortages and higher salaries to keep those trucks operating with sufficient drivers.

Overall YRC reported consolidated operating income of $11.3 million on consolidated operating revenue for fourth quarter 2017 of $1.209 billion. That compares with $14.9 million operating income on $1.148 billion combined operating revenue in the 2016 fourth quarter.

For the year YRC had a $10.8 million net loss on $4.891 billion with consolidated operating income of $98.4 million. This compares to full-year 2016 net loss of $21.5 million consolidated operating revenue of $4.698 billion with consolidated operating income of $124.3 million, which included a $14.6 million gain on property disposals.

The losses were blamed on increased purchased transportation costs and the ongoing increased driver costs to keep and attract drivers, YRC officials said. To combat that purchased transport costs (which were $15 million in the fourth quarter), YRC is taking delivery of 900 new tractors in the first half of this year.

“We did not fully execute down the stretch like we believe our company is capable of,” YRC CEO James Welch said in a conference call with analysts. “The good news is, with a strong economy and a tight freight environment, a focus on enhancing customer service, growing yield, along with our commitment to investing in revenue equipment and technology, we were both excited and confident that our business is positioned for a better year in 2018.”

The fourth quarter 2017 net loss was $7.5 million compared to a net loss of $7.5 million in fourth quarter 2016. For full-year 2017, the net loss was $10.8 million compared to net income of $21.5 million in 2016. The fourth quarter and full-year 2017 results were impacted by a $7.6 million non-union pension settlement charge.

But YRC Freight had yield increases and had enjoyed a 4.5 percent year-over-year contractual rate increases throughout the year. YRC is taking a 5.9 general rate increase on Feb. 19.

The fourth quarter 2017 results included increases in short-term rental expense of $4.1 million and local purchased transportation expense of $3 million when compared to the fourth quarter 2016. The increases were primarily due to a shortage of revenue equipment and a demand for drivers. These results include a non-union pension settlement charge at YRC Freight of $7.6 million. The pension settlement charge was triggered due to the amount of lump sum benefit payments distributed from plan assets in 2017. YRC said The fourth quarter 2017 was unfavorably impacted by approximately $4 million in legal expenses due to adverse developments at the Regional segment when compared to the fourth quarter 2016. 

Reinvestment in the business continued in 2017 with $103.3 million in capital expenditures and new operating leases for revenue equipment with a capital value equivalent of $133.8 million, for a total of $237 million. This compares to a total of $253.1 million invested in 2016. The majority of the investment was in tractors, trailers and technology, YRC said.

The consolidated operating ratio for fourth quarter 2017 was 99.1 compared to 98.7 in fourth quarter 2016. The operating ratio at YRC Freight improved to 99.5 compared to 100.0 for the same period in 2016. The Regional segment's fourth quarter 2017 operating ratio was 98.0 compared to 96.1 a year ago.

Fourth quarter 2017 tonnage per day decreased 0.5% at YRC Freight and increased 3.9% at the Regional segment compared to fourth quarter 2016.

 At YRC Freight, including fuel surcharge, fourth quarter 2017 revenue per hundredweight increased 4.4% and revenue per shipment increased 4.9% when compared to the same period in 2016. Excluding fuel surcharge, revenue per hundredweight increased 2.6% and revenue per shipment increased 3.1%.

 At the Regional segment, including fuel surcharge, fourth quarter 2017 revenue per hundredweight increased 1.2% and revenue per shipment increased 4.6% when compared to the same period in 2016. Excluding fuel surcharge, revenue per hundredweight decreased 0.4% and revenue per shipment increased 2.9%.

"In the fourth quarter 2017, we continued to see yield improvement at YRC Freight as it reported the largest year-over-year increase in revenue per hundredweight since the fourth quarter 2014," Welch said in a statement, adding that for most of the year YRC operated as “pretty normal company.”

Collectively, YRC Regional companies reported strong year-over-year increases in revenue per shipment, tonnage per day and weight per shipment.

Fourth quarter results were lower than our previously released projections primarily due to purchased transportation expense being unfavorably impacted by a shortage of revenue equipment and a demand for drivers, YRC said. These factors contributed to an increase in local purchased transportation and short-term rental expense including the impact from approximately 2,000 rented tractors and trailers.

Positive pricing and demand trends suggest the outlook for the trucking industry remains positive. The dynamics of the industry, including the planned progression of ELD enforcement and an ongoing shortage of qualified drivers, could restrict capacity further.

“With the revenue equipment and technology investments that we are making plus our initiative to grow yield, we're excited about 2018 and the opportunity we have in front of us to improve the business," concluded Welch.

The fourth quarter 2017 results include increases in short-term rental expense of $4.1 million and local purchased transportation expense of $3 million when compared to the fourth quarter 2016. The increases were primarily due to a shortage of revenue equipment and a demand for drivers.

The fourth quarter 2017 was unfavorably impacted by approximately $4.0 million in legal expenses due to adverse developments at the Regional segment when compared to the fourth quarter 2016.

YRC posted consolidated operating ratio for fourth quarter 2017 was 99.1 compared to 98.7 in fourth quarter 2016. The operating ratio at YRC Freight improved to 99.5 compared to 100.0 for the same period in 2016. The Regional segment's fourth quarter 2017 OR was 98.0 compared to 96.1 a year ago.

Fourth quarter 2017 tonnage per day decreased 0.5% at YRC Freight and increased 3.9% at the Regional segment compared to fourth quarter 2016.

At YRC Freight, including fuel surcharge, fourth quarter 2017 revenue per hundredweight increased 4.4% and revenue per shipment increased 4.9% when compared to the same period in 2016. Excluding fuel surcharge, revenue per hundredweight increased 2.6% and revenue per shipment increased 3.1%.

 At the Regional segment, including fuel surcharge, fourth quarter 2017 revenue per hundredweight increased 1.2% and revenue per shipment increased 4.6% when compared to the same period in 2016. Excluding fuel surcharge, revenue per hundredweight decreased 0.4% and revenue per shipment increased 2.9%.

Darren Hawkins, who is taking over for Welch as YRC CEO in July, said the new yield improvements “are very powerful,” and added he expects 2018 to be a much better financial year for the company

Dawkins said YRC Freight had revenue per hundredweight increased 4.4% and revenue per shipment increased 4.9% when compared to the same period in 2016. This represents three consecutive quarters of positive year-over-year yield improvement, Hawkins said.

“In the fourth quarter, YRC Freight delivered the largest year-over-year increase in revenue per hundredweight and revenue per shipment since the fourth quarter of 2014,” Hawkins said.

YRC Freight’s revenue per hundredweight increased 4.4% and revenue per shipment increased 4.9% when compared to the same period in 2016. This represents three consecutive quarters of positive year-over-year yield improvement.  YRC Freight’s fourth quarter was its largest year-over-year increase in revenue per hundredweight and revenue per shipment since the fourth quarter of 2014.

“We’re in a positive trucking environment,” Welch said.