Weather, Teamsters concessions chatter batter YRC earnings in first quarter

Winter weather took its toll on the financial performance of YRC Worldwide, parent of the nation’s long-haul carrier YRC Freight (the nation’s second-largest LTL carrier) and YRC Regional (which represents the nation’s seventh-largest LTL unit).
 
YRC swung from consolidated operating income of $9.9 million in the year-ago quarter to a consolidated operating loss of $32.4 million in the 2014 first quarter. That came on operating revenue of $1.211 billion, compared with year-ago revenue of $1.162 billion.
 
YRC officials cited the rough winter weather as well as “distractions” from ratification of a memo of understanding (MOU) with the Teamsters union. That MOU provides for wage and benefit concessions through 2019, which allowed the company to renegotiate more than $1 billion in long-term debt on more favorable financial terms.
 
“This was one of the worst winter seasons in my more than 30 years in trucking,” YRC Worldwide CEO James Welch said in a statement. “We estimate that it negatively impacted our operating income by approximately $20 million. The main culprits were lower volumes, decreased productivities and higher use of purchased transportation.”
 
YRC also reported a $13.2 million increase in expense related to workers’ compensation, bodily injury and cargo claims. The increase in both bodily injury and cargo claims expense was driven by an increase in the number of claims due to adverse weather conditions, YRC said.
 
“The good news is that during the first quarter of 2014, we laid the foundation for our future operational improvements based on changes provided by the recently ratified MOU, more specifically the establishment of a uniform national attendance policy, payment of vacation based on the number of hours worked and, to a lesser extent, our new over-the-road purchased transportation policy,” Welch said.
 
“I am pleased with the progress we’ve made during the first quarter in implementing these new policies,” Welch said. “However, because the MOU was ratified halfway through the quarter, there were little, if any, positive impacts on year-over-year results. I believe it will take the better part of 12 months before we experience the full effect of the operationally-related policy changes.”
 
YRC’s financial story effectively is that of two companies: long-haul and regional. YRC Freight, its long-haul unit, continues to struggle, with an operating ratio of 104.3 in the first quarter, a 4.6 percent decline from the 99.7 OR posted in the 2013 first quarter. Welch has moved quickly to remedy the situation.
 
Jeff Rogers, who had been YRC Freight president, resigned last September and was replaced by Darren Hawkins who has restructured the organization at YRC Freight to align sales with operations and three terminals are set to open to meet demand for service in certain areas of the country.
 
“For the remainder of 2014, these changes, in addition to our regimented service cycle, are anticipated to provide additional efficiencies that will intensify our operational improvements,” Welch said.
 
YRC’s three regional subsidiaries (New Penn, Holland and Reddaway) are performing much better than the long-haul unit. The regional companies posted a collective 98.3 OR, a 1.2 percent deterioration from the year-ago quarter. But total tonnage was up 2.6 percent, compared to a 1.7 percent rise in tonnage for the long-haul unit.
 
Despite the significant impact of the winter weather, YRC Regional grew revenues by 11.1 percent during the first quarter of 2014. That was partially because of an additional 4.5 days in the quarter for Holland and Reddaway. Welch said he is “very pleased” with the regional unit’s performance.
 
“I believe the strength in the top line speaks volumes for their management teams and the tightening of capacity in certain areas of the country,” Welch said.