YRCW keeps turnaround story intact with solid first quarter results

Bottom line improvements continue to be the theme for less-than-truckload (LTL) transportation services provider YRC Worldwide (YRCW).

Following February’s announcement that it had achieved a positive annual operating income in 2012 for the first time in six years, the Overland Park, Kan.-based carrier said today it had a positive first quarter operating income—also for the first time in six years. 

YRC’s consolidated operating revenue for the first quarter—at $1.162 billion—was down 2.7 percent compared to the first quarter of 2012. Meanwhile, its consolidated operating income increased from a $48.8 million loss a year ago to a $9.9 million gain in the first quarter, representing a $58.7 million increase. YRC officials said that first quarter operating income included a $4.5 million gain on asset disposals, which included an $8.3 million loss in 2012. And adjusted EBITDA—at $60.7 million—was $45.4 million more than the adjusted $15.3 million recorded a year ago.

“We concluded the first quarter with continued momentum that we began generating in the last half of 2012,” YRC Worldwide CEO James Welch on a conference call this morning. “Despite fighting difficult weather conditions throughout the quarter, our first quarter 2013 performance is substantially better than the first quarter of 2012…by quadrupling EBITDA. The last time we delivered this type of financial performance was when the first iPhone was hitting the market. But the brutal fact is we are simply not yet performing as well as we should be, and our management team recognizes that. We must perform better.”

Welch said that since the company’s new management team took over in 2011, YRCW has consistently exceeded its internal forecasts and did it again in the first quarter. And he said that the current momentum is in the company’s favor as it sees continued benefits from the operating initiatives it has implemented over the past few quarters, with customer mix management serving as a key ingredient in returning the company to positive consolidated operating income, especially at its YRC Freight group.

He noted how not long ago the financial condition of the company was preventing YRC from achieving competitive pricing levels but now improving service at YRC Freight and best-in-class service from its three regional carriers—Holland, New Penn and Reddaway—have provided the opportunity to get competitive pricing in the marketplace.

First quarter operating revenue at YRC Freight—at $753.8 billion—was down 4.5 percent annually, with total tonnage per day and total shipments per day down 5.4 percent and 5.3 percent, respectively. Revenue per hundredweight and revenue per shipment were up 3.4 percent and 3.2 percent, respectively. First quarter operating income for YRC Freight—at $2.4 million—represented a $58.5 million annual increase and the third straight quarter of positive operating income for the company’s largest segment.

YRCW is expecting to see improvements for YRC Freight in the future as Freight recently had its change of operations plan approved by its union leadership. The network optimization is a key component of YRC Freight’s strategy to continuously improve customer service by reducing the handling of shipments and excess time in transit.  And it added that the transportation team and network engineers at YRC Freight will implement the enhancements over the next several weeks.

YRC Freight President Jeff Rogers said on the earnings call that the company estimates gross annual savings will be between $25-to-$30 million through the plan that he said will eliminate a tremendous amount of fixed costs, with some of the chief benefits being increased network density, fewer shipment touches, and a reduction in empty mileage.

“Our operating improvements are due to a continued focus on getting back to the basics of the Freight business and focusing on business that fits our network and core competencies,” said Rogers. “This focus resulted in an EBITDA margin of 4.5 percent for the first quarter and was mostly due to the 3.4 percent year-over-year increase in our revenue-per-hundredweight and incremental operating improvements. The revenue-per-hundredweight increase is due to concentration in growing higher margin and higher value-added services.”

Total revenues for YRCW regional subsidiaries—Holland, New Penn and Reddaway—at $408.7 million was up 1.7 percent annually. Daily tonnage and shipments per day were up 1.9 percent and 2.5 percent, respectively, and revenue per shipment and revenue per hundredweight was up 2.3 percent, and 1.6 percent, respectively.