YRCW posts second quarter loss but shows improvement

Citing improving business conditions, second quarter earnings for less-than-truckload transportation services provider YRC Worldwide (YRCW) showed some sequential and annual gains, although the company posted quarterly net and revenue losses.

YRCW recorded a quarterly net loss of $9.5 million and $.01 per share, which is ahead of a net loss of $309 million and a $5.20 loss per share during the second quarter of 2009. Operational revenue at $1.12 billion was down 8.7 percent year-over-year, and total operating expenses at $1.1 billion were off by about 30 percent. Operating income for the quarter at $48.3 million was up significantly compared to a $294 million loss a year ago.

“We are pleased with the gains we have made with our key initiatives, including pricing, customer mix management, and cost improvement,” said YRCW Chairman, President, and CEO Bill Zollars on an earnings conference call earlier today. “We appreciate the continued confidence demonstrated by our customers who have returned business to us or increased their shipments with us. They have significantly helped create operating momentum, which we achieved throughout the quarter.”

Zollars said this was evident in YRCW’s EBITDA going from $3 million in April to $22 million in June, which he said was an encouraging trend and is the first time YRCW has had positive EBITDA since the third quarter of 2008.

Second quarter shipments per day at YRC National Transportation were down 18.6 percent year-over-year and up 8.0 percent compared to the first quarter. Revenue per hundredweight and revenue per shipment were both up 3.9 percent year-over-year, and revenue per shipment was up 0.9 percent from the first quarter. Tonnage per day was up 11.0 percent compared to the first quarter.

At YRC Regional Transportation, tonnage per day was up 4.6 percent and shipments per day were down 3.1 percent year-over-year, and revenue per hundredweight was down 2.8 percent year-over-year, and revenue per shipment was up 4.9 percent. Compared to the first quarter, daily tonnage at YRC Regional was up 15.5 percent, shipments per day were up 13.8 percent, and revenue per shipment was up 0.5 percent.

YRCW’s financial condition has been closely watched by industry observers, due to the extensions leading up to the debt-for-equity exchange, as well as difficult LTL market conditions caused in large part by excess capacity, decreased fuel surcharge revenues, and pricing issues, although the LTL sector is showing some signs of improvement in the form of improved pricing and revenue gains in recent months.

But YRCW by no means is out of the woods, given that it is scheduled to resume full participation in its pension plans in January, following a 2009 agreement for YRCW Teamsters to take a 15 percent wage concession for a 15 percent ownership stake in the company, as well as an 18-month pension contribution freeze and a reduction in health and welfare contributions. YRCW executives said at the time this deal was inked that these measures would save the company $45 million per month through the end of 2009 and increase to roughly $50 million per month in 2010.

Zollars noted that YRCW and the Teamsters remain actively engaged in conversations on these issues but declined to go into specifics.

And in late July, YRCW amended its credit agreement, which stated it would retain 100 percent of the estimated $30 million of net proceeds from the initial closing of its recent sale of YRC Logistics to Austin Ventures, with its revolver to be reduced by 50 percent of those proceeds. Among other items included in the agreement is for YRCW to receive 75 percent—rather than 25 percent—of the next $20 million of cash proceeds from sale and leaseback transactions with its revolver reduced by 50 percent of those proceeds.

Pittsburgh-based SJ Consulting President Satish Jindel told LM that YRCW’s quarterly performance compared to other publicly-traded LTL players on a sequential basis in terms of tonnage increases and shipment increases was as good or better in some cases that its public competitors.

“This is an indication that YRCW is not losing market share anymore to competitors like they did three months ago or a year ago, which is positive,” said Jindel. “They are also focusing on pricing rather than pushing for volume gains, and it is an important message that they needed to convey from a customer and competitor point of view as a price war hurts everyone and prevents investment into the business for YRCW.”

Going forward, if YRCW can maintain current levels in the second quarter and work successfully with the Teamsters on getting its pension payments pushed out, the company could potentially be on solid footing for the next several months, according to Jindel.