LTL news: YRCW reports Q3 loss of $158.7 million
Despite loss, company cites sequential improvements
Jeff Berman, Group News Editor -- Supply Chain Management Review, 10/30/2009
Despite sequential improvements from the second quarter, less-than-truckload transportation services provider YRC Worldwide (YRCW) had another difficult quarter based on the results of today's third quarter earnings announcement.
The leader in LTL market share reported a net income loss of $158.7 million, which fared better than the second quarter's $309 million loss and a third quarter 2008 loss of $720.9 million. Quarterly revenue at $1.31 billion was down nearly 50 percent compared to $2.4 billion last year and was in line with the second quarter's $1.33 billion.
YRCW's financial condition has received a lot of attention going back more than a year, with the company continuing to work with lenders on its credit facility amendments and its revolver reserve amount, as well as dismal conditions in the LTL marketplace which have taken a toll on all major LTL players.
YRCW's current situation is heightened by ongoing low tonnage volumes. Third quarter shipments per day at YRC National Transportation were down 39.9 percent, and total revenue per hundredweight, including fuel surcharge, were down 11.5 percent, according to company officials. And at YRC Regional Transportation, total third quarter shipments per day were down 22.7 percent and total revenue per hundredweight, including fuel surcharge were down 12.2 percent. In the second quarter YRC National and YRC National shipments per day were down 37.1 percent and 22.0 percent, respectively. YRCW officials have said these low tonnage numbers are due to an effort to "right size its network to support current and future shipment volumes."
As Logistics Management has previously reported, these volumes to a certain extent are related to the network integration of YRCW's two largest subsidiaries-Yellow Transportation and Roadway-to operate under the YRC brand name. The integration, which went live in March, was made to create capacity in the company's networks to effectively integrate operations, improve service and speed, and mesh sales teams. Reducing capacity was viewed as an impetus for the integration, with YRC consolidating the number of YRC service centers from 650 to roughly 450 throughout the U.S., Canada, and Mexico, cutting staff from 37,000 to 34,000 by the end of 2009, its number of trucks dropping from 16,700 to 14,000 and trailers decreasing from 62,500 to 53,000.
Even though YRCW's quarterly losses continued, the company did report that two units-YRC Regional Transportation and YRC Logistics-had profitable quarters and it added that its operating cash flow trends improved sequentially despite current economic conditions.
"We gained significant momentum in the third quarter as we executed on our comprehensive plan to improve operating efficiencies, restore financial strength and position our company for future success," stated Bill Zollars, Chairman and CEO of YRC Worldwide, in a statement. "We achieved significant sequential improvement from the first half of the year."
Along with taking steps to revise its credit amendment, YRCW has also been active in making efforts to reduce expenses and remain solvent in other ways.
One cost cutting measure centered on Teamsters at New Penn, a regional subsidiary of YRCW, who earlier this year signed off on a labor agreement previously approved by more than 90 percent of YRCW Teamsters employees. This original agreement went through in early August-and approved by Teamsters at YRCW-is comprised of a 5 percent incremental cut and an 18 month freeze on union pension fund contributions. YRCW officials said these measures are expected to save the company roughly $45 million per month through the rest of 2009 and increase to roughly $50 million per month in 2010.
And in September, YRCW made job cuts in response to economic conditions that continue to affect business volumes; it did not disclose a specific number of terminations, though. In the second quarter, YRCW eliminated 5,500 jobs and shuttered about 30 percent of its terminals.
Earlier this year, CEO Zollars said that YRCW believed its volumes are being impacted by tactics from its competitors that are clearly targeted at buying market share at any price and attempting to make YRCW's financial position seem worse than it is. While this may be occurring, Michael A. Regan, president and CEO of TranzAct Technologies Inc., recently told LM that YRCW remaining in the marketplace is a good thing for shippers, as it gives them more options and better rates.
"While [freight data] looks ‘less worse' in current year-over-year comparisons, you need to look at it in the context of what happened two years ago," said Regan. "The indexes now compared to then are just awful for the entire freight sector. "YRCW has roughly between 18-20 percent market share. And if YRCW were to exit the marketplace, I don't think there is 18 percent excess capacity in the LTL sector. Shippers should be very glad YRCW is still around, because it is creating leverage for them that they are using to extract lower rates."
Aside from that, Regan said that YRCW's financial volatility has created a fair amount of predatory pricing in the LTL market, which, he said, is intended to put as much pressure on YRCW as possible. Predatory pricing is not good for the industry, said Regan.
Even with all the challenges YRCW is facing, Regan said that the company should be given credit for what it has accomplished.
"Between the lenders and unions, YRCW has done the impossible," he said, "which is still to be standing here in October. The reality is if you are a carrier you have got to say that the bankers are "all in" and not folding with YRCW. If they were going to fold, they would have done it a long time ago. At some level, carriers need to wonder how much more predatory pricing they can engage in before they inflict serious economic harm on their own business models."
Featured Company
Most Recent Resources
- Trade Agreement Management: Survey Results & Best Practice Research
- Supply Chain Risks: Barriers to Manufacturing in Emerging and...
- Demand Planning Maturity Model: Strategies for Demand-Driven...
- Special Report: Tips to Rapidly Implement and Generate ROI From a WMS
- Supply Chain Education: Opportunities Online and in the Classroom
View All On-Demand Webcasts
