YRC Worldwide Reports Profit, Aided by Income Tax Benefit
This story appears in the March 3 print edition of Transport Topics.
YRC Worldwide Inc. last week reported fourth-quarter net income of $400,000, helped by a tax benefit, compared with a $35.3 million loss in the prior-year period.
The company’s operating results, however, were hurt by losses at national trucking unit YRC Freight, which accounts for two-thirds of revenue. That business showed an operating loss of $15.4 million, compared with operating income of $21.1 million, before interest and taxes, the year before.
“The fourth quarter closed with some challenges,” said CEO James Welch, citing continued difficulties with operational changes. “While YRC Freight stumbled during 2013, our regional carriers delivered a solid performance.”
The regional unit produced $22.2 million in operating income, nearly triple the $8.4 million the year before.
Companywide revenue rose 3.3% to $1.21 billion. YRC Regional accounted for all of the $39.6 million revenue increase.
Companywide operating loss was $1.6 million compared with operating income of $30 million a year ago.
Chief Financial Officer Jamie Pierson said on a conference call that the weaker operating results were due to inclement weather, workers’ compensation costs and lower rates. Weather alone hurt results by $10 million to $15 million last quarter and by $15 million between Jan. 1 and the Feb. 27 earnings announcement.
YRC Freight hauled 3.2% more tonnage and 1% more shipments in the fourth quarter, but revenue per 100 pounds of freight fell 3.3%. The regional unit boosted tonnage 8.9% and raised shipments 7.5%, but revenue per 100 pounds of freight slipped 0.4%.
Welch said on the conference call that the first-quarter freight levels have been solid, when the weather has cooperated.
“When the network is free and clear, business is strong,” he said. “It feels pretty good when we get a four- to five-day stretch [without bad weather]. Then you get bogged down. It feels like we have been fighting it every day.”
His comments were in line with other fleet executives who spoke last month at an investor conference in Florida. They noted the stronger demand as well as the difficulty in gauging how much was due to underlying economic improvement and how much was due to reduced capacity from weather delays.
“If we can get Old Man Winter out of the way, I am confident we will see real progress at YRC Freight,” Welch said.
Welch told Transport Topics he wouldn’t give specific targets for improved results at YRC Freight, but he did say, “I am more confident than at any time I have been here [since 2011] that we are doing the right things to get YRC Freight in the black.”
He also told TT that YRC Freight was hurt more by storms and cold weather than the regional units because every storm hit the national unit, while some of them missed the Holland and New Penn regional LTL businesses.
On a per-share basis, YRC lost $1.71 in the fourth quarter and $4.53 in the year-earlier period.
YRC also said Darren Hawkins, 44, has been promoted to president of YRC Freight.
Welch put himself in charge of that unit late last year after a botched change of operations during the summer widened losses instead of reaching the targeted $30 million improvement in profitability.
In the first half of 2013, YRC Freight’s operating loss totaled $6.1 million and worsened to $25.1 million in the second half.
Welch and Pierson noted the importance of a recent $1.15 billion refinancing completed after the Teamsters union approval of a continued 15% pay cut until 2019. The refinancing pushes loan repayments that were due in 2014 and 2015 until 2019.
Welch said the new union agreement would allow 6% of YRC Freight shipments to be moved at lower cost through purchased transportation. Some of that purchased transportation will be switched from higher-cost intermodal to over-the-road, he said.
For the full year, the company posted a net loss of $83.6 million, or $8.96 per share, compared with a loss of $140.4 million, or $19.20, the year before. YRC is maintaining its projection that earnings before interest, taxes, depreciation and amortization will improve to between $350 million and $360 million next year. In 2013, that financial measure, known as EBITDA, totaled $257.7 million.
