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Losses at YRC Worldwide Inc. widened in the second quarter amid the economic fallout of the COVID-19 pandemic, but the company said federal loans it received under coronavirus relief efforts will help position it to emerge healthier from the downturn.
The Overland Park, Kan., motor carrier on Aug. 3 said its Q2 net loss widened 57.2% to $37.1 million from $23.6 million in the same quarter a year earlier. The company’s diluted loss per share grew to $1.09 compared with 71 cents a year ago.
YRC’s revenue fell 20.2% to $1.02 billion compared with $1.27 billion in the same quarter a year earlier.
The company made several moves to shore up its financial position after the quarter closed, CEO Darren Hawkins said in an Aug. 3 conference call with industry analysts.
For one, it issued to the U.S. Treasury 30% of its outstanding share as a condition for the government financing a loan of up to $700 million under the federal CARES act. The company will use $300 million to satisfy deferred short-term contractual obligations such as health care payments and some lease obligations.
The remainder of that amount will fund an increase in liquidity. YRC will use the other $400 million to purchase semi-tractors and trailers for its daily operations.
The loan “will allow us to shift into high gear,” Hawkins said. “It has been a long time since this company has had this much runway in front of it.”
Additionally, YRC said in an Aug. 3 Securities and Exchange Commission filing that its long-term survivability has improved to the point where it no longer must provide disclosures outlining doubts about its ability to continue as a “going concern” in its financial statements.
Hawkins said YRC hopes to recapture some of the business lost to rivals when customers grew concerned about its financial health.
YRC Worldwide owns a portfolio of less-than-truckload companies including Holland, New Penn, Reddaway and YRC Freight, as well as logistics company HNRY Logistics. It is working to meld those operating units into a single cohesive enterprise and is closing terminals where there is overlap. The company ended the first quarter with 343 terminals. It now is at 335 and plans to shrink to 325 by the end of this year, Hawkins said.
“From a demand standpoint we won’t give up any geographic coverage that we have now,” he said.
While YRC like many other carriers saw Q2 business erode as the pandemic took a toll on the economy, the picture improved as the months wore on. The carrier’s LTL tonnage fell 22.6% compared to the same month a year earlier, while May sagged 14.5% and June fell 8.6%. By comparison, it was down 4% in July.
Hawkins said the investments in new equipment will help improve driver morale and dramatically improve YRC’s cost structure through improved fuel economy and reliability. He noted that maintenance expenses will be lower with new trucks.
YRC also plans to invest in the latest collision avoidance and other safety systems, which will pay dividends, he said. Additionally, YRC’s improved financial position will allow it to negotiate more favorable equipment lease terms, he said.
The motor carrier also said it is expanding YRC Freight’s Regional Next-Day Service to the mid-South region, including parts of Arkansas, Oklahoma, Louisiana, Tennessee, Mississippi and Missouri. The move is part of YRC’s strategy to better leverage its network. The service is targeting customers looking to lower inventory costs and reduce supply chain interruptions, the company said. “The expansion of Regional Next-Day services is a strategic investment to position YRC Freight for growth, operational improvements and continued responsiveness in servicing our customers,” said Jason Bergman, chief customer officer.
YRC Worldwide ranks No. 6 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
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