November 2, 2017 5:45 PM, EDT

YRC Profits Plunge 78% in Third Quarter

Hurricanes Create Network Problems in Freight Division
YRC FreightTT File Photo

YRC Worldwide CEO James Welch was hopeful three months ago that the third quarter would be in line with the second quarter, but that was before two hurricanes wreaked havoc in Texas and Florida, slashing the company’s operating income due to unexpected higher expenses to rent transportation.

YRC's earnings plummeted 78% year-over-year in the third quarter to $5.5 million, or 9 cents per share. One year ago, the numbers were $13.9 million, or 42 cents. In the second quarter of this year, YRC made $19 million, or 56 cents.

Certainly, not having the right mix of equipment at times has hurt us.

James Welch, YRC Worldwide CEO

YRC Worldwide ranks No. 5 on the Transport Topics Top 100 list of for-hire carriers in North America.

The Overland Park, Kan., less-than-truckload carrier’s revenue slightly increased to $1.25 billion from $1.22 billion a year ago. Revenue also was only slightly down from the $1.26 billion in the second quarter. YRC matched the Bloomberg News consensus forecast on revenue, but finished far short of the 28-cent forecast.

“I think the yield momentum we’ve got underway right now is very positive, I’m happy with that. Disappointed, quite frankly, with our productivities across all four operating companies. We just haven’t made the move there that we wanted to move or thought we can make. Certainly, not having the right mix of equipment at times has hurt us. Short-term rentals has been a big drag on us,” Welch said on a conference call.

Truck rentals, or purchase transportation costs, rose 7.8% to $169.1 million, increasing operating expenses and slashing into operating margins. Welch acknowledged some of the added costs were directly related to Harvey and Irma, specifically in the YRC Freight division.

“We spent some time trying to quantify [the financial effect of the hurricanes], but it’s really hard to get it down to a specific dollar. We believe it’s in the low double digits of millions [$10 million-plus] range at YRC Freight,” Welch said. “We certainly know it had a big impact for YRC Freight.”

YRC Freight’s revenue improved 1.3% to $787.8 million, but operating income slipped 2.4% to $20.3 million. Tonnage per day edged up 0.7% to 25,470, total shipments per day eked out a 0.3% gain to 41,960 and weight per shipment crept up 0.4% to 1,214 pounds. Revenue per 100 pounds of freight, excluding fuel surcharges, increased 2.4% to $21.81.

YRC Worldwide

YRC Regional Transportation, consisting of Reddaway, Holland and New Penn, reported a 4.5% increase in revenue to $463.5 million, but operating income fell 1.9% to $21.5 million. Tonnage per day improved 4% to 31,600, total shipments per day rose 1.1% to 42,100 and weight per shipment went up 2.8% to 1,501 pounds. Revenue per 100 pounds of freight, excluding fuel surcharges, ticked up 0.3% to $10.52.

Despite all the lingering network issues the company outlines around the continued efforts to recover from the hurricanes even into October, Welch said he also was optimistic about the outlook for 2018.

“We have volume to about where we want it, so we’re going to work even harder on yield. Our major change in operations at YRC Freight, I have a lot of high expectations for that,” he said. “We were just looking at the fuel mileage at the new tractors we’re getting in versus the old fleet, which will be a good positive effect. Better fuel mileage, less maintenance expenses, which hurt us in [the third quarter], better safety technology, better service, better morale.”