YRC Loses Almost $1 Bln. In ’08 as LTLs Struggle

By Dan Leone, Staff Reporter

This story appears in the Feb. 2 print edition of Transport Topics.

Less-than-truckload carriers in the fourth quarter were hammered by sagging tonnage and fiercely competitive pricing, several of the largest publicly traded LTLs said last week.

YRC Worldwide Inc. trimmed its fourth-quarter deficit, but lost almost $1 billion in 2008, while Arkansas Best Corp. posted its first quarterly loss in five years and cut more than a thousand jobs.

YRC Worldwide, which is in negotiations with its banks as it embarks on an expansive plan to combine its Yellow Transportation and Roadway units, lost $244.4 million in the fourth quarter, less than the $735.8 million it lost in 2007’s fourth period.

For all of 2008, YRC’s net loss last year topped the $638.4 million it lost in 2007, according to the company’s latest financial report, issued Jan. 29.

Arkansas Best Corp., Fort Smith, Ark., posted its first quarterly loss since 2003, cut 1,100 jobs and shrank its tractor fleet by 14% in the face of a prolonged freight recession.

“Arkansas Best’s fourth-quarter results reflect the profitability effects of ABF’s decelerating tonnage levels and competitive pricing pressures in the midst of a freight environment of unprecedented weakness,” said David Robinson, Arkansas Best’s chief executive officer.

The company lost $11 million, or 44 cents a share, in the fourth quarter, down sharply from a profit of $13.5 million, or 54 cents a share, in 2007. Quarterly revenue tumbled to $391 million, down from $459 million a year ago.

Con-way Freight, the LTL arm of San Mateo, Calif.-based Con-way Inc., posted an operating loss of $9.4 million in the fourth quarter.

Con-way Freight took a $21.3 million restructuring charge related to the 1,450 jobs it cut in December, and the closing of 40 LTL freight terminals in November. Net of the restructuring charge, Con-way Freight’s operating income was $11.9 million, less than a fourth of the $55.2 million the unit earned in 2007.

Quarterly revenue at Con-way Freight fell to $640.3 million from $739.2 million a year ago.

Old Dominion Freight Line, Thomasville, N.C., also took a hit in the fourth quarter, but managed to remain profitable in the period.

Old Dominion’s fourth-quarter earnings fell almost 30% to $11 million, or 30 cents a share. Quarterly revenue dropped 6.4% to about $336 million, the Thomasville, N.C. company said Jan. 29.

Meanwhile, tonnage levels and operating ratios fell across the board.

Tonnage at YRC’s Yellow and Roadway long-haul national LTL units fell 14.6%. At the regional LTL unit, tonnage fell 14%, after adjusting for network changes made in 2008. Without the adjustment, regional LTL tonnage fell 23.6%, YRC said.

Operating ratio — operating expenses expressed as a percentage of revenue — deteriorated to 117.9 from 103.5 at YRC’s National Transportation unit. The regional unit posted an operating ratio of 105.8 for the 2008 quarter, slightly worse than the 102 the unit recorded a year ago.

ABF’s daily tonnage hauled fell 11.5% in the fourth quarter, compared with 2007, the company said. The company’s quarterly operating ratio soared to 104, the highest in the carrier’s history as a publicly traded company. Operating ratio was 95.5 in the 2007 quarter.

At Con-way Freight, daily tonnage hauled fell 7.7% year-over-year compared with the 2007 fourth quarter. Operating ratio for Con-way’s LTL division worsened to 101.4 from 92.6 in 2007. Net of the restructuring charge at Freight, operating ratio was 98.2, Con-way said.

At Old Dominion, daily tonnage fell 4.9% year-over-year in the 2008 fourth quarter, slightly less than the 6%-to-7% drop the company had projected.

Old Dominion’s quarterly operating ratio deteriorated to 93.2 from 91.6 a year ago.

In spite of the ongoing recession and the general freight drought, LTL pricing remained viciously competitive, executives said.

During Con-way’s quarterly earnings call, John Labrie, president of Con-way Freight, said he agreed with Dahlman, Rose & Co. analyst Jason Seidl, who said shippers were “trying to take advantage of a weak [LTL] marketplace.”

Pricing pressure was felt less keenly at Old Dominion.

Earl Congdon, Old Dominion’s chief executive officer, noted that “our pricing was relatively stable for the quarter, considering the competitiveness of the pricing environment.”

“We believe increasingly cost-conscious shippers are likely diverting freight to lower-cost LTL service providers such as ODFL,” said Justin Yagerman, an analyst with Wachovia Securities. “In addition, ODFL is also likely benefiting as shippers appear to be diverting freight from more highly leveraged LTL companies.”

YRC offered no discussion of pricing in its latest earnings report, which was released late Jan. 29 as Transport Topics was going to press.

Meanwhile, at least one privately held carrier signaled that the LTL pricing war is likely to continue into 2009.

Averitt Express, a Cookeville, Tenn., LTL, announced Jan. 29 that it will not institute a general rate increase in 2009.

YRC, Con-way, ABF, Old Do-minion and Averitt Express respectively rank No. 4, No. 6, No. 15, No. 20, and No. 26 on the Transport Topics 100 list of the largest for-hire carriers in the United States and Canada.