YRC Posts Improvement in Quarterly Results

This story appears in the Oct. 25 print edition of Transport Topics.

YRC Worldwide Inc.’s third-quarter financial results improved on both a year-over-year basis and from the second quarter of 2010, the less-than-truckload company said last week, reporting that tonnage improved and operating losses declined.

Meanwhile, YRC, whose Teamsters union-represented employees are voting to ratify a third set of wage and pension cuts, said it would end the separate operation of its New Penn regional unit if the concessions are rejected.

While the LTL giant’s financial position improved in the third quarter, one analyst said the company “still faces meaningful challenges,” including potential higher costs if union employees turn down the concessions Teamsters leaders agreed to last month (click here for previous story).

The new set of concessions would extend a 15% wage cut until 2015 and include a restoration next year of just 25% of pension contributions that the company has halted. YRC committed itself to raising $300 million in new investment.

The company expects the package to save $350 million annually; results of the union vote are due on Oct. 28 or Oct. 29.

While union members were deciding how to vote, YRC last week sent a letter to Teamsters leaders saying that the carrier couldn’t afford to continue the New Penn regional unit of YRC as a separate operation if the concessions are rejected.

In the letter, Jack Peak, YRC senior vice president, said the company would start a formal change of operations to integrate New Penn into YRC’s other operations in the Northeast, which could result in terminal closings and job losses. “I am hopeful that this proposed change of operations will not be necessary,” he wrote.

The Teamsters union acknowledged it had received the change of operations proposal but had no further comment; YRC did not respond to requests for comment.

Company earnings before interest, taxes, depreciation and amortization, abbreviated as EBITDA, totaled between $42 million and $46 million last quarter, YRC said on Oct. 18. That performance bettered the EBITDA of $39.9 million in the second quarter and a loss of $70.6 million on that basis in the prior-year period.

However, “YRCW still faces meaningful challenges” including the potential for increased pension and lending costs if union members turn down the latest round of cuts, said Jon Langenfeld, an analyst at Robert W. Baird & Co.

YRC said on Oct. 21 it has renewed its asset-backed securitization agreement that allows the carrier to borrow money secured by its equipment and facilities. As part of the new agreement, which extends until Oct. 19, 2011, YRC said it repaid some deferred interest and fees, while others will be deferred until March 2011.

Under previous union concessions, YRC, Overland Park, Kan., won’t have to make any pension contributions through the end of this year, and it also is benefiting from lenders’ forgiveness of some interest.

YRC’s third-quarter operating loss ranged between $18 million and $22 million, better than both the $34.7 million in the second quarter and $126.6 million in the third quarter of last year.

Operating losses include depreciation and amortization.

Operating ratio was improved to a range of 101.6 to 101.9 from 103.1 in the second quarter of this year and 110.5 in the third quarter of last year. The company ranks No. 4 on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers.

Langenfeld noted that the company is losing market share because of volume declines at its national unit.

Tonnage per day was 1.2% better than in the second quarter at the national unit and improved 2.1% at YRC’s regional business. On a year-over-year basis, tonnage per day slipped about 15% at the national unit and rose about 8% at the regional unit.

More detailed financial results, including net income, are scheduled to be released on Nov. 5.