YRC Reduces 4Q Loss

This story appears in the Feb. 15 print edition of Transport Topics.

YRC Worldwide Inc.’s loss from operations narrowed in the fourth quarter to $95 million from $135 million a year earlier as Chief Executive Officer William Zollars said the less-than-truckload company would continue the improving trend this year.

“We continued our positive momentum in the fourth quarter,” Zollars said in a statement. “We entered 2010 on a more solid financial base with good momentum.”

He said he expected results to improve because shippers are bringing business back to YRC.

“We remain optimistic that we will continue to see more volume return to us over the weeks and months ahead,” Zollars said.

He would not estimate the dollar value or volume that business would increase, though he labeled the improvement as “pretty aggressive.”

Zollars said he expected first-quarter volume to surpass the national LTL’s 47,700 daily shipments in the fourth quarter. In the fourth quarter of 2008, YRC averaged 79,200 shipments daily.

The fourth-quarter volume was hurt by shippers’ concerns about YRC’s future in the days before the corporation completed a debt-for-equity swap in December, Zollars said.

YRC remains disciplined in its pricing, he said. “We refuse to chase bad business. We don’t want any empty calories in our network,” Zollars noted.

The company, which had said it could face bankruptcy if the swap wasn’t successfully completed, extended the tender offer several times to obtain sufficient note holder approval.

One-time charges and gains affected quarterly results in both 2010 and 2009.

The $135 million loss in the fourth quarter of 2008 excluded one-time charges of $200 million, the company announced Feb. 5.

Because of the debt-for-equity swap, YRC reported a gain of $194 million and a pre-tax profit of $49.8 million.

Zollars said during a conference call that he expects results using a different financial measure — earnings before interest, taxes, depreciation and amortization, or EBITDA — will be positive in the second quarter.

Based on EBITDA, YRC lost $22 million in the fourth quarter. The operating loss of $95 million for the quarter did not include interest, taxes, depreciation and amortization.

The fourth-quarter results also did not include any taxes or per-share measurements, Chief Financial Officer Sheila Taylor said, because of the complexity of tax-related issues that were raised in the December debt-for-equity exchange (click here for previous story).

Because of that debt-for-equity agreement, YRC plans to do a reverse stock split meant to boost its value. Shareholders are scheduled to vote Feb. 17 on whether to approve that step.

The number of shares expanded when $536.8 million in debt was exchanged for equity, leaving debt-holders in control of 94% of the company’s shares.

Fears about YRC’s cash position have eased, an analyst said.

“Barring another economic downturn or YRC Worldwide execution issues, the company appears to have enough liquidity to carry it into 2011,” Jon Langenfeld, a senior analyst for Robert W. Baird & Co., said in a report.

The company ended the quarter with $98 million in cash after using $70 million during the quarter.

However, because of the debt-for-equity exchange, YRC now can use up to $160 million in a line of credit.

The company also expects $85 million in a tax refund from the federal government during the first quarter to bolster its finances.

The refund results from tax law changes in the 2009 economic stimulus bill that allowed companies to apply 2009 losses to prior-year taxes when they were profitable.

The fourth-quarter results also showed a change in two longstanding industry rankings — YRC’s size and its operating ratio.

The company’s LTL business, which had been the nation’s largest by revenue and in 2007 topped $2.4 billion in quarterly revenue, fell to $1.04 billion.

YRC ranks No. 4 on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers.

That total lagged behind the FedEx Corp. freight unit’s total of $1.07 billion for its fiscal second quarter, which ended Nov. 30.

YRC’s revenue decline resulted from the restructuring of its national LTL business and lower revenue, rates and shipments over the past year. In the fourth quarter of last year, revenue was $1.77 billion.

While YRC at least temporarily lost its standing as the largest LTL carrier, its fourth-quarter results produced an LTL operating ratio of 109.1, which was no longer the worst among publicly traded carriers. Arkansas Best Corp.’s ABF Freight System posted a 109.3 fourth-quarter operating ratio.

For the quarter, YRC’s shipment totals fell 40% at the national unit, and revenue per hundred pounds of freight slid 4.2%. At the regional unit, volume fell 20% and rates dropped 7.7%.

Revenue fell 45% at the national LTL unit to $743.7 million. The national LTL business now has 360 terminals — less than half its total two years ago, when Yellow Transportation and Roadway were separate businesses.

The national LTL unit lost $89.9 million from operations.

Regional trucking had a $4.5 million loss from operations as revenue dropped 31% to $290.8 million.

Chief Operating Officer Timothy Wicks said during the conference call that the company expects to achieve $200 million in administrative savings by the middle of this year — six months earlier than its plan.