It’s been a long time since “YRC Worldwide” and “profit” could be mentioned in the same breath. Although the troubled company is still far from being in the black, its $15.5 million second quarter operating profit is a milestone worth noting.
The $4.9 billion less-than-truckload operator, which has suffered more than $3 billion in losses since 2006, hasn’t had a consolidated operating profit attributable to actual financial results from its freight operations since the third quarter of 2008 — a period that seems almost antedeluvian today.
In the second quarter, YRC Worldwide narrowed its net loss by 47 percent to $22.6 million. The company reported a $48.8 million net loss in the first quarter, a 35 percent year-over-year improvement.
The holding company's liquidity under its $400 million asset-based loan facility was $248.7 million, its highest second quarter liquidity level since 2008 and an increase from $240.7 million at the end of the first quarter. For the first six months of 2012, cash used in operating activities, totaled $16.6 million, compared with $61.3 million in the year-ago quarter.
Good news for YRC? Yes, but they’re not breaking out bottles of champagne at the company’s Overland Park, Kan., headquarters. “We’re doing better, but we’re still not satisfied with the overall results,” James Welch, CEO, said in an interview Friday.
“Our regional carriers are performing very well,” he said. “That really drove a lot of our improvement” in the second quarter. The regional carrier group increased its operating profit in the quarter 55 percent from a year ago to $22.9 million.
Holland, New Penn Motor Express and Reddaway increased their combined revenue 7 percent from a year ago to $429.8 million. Tonnage and shipments rose 4.4 percent and 2.5 percent, respectively. Weight per shipment increased 1.9 percent.
In the first quarter, the $1.6 billion regional group increased revenue 9.8 percent from a year ago to $402 million, boosting net profit to $11.4 million. The carriers had an annual profit of $32.9 million in 2011 and a $3.1 million profit in 2010.
Michigan-based Holland recently announced plans to hire 450 drivers to meet growing demand that is “knocking some of the rust off the Rust Belt,” President Scott Ware said. The trucking company hired 750 drivers in 2011 and 300 earlier this year.
“I can’t say enough about how the regionals have performed,” Welch said. However, long-haul YRC Freight, “while getting better, is still not performing like we want it to,” he said. “We’re continuing to push change at the company.”
YRC Freight reengineered its LTL network late in the first quarter, speeding transit times in about 24,000 lanes and reducing freight handling in transit. “I’m pleased with the effort but just not satisfied we’re doing it quick enough,” Welch said.
The nationwide LTL carrier saw revenue decline 0.7 percent year-over-year in the quarter to $821.1 million as tonnage dropped 3.3 percent, shipments fell 2.1 percent and weight per shipment decreased 1.2 percent from the year-ago quarter.
Welch attributed the drop in tonnage and shipments partly to a slower economy and partly to efforts to cull less profitable freight from the long-haul carrier’s network.
“Our mix of freight at YRC Freight was definitely not what we needed it to be,” he said. “We have made some decisions to exit business that didn’t fit what we are all about” — a tough call for a carrier trying to rebuild volume and market share.
The company implemented a new pricing and costing system in March that Welch hopes will help it improve its freight mix and increase profitability over time.
YRC Freight posted an operating loss of $5.1 million, compared with a $6.6 million operating profit a year ago. The company had expenses, such as pension payments, it didn’t have a year ago, putting pressure on its bottom line, Welch said.
Both YRC Freight and the regional carriers improved their revenue per hundredweight, or yield, a measure of pricing and surcharges. YRC Freight’s yield rose 2.9 percent year-over-year and the regional group’s yield 2.4 percent.
YRC Freight was one of several LTL carriers to raise general tariff rates on non-contract business between 4.9 and 6.9 percent on average this summer. Price increases to date in 2012 “seem to be sticking pretty well,” Welch said.
“It’s still pretty stable pricing environment,” Welch said. “We’re not seeing irrational activity on the part of our competition and that bodes well for the industry.”
To a large extent, that rationality is due to YRC Worldwide’s survival. Instead of the kind of battle for market share witnessed after the collapse of Consolidated Freightways in 2002, LTL carriers are focusing on shoring up their own profitability.
That type of rational self-restraint, uncommon in trucking historically, is likely to continue as long as the recovery chugs or crawls forward. “I think it’s going sideways right now,” Welch said of the economy in the early third quarter.
“I’ll be curious to see what happens as the traditional seasonal holiday stocking begins,” he said. “The next three months will tell us a lot about the economy.”