A long line of people thought last Friday would never come, the day when YRC Worldwide, the less-than-truckload operator that racked up billions of dollars in losses over the past five years, reported an actual quarterly net profit.
YRC Worldwide had a $3 million net profit for the third quarter, its first net gain since the third quarter of 2008, excluding two quarters when the company reported profits propped up by debt-for-equity deals. The last time YRC Worldwide had a net profit from actually hauling freight, George W. Bush was president, the economy was shrinking, and banks were toppling like dominoes on Wall Street.
What’s dropping now are the jaws of those who thought YRC Worldwide was a dead company in 2009 or 2010, when what was once the largest U.S. trucking firm had nine-figure quarterly losses and burned through piles of cash. Since 2006, YRC Worldwide has lost more than $2.9 billion and shed $5.6 billion in revenue.
Never has a trucking company lost more money and market share and lived to truck again. YRC Worldwide’s slim third-quarter net profit, along with two consecutive quarterly operating profits, is a sign the company’s slow recovery is gaining traction.
For that recovery, the carrier and its customers should thank: 1) The support of YRC’s Teamster employees, who accepted deep wage and benefits cuts; 2) the flexibility of YRC’s lenders, who now own a majority stake in the company; and 3) the reorganization of YRC since last July under new CEO James Welch.
Welch insists YRC Worldwide still has a long way to go before “recovery” can be declared. “I’m encouraged but clearly not satisfied with the results,” he said in an interview today. “I’m very pleased with the regional carriers. They’re providing best-in-class service. The attention and focus still has to be on YRC Freight.”
YRC Worldwide’s return to profitability is the climax of a quarter in which some LTL carriers saw profits decline while others roared ahead. The financial performance of companies such as Old Dominion Freight Line, Roadrunner Transportation Systems, Saia and YRC should tell less fortunate competitors, “It ain’t the economy, stupid.”
Welch acknowledges his company’s performance is noteworthy largely because YRC barely survived several brushes with bankruptcy. “More should be expected of YRC Worldwide than other carriers. We had the most opportunity to improve.”
Much of that improvement is coming from YRC’s regional carriers — Holland, Reddaway and New Penn — which account for about a third of the holding company’s $4.9 billion annual business. The regional group has been profitable the past two years, with a consolidated operating profit of $32.9 million in 2011.
In the third quarter, the regional group more than doubled its operating profit, raising it to $27.2 million, compared with $12.4 million a year ago. Revenue increased 3.1 percent to $417.3 million, despite a slight increase in daily tonnage and a slight decrease in shipment count per day. Revenue per hundredweight, or LTL yield, rose 2.9 percent, while revenue per shipment was up 3.6 percent.
“Arguably, the regional carriers put forward the best operating ratio, 93.5 percent, other than Old Dominion in the LTL sector,” said Welch. (ODFL’s third quarter operating ratio was 85.1. FedEx Freight, the largest U.S. LTL carrier, had an operating ratio of 93.6 in its latest quarter, which ended Aug. 31.)
YRC Freight also turned a corner in the third quarter, reporting an operating profit — $2.8 million — for the first time in four years, bringing its operating ratio down to 99.7. That’s despite a 2.6 percent year-over-year drop in revenue to $819.5 million, a 4.6 percent decline in daily tonnage and 4.5 percent fewer shipments per day.
That speaks to better operational management of the carrier under President Jeff Rogers, picked by Welch to lead YRC Freight’s reorganization last year.
“You really can’t isolate the third quarter” when looking at YRC Freight, Welch said. “You have to go back to this time last year to see how it’s improved.”
Landmarks Welch cited include building a separate management team for YRC Freight; renaming the carrier, previously just called YRC; improving freight mix and pricing; reorganizing its terminal network to reduce freight handling and transit times; and improving safety to reduce claims. “It’s a culmination of a lot of things.”
There’s more to do, he said. “The network adjustment unfolded a little slower than we expected. We still have adjustments to make at YRC Freight and we’ll continue to make those adjustments until we’re satisfied we’ve got the right network in place.”
Welch may never be entirely satisfied, he admits, “but I’m often encouraged.”