Rough winter weather, labor talks throw YRC units for loss in first quarter

No one welcomed the warmer spring temperatures more than management and employees at YRC Worldwide, parent of the fourth- and seventh-largest trucking entities in the Less than Truckload (LTL) environment.

And warmer relations with its 24,000 or so Teamsters-covered employees might also help thaw ice-cold profitability. For the quarter, YRC lost $49.1 million compared with a loss of $14.6 million in the year-ago quarter.

YRC reported consolidated operating revenue for first quarter of $1.182 billion and a consolidated operating loss of $31.7 million, which included a $1.6 million net loss on property disposals.  By comparison in the year-ago quarter, YRC posted operating revenue of $1.215 billion and consolidated operating loss of $4.3 million. That loss included a $3.2 million net loss on property disposals.

Darren Hawkins, YRC Worldwide CEO, said in a statement that his company’s “primary focus” in the first quarter was securing a new labor agreement that was scheduled to expire on March 31. On May 3, YRC employees approved the national agreement and 26 of the 27 applicable supplemental agreements, he said.

That agreement, which includes $4 an hour raises over five years, is expected to cost the company approximately $1 billion over the term. YRC Teamsters approved the pack 60% to 40% margin. But the contract will not go into effect until the YRC Freight Teamsters Joint Council 40, which rejected the contract, has the required votes.

“Leading up to the approval of the five-year agreement, we experienced the effects of some customer concerns around the uncertainty of the negotiations process,” Hawkins said. “While we cannot precisely quantify the revenue loss related to the labor agreement, our first quarter results were adversely impacted.

“We believe the new labor agreement provides both long-term value and opportunity for our employees, our customers, and our shareholders and it will be our number one priority to execute on the new contractual operational capabilities,” Hawkins added.

Hawkins added that YRC freight operations were negatively impacted by severe winter weather events. Hawkins said about half of the 63-day quarter was impacted by weather events for both YRC Freight and it largest regional carrier, Michigan-based Holland, resulting in limited or closed operations across our 384-facility network. Holland was significantly impacted during a two-week period in late January, in which more than 25% of its network was “down or severely limited,” he said.

That took a toll on long-haul YRC Freight’s operating ratio as well as for its three regional LTL subsidiaries—Holland, New Penn and Reddaway. YRC’s first quarter OR was 102.8, compared with 100.9 a year ago. At the regionals, YRC posted a 101.6 OR, compared with a 98.9 OR in the first quarter of 2018.

Revenue per hundredweight (including fuel surcharges) was up in the first quarter at both long-haul and regional operations, YRC said. YRC Freight enjoyed revenue per hundredweight of $25.58 (compared with $24.94 a year ago, a 5.4 % increase) and the regionals had $14.59 CWT compared with $14.06 in the year-ago first quarter, a 3.8% increase.

“As we move through 2019, we will continue to prioritize yield over tonnage,” Hawkins explained. “At the very core of our 2019 strategy is network optimization.”

Hawkins said the network initiative has multiple layers – with primary objectives of enhancing service, creating opportunities for productivity improvements, and streamlining our cost structure as we seek to eliminate inefficiencies across the network, providing the potential for revenue growth and margin expansion, he said.

First quarter 2019 LTL tonnage per day decreased 5.8% at YRC Freight and decreased 7.5% at YRC’s regional segment compared to first quarter 2018. Also, the company said total shipments per day for the first quarter 2019 declined 4.1% at YRC Freight and 7.6% at the regional segment.