YRC Worldwide loss widens in Q2, but ‘a new day’ is on the way

YRC Worldwide, whose four operating trucking company units control 10% of the $46 billion less-than-truckload (LTL) sector, continued to lose money in the second quarter.

But those losses may soon be a thing of the past. YRC, citing its strategic position as a key carrier for the Defense Department, recently secured $700 million in financial aid from the federal government in exchange for a 30% stake in the company.

YRC lost $37.1 million in the second quarter on revenue of $1.015 billion, compared with a $23.6 million loss on $1.273 billion in the year-ago second quarter. Operating loss was $4.6 million, which included a $6 million net gain on property disposals. By comparison, operating revenue in the second quarter of 2019 was $1.273 billion and operating income was $14.3 million, which included a $6.2 million net gain on property disposals.

On July 7, YRC successfully secured a loan from the Treasury Department for up to $700 million under the CARES Act. The significant terms of the loan are:

• Tranche A of up to $300 million to satisfy previously deferred short-term contractual obligations such as healthcare payments and some lease obligations with the remaining amount going to fund an increase in liquidity; and
• Tranche B of up to $400 million to reinvest back into the business via purchases of tractors and trailers, which YRC says it intends to pay the government back

“It is a new day at YRC Worldwide,” YRC CEO Darren Hawkins said in a statement.  “During this pandemic and historically difficult economic backdrop, we were able to secure financing that not only took care of our employees’ healthcare coverage but also will allow us to significantly upgrade the condition, age and efficiency of our rolling stock.”

Hawkins said YRC was also able to gain additional covenant relief and maturity extension of other substantive debt instruments “simultaneously.”

But some are questioning YRC’s fitness for the loan. The Congressional Oversight Commission is looking into whether YRC is that essential. There’s no question YRC is well-connected in Washington. Its largest shareholder is Apollo Global Management, a private equity firm with close ties to Trump administration that also has lent money to a company controlled by Jared Kushner, son-in-law of President Donald Trump.

YRC volumes declined year-over-year in the second quarter. However, after bottoming out in April, Hawkins said volumes have “steadily improved” through the quarter with rate of improvement slowing since late June. 

“I would like to say the worst is behind us, but this virus and the spread thereof is too unpredictable,” Hawkins added.

To that end, YRC built liquidity which allowed it to improve its cash position and end the quarter at just over $300 million in liquidity, the company said. YRC has outstanding debt of $909.8 million, an increase of $44.8 million compared to $865 million as of June 30, 2019.

Operationally, YRC continued to erode with a consolidated operating ratio for the quarter of 100.5 compared to 98.9 in 2Q19. LTL revenue per hundredweight including fuel surcharge decreased 5.7%.

But weight per shipment increased 1.4% resulting in a LTL revenue per shipment decrease of 4.4% when compared to the same period in 2019.  Excluding fuel surcharge, LTL revenue per hundredweight was down 2.6% and LTL revenue per shipment was down 1.2%. LTL tonnage per day decreased 14.8% when compared to 2Q19.