Yellow | Amid Losses, Yrc Looks For ‘green Shoots’

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Amid losses, YRC looks for ‘green shoots’

William B. Cassidy, Senior Editor | Feb 10, 2020 4:16PM EST



YRC Worldwide will continue to streamline its network in 2020, company executives said. Photo credit: YRC Worldwide.

YRC Worldwide is hoping recent signs of a US manufacturing revival foretell a developing tailwind and not just a few sporadic gusts of economic activity. The less-than-truckload (LTL) operator blamed last year’s manufacturing slump for a decline in freight volumes, revenue, and profits that made 2019 its most difficult year since it first returned to profit in 2014.

The holding company reported a $104 million net loss on $4.87 billion in revenue for 2019, its largest net loss since running $136.5 million in the red in 2012. Revenue slipped 4.3 percent for the year, while tonnage per day dropped 5.8 percent compared with 2018 at both national LTL carrier YRC Freight and YRC’s three regional carriers, Holland, Reddaway, and New Penn.

In the fourth quarter, YRC Worldwide reported a net loss of $15.3 million on $1.16 billion in operating revenue. YRC Freight revenue dropped 7 percent to $740.9 million, as LTL tonnage per day fell 6.6 percent and shipments per day dropped 8.5 percent. The national LTL carrier had an operating profit of $11.8 million, giving it an operating ratio of 98.4 percent.

YRC's regional carriers saw revenue decline 7.2 percent to $418.7 million in the fourth quarter, while LTL tonnage per day dropped 7.4 percent and shipments fell 7.9 percent. The regional group eked out a $3.7 million operating profit in the quarter and had an operating ratio of 99.1 percent.

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The decline in volumes across the LTL landscape and especially at YRC Worldwide’s four asset-based subsidiaries puts more emphasis on the company’s ongoing reorganization, which includes a back-office consolidation and streamlining of its asset-based network. YRC Worldwide consolidated 25 terminals last year and will close an additional 25 this year.

“We’re not wavering,” CEO Darren Hawkins told Wall Street analysts in an early February call. But the industrial market slowdown and the decline in freight volumes “certainly impact the timeline” for achieving the $60 million to $80 million in margin improvements YRC Worldwide hopes to see from its reorganization 2020, Hawkins said. An additional $25 million in cost reduction “is in play,” he added.

“We will remain lean until we see more green shoots than we've seen so far in January,” Hawkins said during the earnings call. January was “less worse” than the fourth quarter for YRC Freight, with preliminary data showing that LTL tonnage per day was down only 0.8 percent from a year ago, CFO Jamie Pierson told investment analysts on the call.

“From our perspective,[it was] a pretty good reversal in the month of January,” after a 6.6 percent decline in tonnage at YRC Freight in the fourth quarter, Pierson said.

“It’s certainly encouraging, but there’s a lot of winter left,” added Hawkins. “We'll keep the operations tight and we'll add back headcount only when it's justified by expanding shipment and tonnage levels.”

‘Green shoots’ in US manufacturing

The “green shoots” YRC executives saw in January were pushed up by an improvement in manufacturing noted by the Institute for Supply Management (ISM) Purchasing Managers Index (PMI). The ISM PMI rose from a revised reading of 47.8 in December to 50.9 in January, signaling a return to industrial expansion after five months of contraction, starting last August.

The ISM report for January showed new orders and production increasing, with factory backlogs shrinking. The ISM’s New Export Orders Index leaped from a reading of 47.3 in December to 53.3 last month, while the ISM Imports Index rose from 48.8 to 51.3. Manufacturing inventories also dropped in January, according to ISM, as companies dug deeper into stockpiled goods.

The January improvement brought the ISM PMI closer to the IHS Markit PMI, which has shown moderate to “subdued” expansion on the manufacturing front over the past six months, rather than contraction. The January PMI from IHS Markit, the parent company of JOC.com, dropped from 52.4 in December to 51.9 in January, amid slowing export orders, the company said.

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“Manufacturers registered a slower and only mild increase in new orders at the start of 2020,” IHS Markit said in a statement. “Although firms stated that the upturn stemmed from greater client requests, the pace of growth was the softest for three months.” Domestic manufacturing demand continued to rise, however, and that’s good news for YRC Worldwide and LTL carriers.

Cutting another 25 terminals

In the meantime, YRC Worldwide will stick to plans to reduce the number of terminals in its network and share more of those terminals among its four LTL brands. The company now has 351 terminals, Hawkins said. He insisted YRC’s brands aren’t about to change — or be merged. “The brands are where the value is,” he said in the earnings call, transcribed by Seeking Alpha.

Hawkins pointed to steps YRC Worldwide took to shore up its operations in 2019, including the ratification of a new five-year labor contract with the Teamsters union and refinancing under more flexible terms with its lenders. The corporation reorganized its enterprise-wide salesforce and its leadership team, streamlining the flow of management reporting from its companies.

In 2020, the company will focus on optimizing its operations and consolidating all of its information technology systems onto one platform. The goal, Hawkins said, remains to provide access to five brands — the four carriers and HNRY Logistics — through one network. Those plans are designed to drive costs down and to build freight density among YRC carriers.

“We're a lean organization at the right time, and we will certainly stay lean until we see volumes return to a more normal state or even less bad, if you will,” Hawkins said.

Contact William B. Cassidy at [email protected] and follow him on Twitter: @willbcassidy.

https://www.joc.com/trucking-logist...losses-yrc-looks-‘green-shoots’_20200210.html
:bananapartyhat:
 
“We're a lean organization at the right time, and we will certainly stay lean until we see volumes return to a more normal state or even less bad, if you will,” Hawkins said.

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:chairshot:
 
When Zollars took over Yellow, this started partner.
Hoffa let it happen shame on him and Zollars!

Imagine if Yellow never bought Roadway or Holland all 3 companies would still be paying full rate and pension plus UPS would still be in Central States too?
 
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