The trend of year-over-year tonnage improvement from the less-than-truckload (LTL) carriers in August ends with YRC Worldwide’s (NASDAQ: YRCW) midquarter report. In a press release issued after the market closed on Wednesday, the company reported that tonnage declines actually accelerated during the quarter, down 6.4% in August, following a 4.3% decline in July.
The report was worse than the updates from competitors Old Dominion Freight Line (NASDAQ: ODFL) and SAIA (NASDAQ: SAIA), which reported August tonnage increases of 2.4% and 0.5%, respectively. Before the market opened on Wednesday, ArcBest Corp. (NASDAQ: ARCB) reported a total tonnage-per-day increase of 3.5% for August, with LTL tonnage up by a high-single-digit percentage.
For the first two months of the third quarter, YRC’s shipments per day were down 7.6%, which was partially offset by a 2.4% increase in weight per shipment compared to the same period of 2019. Revenue per hundredweight, or yield, is down 4.9% quarter-to-date.
The implied revenue decline quarter-to-date is in excess of 10% year-over-year, worsening as the quarter progressed. The carrier’s peers reported flat to slightly better revenue for the month of August.
The results for the quarter may not matter all that much to investors as the carrier advances its turnaround, following a $700 million lending package from the federal government.
Terminal consolidation moves forward
Recent posts on truckingboards.com show change-of-operations notifications have been issued at a couple of YRC’s facilities.
In an Aug. 25 letter to Teamsters National Freight Director Ernie Soehl, the carrier said it was formally filing for a change of operations under the national master freight agreement to make the distribution center in Memphis, Tennessee, a containerization location. The letter stated that rail freight at the facility will need to be placed into containers as procedure changes at Class I railroad BNSF Railway (Berkshire Hathaway, NYSE: BRK.B) will no longer allow the shipment of trailers on railcars.
YRC said it had already purchased 640 containers so far and plans to add 340 more in the “very near future” to accommodate the change. The operation is expected to handle 500 shipments daily.
The message boards also showed notifications that YRC Freight terminals in Des Moines, Iowa, and Lexington, Kentucky, will be merged into existing Holland service centers in those respective markets. No indication as to the number of employees impacted by the changes was provided.
In an email to FreightWaves, YRC said, “we do not comment on pending change of operations.”
Overhaul taking shape
The announcements advance the carrier’s corporate overhaul, which is designed to market all five of its brands under one umbrella, operating on one network. The facility rationalization will also eliminate redundancy, improve density, cut costs and free up capital.
In the past, it wasn’t uncommon for the carrier to have two of its companies operating independently out of the same facility. However, the ratification of its new labor agreement a year ago has provided the company with more flexibility around operations and work rules.
YRC started the year with 351 facilities, shuttering 16 by the close of the second quarter. Those consolidations complemented similar efforts made last year, which resulted in the elimination of approximately 25 terminals. On their Aug.3 second-quarter call, management said they plan to trim a few more by year-end, bringing the total network to roughly 325 service centers.
Another key cog in the turnaround is the second tranche of the $700 million package it received from a lending program set up under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The $400 million allocation provides YRC the capital needed to update its older tractors and trailers, which have been a cost headwind.
Management said they expect to see cost savings of roughly $10,000 per replaced tractor annually as the cost profile for expense lines like maintenance, fuel and insurance improve. Additionally, the savings in owning versus leasing, and improved vehicle up time are expected to be tailwinds to operating results.
While the company has moved forward with deploying funds from the first tranche of the loan package, which were allotted for the repayment of deferred health, welfare and pension payments, the second tranche hadn’t been accessed as of the company’s second-quarter report.
The loan to the carrier, which was identified as “critical to maintaining national security,” still has some lawmakers questioning the rationale behind the deal. The congressional commission overseeing the distribution of federal funds allotted by the CARES Act still has several questions out to the Treasury and Defense departments.