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YRC Worldwide reports a fourth-quarter profit despite distractions

Updated: 2014-02-28T03:27:36Z

By MARK DAVIS

The Kansas City Star

If only winter would end. Trucking giant YRC Worldwide Inc. says it has refocused on business after being distracted for months by its labor deal and debt refinancing.

The Overland Park-based company plans this year to bolster its fleet, invest in new technology and boost its workforce with the savings its efforts are beginning to show. If only winter would end.

Ice storms, heavy snows and frigid temperatures continue to knock YRC’s freight operations off their carefully timed schedules, executives said Thursday after releasing financial results for the fourth quarter and all of 2013.

YRC Worldwide posted a tiny fourth-quarter profit but lost $83.6 million during the year after posting a loss of $140.4 million in 2012.

The 2013 losses included setbacks in the summer months that were tied to the company’s effort to close some terminals and change routes to run more efficiently. The changes left some workers and equipment out of place, freight stacked up in terminals and schedules disrupted. Overtime and other expenses hurt financial results.

“It was definitely not one of our finer moments,” chief executive James Welch told analysts during a conference call Thursday.

He said those problems have been fixed and the system runs well when not disrupted by the weather. But each winter storm throws the cycle off again, and the company scrambles to catch up and restart the cycle.

YRC said winter’s financial impact this year already equals or may have exceeded the damage late last year.

Its fourth-quarter results also showed the effect of the extended effort to get the new labor agreement.

Welch said the company’s campaign was “no doubt a major workplace distraction as we held literally hundreds of meetings with our employees,” but the focus of workers and management has returned to improving the freight operations.

Still, customers took note as the company pleaded for more concessions from employees in the runup to a December union vote. The pact failed, but an altered proposal passed in January.

In the interim, shippers “were becoming concerned” about YRC’s future, said Darren Hawkins, who was named Thursday as the new president of YRC Freight, the company’s struggling national carrier. He had been its senior vice president of sales and marketing.

Hawkins said YRC Freight didn’t lose customers during the uncertainty, but shippers were less willing to accept higher prices. That has changed.

“Since Jan. 1, we’ve had 674 contract negotiations (with customers), which represents 16 percent of our total for 2014, and we’re running well above our internal goals,” Hawkins said.

YRC Worldwide’s financial report showed YRC Freight carried more tons of freight in the fourth quarter but collected less revenue per 100 pounds shipped. That means revenues essentially remained flat in the quarter when compared with a year ago.

Higher revenues from YRC Worldwide’s healthy regional trucking companies lifted combined sales to $1.2 billion, up 3.3 percent from a year earlier.

A large tax benefit in the recent quarter meant YRC Worldwide posted a net profit of $400,000. It reported a loss of $35.3 million in the last months of 2012.

YRC shares gained 14.9 percent after the report and call, climbing $3.37 and closing at $26. It was the highest closing price since August.

Markets reacted to management’s outlook for improving operations.

The new labor pact should shave $70 million off company costs, YRC said. A reduced debt burden frees up $40 million to $50 million that can be spent on something besides interest payments.

YRC Worldwide said it spent $137 million last year refurbishing trailers, rebuilding truck engines and leasing new equipment. It would not offer an estimate of fleet investments for this year.

Welch also said he expects more success attracting drivers now that the labor agreement is in place.

If only winter would end.

To reach Mark Davis, call 816-234-4372 or send email to mdavis@kcstar.com.

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