YRC Worldwide counts savings from refinancing debt, but storms curb progress
02/14/2014 8:53 PM
02/14/2014 8:53 PM
Labor deal? Done. Debts settled? Done. Weather? Done in.
So goes 2014 at trucking giant YRC Worldwide Inc.
Already this year the Overland Park company worked out a labor agreement with the International Brotherhood of Teamsters. And that led lenders to agree Friday to a five-year reprieve on looming debts the company couldn’t repay.
Amid it all, Mother Nature pounded the company’s fleet, docks, drivers and loaders.
“January and February have been miserable,” chief executive James Welch said Friday.
The weather has hit YRC’s efforts to smooth the operation of its reconfigured network of terminals and shipping routes. Intended to save money, the reorganization instead hurt YRC’s third-quarter financial results because the changes weren’t working quite as planned.
“We had made a ton of progress up until about December,” Welch said of the reconfiguration. “Since December, it’s been hard to keep the network in cycle, in a repeatable rhythm with all these snowstorms.”
Welch said winter traditionally throws the industry for a loop in one part of the country or another — the Northeast one time, the Midwest another. Not this winter.
“Someplace in our network, since Dec. 4, has been affected almost on a daily basis. It’s just crazy,” Welch said. “These storms have just come sweeping across the country.”
Welch declined to say what effect the weather would have on the company’s financial results this year. The company plans to report its numbers for the last three months of 2013 on Feb. 27.
In something of a preview, Welch said the company suffered no loss of business while it struggled to complete a labor agreement with the Teamsters. During the effort he had called the pact critical to the company’s future, telling employees that all YRC jobs rested on the vote, not just theirs.
A first vote on a company proposal failed early in January before the Teamsters approved a negotiated pact late in January.
Analysts had speculated that the failed vote might have allowed rival trucking companies to pick off shippers that use YRC.
“Our customers stuck with us,” Welch said.
YRC Worldwide’s fortunes improved dramatically with the new labor terms and debt financing.
The company cut its interest costs between $40 million and $50 million a year by refinancing more than $1.1 billion in debts this week.
The trucking company said its new credit arrangements mean it faces no debt due dates until March 2019.
Lenders agreed to extend the debts after the company’s Teamsters employees agreed to an extended 15 percent pay cut that began in 2009, reduced pension contributions and other concessions into 2019. The revised labor pact added new concessions as well.
Savings and stability in the company’s labor costs and financing arrangements for the next five years give it time to improve operations at its struggling national carrier, YRC Freight.
Shares of YRC gained 8 cents Friday and closed at $21.03.