YRC Worldwide ended the third quarter with $1.25 billion in revenue, a 1.3-percent, year-over-year increase, but the company saw consolidated operating income fall by $21.5 million during the same time frame.
Adjusted earnings before tax fell by $16.4 million from the third quarter of 2012.
James Welch, chief executive officer of YRC Worldwide, pointed to YRC Freight as the primary driver of the poor results. An increase in weight-per-shipment, coupled with a loss in volume helped drag down performance, but Welch also said labor-related issues also played a factor.
“During the quarter, the YRC Freight network was 'out of cycle,' which caused our service to decline in certain lanes. Additionally, due to summer vacations and the movement of drivers resulting from the network optimization, we were short drivers in certain terminals, which obviously impacted service in those areas,” he said in a statement. “The shortage also resulted in higher-than-expected overtime pay, increased purchased transportation in certain lanes, and lower productivity.
YRC lost $152 million during 2012, and the first half of this year resulted in a loss of $54 million, according to the materials. And as a result of its current debt situation, YRC said its stock price has declined by 75 percent since July.
Negotiations between YRC Worldwide and the International Brotherhood of Teamsters are officially on, as the carrier is looking for a new five-year contract, which would help stem its losses and reduce its debt, to be voted on by the end of December.
The deal, which would cover 32,000 union workers, would help YRC achieve significant cost savings, but according to the carrier, it would also include future wage and benefit increases.
According to the website Teamsters for a Democratic Union, during an initial meeting between the parties on Nov. 5, Welch told Teamsters officials that YRC desperately needed to refinance its debt to take advantage of lower interest rates. YRC officials also said they have a $69 million debt payment due February 15, and to get proper refinancing, a new contract would need to be in place by that deadline.
In a letter to teamsters, Welch said the carrier needs to renegotiate its contract early due to “numerous missteps made prior to 2011 by YRC Worldwide’s previous management” that resulted in a current debt load of nearly $1.4 billion. He added that the large debt amount leaves no cash for investment after all of the carriers operating expenses are paid. The letter included materials that put YRC’s annual debt interest payments at more than $150 million.
“In the past, some companies in our position have simply declared bankruptcy,” he wrote. “We have all worked too hard and sacrificed too much to go that route and lose some of the industry’s best jobs. The better path is to refinance the debt before the due dates are upon us. In doing so, we should be able to improve our cash flow and be in a far better position to invest in the company and compete in an industry that is now dominated by non-union LTL companies.”
This refinancing comes with a timeline. According to YRC, it takes 90 days to fully refinance debt, so the process has to begin on Nov. 15 in order for it to be complete by the time the first debt payment is due.
Even with a tight deadline, it seems wise that YRC started negotiations with the Teamsters as soon as it could. Arkansas Best recently experienced a protracted negotiating process and a strike threat by employees before obtaining a new freight contract. During that process, it was announced that YRC Worldwide made an unsolicited overture to acquire ABF, a move that was not taken well by ABF employees.