From SCDigest's On-Target E-Magazine
- Nov. 20, 2013 -
Logistics News: LTL Sector Results Continue to Improve in Q3, even as YRC Goes a Bit Wobbly Again
Profitability Continues to Grow, as Operating Ratios Fall; Are Looming Debt Payments a Big Problem for YRC Worldwide?
SCDigest Editorial Staff
The less-than-truckload (LTL) sector in the US has been challenged financially for decades, but in Q3 turned in another relatively (and we emphasize relatively) strong financial performance, even though the recovery story at YRC Worldwide now seems a bit wobbly.
SCDigest Says: |
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| The performance gap between the YRC Freight and YRC regional businesses is growing.
Freight had an operating ratio of over 100 (101.2%) in the quarter, versus just 95.5% for the regional unit. |
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What Do You Say?
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This is the last in our three quarterly reviews and comments across US transportation modes, following similar efforts for truckload carriers (see US Truckload Carriers Muster Decent Q3 Result Despite Lukewarm Freight Environment) and for the rail carriers (see Rail Carrier Profit Machines Keep Rolling Along in Q3).
This week, we analyze results and the relatively brief comments from the five public LTL carriers we follow, based on each of their Q3 2013 earnings calls.
Note we do not track major LTL service providers UPS and FedEx because they do not break out their results for LTL in a way that is amenable to our analysis.
In Q3, net income was up sharply for four of the five LTL carriers, including a rise of 114% at Akrkansas Best/ABF Freight. Conway Freight saw its operating income (not net income, which it does not report by segment) up almost 50% year over year, while Saia saw a jump in profits of more than 39%.
Still, the group as a whole saw net income fall 9.6% because of the loss $44 million for the quarter by YRC Worldwide, whereas it had a positive net income of $3 million one year ago.
Has the recent recovery of YRC, which narrowly avoided bankruptcy a couple of yeara ago, stalled or even reversed itself?
The bad quarter was mostly attributable to its YRC Freight group, versus its regional business unit, the company said.
"As a consequence of YRC Freight's performance, we made leadership changes in late September," the company said in its earnings call.
And YRC has more troubles ahead.
In early November, after the earnings call, YRC issued this terse press release: "Last Tuesday, YRC Worldwide management met with officials of local unions affiliated with the International Brotherhood of Teamsters (IBT). Since then, there has been an ongoing dialogue between the Company and the IBT. Today, we understand that local unions have indicated support for the Teamsters National Freight Industry Negotiating Committee (TNFINC) to begin discussions about the company's financial future."
What on earth does that mean?
A Kansas City area newspaper wrote that "Vic Terranella, president of Kansas City's Teamsters Local 41, attended the meeting [with YRC executives]. He said the company faces two big debts payments coming due in 2014 that it cannot finance."
The Kansas City Star more recently noted that YRC "wants 'flexibility' rather than more wage and benefits concessions from its Teamsters employees, according to an independent Teamsters group."
Regardless, it appears the YRC is asking the union to extend the significant concessions relative to wages and benefits it accepted a few years ago to keep the company afloat through 2019. Those concessions are currently set to expire in 2015.
YRC has not detailed what it means by achieving more flexibility, but chief financial officer Jamie Pierson recently said that "We operate in a non-union industry, and we need to be able to react quicker."ÂÂ
This all means the on-going YRC saga is certainly still not over.
Read more here: http://www.kansascity.com/2013/11/19/4634769/yrc-worldwide-not-after-more-pay.html#storylink=cpy
Operating ratios (operating expense divided by operating revenues, a key transportation sector metric) continue to fall for the group, though in general they remain much higher than truckload and rail carriers. Still, all five LTL carriers in our group had OR's of under 100%, a rarity not long ago but a growingly common occurence in recent quarters. The unweighted group OR average fell to just 93.2% from 94.5% in 2012.
But as usual, Old Dominion led the way, driving its operating ratio down to just 84.1%, more than 8 percentage points below is closest rival Saia. Old Dominion's tonnage was up 9.6% in Q3, versus small tonnage gains or losses at the other five carriers.
The full Q3 results summary can be found in the table below.
LTL Carrier Q3 2013 Results
| For Quarter Ending September 30, 2013 |
Data in $Thousands |
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| Carrier |
YRC Worldwide |
Arkansas Best/ABF* |
Old Dominion |
Conway** |
Saia |
Total Carriers |
| Total Operating Rev Including Fuel |
$1,252,700 |
$623,414 |
$616,458 |
$899,254 |
$293,087 |
$3,391,826 |
| Change 2013 from 2012 |
1.3% |
7.9% |
12.0% |
4.8% |
5.4% |
5.2% |
| LTL Tonnage (total is unweighted average) |
3.2% |
1.8% |
9.6% |
-1.4% |
1.5% |
3.2% |
| Net Income |
-$44,400 |
$13,982 |
$60,149 |
$51,570 |
$12,908 |
$94,209 |
| Change 2013 from 2012 |
Net Income of $3 Million in 2012 |
114.5% |
17.8% |
49.7% |
39.5% |
-9.6% |
| Net Income as % of Revenue 2013 (total is unweighted average) |
-3.5% |
2.2% |
9.8% |
NA |
4.4% |
3.2% |
| Net Income as % of Revenue 2012 |
0.2% |
1.1% |
9.3% |
NA |
3.3% |
3.5% |
| LTL Operating Ratio 2013 (total is unweighted average) |
98.8% |
96.3% |
84.1% |
94.3% |
92.5% |
93.2% |
| LTL Operating Ratio 2012 |
98.8% |
98.1% |
85.3% |
96.0% |
94.1% |
94.5% |
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| * Includes numbers from its Panther Express Unit, except for OR percents |
| ** The Conway numbers refer only to its LTL group, not the business as a whole, which includes Menlo Logistics, a truckload business, and other units |
| Conway Income Refers to Operating Income only for LTL Group, before other Expenses |
| that would be included in full net income number as is posted for the other carriers |
(Transportation Management Article Continued Below)
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