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YRC Finally Figures Out How to Make Money Rather than Lose It

Feb. 14, 2013
It took six long years, but LTL carrier YRC Worldwide has finally had a profitable year.

Think back to December 2006. George W. Bush was President. The iPhone hadn't even hit the market yet, and nobody had ever even heard of an iPad. The top movies were “Casino Royale,” “Happy Feet” and “Borat.” On TV, new shows that had made their debut that fall included “30 Rock,” “Friday Night Lights” and “Ugly Betty.” The St. Louis Cardinals had beaten the Detroit Tigers in the World Series. The University of Florida would soon play (and defeat) Ohio State for the NCAA football championship. If you can remember that far back, then maybe you can also remember YRC Worldwide’s year-end results because that was the last time the national LTL carrier reported a profitable year. Until now, that is.

For the year ended December 31, 2012, YRC reported operating revenues of $4.8 billion. Although that was actually a slight 0.4% dip from 2011 revenues, when the company had revenues of $5.0 billion, it translated into operating income of $24.1 million, a significant jump from the $138 million loss YRC posted in 2011.

James Welch, YRC’s CEO, attributes the improvement to several factors: focus on customer mix management, pricing discipline, productivity improvements and a decrease in safety-related costs. In 2012, he says, “we eliminated all distractions that have been keeping this company from focusing on what we do best, which is providing premium services to both the regional and long-haul segments of the LTL market.”

Of course, many of those “distractions” were self-inflicted, beginning with the decision in 2003 by Yellow Transportation to acquire rival LTL carrier Roadway Express for just over $1 billion, a mammoth deal which over the past decade became the living representation of the expression, “biting off more than they could chew.” The integration of Yellow and Roadway got off to a rocky start when it was initially stated that both companies would continue to operate separately, which threw the marketplace into an extended period of confusion as to what exactly the separate-but-equal situation would mean for customers.

The distractions only multiplied when in 2006 YRC decided to acquire USF Corp., another LTL carrier, for $1.5 billion. Staking major investments in some Chinese logistics companies only added to the mixed message to the marketplace. Net losses began piling up regularly and often, even after Yellow and Roadway finally merged into a single entity in 2009, YRC Worldwide. Headcount reductions, union problems and bank debt covenant issues led to some industry analysts questioning whether YRC could survive in its current state.

So the fact that YRC is not only still very much in business but in fact is now profitable for the first time since Justin Verlander’s rookie season with the Detroit Tigers is a major accomplishment for the LTL giant. Time will only tell whether YRC can keep the momentum going.

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