YRC Seeks to Preserve Cash in Troubled Trucking Market
Date: Tuesday, May 12, 2020
Source: The Wall Street Journal
Trucker lays off, furloughs workers as coronavirus lockdowns hit freight demand
YRC Worldwide Inc., one of the largest U.S. trucking companies, is trying to shore up its troubled finances even as coronavirus lockdowns carve off its trucking business.
The Overland Park, Kan.-based company reported improved first-quarter financial results on Monday and outlined steps it was taking to improve liquidity in the face of the pandemic, which Chief Executive Darren Hawkins said triggered an unprecedented decline in business, beginning in late March.
“We immediately realized this was going to be bigger than what we had thought,” said Mr. Hawkins.
“When things dropped, it dropped across the board dramatically,” he said. But the company has seen freight volumes pick up sequentially since the first week of April.
YRC has laid off and furloughed some workers, eliminated executive bonuses and merit raises, and is cutting capital spending to preserve cash.
The company gained breathing room with its lenders through an amended credit agreement to defer some interest payments and suspend through the end of the year a covenant requiring the company to maintain a minimum trailing 12-month adjusted earnings before interest, taxes, depreciation and amortization of $200 million, measured quarterly.
Mr. Hawkins said YRC also had applied for federal relief under a portion of the Cares Act. He said the application had been received but declined to specify the amount of aid requested.
YRC is the fifth-largest U.S. trucker by 2019 revenue, according to transportation research provider SJ Consulting Group Inc. The unionized carrier employs some 29,000 workers through its YRC Freight and regional transportation divisions, which mostly provide less-than-truckload service combining multiple shipments onto single trucks.
The trucker generated $1.15 billion in operating revenue for the first quarter, a 2.7% year-over-year decline that beat analyst expectations, according to FactSet. The company reported $4.3 million in quarterly net profit, up from a net loss of $49.1 million in the previous year period.
“We were able to finish the quarter with better liquidity than we had at the end of the year,” increasing available liquidity to $118 million from $80.4 million at the close of 2019, Mr. Hawkins said.
Moody’s Investors Service cut its ratings for YRC on March 31, saying the company’s weak credit profile and thin margins left the trucker exposed as the U.S. economy falters.
The unionized carrier missed a March payment to a multiemployer health-care fund covering some 500,000 Teamster members. Mr. Hawkins said the company is working through arrangements with the various Teamsters health, welfare and pension funds, and that YRC employees covered by the above fund will have health care for the next eight weeks.
Other trucking companies also are grappling with falling freight volumes as business from industrial and retail customers dries up during widespread U.S. business shutdowns.
ArcBest Corp., parent of YRC competitor ABF Freight System, said in a May 5 investor conference call on its first-quarter earnings that it is cutting costs by $15 million to $20 million in the second quarter. The company laid off 12% of its drivers and 14% of its workers at terminals and suspended its matching contribution to the 401(k) pension plan for nonunion employees.