Yellow Corp. transformation pays off early in third quarter

In a year of change for Yellow Corp., it closed out its third quarter with increased operating revenue and operating income compared to last year’s third quarter.

The increases come as the company progresses through its One Yellow transformation plan announced in 2021 to revamp its three legacy subsidiaries into one super-regional carrier.

Operating revenue increased from $1.3 billion in third quarter 2021 to $1.36 billion in third quarter 2022, the company reported during a Nov. 2 earnings call.

Operating income grew from $48.4 million in third quarter 2021 to $49.1 million in third quarter 2022.

“For the sixth consecutive quarter, revenue and operating income improved on a year-over-year basis,” Darren Hawkins, Yellow chief executive officer, said during the earnings call. “Operating income improved despite a $19.4 million increase in third-party liability claims expense compared to a year ago, mostly due to unfavorable development of prior-year claims, including the resolution of several of our most significant outstanding claims.”

One Yellow windfall

Helping boost the company’s bottom line in the third quarter was a $1.1 million net gain on property disposals. Terminal operations have been consolidated as part of the One Yellow strategy.

In September, Overland Park, Kan.-based Yellow implemented the first phase of its network optimization plan. That involved integrating 89 YRC Freight and Reddaway terminals. Phase two involves 200 facilities and 15,000 employees, Hawkins said. It is expected to be accomplished in the fourth quarter.

“We plan to have the rest of the network transformation completed around the end of the year,” Hawkins said.

Also being consolidated into the super-regional carrier strategy are Yellow’s Eastern regional LTL carrier New Penn and its Midwest regional LTL carrier Holland.

“One of the benefits of optimizing an LTL network with more than 300 terminals, such as ours, is we will be able to dispose of terminals in close proximity to each other that have overlapping service territories,” Hawkins said.

By year-end, 28 terminals in the combined Yellow network will be closed. The company has realigned and optimized more than 46,000 terminal ZIP codes to speed up pickups and deliveries and reduce city miles traveled, he said.

“We made things easier for our customers by having one driver picking up and delivering both YRC Freight and Reddaway brands, which resulted in reduced congestion at our customers’ docks,” Hawkins said.

In addition to income from the sale of terminal properties, the company expects to cut expenditures by closing them and to have lower delivery costs.

Financial overview

The company’s operating income increased for the third quarter over last year despite $19.4 million increase in third-party liability claims expense. Hawkins said that was mostly due to unfavorable development of prior-year claims, including the resolution of several of its most significant outstanding claims, which were one-off transactions.

One claim might have been settling for nearly $7 million a Department of Defense dispute about overcharges. There also was a payroll deferral allowed by the Coronavirus Aid, Relief and Economic Security Act.

Less than truckload tonnage per workday dropped 16.2% in the third quarter compared to the year before, from 35.6 million in third quarter 2021 to $30.64 million in 2022. Shipments per workday also dropped 14.8%, from $65.22 million in 2021 to $55.58 in 2022.

However, revenue per hundredweight increased 24.6% for the third quarter compared to the year before, from $25.12 million in third quarter 2021 to $31.3 million in third quarter 2022.

Retail freight softening

Hawkins noted that the fourth quarter revenue could be affected by soft retail freight shipments. October demand had slackened, he said, and half of Yellow’s top 10 accounts are retail connected.

“Even though we haven’t lost any accounts in that area, we saw across-the-board shipment and tonnage decline in those areas in October,” Hawkins said.

You can listen to a webcast of the earnings call here.

Yellow Corp. is a publicly-traded company listed on the Nasdaq stock exchange.

More business news is available on LandLine.Media.