Winter weather stunts Yellow’s first-quarter earnings; carrier posts $63.3 million net loss

Winter weather and severe storms in Texas and elsewhere were blamed by Yellow Corp. for swinging it to a net loss of $63.3 million in the first quarter, compared with net income of $4.3 million in first quarter 2020. 

Yellow collectively is the third-largest less-than-truckload (LTL) carrier, operating its long-haul Yellow Freight unit, three regional carriers (New Penn, Holland and Reddaway) and a logistics arm.   

Yellow no longer is breaking out operating performances of those units. But collectively, Yellow posted a 102.3 operating ratio, compared with 97.6 in the year-ago first quarter.

Yellow’s operating revenue was $1.198 billion and operating loss was $27.6 million, which included a $1 million net loss on property disposals.

By comparison, operating revenue in the first quarter 2020 was $1.15 billion and operating income was $28 million, which included a $39.3 million net gain on property disposals.

Excluding fuel surcharge, first quarter 2021 LTL revenue per hundredweight increased 6.9% and LTL revenue per shipment increased 5.6% compared to the same period in 2020. Including fuel surcharge, first quarter LTL revenue per hundredweight increased 6.7% and LTL revenue per shipment increased 5.4%.

“The severe winter weather, including a generational storm in the southern United States, significantly impacted our first quarter results,” Yellow CEO Darren Hawkins said in a statement.

In February, Hawkins said about two-thirds of its 322 terminals were either closed or had limited operations. Linehaul operations were also impacted by suspended service at various times, he added.

“The recovery period to get the network fully back in cycle had a long tail that lasted into March and we estimate the unfavorable impact to operating income in the first quarter was approximately $16 million,” Hawkins said.

But with that winter weather behind, Hawkins said LTL capacity remains “tight,” driven by an improving economy and consumer optimism.

 “We continue to see a strong yield environment,” he added.     

 But Yellow has previously indicated it expects what it calls “near-term headwinds” from higher purchased transportation expense primarily attributable to the use of local cartage and over the road purchased transportation. Both are more expensive in the current tight capacity environment. Drivers are also an issue.

“We continue to expand our nationwide recruiting efforts including holding more than two dozen hiring events and increasing the number of driving academy locations to 17,” Hawkins explained.

Flush with $700 million in a federal loan arranged under the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act (CARES Act), Yellow has been spending on new equipment.

“We also took delivery of more than 1,100 tractors, 1,600 trailers and 140 containers during the first quarter as part of our $450 million to $550 million capital expenditures plan in 2021,” Hawkins said. “As we hire drivers and bring on additional revenue equipment, we expect to use less local cartage and over the road purchased transportation.”

Yellow is migrating to a “One Yellow” technology platform. It also is expanding service in the one-, two- and three-day lanes nationwide. The transformation to One Yellow remains on schedule to be completed in the middle of 2022, Yellow said.

In first quarter 2021, Yellow invested $202.4 million in capital expenditures. This compares to $12.4 million in capital expenditures and $700,000 in capital value equivalent in new operating leases for a total of $13.1 million in first quarter 2020.

Yellow’s outstanding debt was $1.462 billion as of March 31, 2021. That’s an increase of $582.1 million compared to $879.9 million as of March 31, 2020.