YRC Worldwide Management Discusses Q1 2014 Results - Earnings Call Transcript

May. 1.14 | About: YRC Worldwide, (YRCW)

YRC Worldwide (NASDAQ:YRCW)

Q1 2014 Earnings Call

May 01, 2014 9:30 am ET

Executives

Stephanie D. Fisher - Vice President and Controller

James L. Welch - Chief Executive Officer and Director

James G. Pierson - Chief Financial Officer and Executive Vice President

Darren D. Hawkins - President of YRC Freight

Analysts

Thomas S. Albrecht - BB&T Capital Markets, Research Division

David G. Ross - Stifel, Nicolaus & Company, Incorporated, Research Division

Scott H. Group - Wolfe Research, LLC

Robert H. Salmon - Deutsche Bank AG, Research Division

Operator

Good morning. My name is Jessica, and I will be your conference operator today. At this time, I would like to welcome everyone to the YRC Worldwide First Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Stephanie Fisher, Vice President and Controller. Ms. Fisher, you may begin the conference.

Stephanie D. Fisher

Thank you. Good morning. Thank you for joining us for the YRC Worldwide First Quarter 2014 Earnings Call. James Welch, Chief Executive Officer of YRC Worldwide; and Jamie Pierson, CFO of YRC Worldwide, will provide comments this morning. James, Jamie and Darren Hawkins, President of YRC Freight, will be available to answer questions following our comments.

Now for our disclaimers. During this call, we may make forward-looking statements within the meaning of federal securities laws. These forward-looking statements and all other statements that might be made on this call which are not historical facts are subject to uncertainty and a number of risks, and thus, actual results may differ materially. These include statements regarding the company's expectations, assumptions of future events and intentions on strategies regarding the future. The format of this call does not allow us to fully discuss all of these risk factors. For a full discussion of the risk factors that could cause the results to differ, please refer to this morning's earnings release and our most recent SEC filings, including our Forms 10-K and 10-Q.

Additionally, please see today's release for reconciliation of operating income and loss to adjusted EBITDA and the reconciliation of adjusted EBITDA to net cash flow from operating activities and adjusted free cash flow deficit. During this call, we may refer to the non-GAAP measure of adjusted EBITDA simply as EBITDA.

I'll now turn the call over to James to provide comments on our first quarter results.

James L. Welch

Thank you, Stephanie. The first quarter of 2014 was a hectic period of nonstop activity, as we worked to finalize our new Memorandum of Understanding, or MOU, which paved the way for us to recapitalize the company and extend the maturities for the majority of our debt. The MOU process restate peak of activity in the first quarter as we spent a tremendous amount of time meeting with our employees and educating them on why ratifying the MOU was in the best interest of our employees and our companies. And while I know you haven't, don't forget that the process that we worked through was a 2 ratification voting process during the quarter. Also for a period of time before and after those 2 votes, distractions on the dock and on the road, along with the pending uncertainty, negatively affected our labor costs and productivity at all 4 operating companies.

On the refinancing side, we completed what we set out to do a little more than 2 years ago. Although it may seem like a long time ago, we've closed $0.25 billion equity raise and related delevering event and refinanced over $1 billion of debt just in the last 3 months. These milestones tapped our resources and distracted our employees. However, they laid the operational and financial groundwork for the foreseeable future. While no one ever wants to endure that type of disruption, everyone from our employees, to our lenders, to our shareholders appreciates the investment we made and looks forward to realizing the benefits from both the new MOU and the delevered balance sheet and associated interest expense savings. And while we experienced distractions inside the walls of our offices and terminals, outside, Mother Nature and the winter of 2013 and '14 wreaked havoc upon the supply chain networks everywhere, and it was a big driver of our poor operating results in the first quarter. YRC Freight, Holland and New Penn were affected the most.

YRC Freight, for example, as a true long-haul national carrier, was mostly impacted by storms in the Midwest to the Northeastern states, which have negatively affected its network and productivity coast-to-coast. As a result, YRC Freight found its freight flow disrupted throughout most of the first quarter. For example, during the first quarter of 2013, freight or load pattern adjustments, where shipments are sent out a route peak at about 750,000 pounds per day. However, during the first quarter of 2014, those adjustments peaked at nearly 4 million pounds per day. We made over 25 load pattern adjustments or diversions that added either additional inefficient line-haul miles or additional handling costs on thousands of shipments.

We estimate that our operating income was adversely impacted by approximately $20 million in the first quarter. Thankfully, we are through the winter weather season, and in April, we have experienced a much more normal service cycle at each of the affected operating companies at YRC Worldwide. And as always is the case, we could not do it without our employees and our customers, and I think it's very important to emphasize how appreciative and grateful we are for the loyalty and commitment through what was one of the most taxing times in this company's history.

In terms of the present and the future, while it's early in his tenure as President of YRC Freight, Darren Hawkins is making a quick and positive impact on the organization. He's leading the YRC Freight team with an emphasis on the 4 core operating principles: safety, service, efficiency and everyone sells. I like Darren's focus, and his team is rallying around these 4 critical areas of success for YRC Freight. And more on YRC Freight later in my closing comments.

As usual, we continue to be pleased with our Regional segment's operating performance. Their shipment, tonnage and yield growth continues to demonstrate that they're very much valued in the Regional markets that they serve. And we anticipate that they will continue improving their performance throughout the remainder of the year and end up with a strong 2014.

I will now turn the call over to Jamie for his comments, after which I'll make some additional observations regarding the changes that we've seen at YRC Freight.

James G. Pierson

Thanks, James, and good morning, everyone. For the first quarter of 2014, we reported consolidated adjusted EBITDA of $23.4 million, which is a decrease from the $60.7 million we reported in 1Q '13. The decrease is primarily a result of 2 items. First and foremost, as James has already stated and just like everyone else, we experienced extraordinarily severe winter weather across most of the company, causing service delays, bold pattern changes and increased use of purchased transportation, as we dug out the storms that negatively impacted productivity, most notably, at YRC Freight, Holland and New Penn.

Secondarily, we experienced $13.2 million year-over-year increase in expense related to workers' compensation, BIPD and cargo claims, which was driven by an increase in the number of claims due to the adverse weather conditions, as well as favorable development experienced in the first quarter of 2013.

Now for the year-over-year first quarter stats. YRC Freight's tonnage per day was up 1.7%, and Regional tonnage per day was up 2.6%. YRC Freight's revenue per shipment was down 0.4%, which included a decrease of 2.6% in revenue per hundredweight and an increase in its weight per shipment of 2.3%. While the Regional carriers increased their revenue per shipment by 1.9%, their weight per shipment increased by 0.9%, which, in turn, caused revenue per hundredweight to increase by 1%.

Moving on to earnings. YRC Worldwide reported consolidated revenue of $1.2 billion for 1Q '14, an increase of $48.4 million over 1Q '13 from top line revenue growth at the Regional carriers, due to both tonnage and rate increases, plus an additional 4.5 days in the quarter at Holland and Reddaway in 1Q '14 when compared to 1Q '13. Additionally, we reported consolidated operating loss of $32.4 million for 1Q '14, a decrease of $42.3 million when compared to 1Q '13. Finally, as I stated earlier, we reported adjusted EBITDA for 1Q '14 of $23.4 million.

On a segment basis, for the first quarter of 2014, YRC Freight reported an operating loss of $32.5 million, a decrease of $34.9 million over their prior year, which translates into an operating ratio of 104.3, a decrease of 460 basis points versus 1Q '13. Further, Freight reported a negative adjusted EBITDA of $3.7 million, a $37.3 million decrease in the first quarter of 2013, primarily due to the MOU inefficiencies and weather, already discussed, and a lack of positive workers' compensation, BIPD and cargo claim development in first quarter of 2014 when compared to 1Q '13.

Our Regional segment reported operating income at $7.9 million, a decrease of $4.1 million over 1Q '13, and an operating ratio of 98.3. Additionally, this segment reported adjusted EBITDA of $25.9 million, which was a decrease of $3.1 million over the first quarter of 2013, due to the MOU inefficiencies and weather, already discussed.

Turning to cash flows and liquidity. We ended the first quarter with balance sheet cash and ABL availability of $223 million, which is a slight decrease of $5 million from the fourth quarter of 2013 but an increase from the $214 million reported in the first quarter of 2013. Our ability to maintain liquidity at this level is due to our continued active management of our balance sheet and working capital and the current seasonality of the business cycle.

Now I would like to leave you with what I consider to be a few key takeaways for the quarter. One, as we noted in the fourth quarter call, we plan to reinvest in our equipment, technology and workforce as we move throughout 2014. In the first quarter, we committed to the installation of 38 dimensioners in our distribution centers at YRC Freight and plan to continue polishing the same on a selective basis in our Regional companies. We anticipate all 38 will be installed by the end of the year and further anticipate seeing the plant's run rate benefit by the end of 1Q '15. This technology enables us to more precisely measure the actual cubic volume on a much higher percentage of the shipments we handle. The capture of precise shipment dimension improves our ability to determine the true cost of each shipment based on weight and space utilized. Finally, this technology positions us to accommodate a shift in the market towards density-based pricing methodologies.

And to further show our commitment to the importance of technology for our long-term strategy and success, we hired Jason Ringgenberg to be the new Chief Information Officer at YRC Freight. Jason was a Managing Director in Accenture's Freight and Logistics practice and brings with him over 20 years of experience serving clients across all modes of transportation, including LTLs.

And finally, our CapEx plans for 2014 currently forecast spending about 3 times more in technology dollars than we did in 2013, and about as much as we spent in 2011, '12 and '13 combined.

Two, as was the case in 2013, we plan to continue our strategy of using operating leases to acquire new revenue equipment and have already placed orders for both tractors and trailers, which we anticipate taking delivery in the second half of the year. And before you ask in the Q&A's portion of the call, we do not give specific guidance on capital expenditures or otherwise.

Three, at YRC Freight, March of 2014 was one of 3 months in the last 24 in which total shipments per day has positively comped year-over-year at an increase of 2%. And while it's too early to tell if it's from real economic growth or spillover of pent-up demand from the winter weather, we saw this trend continue in April. Month to date, through Friday, April 25, total shipments per day for April were up approximately 6% at YRC Freight and approximately 4.5% at the Regional segment.

In closing, our first quarter results were undoubtedly disappointing. No doubt that first half of the quarter was consumed with issues related to the ratification of the MOU and the finalization of the 2014 financing transactions. The second half of the quarter was devoted to deploying our strategy to implement the new policies provided under the MOU. And the winter weather was a consistent battle throughout the entire quarter. As we continue to move through 2014, we will focus on implementing the policies and the flexibilities provided by the MOU, continue to invest in our equipment, technology and our people and focus on operational execution.

I will now turn the call back over to James to discuss the positive trends that we saw in the last part of March and into April that we believe will lead to improving results for the remainder of 2014.

James L. Welch

Thanks, Jamie. I'm optimistic about the prospects of improved performance at YRC Worldwide starting in the second quarter. Before opening up to Q&A, I thought I would share with you some of the support from optimism, specifically at YRC Freight.

Here are 5 quick reasons: Number one, implementation of the over-the-road purchased transportation changes and improved MOU are under -- away, and will continue to grow. As a reminder, we can run up to 6% of our annual miles with over-the-road purchased transportation.

Two, the YRC Freight network is operating much more like we designed it to, and sustainable progress is being made every day. We are handling higher-than-anticipated volumes in April without disruption, and service levels have improved as expected now that we are able to adhere to a normal load plan without diversions due to the weather backlogs.

Three, with the network service cycle getting back to where we want it, the reduction in rehandling of shipments is translating into improved productivity.

Four, the newly negotiated national attendance policy is reducing absenteeism, as we have seen improvements in the number of tours per line-haul driver and in the number of hourly employees who are working a full work week. This is a benefit that will lower costs at each of our 4 operating companies.

Five, the new division structure Darren put into place after being named President, which combined operations and sales, local sales under the 7 division VPs is gaining tractions. Key decisions were being made where the trucks are operated and the revenue is generated. The shift to local environment [ph] is resulting in hands-on local leadership getting us back to being in cycle.

And finally, the combination of everything I've outlined above will allow us to pursue yield improvement. It starts with the service cycle and is managed one customer at a time and one lane at a time through our scheduled contract rate negotiations. We will continuously improve margin with each interaction in 2014 and, for example, I've already completed approximately 30% of our annual contract negotiations at YRC Freight with solid results.

So having completed that historic transformation of the company's capital structure and gotten the MOU ratified, we are well positioned and completely focused on implementing the opportunities in front of us to drive improved financial results.

With these comments, we're ready to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Tom Albrecht from BB&T.

Thomas S. Albrecht - BB&T Capital Markets, Research Division

A couple of quick questions, starting with YRC Freight. Relative to either the month of March or April, were you able to have an operating ratio at 100 or better in either of those 2 months?

James G. Pierson

Tom, it's Jamie. Yes, we don't discuss [ph] inter-quarter or even on a quarterly basis, so I'm not going to provide comments about that. But we can certainly speak from a volume perspective and having the service cycle -- or actually, having the network in service, we actually feel pretty good about that.

Thomas S. Albrecht - BB&T Capital Markets, Research Division

Well, then let me ask the question another way. How bad was your worst OR in the quarter on a monthly basis?

James L. Welch

Well, it was in January, I can tell you that.

Thomas S. Albrecht - BB&T Capital Markets, Research Division

It was in January?

James L. Welch

Yes.

Thomas S. Albrecht - BB&T Capital Markets, Research Division

Okay. All right. So relative to when you did your debt refinancing, you laid out some EBITDA targets. Given your performance in the first quarter, are you going to have to revisit those targets or do you still feel comfortable about those goals that you laid out for the financial institutions?

James G. Pierson

Tom, it's Jamie again. That number was based on the information we knew at the time. And obviously, we didn't anticipate the weather that we've incurred or -- that everyone incurred candidly. It's up on a couple of other assumptions, whether it be macro or how quickly we can implement the MOU. We clearly have been impacted by the weather since then, and we've provided that information, really, to the holders -- of that information that's provided as a part of the refinancing. So we don't intend to update this information, as it's our policy not to provide guidance at this time.

Thomas S. Albrecht - BB&T Capital Markets, Research Division

Okay. And then another question would be on the 6%, I think you said tonnage growth or was it shipment growth in the month of April for Freight?

James L. Welch

Shipment.

Thomas S. Albrecht - BB&T Capital Markets, Research Division

Okay. So how much of that is catch-up? And how much of that is some of the sales and marketing initiatives you undertook last year but which were slow to develop because of the uncertain economy -- or I'm sorry, uncertain labor situation?

James L. Welch

Sure. It will be hard to put a specific percentage on it, but it's certainly a little bit of all that you described. Darren came back as Senior VP of Sales and Marketing in January of '13, and I think has our sales effort much more on a better track at YRC Freight, obviously, the winter weather pent up, as is everyone, we're having a hard time trying to figure it out, is that temporary or is it sustained. But April was very strong in all 4 operating companies, and we'll have to see how that goes into May before I can really say, is it winter weather hangover or do we have more sustained internal growth. But definitely, I feel better about what's happening with our sales efforts at all 4 companies. Our salesforce went through a really tough time, Tom, as you know, between the MOU distractions and discussion and the uncertainty around the refinancing. And it was a very tough time for our company. And certainly, our customers really hung with us very, very well, but I think it's a little bit of both and, hopefully, some underlying fundamental improvements with the economy. So we're interested to get into May and see what happens because we were definitely liking what we saw in April.

Thomas S. Albrecht - BB&T Capital Markets, Research Division

In the weight per shipment increase that you saw in the first quarter, has that continued into April? I think that's outpacing your shipments by at least 2%.

James G. Pierson

Tom, I don't think it's a meaningful change, candidly.

Thomas S. Albrecht - BB&T Capital Markets, Research Division

You mean change from those -- what you were experiencing or...

James G. Pierson

Yes. I think, on a weight per shipment basis, it's pretty flat.

Operator

Your next question comes from David Ross from Stifel.

David G. Ross - Stifel, Nicolaus & Company, Incorporated, Research Division

At YRC Freight, the D&A declined 12% year-over-year. Some of that probably is a shift from owned to leased equipment, as you're talking about, Jamie, but is there anything else going on there?

James G. Pierson

We certainly -- you talking about general administrative expense?

David G. Ross - Stifel, Nicolaus & Company, Incorporated, Research Division

No, the D&A actually, yes, the depreciation. Went from $28 million down to $24.7 in the first quarter.

James G. Pierson

Yes, David, I think it's really the fact that we continue to depreciate the equipment. There's not been any real seismic shift in what we've done from a capital expenditure perspective at all. From our viewpoint, we ended 2013 with good results on our ability to enter into operating leases for any capital equipment. And it's our intent -- our strategy to continue to do so for the balance of 2014 as well.

David G. Ross - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay. And then the 3 new terminals that are set to be opened up at YRC, were they previously closed facilities that you guys had had in your network already, and you're just starting them back up or are they recent lease/purchased deals?

James L. Welch

They're in the same proximity of geographic location, David, but they're not going back into the same exact facilities, but 3 locations that we needed a little bit of release that we probably overestimated our ability to handle with some larger-size facilities and a few of those areas. So we're back into -- make sure that those service territories can be serviced the way that we want. And we're very optimistic that we're going to see some nice growth out of those.

David G. Ross - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay. So they're new facilities, they're not mothballed facilities you're bringing back online?

James L. Welch

Yes, 1 is the same, and then 2 are different facilities.

David G. Ross - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay. And then can I ask questions on the tax picture going forward?

James L. Welch

Sure.

David G. Ross - Stifel, Nicolaus & Company, Incorporated, Research Division

Yes, I'm sure you've got plenty of NOLs but don't seem to be using them too much. Is there a period when you'd be able to use more NOLs? And what are you expecting for the effective tax rate?

James G. Pierson

Yes, it's going to be very minimal going forward, David, because of the change of ownership that we had in the most recent transaction. And Section 382 is limiting the use of those NOLs going forward.

David G. Ross - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay. So should we be modeling a little bit of a tax benefit in loss periods and say a 35% tax rate in profitable periods?

James G. Pierson

Yes. What I would say is, given the loss of those carryforwards, you'd be -- probably prudent to use just a normal tax rate.

Operator

Your next question comes from Scott Group from Wolfe Research.

Scott H. Group - Wolfe Research, LLC

So wanted to know if you can maybe talk about kind of the tenure conversations with customers. And do you feel like -- did you lose a lot of business when there were that couple weeks of real uncertainty? And now that there's more certainty, are you -- do you think you're in a position to be taking market share back?

James L. Welch

Good question, Scott. This is James, and if Darren wants to jump in, he certainly can when I get through. But if I had been a betting man before we went through the timeframe of difficulty that we did with that whole 2 MOU vote process, I would have thought that our business levels would have fallen down. And certainly, they were affected some but not nearly like what I thought that they could have been. I think maybe the winter weather had something to do with everyone having problems servicing and picking up freight. But our customer base really stayed pretty steady. But then the thing, I think, that's been most encouraging to me, Scott, is the fact that our contract negotiations with customers since the MOU was finalized and the refinancing was finalized, and we kind of got some certainty and clarity and stability about our foreseeable future, we've been able to do much better with our rate increases, with our customer-specific negotiated increases. And then we've seen some of our existing customers give us more business than they had, which is something that -- when I came back, I was hoping that we would eventually could get to is we still had a big base of customers but didn't have as much business with some of those customers as we used to have. So it was good to see some increases from existing customers. And we've had some new wins as well. So I'm not sitting here saying that we're going to take market share. That's -- it's not really something that is at the top of our list of go out and price it or do whatever we have to do. On that side, what we want to just provide: very good, consistent service; repeatable, dependable, reliable service, and we think we can grow our business that way. So I don't know, Darren, if you want to jump in there from what you're seeing.

Darren D. Hawkins

One of the things I would mention on that front, as James mentioned, 30% of our contract negotiations is being completed. That's 100 -- 1,357 negotiations being completed. And based on the solid results we've seen from that, it goes back to a real strong asset of YRC Freight for a long period of time, and that's the loyalty of our customers. That's very encouraging for me moving forward. And I was also quite impressed coming out of the MOU ratification that we didn't have a lot of ground to make up -- to replace our business and allowed us to focus on keeping those negotiations current, and also in implementing the GRI, which certainly has an impact on about 23% of our revenue.

James G. Pierson

Scott, it's Jamie. If I might add as well, we're not pricing for market share, we are pricing for profitability, and we're pricing for those customers at Freight that fit with -- inside our network, and that best actually serve our ability to efficiently service those customers.

Scott H. Group - Wolfe Research, LLC

Yes, I hear you. Do you think then do the yields then turn positive starting in the second quarter? Because the tonnage was better than we thought, and the yields were negative and worse than we thought, so just how should we think? And tonnage is accelerating. I don't know if yield growth accelerates as well and turns positive. If you have any color you can give us, that would be great.

James G. Pierson

Sure, Scott. It's Jamie again. What I would say is that you were continuing to see [indiscernible] in that 3% to 4% range.

Scott H. Group - Wolfe Research, LLC

Sorry, continue to see?

James G. Pierson

[indiscernible] in that 3% to 4% range.

James L. Welch

The specific negotiations with customers, like contract negotiations.

Scott H. Group - Wolfe Research, LLC

Okay. And then just last 2 things. One, I didn't see a press release. I don't know. Did you guys announce your GRI, when and how much? And does the big -- the faster tonnage change your CapEx expectations for the year? I know you're not going to tell us the number, but are you changing your CapEx expectations for the year?

James L. Welch

Yes, the GRI was April 14, and that was 5.9. I'll let Jamie kick around that other question.

James G. Pierson

Yes, and great, Scott -- great question, Scott, on the CapEx. I actually would anticipate us spending more than we had anticipated at the beginning of this year. We're seeing some real good strong volumes in our Regional companies. So in order to not continue to enter into expensive local day-to-day leases on tractors and trailers, we very well may actually go longer into more equipment, but again, probably more on an operating lease basis than a straight-out CapEx buy.

Operator

Your next question comes from Rob Salmon from Deutsche Bank.

Robert H. Salmon - Deutsche Bank AG, Research Division

Just a quick follow-up to Scott's last question about kind of the yield trends that we're experiencing. Can you -- you may have mentioned this in the prepared remarks, but could you give us a little bit more color in terms of how the national and local accounts trended throughout the quarter and what you guys are seeing with tonnage reaccelerating in the month of April?

James L. Welch

Well, it's hard to comment on -- what we saw in April was just good volume growth and good shipments growth. I don't know if we want to get too detailed on April, but certainly, the yield, it did not go backwards and it continued to move forward. So I think that we're feeling pretty good about our position. And again, anxious to see what May brings.

James G. Pierson

Yes. And what I would say, Rob, is I think we're seeing a pricing increase across all of the channels. So I wouldn't say that it's any one channel that's performing better or worse than the other. It's kind of the rising tide's lifting all boats.

Robert H. Salmon - Deutsche Bank AG, Research Division

Yes, I was just trying to get a little bit more to the mix, if we should start seeing the revenue per hundredweight increase a little bit more in line with that 3% to 4% that you guys were mentioning in terms of the contractual increases.

James G. Pierson

Yes.

Robert H. Salmon - Deutsche Bank AG, Research Division

As we look throughout the year, I realize there are a lot of different moving parts though...

James G. Pierson

Yes, no, Rob, I think so. And the reason I say that is, in this quarter, which is slightly shorter length of fall, we had higher weight per shipment, and we even had some lower fuel prices in the first quarter of '14 versus the first quarter of '13. Now that kind of results in a lower full fuel surcharge, but we also had -- that's just the number side of the equation. What I'd say qualitatively is that we also had 2 other factors going on: one, the MOU, which everyone is very aware of, during those continuous time and negotiating with that customer, it's just a little bit more difficult to do it with the sure footing that we have now on the other side of the MOU. So I think that we'll be in a better position for those negotiations. But also don't forget, in the May of 2013, we went through the change of operations and lost some of our profitable local accounts. I think we said that on the last couple of calls. And on a year-over-year comping basis, we're comping against a more difficult set. Yes, it will take a little time for the [indiscernible] to show up.

Robert H. Salmon - Deutsche Bank AG, Research Division

Jamie, that makes a lot of sense. When we're thinking about the weather headwind that you guys called out in the quarter, is that $13 million increase in terms of the workers' comp, is that included in the $20 million or is that an incremental headwind that you guys experienced in the first quarter?

James L. Welch

Rob, this is James. That was an incremental headwind that we experienced other than the $20 million for weather.

Robert H. Salmon - Deutsche Bank AG, Research Division

I appreciate that clarification. And my final question is -- kind of circles back to the -- how much available capacity do you guys currently have on both the brick-and-mortar side, as well as your rolling stock? Jamie, from your comps, it sounds like on the regional side, you're probably much closer, given the fact that you're increasing the overall CapEx that you would have expected for the full year, given the performance you guys have seen to date, but -- any sort of color you could give us. I realize it varies by location, but just how we should be thinking about the overall network right now?

James L. Welch

I'm going to make a couple comments. This is James. Certainly, the Regionals are running more at capacity. We still have some capacity, certainly, at YRC Freight. But with the way volumes spiked in April, that could be a little bit more questionable if May and June would continue on the trends that we saw in April. But again, that's yet to be determined, but definitely the Regionals are running at tighter level of capacity than YRC Freight. But with that network redesign that we did at YRC Freight last May, it doesn't have quite the capacity that it had before, the change of operations. So again, I think, as we move forward, it will gives us a good opportunity to make sure that we have the right kind of business on the truck line at YRC Freight and, hopefully, will continue to give us the ability to work that yield improvement side.

Operator

And your next question comes from Tom Albrecht from BB&T.

Thomas S. Albrecht - BB&T Capital Markets, Research Division

A year ago, you shared a statistic that about 22% of your miles at freight were on equipment that was 2 years old or newer. Can you share a target how soon you can get that figure to 40% or 50%?

James G. Pierson

Tom, 22% of miles or [indiscernible] tractors 2 years...

James L. Welch

Tractors [indiscernible]

Thomas S. Albrecht - BB&T Capital Markets, Research Division

Yes, you gave that number 2 quarters in a row last year. What percentage of your line-haul miles are on equipment at freight that was 2 years old or newer? It was 21% and then 22%.

James G. Pierson

Yes, I don't have that on my fingertips. So let me follow back up, and I'll let you know.

Thomas S. Albrecht - BB&T Capital Markets, Research Division

Well, and even just looking forward, as you refresh your fleet, when can you get that figure to 40% or 50%?

James G. Pierson

It's going to take a while. I mean, we've got 60,000 pieces of equipment running across the network, at any one given time if you consolidate the companies. So this is going to be more of a turning of the battleship than it is going to be a flip of the switch.

Thomas S. Albrecht - BB&T Capital Markets, Research Division

Okay. Well, if you could get me the follow-up then where you are currently, that would be helpful.

Operator

And we have no further questions at this time. I'll turn the call back over to the presenters.

Stephanie D. Fisher

That concludes our call for today. Thanks, everyone, for joining us. Please contact me for any follow-up questions you may have. I'm transferring the call back to you.

Operator

And this concludes today's conference call. You may now disconnect.

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