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YRC Worldwide (NASDAQ:YRCW)

Q1 2011 Earnings Call

May 06, 2011 9:30 am ET

Executives

Mike Smid - Chief Operations Officer and President of YRC Inc

William Zollars - Chairman, Chief Executive Officer and President

William Trubeck - Interim Chief Financial Officer, Executive Vice President, Treasurer and Director

Paul Liljegren - Chief Accounting Officer, Vice President, Controller and Investor Relations Officer

Analysts

David Ross

Edward Wolfe - Wolfe Trahan & Co.

Thomas Wadewitz - JP Morgan Chase & Co

Jack Waldo - Stephens Inc.

Neal Deaton - BB&T Capital Markets

Christopher Ceraso - Crédit Suisse AG

Robert Salmon - Deutsche Bank AG

Matthew Elkott - Dahlman Rose & Company, LLC

Operator

Good morning. My name is Steve, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the YRC Worldwide First Quarter Earnings Conference Call. [Operator Instructions] I will now turn the call over to Paul Liljegren, Corporate Controller and Vice President Investor Relations.

Paul Liljegren

Good morning. Thanks for joining us for the YRC Worldwide First Quarter 2011 Earnings Call. Bill Zollars, Chairman, President and CEO of YRC Worldwide; and Bill Trubeck, our CFO and Treasurer will provide comments this morning. Bill Zollars, Bill Trubeck and Mike Smid, President of YRC and Chief Operations Officer of YRC Worldwide, will be available for questions following our comments.

Now for our disclaimers. Statements made by management during this call that are not purely historical facts are forward-looking statements. This includes statements regarding the company's expectations and intentions on strategies regarding the future. It's important to note that the company's future results could differ materially from those projected in such forward-looking statements due to a variety of factors.

The format of this call does not allow us to fully discuss all of these risk factors. For a full discussion, please refer to this morning's earnings release and our SEC filings, including our 10-K, and today's 8-K.

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

Finally, this conference call and any discussions of our restructuring plan do not constitute an offer to sell or buy nor the solicitation of an offer to sell or buy any securities referred to herein, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offering, solicitation or sale would be unlawful.

Any offer or sale of securities referred to herein, have not been registered under the Securities Act of 1933 as amended and unless so registered, may not be offered or sold in the United States absent an applicable exemption from registration statements.

After all that, I'll turn it over to Bill Zollars.

William Zollars

Thanks, Paul. Good morning. Let me start with a few a comments on our important announcement last week. As you know, we now have definitive agreements with the lender groups, pension funds and the Teamsters providing for their support of a comprehensive restructuring plan designed to weigh the foundation for long-term success.

This plan enhances our liquidity and improves the health of our balance sheet. The planned new capital infusion, the conversion of lender obligations into equity and notes with equity conversion features and the extension of maturity dates to 2015, all provide the runway needed to grow the business and return to profitable operating performance.

The ongoing support of our stakeholders, that's customers, the union and non-union employees, lenders and shareholders continues to play a critical role in the success of our comprehensive recovery plan.

In addition, as we noted in our release today, Morgan Stanley has been engaged to arrange our planned 3-year up to $400 million asset-based loan facility, which is part of our restructuring. This facility is expected to provide important new liquidity for the company.

Now moving on to the quarter, despite the harsh winter weather, we are encouraged by the continued year-over-year improvement in our operating performance. As customers continue to return and we remain focused on our 3 key operational initiatives. Those are disciplined pricing, customer mix management and cost improvement.

The general economic outlook reflects GDP and IPI growth during 2011, while the LTL industry dynamics continue to improve. Industry pricing is firming as economic growth and seasonality absorbed industry capacity.

As we mentioned on our last quarter's call, National's year-over-year volume comparisons improved every quarter of 2010, as we narrow the year-over-year gap and it turned positive year-over-year in January of 2011.

For the first quarter this year, National shipments per day grew 6.3% year-over-year, with tonnage per day growing 7.9%. In addition, National's year-over-year volume increase has accelerated each month during the first quarter.

Regional grew its shipments by 9.8% and tonnage by 16.2% as compared to the prior year, as its growth rate also accelerated during the quarter. Our pricing also improved as we move through the quarter with our contractual increases tracking ahead of last year, we remained focused on efforts to improve customer mix management. As an example of that, we recently announced the hiring of additional local sales reps to support our growth initiatives in this important channel.

Accordingly, changes in weight per shipment and customer mix affected pricing metrics for both National and Regional in the first quarter. National increased its weight per shipment by 1.5% over the prior year, and it's revenue per shipment by 3.3%.

Regionals revenue per shipment grew 7.7% in Q1 versus Q1 of last year, which included a 5.8% increase in weight per shipment. Similar to the fourth quarter, the weight per shipment growth was the strongest at Holland, which reflects the ongoing recovery of the manufacturing sector.

Moving on now to earnings. Despite the harsh winter weather that I mentioned earlier, National improved it's EBITDA by more than $35 million over last year. In addition, National's adjusted operating ratio improved by more than 550 basis points versus 2010.

Our Regional business also impacted by winter weather, but improved its adjusted operating ratio by nearly 100 basis points year-over-year.

So in summary, our consolidated operating results in the first quarter delivered the 6th consecutive quarter of year-over-year EBITDA improvement. During the quarter, once we moved past the winter weather impacts, which created an earnings shortfall in January and February that we highlighted on our last quarterly call, our core operating performance accelerated and we generated consolidated EBITDA in excess of $20 million in March.

Finally, our consolidated incremental EBITDA margins were 26% on a 14% year-over-year revenue growth. For National, our incremental EBITDA margins year-over-year were in excess of 50%, that's 5, 0, on a 10% year-over-year revenue growth. I think that demonstrates a significant operating momentum we have achieved in that business.

Now Bill Trubeck will provide more color on our financial results and 2011 outlook.

William Trubeck

Good morning, everyone. Well, as Bill mentioned and as we highlighted in our earnings release, we took a $17 million charge in our income statement primarily related to 2009 and older self-insured claims and incurred about $8 million of operating expense related to our restructuring. Now, let me provide additional perspective on the self-insured claims charge.

Our workers' compensation claim activity spiked in 2009 both in terms of frequency and severity during the rightsizing of our workforce to match the reduced market demand and the lower level of shipments, which included the integration of the Yellow and Roadway network operations.

Looking back specifically at YRC National claims costs, and when considering the first quarter charge, our estimated cost for 2009 worker's comp claims is now about 9% of payroll or about $8.50 per shipment during that year.

Our estimated worker's comp claim costs for the 2010 claim year is now about 7.3% of payroll or about $6 per shipment, which is nearly a 30% cost improvement from the 2009 claim year but is still substantially higher than our historical performance.

So to put the cost for the 2009 and 2010 claim years into perspective, our historical performance for claim years 2006, 2007, and 2008, which were claim years not severely impacted by the financial crisis and recession, our integration and our downsizing, averaged about 5.5% of payroll or about $4.50 per shipment for YRC National. This 3-year average historical performance was 25% better than our 2010 claim year performance and over 45% better than the 2009 claim year.

Now going forward, we expect our workers' comp claims to cost to further improve from these 2009 and 2010 claim year levels and move closer to our 3-year average historical performance that I just mentioned.

Compared to 2010 reported results, this cost reduction opportunity is in excess of $50 million. Our focus on safety programs have already reduced the rate of new claims by 31% over the last 12 months, compared with the previous 12 months.

This significant improvement, which we expect to accelerate as we move through 2011, mitigates the settlement cost of claims going forward and allows us to move back to a more historical cost performance level.

Moving onto cash flow, the balance sheet and liquidity. Our sequential revenue growth coming out of the winter months, especially the ramp up of volumes during March, generated working capital requirements. To fund those requirements, we utilized existing availability on our revolver and the incremental availability created during the quarter from the increased borrowing base on our ABS facility.

So let me highlight the quarterly change in our ABS borrowing base. At December 2010, our balance sheet receivables were $443 million, and our ABS borrowing base was $189 million or about 43% of accounts receivable.

By the end of the first quarter, our receivables grew by $55 million to $498 million, and our ABS borrowing base increased to $217 million, which generated $28 million of incremental liquidity during the quarter. In addition, our ABS borrowing base continues to increase during the second quarter, driven by our revenue growth. It's important to note that we improved the quality of our customer receivables as well.

Our consolidated DSO at quarter end was 40, which represents a one day improvement from March a year ago, and we expect to further improve this quality metric going forward. Every one-day improvement generates about $12 million in liquidity.

Let me remind you, too, that our restructuring plan includes the replacement of our 364-day ABS facility and it's low to mid-40% advanced rate with a longer tenure, asset-based facility. The planned 3-year, $400 million ABL is expected to have a significantly higher advance rate than our existing ABS facility, which will provide incremental liquidity to enhance the support for our seasonal pattern of revenues and working capital requirements as we grow our revenues.

As an example, every 10 percentage point increase generates about $50 million in liquidity. From a current liquidity perspective, we ended the quarter with a balance sheet cash of $157 million, unrestricted availability of $8 million and restricted revolver reserves of $71 million for a total of $236 million.

And before we leave the balance sheet, let me comment on the classification of our debt. As a result of the March 10 milestone failure and since we have not yet completed the restructuring, accounting rules require us to show most of our debt as current. After completing the restructuring, we would expect nearly all of our debt to be shown as long-term consistent with the planned maturity dates contemplated by the restructuring. An important feature of the restructuring plan is the extension of maturities to 2015 and the equity conversion feature, which could allow us to reduce our total debt levels over time. Again, the plan provides considerable runway as it relates to debt maturities.

Moving on, our letters of credit were about the same as the amounts outstanding at the end of the last quarter. And as you know, we continue to work with the states and our insurance providers and other vendors to reduce the required letters of credit. We believe there is significant opportunity upon completion of our restructuring.

Now before turning it back to Bill Zollars, let me comment on guidance. We will continue to refrain from providing specific earnings guidance. That being said, now that we are past the seasonally low-volume first quarter, we do expect to, again, generate positive, adjusted EBITDA for the second quarter of 2011.

We also expect customers to continue to return and the company to continue its significant improvement in year-over-year operating performance trends as we move through the year, including continued year-over-year volume growth and year-over-year pricing improvements.

For 2011, we would also expect to fund CapEx in the range of $100 million to $125 million, mostly in the second half of the year, subject to the timing and closing of the contemplated restructuring transactions. And with that, I'll turn it back to Bill Zollars for closing.

William Zollars

Thanks, Bill. Let me close by commenting briefly on our second quarter trends. Our April volumes per day increased sequentially for March and National and Regional both continued their year-over-year volume growth during April. That trend as we just defined in April has continued into May, so we are seeing continued growth there.

And finally, we continue to work with stakeholders to complete the restructure, but we'll not be taking any questions on that topic during this call.

With that, we'll now take your questions related to anything we've covered here this morning.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Tom Wadewitz from JPMorgan.

Thomas Wadewitz - JP Morgan Chase & Co

I wanted to see if you could give some thoughts on, I guess, how you would expect the management team to evolve, if there's any kind of timeframes you have in mind, any comments you can offer on that?

William Zollars

Sure, Tom. I think as we've said before, I'm going to be here through the restructuring process. It looks like we're going to be on track to close the deal here in July sometime, and following that, we'll have a new CEO. Bill Trubeck is on about the same time line.

Thomas Wadewitz - JP Morgan Chase & Co

Okay. So you would expect a new CFO as well at the close of the restructuring?

William Zollars

Yes, following the restructuring, that's right.

Thomas Wadewitz - JP Morgan Chase & Co

Okay. Let's see, can you talk a bit about pricing that you achieved in the quarter and can you -- I guess, I'm used to thinking in terms of revenue per hundredweight, I think you talked a little more about pricing on shipments. But if you're talking about revenue per hundredweight, what were the numbers x fuel for Regional and National in the quarter?

William Zollars

Yes, we'll get you those here in a second, Tom. Just to kind of put this in context, the revenue per hundredweight numbers and the reason we didn't spend a lot of time talking about them is because the weight-per-shipment shift really distorts the revenue per hundredweight numbers, particularly from a year-over-year standpoint. The other comment to make is that in comparing our pricing to other competitors in the marketplace on a year-over-year basis, it is important to remember that some of these customers came from very much lower levels of pricing in 2010. So the percentage increases year-over-year are a little bit different for us just because we did not cut our prices as much in 2010 as others. And therefore, the year-over-year increases are not the same. So the revenue per hundredweight for National transportation year-over-year was up 1.8%. Again, with the proviso that we had a fairly significant shift in weight per shipment, and the revenue per hundredweight for Regional was about 1.8% as well.

Thomas Wadewitz - JP Morgan Chase & Co

Presumably, you had a meaningful boost to those numbers from fuel surcharge, can you give those numbers x fuel?

William Zollars

We really don't release that information, Tom. We try and give it all in just as most of our competitors do.

Well, the other comment to make there, as you know, Tom, is that the fuel surcharge has become such an integral part of the pricing equation with customers that it's now marbled into the overall price we get for our services. So with and without fuel surcharges is really less meaningful than it has been historically.

Thomas Wadewitz - JP Morgan Chase & Co

Okay. How much mix effect do you think there was? Was that a point or 2? Or was it more than that in terms of considering an adjustment to the revenue per hundredweight?

William Zollars

Well, I think if you just look at the difference between the revenue per hundredweight and the revenue per shipment, you can kind of get the impact. So on the National side, it was 1.8% revenue per hundredweight percent increase, and on the revenue per shipment it was 3.3%. So definitely, a large swing there but an even bigger swing on the Regional side, when it went from 1.8% to 7.7% from a revenue per hundredweight to a revenue per shipment. The other thing that's going on within all this yield numbers, of course, is the customer mix. As we've said before, we had faster growth in our corporate account customer base than in our local account customer base, which again has an impact on the yield.

Thomas Wadewitz - JP Morgan Chase & Co

Okay. So, I mean, how would you view, it seems like your competitors are seeing, not uniformly, but a number of the competitors are seeing pretty strong growth in the revenue per hundredweight with -- and pricing seems to be constructive in the market. How would you characterize the market in terms of pricing? And how would you characterize what you think will -- your pricing will look like going forward?

William Zollars

Yes, I think that we see evidence that the economy, although not increasing as quickly as we would have hoped, is still growing. And we also see evidence that, that combined with the seasonality of the business is soaking up the excess capacity. So our pricing has been fairly consistent throughout. And again, just to remind people that, that isn't true for all of our competitors. So if you went down significantly in 2009 and '10, your year-over-year increases are going to look a lot different than ours because we've been pretty consistent throughout. We would assume that the pricing trend we're on, which is continuing to improve every month, will sustain throughout the balance of 2011 as seasonality kicks in and the economy continues to recover.

Thomas Wadewitz - JP Morgan Chase & Co

Last question, I'll pass on. What do you think is kind of the key for you to keep making progress on your margin performance and getting to kind of breakeven or better in National and Regional? Is it expense? Or is it really pricing or tonnage? I mean, I'm sure it's a sum of all of them. But is there kind of a key aspect of that, that’s really going to be important to driving improvement in the margin looking forward?

William Zollars

I think you're right, Tom. It's all of the above. And I would say that if we just stay on the trends we're currently on, we'll be back in, in sort of more normal historical performance categories relatively soon.

Operator

Your next question comes from the line of Ed Wolfe with Wolfe Trahan.

Edward Wolfe - Wolfe Trahan & Co.

Bill, can you give a little bit of a sense, first of all, of what the union pension payments beginning in June are going to be?

William Zollars

Yes, that's going to be around $6 million to $8 million, Ed. This is Bill Zollars. And that we would expect to be offset by work rule productivity improvements and, of course, that starts in June.

Paul Liljegren

And to clarify, this is Paul. It's June hours, it's payable once a month, so the first cash payment will be July or something.

Edward Wolfe - Wolfe Trahan & Co.

$6 million to $8 million is pretty wide, are you saying that every month it's going to be different based on hours in that range of $6 million to $8 million, give or take?

William Zollars

Yes, it always is different because of the number of hours worked. So in our world, we'd rather pay a higher number because that means we've got more volume to handle. So yes, it'll vary from month-to-month based on the hours worked, Ed.

Paul Liljegren

But,Ed, generally, it's a weekly calculation, generally, and it's just paid month-to-month so.

Edward Wolfe - Wolfe Trahan & Co.

And in terms of the restricted and unrestricted access to the revolver reserve, the $71 million I thought was linked to EBITDA targets. Under the current EBITDA targets, which I know were suspended for first quarter, you would need to do something like $129 million of EBITDA in the second quarter,. The guidance is just for positive EBITDA. So I guess the question is, do you have access to that $71 million? And does anything changed if the recap goes through in reference to when you can tap that?

Paul Liljegren

Ed, this is Paul. Yes, the $71 million of revolver reserves are not related to EBITDA.

Edward Wolfe - Wolfe Trahan & Co.

Okay. So can you tell me what they are related to, if you have access to them and if that changes after the recap?

Paul Liljegren

Sure, that's fair. First of all, we're not taking questions around the restructuring, but the $71 million is unchanged from the end of last quarter. It still has the same 2 components. There's a $21 million component that requires lender vote to grant the company access to it. The other $50 million is available -- at the company's option to fund operating expenses. So they haven't changed since last quarter.

Edward Wolfe - Wolfe Trahan & Co.

Okay. And how many of the lenders need to vote the access, what percent?

Paul Liljegren

It's a 2/3 vote and again, for the $21 million.

Edward Wolfe - Wolfe Trahan & Co.

The excess property sale guidance of $30 million to $40 million, does all of that go to YRC?

Paul Liljegren

With the lenders, it's primarily real estate, and we're in the waterfall with the lenders where 75% of the proceeds used to pay down the term loan or reduce the capacity in the revolver. The remaining 25% come to the company.

Edward Wolfe - Wolfe Trahan & Co.

Okay. So 25% of the $30 million to $40 million goes to you?

Paul Liljegren

Yes.

Edward Wolfe - Wolfe Trahan & Co.

Okay. Can you give a little bit of guidance, the interest expense of $38 million. How that looks going forward, as well as the DNA of $49 million a quarter? How do we think about those numbers going forward?

Paul Liljegren

I think, again this is Paul, the DNA for the first quarter probably had a little bit of noise in it. But it's probably in that ballpark going forward. Obviously, as we bring new equipment on, it will go up, but $49 million is probably a good benchmark going forward. And for interest expense, obviously, the second quarter number will probably be comparable to first quarter number and we're not giving guidance beyond the second quarter on interest expense book price.

Edward Wolfe - Wolfe Trahan & Co.

Okay. And the $17 million in workers' comp charge, how much of that was cash in the quarter?

Paul Liljegren

A very little of it. There's a really long tail on the payout of cash for work comp claims. So very low of it was first quarter.

Edward Wolfe - Wolfe Trahan & Co.

Okay. And the $400 million ABL that you put in the release, so I'm not talking about anything that's not in the release. Relative to the $325 million ABS and the total $706 million of revolver capacity, how do I think about that? How much -- I mean, is it as simple as it expands by $75 million? Or is it trickier because it's in the context of the revolver shrinking?

William Zollars

There are 2 pieces to the ABL that are good news for us: One, is, as you point out, the increase in the overall capacity in the facility from $325 million to $400 million. The second as we mentioned, as Bill Trubeck mentioned, we expect to get a higher advance rate. So it should give us kind of a double whammy on liquidity.

Edward Wolfe - Wolfe Trahan & Co.

What do you have outstanding right now under the ABS? How much room is there?

Paul Liljegren

Those details are in the supplemental information, but we only have 8 -- at the end of March, we had $8 million available under both the revolver and the ABS. So pretty small.

Edward Wolfe - Wolfe Trahan & Co.

So that number stayed at $8 million, everything else being equal on July 22 and you did the recap, would we add $75 million to that before we go into the number of days, the second part of the good news? Or are there other things that I'm missing there?

Paul Liljegren

I think there's other things, Bill Trubeck mentioned the changes in the borrowing base. The changes -- the borrowing base was $218 million at the end of March compared to the $325 million ABS facility. And Bill also mentioned this borrowing base increased in the second quarter. That's probably the piece you're missing, is the changes to the borrowing base.

Edward Wolfe - Wolfe Trahan & Co.

Paul, I'll get back to you with that offline. Last question is, the CapEx guidance last quarter was $150 million to $175 million. You dropped that dramatically down to $100 million to $125 million despite the tonnage being better than we thought. So should we just look at that as because of the worst-than-expected EBITDA, you're being careful with your cash flow or has something changed and you're just going to age the fleet a little more? How do we think about the change in CapEx guidance?

William Zollars

I think your first point is right, we're being a little bit more careful with respect to the cash flow requirements and how that is scheduled through.

Edward Wolfe - Wolfe Trahan & Co.

Okay. And virtually all of the $100 million to $125 is going to be in the second half? I saw you had a -- is this a net CapEx, $100 million to $125 million?

Paul Liljegren

It's gross.

Edward Wolfe - Wolfe Trahan & Co.

It's gross of the 25% of the $30 million to $34 million...

Paul Liljegren

No, it's the gross spend number. It's not net of proceed. It's just the gross spend.

Edward Wolfe - Wolfe Trahan & Co.

Okay. But what besides the excess property sales -- so you're saying, net of equipment that you said that you trade-in?

Paul Liljegren

No, it's just the gross spend on new equipment. It excludes all of the proceeds on what we sell.

Edward Wolfe - Wolfe Trahan & Co.

What would the net CapEx guidance be? What's the equivalent of that?

Paul Liljegren

You can take the gross and subtract the range of proceeds, the $30 million to $40 million that we gave.

Edward Wolfe - Wolfe Trahan & Co.

But again, you said you're only getting about $8 million or $9 million of that $30 million or $40 million. So should I subtract the $8 million or $9 million from that?

Paul Liljegren

From a funding standpoint, yes.

Edward Wolfe - Wolfe Trahan & Co.

Okay. I appreciate the time.

Operator

Your next question comes from the line of Jason Seidl with Dahlman Rose.

Matthew Elkott - Dahlman Rose & Company, LLC

This is Matt Elkott for Jason. Can you guys give us an update on the capacity in your network? Tonnage levels have been increasing significantly lately in the industry, so what's capacity like?

William Zollars

Well, it's a little different by operating company, Matt. I would say that at YRC in the big network, we're still probably a little bit below 100%. We probably still have 10% of excess capacity. But, as you know, in this business, you can operate sometimes most efficiently well above that 100% level. At some of the other companies, the Regional companies is a little bit different. Holland is probably the fullest in terms of their network. Reddaway, probably a little bit like YRC and New Penn kind of somewhere between YRC and Holland.

Matthew Elkott - Dahlman Rose & Company, LLC

Okay. And is there any scenario where we can probably see you guys do a general rate increase to kind of take somewhat of a leadership role on the pricing front in the industry?

William Zollars

Of course, we did that last fall with the GRI that we announced then. And the price environment is something we obviously monitor on a daily basis. So I wouldn't want to do any kind of action there.

Matthew Elkott - Dahlman Rose & Company, LLC

Okay, great.

Operator

Your next question comes from the line of Justin Yagerman with Deutsche Bank.

Robert Salmon - Deutsche Bank AG

It's Rob Salmon on for Justin. Could you all walk us through the tonnage trends at both National and Regional by month in the quarter?

William Zollars

I think so.

Paul Liljegren

Robert, this is Paul. We didn't provide that detail. But as Bill said earlier, our volume trends accelerated each month during the quarter, but we didn't provide the monthly detail.

William Zollars

And remember that January and February were significantly impacted by weather in both cases. So it got better every month, March by far the best.

Paul Liljegren

You might recall that National, for example, turned positive in January. Compared -- and it proved its volume comparisons all throughout all of 2010, turned positive in January and that trend continued during the quarter, each month.

Robert Salmon - Deutsche Bank AG

Okay. When we're thinking -- I guess, it sounds like the trends continued into April as well. As we're thinking about the balance between kind of tonnage and yields as you guys look out, the yields were, well, a little bit softer than we have been expecting, but the tonnage a little bit stronger. In particular, I'm thinking in National, where you had weight per shipment on a sequential basis, which declined from Q4. And you also saw a kind of lighter yield improvement despite kind of the increase in the fuel surcharge. Can you walk us a little bit through kind of how you're thinking about that balance between tonnage and yield?

William Zollars

Yes, as always, yield is a very complicated subject. We have mix management occurring within the channels. As I said a little earlier, corporate accounts growing faster than local accounts. We also have the shift in weight per shipments that we talked about. So the revenue per hundredweight is different from the revenue per shipment. And then obviously, the fact that we've been fairly stable on our pricing, where some of our competitors have not been, makes the year-over-year comparisons different. I would say that in all of our channels, we're seeing pricing improve on a month-to-month basis both contractually and on the non-contractual side, the GRI is holding kind of on the same historical basis as in the past. If you look at, probably, the most important way to judge our balance between revenue, I'm sorry, volume growth and growth in yield, you can look at our incremental margins, which I touched on a little earlier. At YRC, we had a 50% incremental margin on the revenue growth, which I think is an indication that we're doing a pretty good job of balancing the revenue and, I'm sorry, the volume and the yield.

Robert Salmon - Deutsche Bank AG

I guess shifting gears to the cost side of the equation. You guys laid out an opportunity to continue to reduce the workers' comp and we can model out what that means on the expense side. Are there additional cost opportunities that you guys are currently kind of looking at right now, where you got further savings potential?

William Trubeck

Yes, I'm going to let Mike Smid comment on that. I think the general comment is, yes, particularly in the area of new work rules and savings that were generated because of the MOU, Mike?

Mike Smid

Bill, true, the further implementation of our changes in the labor agreement continue to provide efficiencies, position us both from a service performance and a cost performance standpoint, far better than we have been. And second, we had talked last quarter about some further facility consolidations in the National network. Those have been completed as we move through the end of April. Those further consolidations allow us to continue to compress the network to improve the density and improve performance overall. We've continued with the implementation of some technology changes and processes in our local facility that support the changes. And as you mentioned, our approach to safety and workers' compensation is yielding a significant reduction in the current occurrence of injuries. Those are the primary areas that we're focused on.

Operator

Your next question comes from the line of David Ross with Stifel, Nicolaus.

David Ross

Bill, you said that the contractual increases were tracking ahead of last year to date. Can you give a little more color on that by how much, are they up 2% to 3% on average, 4% to 5%?

William Zollars

Yes, it's more north of 3% coming off a year where we were negative. So and that, as I said, continuing to improve every month.

David Ross

And going back to the yield question, I want to know really why yields were so bad? Weight per shipment was only part of it. Looked like pricing was negative year-over-year and sequentially excluding fuel at YRC National and maybe at Regional. Regional did have more of a mixed impact from weight per shipment. Is this basically because the large customers are not giving rate increases? The corporate accounts?

William Zollars

It's not that so much, David, as it is the change in the rate of growth between the corporate channel and the local channel. The corporate channel, as you know, is less profitable than the local and is growing faster as customers regain confidence on our ability and it brings more business back to us. So we got a mix shift going on between corporate and local in the sense that corporate is growing faster than local. They're both growing, pricing is improving on both sides and pricing is getting stronger on both sides of the equation. But we have to have faster growth on the corporate side, which is why probably, some of the analysts have been surprised by the volume growth that we've seen. We've got a lot of customers coming back.

David Ross

To us, it doesn't make sense to grow your volume at unprofitable rates.

William Zollars

It doesn't make sense to us either, David, that's why we have a 50% incremental margin.

David Ross

And also I don't think incremental margins is a good way to look at it because you could throw crummy price rate on the back of a half-full truck and you get good incremental margins. But if the operating ratio is not getting significantly better close to 100 or below, then something is wrong. These National accounts, I think, they're highly unprofitable. And are you at the point where you can walk away from some of these big accounts or do you just need the volume so much?

William Zollars

It's always a judgment call in terms of -- every account is different but I can tell you that based on the incremental margins we are seeing, we do think that's an important factor. And based on the performance in March, where we generated $20 million of EBITDA, we think that we've got a good balance between the decisions we're making around volume and price. The fact is, at a 90% capacity level, our volume is still an important thing to add to the network at YRC, but the most valuable way to look at how we're doing on that balance between volume and price, we believe is in the incremental margin area and the fact that we're continuing to see growth in EBITDA.

David Ross

Another question on the truckload side of things. Why is YRC still on the truckload business? The 115 OR it doesn't seem to fit the profile. It doesn't seem to make a lot of sense for a company that's trying to make money.

William Zollars

Yes, the truckload situation is, again, a little bit unique. We had used Glen Moore as sort of an internal line-haul carrier for the company. We have since moved away from that as we've gotten more competitive rates from rail. So going forward, you can be assured that we're going to be focusing on that business and making sure that we're getting most out of that asset. Really, it’s been primarily a function of the change in strategy within the company.

David Ross

Okay. And then just the last question is, even with a huge labor cost advantage against your biggest union competitor, YRC National still has the worst operating ratio in the business. How do you get it to sustain profitable levels that really just can't be fixed by balance sheet restructuring?

William Zollars

Well, I think first of all, if you looked at the numbers, the operating ratio at least one or two of our competitors was worse than ours, and one of them is nonunion. So...

David Ross

Worse than 1 of 7?

William Zollars

Are you talking about for the company or are you talking about...

David Ross

YRC National.

William Zollars

Oh, YRC National. Okay. I think the important thing for us here is continue to focus on improvement in the performance of the company. As I said, the $20 million of EBITDA generated corporately and the amount of momentum we have on the National side of the business in terms of incremental margin, customers returning, our revenue and shipment growth gives us a lot of confidence that we're on the right track and that we'll be back where we should be here in the foreseeable future.

David Ross

Well, I hope you can get some big rate increases from your corporate accounts.

Operator

Your next question comes from the line Chris Ceraso with Crédit Suisse.

Christopher Ceraso - Crédit Suisse AG

A couple of questions on the pension here. What's the schedule for contributions over the next several months? And do you have any update on what the withdrawal liability is at this point?

William Zollars

Well, just to start with the same question, the withdrawal liability is a contingent liability. We don't think that will come into play. In terms of when we reenter these pension funds, we'll be reentering those funds in June at $1.75 per hour, which is about 25% of our previous contributions.

Christopher Ceraso - Crédit Suisse AG

So on a cash flow basis, what's the cash contribution that you have to make in 2011?

Paul Liljegren

For our union pension?

Christopher Ceraso - Crédit Suisse AG

Yes.

Paul Liljegren

It depends on hours work. We've said previously, it's in the $6 million to $8 million range. It could be higher based on volume and hours per month. And so it's June hours, the cash begins in July, but that's the monthly rate.

Christopher Ceraso - Crédit Suisse AG

Okay. What was the operating ratio for the month of March?

Paul Liljegren

We didn't break that up separately.

Christopher Ceraso - Crédit Suisse AG

Can you?

Paul Liljegren

No, we did provide adjusted EBITDA by month, but we didn't break out the operating ratio. But to Bill's point, we improved each month during the quarter, even with the EBITDA trends and then if you throw out the insurance charge, which we booked in March, and look at the positive EBITDA we generated in March. You can get an indicative operating ratio.

Christopher Ceraso - Crédit Suisse AG

Okay. Last question, how do you measure density in your network? Let's say the National network as an example, and where does that measure today? And where do you think it needs to be for you to be making an appropriate margin?

William Zollars

Well, I think there are a number of ways to look at density. I think we tend to use below the average metric as the primary metric and I can tell you that we're getting very close to where we would like to be from a load average standpoint. But density and the amount of volume going through the network is something that we track daily. As I said a little earlier, the YRC network is still not quite where we would like it to be from a volume standpoint, but it's moving in that direction and we would expect it to be there in the not-too-distant future. The density or the utilization of the network at Holland is probably at the other end of the spectrum from our operating company standpoint. Their network is pretty close to 100% full and obviously, the focus there is on customer mix management more than in volume growth.

Operator

Your next question comes from the line of Neal Deaton with BB&T Capital.

Neal Deaton - BB&T Capital Markets

A couple of quick question. First of all, you talked about the consolidation of your National network. Could you give us an exact number of terminals you had at the end of the quarter? And kind of where you expect that figure to be at the end of the year?

Paul Liljegren

We had, at the end of April, the last day of April, we had 296 active facilities. We will continue to work on our network design and evaluate the facilities for potential consolidation or reassignment within the network as we progress through the year, but there is not a definite number at this point.

Neal Deaton - BB&T Capital Markets

Okay. And then, certainly Holland has been performing pretty well and is at capacity, which triggered a fall -- regarding the tragedy in Japan and how much -- all the business Holland had traditionally carried. What kind of impact do you foresee on the automotive supply chain there? How much of your business is sourced from Japan versus, say, internally in the U.S.?

William Zollars

Yes, there's been a slight impact on the margin at Holland as a result of the issues in Japan. I don't think it's going to be a dramatic impact going forward, but there has been a little bit of a hiccup as a result of that.

Neal Deaton - BB&T Capital Markets

Okay. And then, I know, before, you were basing your restructuring back in '10, I'm sorry, end of '09, you had quite a bit of freight diversion leading up to the debt for equity exchange. Just curious, in the weeks preceding the April 29 deadline, did you have much freight diversion then out of fear that you weren't get the deal done and may have to file for bankruptcy?

William Zollars

Not a lot. It's hard to specifically know, but we felt like our trend and our momentum continued throughout the end of the month.

Neal Deaton - BB&T Capital Markets

Okay. And the business that you did lose there during that process, are you successful in getting some that back so far or is it too early to tell?

William Zollars

We're continuing to see customers return. The data we've been looking at within state, we are regaining market share based on the published public company numbers we're looking at. So our customers are continuing to return as we move our way through 2011.

Neal Deaton - BB&T Capital Markets

Okay. All my other questions have been asked.

Operator

Your last question comes from the line of Jack Waldo with Stephens.

Jack Waldo - Stephens Inc.

Bill, did you say you have 296 terminals?

William Zollars

That was Mike Smid, but yes, that's the current number. That's at YRC and we're continuing to what I would call fine tune the network, but I think we're feeling pretty good about the balance now between capacity and business volumes.

Jack Waldo - Stephens Inc.

Is that YRC National or Regional or both?

William Zollars

That's YRC, that's the National company only. We got somewhere in the $430 million kind of number for the company.

Jack Waldo - Stephens Inc.

Okay. So you haven't seen a precipitous fall in the [indiscernible] terminals? It's still pretty flat from where it was in the fourth quarter, is that right?

William Zollars

We've closed a few more. As I mentioned previously, kind of fine tune the network, taking out some additional capacity that we didn't think was necessary. So there's been a little bit more fine tuning. We probably reduced maybe 30 to 40.

Paul Liljegren

Yes, I think -- Jack, this is Paul. Since the first of the year and the end of last year, the 296 that Mike Smid mentioned was an end of April number, so we're down roughly 35 since the beginning of the year. And for Regional, we're down a couple of terminals, so the Regional network is 123. And so it puts us north of 400 all in, at the end of April.

Jack Waldo - Stephens Inc.

Okay, okay. Bill, I know that you have -- there are a lot of indirect costs associated with higher fuel prices that might not -- makes this analysis maybe a little bit more of an art than a science. But on the science part, what impact did rising fuel prices have on your earnings this quarter? I know, Conway mentioned yesterday in their conference call it was a slight tailwind.

William Zollars

Yes, that's probably a fair comment. I think we've said in the past that fuel prices -- the fuel price impact on us depends on how fast it rises and to what level and the duration of how long it stays there. I'd say that we're still very confident that the fuel surcharge is the best hedge against fluctuating fuel prices. Maybe slight tailwind is accurate for us as well.

Jack Waldo - Stephens Inc.

When you talk -- just talking slight tailwind, of the $20 million in EBITDA, I guess, in March, how much do you think was fuel related?

William Zollars

It's almost impossible to tell, Jack. As you said, that's a really complex equation to disconnect and unravel because you've got this fuel surcharge now totally marbled into the pricing for so many of our customers. To get a clean number there, it's very difficult.

Jack Waldo - Stephens Inc.

Sure, sure. Could you talk a little bit about what you're seeing on the pension side? I have seen, I guess, in recent conversations about maybe some proactive steps that the different plans are doing, their funds are doing. I think, there was a discussion of one of the -- I guess, I can say union-related website recently talking about a 401(k) switch over on the western side of the U.S. Is there -- can you just give us a little update on what you're seeing there and what type of implications that can have on you guys?

William Zollars

Yes, I don't know what you saw there, Jack. I can tell you that the Central States has announced lower benefits as a result of the negotiations that we've been through with the MOU. Yes, the Western Conference, I think is what you're referring to on the 401(k). But there's a lot of work going on the pension area now that we've got a lower level of contribution that we've established through 2015.

Jack Waldo - Stephens Inc.

Does that have any impact on your obligations, I guess, this year, the actions Central States made?

William Zollars

No, we've got a contractual obligation to contribute $1.75 per hour through 2015. And that's the number that we will live by.

Jack Waldo - Stephens Inc.

Okay. And then last question, is there update on the timing of the appeals hearing with ABS?

William Zollars

No, there was an appellate court hearing on April 12. The judges have taken that under advisement. It's hard to predict how fast the courts will move, as you know. So that's where it stands right now. It could be another month or 2 before they rule. But they have it under advisement right now.

Paul Liljegren

Okay, very good. Operator, that concludes our call. So you can do the close out.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

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