YRC Worldwide, Inc. (YRCW) CEO Darren Hawkins on Q2 2018 Results - Earnings Call Transcript

YRC Worldwide, Inc. (YRCW) Q2 2018 Earnings Conference Call August 2, 2018 9:30 AM ET

Executives

Tony Carreno - VP, Investor Relations

Darren Hawkins - CEO

Stephanie Fisher - CFO

Thomas O'Connor - President, YRC Freight

Analysts

David Ross - Stifel, Nicolaus & Company

Albert Delco - Stephens Inc.

Scott Group - Wolfe Research

Seldon Clarke - Deutsche Bank

Willard Milby - Seaport Global Securities

Operator

Good morning, and welcome to YRC Worldwide's Second Quarter 2018 Earnings Call. [Operator Instructions]. Please note this event is being recorded. I would like to turn the conference call over to Tony Carreno, Vice President, Investor Relations. Sir, please go ahead.

Tony Carreno

Thanks, operator, and good morning, everyone. Welcome to YRC Worldwide's Second Quarter 2018 Earnings Conference Call. Joining us on the call today are Darren Hawkins, Chief Executive Officer of YRC Worldwide; Stephanie Fisher, Chief Financial Officer of YRC Worldwide; and T.J. O'Connor, President of YRC Freight.

Before we begin, I must remind you of inherent uncertainties in any forward-looking statements in our discussion this morning. During this call, we may make some forward-looking statements within the meaning of Federal Securities law. 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. This includes 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 the risk factors. For a full discussion of the risk factors that could cause these 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. These items are available on our website at yrcw.com.

Additionally, please see today's release for a reconciliation of net income to adjusted EBITDA on a consolidated basis and operating income to adjusted EBITDA on a segment basis. During this call, we may refer to our non-GAAP measure of adjusted EBITDA simply as EBITDA.

In conjunction with today's earnings release, we issued a presentation which will be referenced during the call. The presentation was filed with an 8-K, along with the earnings release and is available on our website. The format of this morning's call includes an overview of the second quarter from Darren, followed by Stephanie, who will discuss our financial results and T.J. who will provide an update on YRC Freight. Following their prepared remarks, Darren, Stephanie and T.J. will be available for a question-and-answer session. I'll now turn the call over to Darren.

Darren Hawkins

Thanks, Tony, and good morning, everyone. We are pleased with the solid progress made during the second quarter and believe that we are well positioned to improve year-over-year results in the second half of the year compared to last year. During Q2, we continued our yield improvement strategy that was implemented in 2017 with solid increases in customer contract negotiations and those continued through July at all YRCW companies.

On a segment basis, YRC Freight reported its fifth consecutive quarter of positive year-over-year increases in revenue per hundredweight excluding fuel. As you'll hear from T.J., we continue to see spillover from the truckload market, which is impacting YRC Freight's year-over-year increase in weight per shipment. As I discussed on the last earnings call, we have proactively been pushing back on these shipments through contract adjustments and dynamic volume pricing to accept the heavier shipments that are complementary to our networks and avoid those that are not through higher volume rates.

The regional carriers rebounded from the weather challenges in Q1 and reported their best operating ratio in two years. They also reported their highest year-over-year increase in revenue per hundredweight excluding fuel in three years. YRC Worldwide continued to invest in all of our business units with fleet upgrades in Q2, and combined with the additions in Q1, we have taken delivery of more than 900 tractors during the first half of 2018, with approximately another 500 expected in the second half of the year. We have also taken delivery of more than 500 trailers with approximately another 3,300 expected to be delivered this year. The new tractors come with enhanced safety equipment, and we expect improved fuel mileage and less maintenance expense, along with the reduction in the use of more expensive short-term rentals over time while providing customers with valuable capacity in a cost-effective manner.

Industry pricing discipline and demand for the services that we provide remain positive catalysts for YRCW as well as indications of a strong and durable economic cycle for the trucking industry.

In closing, I would like to thank our nearly 32,000 employees for focusing on providing award-winning customer service and putting safety first in everything we do. With these comments, I will now turn the call over to Stephanie for a review of our financial results.

Stephanie Fisher

Thanks, Darren, and good morning, everyone. For the second quarter 2018, YRC Worldwide reported consolidated revenue of $1.33 billion, which is up from $1.26 billion in the second quarter 2017. Operating income was $50.9 million, which included a $2.2 million net loss from property disposals. This compares to operating income of $53.3 million, which included a $1 million net gain on property disposals in the second quarter 2017.

On an adjusted EBITDA basis, the company reported $100.8 million for the second quarter 2018, an increase of $9.7 million compared to $91.1 million for the same period last year. The earnings release and presentation issued this morning includes segment financial information and statistics. Therefore, I will keep my segment comments focused on a few key second quarter stats.

At YRC Freight, the second quarter 2018 year-over-year tonnage per day was down 1%. This was comprised of year-over-year decreases of 3.8% in April and 0.8% in May and an increase of 1.6% in June. Preliminary results for July indicate YRC Freight's year-over-year tonnage per day was down approximately 3.8%. For the second quarter 2018, year-over-year revenue per hundredweight, including fuel surcharge, was up 5.4%, and revenue per hundredweight, excluding fuel surcharge, was up 2.9%. Year-over-year revenue per shipment, including fuel surcharge, was up 9.1% and up 6.6% when excluding fuel surcharge.

Turning to the stats for the Regional segment. The second quarter 2018 year-over-year tonnage per day was down 2.4%. This was comprised of year-over-year decreases of 1.3% in April, 1.5% in May and 4.1% in June. Preliminary results for July indicate the Regional segment's year-over-year tonnage per day was down approximately 6.5%. As a reminder, last year's tonnage per day comps for the regional carriers were strong in June and July, with June 2017 reporting a year-over-year increase of 5.1% and July 2017 reporting a 5.3% increase.

For the second quarter 2018, year-over-year revenue per hundredweight, including fuel surcharge, was up 7.6% and revenue per hundredweight, excluding fuel surcharge, was up 5.2%. Year-over-year revenue per shipment, including fuel surcharge, was up 11.4% and up 8.9% when excluding fuel surcharge.

In terms of liquidity, our cash and cash equivalents and managed accessibility under the ABL facility at June 30, 2018, was $190.8 million, which is an improvement of more than $70 million from the end of the first quarter 2018. The company's total debt at the end of the second quarter 2018 was $910.7 million, which is a reduction of $90.1 million compared to a year ago. We are committed to investing in the business, and during the second quarter, we spent $23 million on capital expenditures. We also entered into leases for revenue equipment with capital value equivalent of $38.6 million for a total of $61.6 million or 4.6% of operating revenue. The total is more than double the $29.6 million invested in the second quarter 2017. Just a reminder, that as we continue to employ our leasing strategy to upgrade the fleet, this will increase long-term lease expense.

Regarding our credit facility covenant, at the end of the second quarter 2018, the last 12 months consolidated adjusted EBITDA was $286.4 million and the funded debt to adjusted EBITDA ratio was 3.18x compared to a maximum credit facility covenant of 3.5x. The covenant maximum remains at 3.5x through the end of 2018.

On last quarter's earnings call, we discussed the potential for nonunion pension settlement charges at YRC Freight in 2018. These charges will not impact the company's cash balance or liquidity and will be excluded from adjusted EBITDA and from operating income. However, these charges will be included in GAAP EBITDA. There was no impact to the second quarter financial results from nonunion pension settlement charges, but we expect the total of approximately $5 million to $20 million to impact the third and fourth quarters in 2018.

In closing, I'm encouraged with the second quarter results as we were able to successfully execute on our yield initiatives and further invest in the fleet. Looking ahead to the second half of the year, we expect to diligently manage our cost structure and execute on our initiatives to improve our operations, profitability and customer experience. At this time, I'll turn the call over to T.J. to discuss YRC Freight.

Thomas O'Connor

Thanks, Stephanie, and good morning, everyone. In the second quarter, YRC Freight reported year-over-year increases in revenue and adjusted EBITDA. Revenue was up nearly 5% compared to a year ago and adjusted EBITDA of $54.5 million is the best performance in this category since the second quarter of 2008 exactly 10 years ago. These improvements reflect the continuation of our efforts to secure the right kind of business at the right price during this historically strong freight industry environment. As an example, our customer contract negotiations averaged 7.2% during the second quarter and this trend carried into July.

Year-over-year shipment and tonnage comparisons improved each month as the second quarter progressed. Growth in shipments over 10,000 pounds was especially strong in the second quarter as the plate truckload market created opportunities for YRC Freight. While the absolute number of truckload shipments handled remains a small percentage of our overall shipments, the much higher weight per shipment in excess of 14,000 pounds had a meaningful impact on the revenue metrics we report. While unfavorably impacting our overall revenue per hundredweight results, the increase in volume shipments had a positive impact on our tonnage and revenue per shipment statistics.

We are confident that we are pricing the volume shipments appropriately. An additional benefit of these shipments is they assist with balancing YRC Freight's network. We are pleased with the tractors have been placed into service so far in 2018. And as we move to the second half of the year, our focus will shift to taking possession of replacement trailers. While YRC Freight has made this progress removing short-term rental tractors from our fleet, the reduction of short-term rental trailers will be a work in progress. Looking forward, our focus will remain on executing strategic initiatives of enhancing safety, service, efficiency and quality as well as drive our hiring. I would like to thank all members of the YRC Freight team for their continued efforts to meet our customers' needs and expectations each and every day.

Thanks for your time this morning. We would now be happy to answer any questions that you may have.

Question-and-Answer Session

Operator

[Operator Instructions]. And the first question today comes from David Ross from Stifel.

David Ross

Maybe I missed it, Stephanie, because you're talking faster than I can write, but the YRC Freight tonnage per day, I caught kind of the end of the regional tonnage per day, but what was that in April through July?

Stephanie Fisher

April, it was a decrease of 3.8%, a decrease of 0.8% in May and an increase of 1.6% in June, and then preliminary results for July are 3.8% decreased.

David Ross

Okay. And why did it go backwards in July from June? It seemed like at least there was some momentum building there.

Thomas O'Connor

Hey, David. Good morning. This is T.J. O'Connor. When we looked at July, I don't really see that as much of an outlier. When we take the month apart week by week, the biggest delta was in the first week, which was just before and after the July 4th holiday which fell in the middle of the week this year on a Wednesday. So that's really probably the biggest deviation we had year-over-year by week.

David Ross

And then can you talk a little bit about the driver situation? Is that any better or worse at freight and/or regional?

Darren Hawkins

David, I'll start with that and then let T.J. provide some additional color as well. We've had a very active hiring year this year, over 4000 total across the YRCW companies. Our turnover remains in the teams like it has been. Based on comparison to some nonunion companies and others, I think we're in a pretty good position on that. We've made some large investments in recruiting two years ago and they continue to provide those benefits, but it's certainly the most challenging year that we've had. So we're bringing people in, but the level of experience with those people that require some additional training and other pieces that we have to be prepared for and I think that will be the case moving forward. T.J, anything you want to add?

Thomas O'Connor

Not a whole lot to add to that, David. I would also just comment that our hiring year-over-year is up, and in fact, we've hired in total, well over 3500 employees at YRC Freight year-to-date including drivers. So we're doing many, many things in addition to the traditional things that we've done to address the driver shortage, including creating our own. We've got a lot of very, very good employees that have traditionally been dock-only employees. We're sponsoring them and help training them to get their commercial driver's license to help service our customers to become part of our driving force.

David Ross

And then, T.J., YRC Freight, why did the OR go backwards year-over-year in the quarter? It seems like a very good environment for that to happen. And then what might change to allow that to start going lower again in the back half of the year?

Thomas O'Connor

Right. And some of that were accounting changes but I think Stephanie can address those specifically.

Stephanie Fisher

Yes. So, David, it's a couple of different factors, one being property gains and losses. In 2017, we had a gain of $1 million in the quarter. Most of that was related to YRC Freight. And then in 2018, we had a $2.2 million loss in the quarter. So that $3.3 million change on a year-over-year basis is a big chunk of that. The other piece of that, for YRC Freight specifically, is the pension accounting. With the change and moving that to non-op from an operating expense in 2017, down into operating now or nonoperating in 2018, that's creating a big change as well. And then the final piece of that is some safety initiatives that we have. Those are creating some nonrecurring consulting fees, specifically at YRC Freight.

David Ross

I mean, should we expect the OR to go the right way soon? Or should this kind of be a trend for another quarter or 2?

Darren Hawkins

David, I'll start with that. And first, just looking at the company as a whole, the progress we made in Q2, I was certainly encouraged by that. We did what we said we would do around the tractor piece, and those tractor rentals, which was predominantly impacted at YRC Freight, the new additions have driven those down to where we would like to have on close to net zero. Tractor rentals, they're 5x more expensive than trailer rentals. The tractor - the new tractors bring in - the fuel miles per gallon progress that we're seeing at YRC Freight is encouraging, along with the reduced maintenance expense reduced, tire expense. All those together, along with the pickup in delivery optimization that YRC Freight is continuing to expand in terminals each month, is driving that local cartage reduction as well. So when I think about the second half of the year, that's where I got the confidence in saying that I expect our results to be better than the second half of 2017. T.J., anything else?

Thomas O'Connor

The only thing I would add to that is just the improvement of adjusted EBITDA up to $54.5 million, which is the highest quarterly figure, too, since the second quarter of 2008. So a good 10 years high point there. So I'll look to that. That reflects on the progress we're making at YRC Freight.

David Ross

Yes, it'd be great if that could be a run rate. You can get up to $400 million adjusted EBITDA for the year.

Thomas O'Connor

I agree.

Operator

Our next question comes from Brad Delco from Stephens.

Albert Delco

Darren, I did want to dig into your comments about kind of the improvement in the back half of the year. I mean, just to kind of be fair, we had some disruptions from storms last year. So your comp is quite easy, I think, in third and fourth quarter. So as we're thinking about improvement in the back half of the year, can you kind of put it in terms of what we just saw in Q2 or on a sequential basis? Because I do believe your comps are pretty easy.

Darren Hawkins

Brad, certainly a good callout there. It was a rough second half of 2017, and the equipment situation that we were in amplified all of those things that you just mentioned. The tractor situation, we have that under control, and that was the most expensive part of our short-term rentals. You heard me mention earlier the trailer piece is now our focus in the second half of the year, and a lot of benefits come from the addition of the trailers that we're bringing in. As we've talked about in the past, the rental situation on trailers, we're not capable of renting 28-foot trailers that we predominantly use in our over-the-road network. So bringing in those 28-foot trailers, we'll have a benefit in our load average metrics and also the overall efficiency while reducing the short-term rental expense, and that doesn't happen overnight. It happens over time. But just like we did with the tractors in the first half of the year, we'll be fully dedicated to doing that.

One interesting thing that I think hasn't been talked about a lot that I'm looking at in the second half of the year is, we're fully deployed on our handheld technology at the regional companies. The regionals already have momentum and yield and some operating metrics. But one thing that we're seeing is when you add the ELD information that we're getting now with this modern handheld technology that we've got, we've got better visibility to our driver detention at customer locations than we've ever had before. That also can be monetized through contract negotiations as we have a good understanding of where our most valuable asset, first of all, the CDL qualified driver, and then also our revenue producing equipment, are literally being stalled with unproductive time. So from those aspects, there's a lot of opportunities in the second half of the year to build on the momentum that we're seeing. Lastly, I'll just mention that dimensioning being fully deployed not only at our companies but in the national LTL sector as a whole, I think, is going to continue to add to this yield momentum as we certainly have a better handle on what we're pricing than at any time in my career.

Albert Delco

Well, that's good color, but may be just kind of try to go back and focus on the comparisons for the second half of the year. I mean, I think you sort of guided us to kind of flat year-over-year EBITDA performance in the first half on a consolidated basis. You just sort of beat that mark by $10 million in 2Q. What sort of expectation do you think we should have for improvement in the back half of the year or. . .

Darren Hawkins

Yes. The only specific comments I've made about the second half of the year is, naturally, I believe we will outperform the second half of last year. Further guidance from that, something that we don't provide. But when I look at some of the leading indicators, and that would be the contract negotiations that we're seeing at YRC Freight and the regionals, and that they don't appear to have peaked as they continue to have that momentum. That tonnage, I've talked about that in the past, of being in a narrow band of slightly positive to slightly negative and that we will continue to prioritize yield over tonnage for the remainder of this year. Those things together, along with the recapitalization effort around equipment, appear to certainly be the right track for all of the YRCW companies. And I think Q2 is evidence of that, and that drives my expectations around the remainder of the year.

Albert Delco

Okay. Maybe one last one before I get back in queue. T.J., I think you give some color about this heavier-weighted truckload freight coming into the network. I mean, I'm sure you guys have seen a lot of your competitors report, but sort of weight per shipment trends up, call it, 3%, 3.5%, seems to be kind of the norm across the industry, which, I think we understand puts pressure on yields. But your yields kind of have been - I guess, in the second quarter, have lagged your competitors. Do you feel like you're being aggressive enough with pricing? Right now, it seems like you have a lot bigger opportunity in this market than what you're sort of realizing today.

Thomas O'Connor

Sure, Brad. I would say that, first off, our customer-specific negotiations for the quarter averaged 7.2% for the second quarter, which is a strong number, and that continued into July. We have a number of processes that allow us to manage volume shipments in our system. Transactionally, volume rate quotes from existing customers that have rates published, we address that through those negotiated increases as the line of rates that we'll discount to and the truckload fuel surcharge schedule. So I feel comfortable that our pricing is appropriate on those shipments. We do monitor and look for larger shipments coming from existing customers and we deal with that on a one-off basis. But it also, keep in mind, helps us balance our network so we're able to use some of these larger volume shipments to reposition drivers and equipment of back to origins or to balance equipment and drivers as needed.

Operator

Our next question comes from Scott Group from Wolfe Research.

Scott Group

So you said that tonnage got, I guess, worse year-over-year in July. Can you say if revenue per hundredweight got better or worse year-over-year in July? And if you can give numbers on that, that's great.

Darren Hawkins

Yes. We don't comment around that, Scott. What we did say, though, is on those contract negotiations that, that trend that we mentioned from Q2 continued into July.

Scott Group

When do you think we'll see the yields look more like the contract pricing?

Darren Hawkins

I think those are closer at the regionals than they are at YRC Freight. Certainly, there's a lot that goes into that and it's been talked about on other earnings calls. And I know you and I have talked about it before as well, that you've got several inputs into that number. As CEO, when I look at those pieces, I certainly look at the contract negotiations. I look at the revenue per shipment, the overall yield metric from a revenue per hundredweight aspect. Then of course, we bought we got length of haul that comes into that equation as well. And I think at the national company, those mixtures can cause that number to vary. But overall, it's translating into the improvement that we're looking for. And I think from an overall pricing aspect, as I mentioned earlier, we've got such a better handle on what we're moving inside our trailers and that allows us to more accurately price it and we're seeing a lot of consistency through the contract negotiations and that actual operating ratio aligning with where we projected it. So that gives me confidence over future quarters that - our pricing at all of our companies is as accurate as at any time in my career.

Scott Group

Okay. Can you say what percentage of the tonnages today is that TL-rated business versus a year ago? And are you seeing that truckload business continue to accelerate? Or is some of that spillover going back to truckload at all? What's the trend you're seeing there?

Darren Hawkins

I think there's still a high demand for those heavier weight shipments. T.J. gave an example of the weights that he's seeing at YRC Freight, around 14,000 pounds, but any of those over 10,000-pound shipments is coming into our LTL network. The demand is still strong there. What we're trying to do, through spot pricing agreements and contractual negotiations, is make sure we get the ones that contribute to our backhaul lanes. When we can reduce empty movements with those shipments, it is a real win for the overall company. As a percentage, certainly, YRC Freight, and Holland, one of our largest regional companies, has more exposure there and the overall shipments that can run around 1,000 a day between those two networks.

Scott Group

And is it still an accelerating number or led an offer or starting to go back?

Darren Hawkins

Holland attacked that area in July specifically just because of their network needs. So they drove it down slightly by being aggressive with it. There's still upward momentum in that area and we're seeing it expanding even with very concentrated efforts to make sure we get the shipments we want and we keep the ones that are head-haul opportunities out of the network as well. So yes, those shipments are expanding.

Scott Group

Okay. And the last question for me. Now that ABS is done with their Teamster negotiations, how quickly do you start your negotiations ahead of next year? And anything from that contract that you want to use as a template for what you're trying to accomplish?

Darren Hawkins

We're in the last year of a five year agreement and the landscape has certainly changed dramatically in that time period for the industry, for us, for the economy as a whole. We look forward to starting the process at the appropriate time, and that's the only comments I can make around that at this time.

Scott Group

Just to that point, though, is the landscape and the backdrop good enough where we need to contemplate giving back some of the concessions from the last deal?

Darren Hawkins

We look forward to starting that process at the appropriate time. In these situations, we haven't commented in the past, and that's the most that I give at this time. So...

Operator

Our next question comes from Amit Mehrotra from Deutsche Bank

Seldon Clarke

This is Seldon Clarke on for Amit. In terms of full year CapEx, do you still expect to get to that 5% to 6% of sales on an equivalent basis?

Stephanie Fisher

Hey, Seldon. It's Stephanie. Yes. We absolutely are expecting actually more in that 6% to 7% of revenue from a CapEx perspective. We will not slow down what you've seen in the first half of the year. We were a little slower in the first quarter than we were in two quarter, but we're going to continue that pace. I think you might have heard Darren say that we're going to bring on an additional 500 tractors in the back half of the year and an additional 3300 trailers. So we've still got some significant CapEx to happen here in the back half of the year.

Seldon Clarke

Okay. That's helpful. And obviously, it's an ongoing investment, but where are you really in terms of replenishing your fee - replenishing your fleet? And like where do you kind of need to get over the next several years just in terms of CapEx to kind of get up to speed to where you really want to be?

Darren Hawkins

Seldon, this is Darren. When I think about that and that's certainly a huge impact on the overall operating metrics of the company, and just as we saw the improvements in Q2, a lot of that came from the new tractors we brought on. Since 2015, we brought in over 3600 tractors across the organization. That is about 26% replacement. But when you look at how an LTL carrier operates or specifically, how we operate our companies, the impact of new equipment really shines through in your over-the-road line haul operation, and that's a lesser number of tractors because your local pickup and delivery units just aren't getting the miles and have the exposure that your line haul fleet does. So when you look at it from a line haul segment, we've been able to look at our line haul fleet and say that over 2/3 of that fleet is less than three years old and that gives us a lot of opportunity, especially with the additional 500 we're bringing on between now and the end of the year. So there's work left to do there and that will be an ongoing effort for a number of years, but we're able to drive the utilization of the new equipment in the appropriate areas of the company so that we can get the most benefit. Stephanie, is there anything else to add there?

Stephanie Fisher

No. I don't have anything else.

Darren Hawkins

Okay.

Seldon Clarke

All right. That's helpful. Just one more. You mentioned that tonnage declines that, I think, YRC Freight and regional are both kind of isolated until first week of July. Could you just give us a sense of how weight per shipment maybe trended? And is it just all decline in shipments during that first week? Or is there anything to read through from that?

Darren Hawkins

I think the weight per shipment trends that we've seen are still similar. It's escalating. When T.J. spoke about YRC Freight, certainly, when the holiday falls on a Wednesday, it has more impact because of the middle of the week piece and the way people choose to take a vacation, those things. But we're not using that as an excuse. Our focus and my strategic message to each of the operating company presidents is to stay in that band of slightly positive to slightly negative and to prioritize yield over tonnage for the remainder of this year, and that's what we're going to do. I'm pleased with the band of tonnage that we're working in. I think it makes sense, especially with the way that we're bringing equipment in and the exposure we've had to short-term rentals in the second half of '17 that we've started to make some nice progress on in the first half of '18, and I want to see that escalate between now and the end of the year.

Operator

Our next question comes from Willard Milby from Seaport Global Securities.

Willard Milby

A lot of my questions have been answered, so I'll just kind of jump around a little bit. But looking at length of haul, has had a material impact on unreported deals, has that jumped around from, I guess, the historical, call it, 1,200 miles of freight and 400 at regional?

Darren Hawkins

Regional, still 400 consolidated across the company. It's not a big impact there. I'll let T.J. update you on the length of haul for YRC Freight.

Thomas O'Connor

Relatively flat, Will. The average for the second quarter of '18 was 12 63, which is down 11 miles year-over-year for the quarter.

Willard Milby

All right. And one thing you all called out in the press release today was that $7 million claims in workers' comp expense decreasing year-over-year. I think it's been a while since you've called out something like that. Is that related to actuarial adjustments that can happen every quarter? Or is that a specific claim where maybe a liability came down and is permanently gone?

Stephanie Fisher

Good morning, Will. It's Stephanie. That's actually a quarterly actuarial adjustment for the second quarter. In the past, we've said that those can range from plus or minus $5 million in any given quarter. This quarter, it's a little bit more than that and, therefore, the reason for the call out. But really that's related to a benefit we received from prior year claim development based on the fact that we're working hard to settle claims faster as we move through 2018 here.

Willard Milby

Got you. All right. And on the pension settlement expense, I know we didn't have the impact in Q2 and we're looking forward then. Is there any - I know you reiterated the guidance for $5 million to $28 million impact. But it is there any way you could kind of give us a split between the quarters on when we could expect that? Or is that you all are starting to be aware at this time when those impacts are going to hit?

Stephanie Fisher

Well, yes. So there's a lot of factors that go into that math. We did trigger it here in July. So you will see a charge in the third quarter for sure. And then depending on the way benefit payments come in, in the fourth quarter, potentially another charge in the fourth quarter, but there's no way for us to actually give you those numbers until we do the actuarial math and we just triggered it two days ago.

Willard Milby

Got you. All right. And last question for me. On property disposals, I mean, I'm sure you're constantly looking at your real estate portfolio, but are you aware of any other maybe larger sales in the second half of the year that might result in any potential maybe outsized gains or losses?

Stephanie Fisher

Yes. So as a result of the change of operations that we did in late 2017, we did create some excess capacity in some of the terminals that we had two docks where we moved those to a one-dock facility. So we're looking to find opportunities for those two open properties. So there could be some potential items coming in the back half of the year.

Willard Milby

And are they looking to trend similar where you might result in other losses? Or are these properties where maybe the real estate markets will be more favorable for you all?

Stephanie Fisher

I think it could be favorable for us.

Operator

Our next question is a follow-up from Brad Delco from Stephens.

Albert Delco

I'll be brief. Darren or T.J., or maybe Stephanie, could you comment on what these trailer rentals are actually costing you? So as we think about beyond the onboarding of these 3,000 units, what that might do to your rental expense.

Stephanie Fisher

Yes, Brad. They're about $1,000 apiece on a monthly basis versus, I think, the long-term rent is like half of that on a monthly basis. So it's a big number if you start adding up the total amount that we have.

Darren Hawkins

And I like that naturally. That's an immediate opportunity, but the operational side of the equation is also an opportunity when you bring the appropriate trailer, and T.J. has done a nice job with that also over YRC Freight. And through their ingenuity, they were able to locate a large retail opportunity to buy out a fleet of pups that are like new and those come through a purchasing agreement that won't have that lease headwind with it. So I like the way they put their plan together for trailers in the second half of the year.

Albert Delco

Okay. So roughly $9 million a quarter. And are all 3,000 of these short-term rentals? Is that right?

Stephanie Fisher

For trailers, it's about - it's closer to 2,000 short-term rentals.

Albert Delco

Okay. And then you guys have given it before. Can you comment on where fuel economy is for freight or regional today?

Darren Hawkins

It's certainly improving. We saw nice gains in Q2. We don't give the actual fuel miles per gallon numbers out. But naturally, with the type of equipment that we're replacing with these modern and efficient tractors, we're seeing mass gains, as you would expect, in those metrics. And utilizing those new tractors and the longest length of haul is also having a positive impact in that area.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to the company for any closing remarks.

Darren Hawkins

Thank you, Operator. We believe that our people, our networks, our assets and our dedication to serving our customers positions YRCW for continued improvement and long-term growth. The transportation industry and overall business climate remain strong, and we intend to continue making the investments that we believe will benefit our customers, employees and investors well for the long-term. Thanks, again, to everyone for joining us today. Please contact Tony if you've got any follow-up questions. This concludes our call, and operator, I'm turning the call back to you. Thanks.

Operator

The conference has now concluded. We thank you for attending today's presentation. You may now disconnect.