Yellow Corp (YELL) 2013 Q1 法說會逐字稿

Good morning. My name is Lindsay 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. All lines have been placed a mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session.

(Operator Instructions)

Thank you. Stephanie Fisher, Vice President and Controller, you may begin your conference.

Thank you. Good morning. Thank you for joining us for the YRC Worldwide first-quarter 2013 earnings call. James Welch, Chief Executive Officer of YRC Worldwide; Jamie Pierson, our CFO; and Jeff Rogers, President of YRC Freight, will provide comments this morning. James, Jamie and Jeff will be available for questions following our comments.

Now for our disclaimers. During this call we may make some 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 a 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 will now turn the call over to James for some introductory comments.

Thanks, Stephanie. Welcome to our first-quarter conference call and thanks for taking time to listen in. I will make some brief overall comments, and then Jamie will cover the details of our financial results. And then Jeff will discuss the performance and progress at YRC Freight. And certainly we look forward to answering any questions that you might have after our comments.

We concluded the first quarter of 2013 with continued momentum that we began generating during the last half of 2012. Despite fighting difficult winter weather conditions throughout the quarter, our 2013 first-quarter performance is substantially better than the first quarter of 2012. By substantially better, I am referring to quadrupling EBITDA from $15 million to $61 million. And expanding our EBITDA margin by 390 basis points to 5.2%. In fact, the last time YRCW delivered this type of financial performance was when the first iPhone was hitting the market. Yes it was that long ago. But the brutal fact is, we simply are not yet performing as well as we should be, and our management team recognizes that. As I stated on the fourth-quarter conference call, and I will say it again, we must perform better.

Since this management team took over in late 2011, we have consistently exceeded our internal forecast. And we did it again in the first quarter of 2013. I believe our current momentum will play in our favor as we move forward throughout the year and as we see continued benefits from the operating initiatives we have implemented over the past few quarters. Our management team continues to make the adjustments necessary to improve our operating results. Customer mix management has been a key ingredient in returning the Company to positive consolidated operating income, especially at YRC Freight. It was not all that long ago when the financial condition of the Company was preventing us from achieving competitive pricing levels. Now, improved service at YRC Freight, and best-in-class service at the regional carriers, are giving us the opportunity to get a competitive price in the market place. This is yet another important step in executing our turnaround, which can be seen in our results.

Our regional carriers are already arguably best in class. Holland, Reddaway and New Penn continue to perform competitively, and are well positioned in their respective markets. I like the work that they are doing, and believe they will continue contributing positively to our turnaround efforts and subsequent results. We have excellent and stable management teams at each of our regional companies. If we were to see an economic pick up, this group of carriers could immediately leverage additional business volumes to bottom line profitability and cash flow.

YRC Freight's intense focus on load average, along with improved operating efficiencies, have been important areas of improvement. Obviously you noticed the 740 basis point improvement in its operating ratio for the first quarter of 2013. No doubt this performance has to be one of the industry's best year-over-year quarterly improvements in recent history. Instilling a new culture of service, safety, discipline and accountability is giving us a better opportunity to grow the business at YRC Freight.

One of the most positive aspects of our turnaround has been the tremendous improvement we have driven on our safety performance, and thus workers' compensation and BIPD results. We have had an all hands on deck approach at all four operating companies in our efforts to improve safety. Our employees have done just a terrific job of accepting the challenge. Not only have they made improvements in safety performance, but they have also embraced the opportunity, and have driven substantial change to our culture. And proved safety is important in and of itself. And, as Jamie will discuss, it has a real and quantifiable impact on our financial results and cash flow.

Another important aspect of our improved service and operating results is the decrease in our cargo claims frequency. Customer satisfaction and quality are absolutely vital to our future success. Just as we have invested in training to improve our safety performance, we are also making investments in equipment to deploy industry-leading technologies, which generate returns in productivity and efficiency savings. We have just finished the first full month of our liquefied natural gas pilot project; YRC Freight partnered with Clean Energy and the California South Coast Air Quality Management District to purchase four LNG units to operate in and around the port of Long Beach. The pilot project has given our operations and maintenance teams a first-hand look at the performance and fuel efficiency of natural gas vehicles.

Along with our natural gas pilot, we are also making strides on our road mileage with clean diesel units. YRC Freight, for example, is running slightly more than 20% of all of its over the road miles with 2012 and 2013 EPA SmartWay-designated power units. It is also realizing fuel efficiency gains from modifications to its 53-foot trailers with trailer skirts and fuel efficient tires. More than 3,000 of YRC Freight trailers have been upgraded. In addition, YRC Worldwide has transitioned nearly 50% of its fleet to SmartWay-certified fuel-efficient tires, and plans to complete the remaining units in the near term.

Another corporate initiative we are participating in is a pallet dimensioner project In partnership with Mettler-Toledo. So far, the results are positive. And the technology-driven precision of the dimensioner gives us and our customers confidence in the data. This project is providing us valuable insight to prepare for what we believe will ultimately be an industry conversion to dimension-based pricing.

The management team continues to make adjustments. And, as Jeff will discuss, YRC Freight is working hard to further optimize its network. Jeff and his operations team inherited a network that was simply too bloated with over capacity and inefficiencies. And density was just a passing thought in the rear view mirror. Today the ground work has been laid to drive the next round of operating and margin gains. The next challenge for YRC Freight and its employees will be to take the momentum from these improvements and turn them into continuous and sustainable gains. This is the path for us to regain our position as a leader in a North American [LTL] industry.

With that I'll turn the call over to Jamie.

Thanks, James, and good morning, everyone. As noted, our performance continued to improve year over year. Which, considering the amount of winter weather we experienced, is a testament to our fine operations folks. For the first time in six years we reported positive consolidated operating income for the first quarter of the year. These results are a product of pricing discipline, customer mix management, and productivity improvement. As for the stats, YRC Freight's tonnage per day was down 5.4%. And regional tonnage per day was up 1.9%. The decline at YRC Freight was due to capacity, discipline, and concerted effort to shed unprofitable business. YRC Freight's revenue per shipment grew 3.2%, which included an increase of 3.4% in revenue per hundredweight, and a slight decrease in its weight per shipment of 0.2%. While the regional carriers increased their revenue per shipment by 1.6%, and their revenue per hundredweight by 2.3%, their weight per shipment decreased by 0.7% on a year-over-year basis.

On the earnings side, YRC Worldwide reported consolidated revenue of $1.2 billion for 1Q '13, which was 2.7% lower than 1Q '12 due to a 4.5% decline in revenue at YRC Freight. Customer mix management and too fewer operating days factored into the decline, both of which were offset by revenue growth of 1.7% at the Regional carriers. Additionally, we reported consolidated operating income of $10 million in 1Q '13, an increase of $58.7 million when compared to 1Q '12. And, finally, we reported adjusted EBITDA for 1Q '13 of $60.7 million, an increase of $45.4 million over $15.3 million recorded in the first quarter of '12. And increased our EBITDA margin by 390 basis points. This brings adjusted EBITDA for the latest 12 months to $287 million.

On a segment basis, for the first quarter of 2013, YRC Freight reported operating income of $2.4 million, a $58.5 million improvement year over year. And an operating ratio of 99.7, which represents an improvement of 740 basis points versus 1Q '12. Further, it reported adjusted EBITDA of $33.6 million, an increase of $44.3 million from the first quarter of 2012. And an EBITDA margin increase by 570 basis points to 4.5%. Our Regional segment reported operating income of $12 million, an increase of 5.3% over 1Q '12. And an operating ratio of 97.1. Additionally, they reported adjusted EBITDA of $29 million, which was flat compared to the first quarter of 2012.

Turning to cash flows and liquidity, we ended the first quarter with balance sheet cash and ABL availability of $215 million, which is a decrease of $36 million from the end of 2012. The first quarter is typically the low point in our liquidity cycle as a result of increased working capital needs, the timing of annual payments, and a reduction of our availability under our ABL facility, which is calculated on a one-month lag basis. Our ability to maintain liquidity at this level is due to our continued operational improvement across both of our reporting segments, and continued active management of our balance sheet and working capital.

If I may, I'd like to leave you with a few important take aways for the quarter. One, in just three months ending March 31, 2013, funded debt to adjusted trailing 12-month EBITDA nearly decreased another full turn from 5.7 times to 4.8 times. Since this management team took over in July 2011, we have decreased our leverage more than 8 turns. We know we are still over levered compared to our peers. However, we are growing into our capital structure each quarter with our improved operational performance.

Two, during the first quarter of 2013, we decreased our outstanding letters of credit by another $14 million, or 3.2%, from $443 million to $429 million. This is in addition to the $53.5 million decrease in 2012 and a result of our continued safety improvements made by our employees, in combination with our work comp and risk management teams. Consequently, our work comp and BIPD liabilities have decreased, which has enabled us to bring down the outstanding LCs backstopping these programs. And in addition to derisking our capital structure, allows us to save the cash otherwise spent on LCCs. Three, as a result of our improved operating performance, ability to meet and/or exceed our internal forecast, and decrease leverage and stable liquidity, we received a clean opinion on our year-end audit from our external auditors. Something we have not had since 2008.

In closing, I'd say we are pleased with our year-over-year performance, not only in the aggregate growth but margin expansion, as well. However, we know we still have a lot of work do and will continue to focus on executing our turnaround plan and delivering results that meet or exceed our internal forecast.

Now I will turn it over to Jeff Rogers to talk about YRC Freight and the progress he and his team have made there.

Thank you, Jamie, and good morning. We continued our positive momentum into the first quarter of 2013. And improved our operating income by $58.5 million, making this the third consecutive quarter YRC Freight reported positive operating income. These operating improvements are due to our continued focus on getting back to the basics of the freight business, and focusing on business that fits our network and core competencies. This focus resulted in an EBITDA margin of 4.5% for the first quarter of 2013, which was mostly due to the 3.4% year-over-year increase in our revenue per hundredweight, and incremental operational improvements. The revenue per hundredweight increase is due to our concentration on growing higher margin and higher value added services. Our tonnage declined 5.4% year over year, as our comparisons reflect tough first-quarter 2012 comps and continued aggressive mixed management that went on throughout 2012. But I assure you we have a strategy for measured disciplined growth as we work our way through 2013.

Finally, I'd like to update you on our network optimization efforts. On April 19 we held a hearing with the Teamsters, at which time the requested changes were approved. As a result of these changes, a tremendous amount of fixed cost will be eliminated, generating gross annual savings of approximately $25 million to $30 million. The network enhancements will enable us to improve efficiencies in the areas of terminal density, lane density, and our ability to direct load with less handling. And will help us improve service consistency, both from an on time and cargo claims basis, and increase customer satisfaction. We expect the approved changes to be implemented in a couple of weeks.

I'd like to thank our employees and the Teamster leadership for their hard work and constructive attitude toward improving YRC Freight's operations and profitability. The team is focused. We have a clear strategy, and we are executing better each and every day. Today more than ever we are an organization powered by professionals.

With these comments, James, Jamie and I are ready to take your questions.

(Operator Instructions)

Justin Yagerman with Deutsche Bank.

Good morning. This is Taylor Mulherin on for Justin. You guys did a good job of adjusting business mix as a way to drive margin expansion. Can you talk a little bit more about the productivity improvements you have also mentioned? And what you can do to improve this part of it even more?

Jeff, you want to take that one?

Sure. A lot of productivity -- the biggest area of our productivities have been in our line haul network. But, again, we are seeing improvements really across the board when you look year over year. And even compared back to where we have been over the last several years in dock and P&D. I won't go into specifics but I think the change of operations that we're going to put in place will just continue, mainly from a line haul perspective. But we're going to just continue to see improvements.

At the Regionals, even though the majority of their business is next day, there are a couple of those companies that do have two- and three-day service points. They've done a nice job, as well, of improving their load average. And productivities on the dock have been good at the Regional companies, as well. So, it's just been a concentrated effort to be very mindful of the operating components of our business and improving on each and every one of those.

And on the Freight side of it, is there a line of sight on how much more room there is to improve the quality of service in that aspect?

I'll tell you, we're just working on it everyday. I am more concerned with being consistent day in and day out. We're always trying to get better from a customer perspective, and make their experience better. But we really have work to do to be consistent day in and day out.

Okay. And with the network optimization plan that just was approved by the Teamsters, is there a timetable about how long it will take to achieve that $25 million to $30 million of annual savings you put out there?

We're going to begin implementing in the third week of May. It will take us a month or two to get everything put in place. But the expectation is we'll start seeing those savings pretty immediately. We won't get to a full run rate for a little while after that, though.

Okay. And then last question before I turn it over. A longer term thing. Can you talk a little bit about how you see your network evolving over time? What do you think the right mix is between Freight and Regional from a long-term perspective?

I am not sure if I totally understand what you are saying. What I see occurring at our Company is to continue to leverage the value that those Regional carriers bring to the marketplace. They're three very good companies. They serve three specific geographic areas of the country. They all have excellent service. They all have three great cultures. So we want to continue to just leverage the heck out of those companies.

And at YRC Freight, as Jeff said, we still have a lot of work to do. We know we can do better over time. But it is a matter of continuing to refine the network. You have to remember that when they slammed Roadway and Yellow together in 2009, the network design was just done very poorly. We had too many distribution centers, too many terminals. It's just going to take a while to get that right-sized to where we want it. This last change of operations is a huge step in the right direction. But our goal is to get YRC Freight more competitive from an operating ratio standpoint. And we think all four companies together, once we accomplish that, will be a powerful force in the North American LTL industry.

Great. Thanks for your time.

David Ross with Stifel.

Good morning, gentlemen, and Stephanie. The pricing environment out there, could you comment on what you are seeing in terms of underlying rate increases? I know there are a lot of unique things going on at YRC as you are adjusting the mix, and addressing some accounts that are apart from the general pricing tone.

Dave, this is James. I'll make a couple comments and then Jeff can jump in. I still think the pricing is rational for where we're at. But if you really think about going back to even 2008 when the economy went south, along with the financial situation at YRC Worldwide going south, that created an interesting dynamic in the industry, that I am confident that it still hasn't recovered from. You had a couple of carriers, in particular, trying to put YRC Worldwide out of business during that time frame. Certainly they haven't recovered yet. And you also had an economic situation that really hurt the industry overall. So those are two really pretty powerful conditions that have set the industry back, I think. I still think the market's 10% or 15% too low. And I think you have even commented on that in a couple of your publications, Dave.

But I think for where we are right now, the economy I think is still a little choppy. I think pricing is rational. We are really trying to leverage the value, especially at the Regionals that they provide to their niche. And then we're trying to improve the value at YRC Freight every day. We are doing pretty well with our contract negotiations. We call them customer-specific negotiated increases - CSNIs. We are still hitting our targets. And in listening to the other competitors' calls, it seems like we are right in there with what's happening on those increases at contracts. Jeff, do you want to jump in and make some comments?

The only thing I would say, it's competitive but still rational. Is about where I'll leave it, David.

One of the competitors commented that the increases are actually improving in the past month as shippers are getting concerned about second-quarter capacity. Have you seen that at all?

No, I really can't comment about end-quarter stuff. I would just again reiterate it's still rational. Let's put it that way.

Okay. And then, Jamie, when you talk about workers' comp, you guys are obviously doing a nice job improving the claims there, and then paying out more than you are getting in. Is that really just a slow process where we're going to see a little bit of improvement every quarter? Or is there a period where we might expect that expense to take a stair step down?

Actually a very good question, David. In terms of where we are today, you got to think about where we were. We have come a long way in the last 12 months. We're 20%, 25% better hours between lost time, injury basis now. We're continuing to see even improvements based on that baseline. So we're improving over an already stellar year. The difficulty in answering the question is it's really actuarially determined. So, while we have in our own forecast a continuation of these types of what I consider good guys for the foreseeable future, there will be a period of time where that will go away.

Okay. So when you hit a certain year, if there is a year that rolls off, that could be a big benefit?

We're looking at some of the older claims, David, that we're settling now. We talk about -- we're settling it off faster than we have in recent history. So, as soon as it reaches maximum medical indemnity, we're going to try to settle those claims as quickly as we can. But we're still left with some legacy claims that have some pretty high reserves on them. So what I would say is we would anticipate for the next year or so to continue to see these good guys. But beyond that I think they're going to start to dissipate.

Okay. And then, James and Jeff, can you talk about what you focused your people on to make these improvements at YRC Freight? Obviously safety is right near the top. Are you just having them focus on one or two things a day so that they keep it simple and get it right? Because something's working there.

This is James. I will make a couple comments, then let Jeff jump in. I think Jeff has done a terrific job of just trying to reset the attitude and the morale at YRC Freight. You just almost have to be here on daily basis to see the condition the Company was in when we all took over in late 2011. And he's just really kept it simplified but very specific with what we're concentrating on. I'll let him jump in there, but I just wanted to give Jeff kudos in that he has basically taken the morale and worked hard to try to build that. We are only as good as our people. We talk about all the technology, and all the optimization, and all the stuff that goes on in the marketplace from a fluff standpoint. But in reality it's still people doing what people need to do from a work and quality standpoint. And we're making a lot of progress there. I think that's helped driving a lot of the results. But Jeff can talk a little more specific.

One of the first things I'd like to say, and I think I might have said it in one of the conferences, is we want to try to simplify so that we can focus, and then we execute. We really are trying to keep it as simple as we can, knowing we are focusing on being just good truckers again. And I think if you keep it simple, it's easy for people to understand and then go execute. But we're really -- it's about being good at what we do. And understanding where Freight's strengths are. And that's what we try to focus on, Dave. And I think the organization has rallied around that and we are seeing good improvements. But we've got a long way to go to being anywhere close to being happy with what we are doing.

Thank you all very much.

Scott Group of Wolfe Research.

Hi guys. This is Carol on for Scott. How are you doing? You guys have been shrinking in Freight for just about a year now, in terms of tonnage at least. Is that still the plan as you guys are pricing through accounts and reoptimizing the network? Is that how we should think about things?

Carol, this is Jeff. As I commented, we started that pretty aggressive mixed management about a year ago. As you work through last year, the comps that we are looking at now still compare to a lot of that aggressive activity. I don't think we need to continue with aggressive mixed management, so that's going to stop. We will constantly look for business that just doesn't work for us. But we are not out there constantly looking to make major changes. Our expectation and our strategy for this year, since we really have reorganized and refocused our sales organization on what makes sense for us, I think the organization knows that now. So our plan is to absolutely be focused on growing the right type of business that makes sense.

Okay. And then with the network reoptimization and the change of operations you guys have announced, what happens with those terminals that you guys are shutting down? Are those treated the same way as the terminal auction that you guys had over the past year?

Some of those, Carol, are actually leased. Some of them are opened. So in terms of what we do with those terminals will depend on where they actually lie within the ownership within the structure. The ones that are leased we'll either let them expire or buy them out, so there will be some restructuring charges. The ones that are owned we will most likely sell off.

Okay. And do you have any debt coming up this year?

Excuse me?

Do you have any debt maturities coming up?

No, we don't until February 2014. That's the next major one.

Okay. And then you guys were talking about some of the technology investments that you were making, and the dimensioners and the pilot programs and stuff like that. Which business is that part of? Is that in the Regional or the Freight? How are you thinking about managing those investments versus just generally liquidity and paying down deleveraging the balance sheet?

We are currently testing the Toledo Mettler dimensioner at one of the Regional companies. YRC Freight is preparing to test one, as well. Obviously we want to continue to understand what that information is telling us, compare it to how we view the pricing of a lot of that business today. Again, we certainly believe that the industry ultimately is going to go towards more of a dimension-based pricing philosophy. We want to be certainly in the mix with that and not trailing. So we're working very hard to be sure that we're able to stay up with that trend. And we think there is a pay off there.

All right. That will do it for me. Thanks.

Chris Ceraso with Credit Suisse.

Good morning. This is Allison Landry in for Chris. It seems like the relationship with the union has been pretty cooperative. But, given that you have been able to restore profitability arguably faster than expected, what are the Teamsters getting in return here? And could they try and come back and renegotiate some of the wage and benefit concessions earlier than expected?

Certainly the cooperation -- this is James -- certainly the cooperation with the Teamsters has been good, not only at YRC Freight but at the Regionals. What the Teamsters are getting today are still good-paying jobs with excellent benefits. We are paying market-rate wages, and certainly above-market benefits. So our employees are still well paid compared to the industry. Our goal is to continue to find ways to work together as partners. And they showed their true partnership spirit when helping us to work through this large change of operations that we're getting ready to implement at YRC Freight. Those things aren't easy to work through. But we've had good cooperation. We have worked really hard to be in front of the Teamster leadership on a regular basis, showing them our results, talking to them about what we're trying to do. Two of our Board members are IBT-appointed directors -- two of our best directors. They've been very valuable to help us there. I've been in this business a long time and I think our partnership with the union is better than it's ever been.

Okay. Then just shifting gears a little bit to the balance sheet. I noticed that the days receivable worsened year over year and sequentially. So I was wondering if you could maybe give some color on that, if there is anything driving that?

Yes, absolutely. This is Jamie. In terms of where the business is growing, it's growing in larger accounts that generally have longer terms to pay. So that's what we've seen probably more so on a year-over-year basis than sequentially. We are absolutely continuing to manage that as best we can. If you look at our DSOs relative to the industry, I still think that we're a top one or two within the space.

Okay. Great. Thanks so much.

Brad Delco with Stephens.

Good morning. Thanks for taking my question. Jamie, this one may be for you. I think we have heard this now for maybe several quarters, that you guys are performing better than your internal forecast and plans. But I imagine those are the same plans that you're sharing with the guys that are lending you money. I was wondering, does that trend of better than the planned performance give you any leeway or room to either renegotiate terms on the debt, considering the environment we're in? Or give you more opportunities to invest in some of the technologies that you had guys had mentioned that were driving some of these productivity improvements? How should we think about what that's allowing you to do?

We update our forecast every year, Brad. We actually do it as judiciously as you'd think that we would. In terms of what it does for us in renegotiating the terms of our debt, is we still have about a $90 million to $100 million covenant cushion, depending on which company you look at. But there is really no need to look at it from that perspective. In terms of CapEx we are still way below what we are allowed to do there. The credit agreements are not limiting us on what we can do with our investments and our EBITDA covenants.

Got you. So when you think about your capital budget, where do you think the capital going forward? I don't think you guys give guidance in terms of CapEx, but what would drive the best return right now? Is it newer equipment? Is it some of these dimensioners? How do you think about where that capital will be allocated? And what internally are you seeing driving the best returns?

First and foremost, where we get our best returns is our operational improvements that we are running through the business today. That has more to do about discipline, focus and accountability, than anything else. If you are talking about equipment, we are arguably still a couple years beyond where we want to be on a revenue equipment basis. But technology, candidly, Brad, is where we're going to see the big pops. We have these handhelds that we are rolling out right now. They'll come out across the organization by the end of June or July. We have big aspirations for those. And not only when they hit the market this year but going forward. We'll be able to load additional software on there that will actually help productivities, as well. So, if you had to rank them, I would say technology first and then regular equipment second.

That's good color. And then, James, maybe last question for you, maybe bigger picture. I know you guys have recently gotten some improvements in the network that your unions let you make. Longer term, where do you think the network in Freight needs to go in terms of whether it's the number of terminals? Do you still see that shrinking? Or, ultimately, how much more is there left to do in terms of trying to optimize the network?

Certainly at the Regionals we are set and we like what's happening there. They're set just fine. At YRC Freight we'll just have to continue to look and see where this next change takes us. We want to be sure that we are competitive from a service standpoint. We want to be sure that we are minimizing our touches. We think that this change that we're getting ready to put forth will cure a lot of our inefficiencies from a line haul perspective. We had too many distribution centers. That is just a matter of fact. I don't anticipate there being a number of large changes coming up at YRC Freight because I think we're getting our network about where we want it. But we'll just have to see what happens with the economy, what happens with our plans and our ability to grow YRC Freight. And we think that we're better positioned than we were certainly six months or a year, year and a half ago. We're pretty excited to see what this change will do for us from an operating standpoint. I think it's going to put us right where we want to be.

Got it. I appreciate it.

Art Hatfield with Raymond James.

This is Alex in for Art. Thanks for taking my call this morning. If I could follow up on Brad's question about the debt. It looks like you have a significant number of maturities in 2014 and '15. Is that something that we can expect you to try to go back to the market and refinance and push that term out this year? Or is that something that likely won't happen?

We don't comment, Alex, on capital market activities.

Okay, very good. As a second one, then, if I could ask, you mentioned the economy being a little choppy there. Have you seen any areas of strength in the network as far as geographically or end markets, any strength or weakness there?

I haven't. Whether you are thinking about retail or automotive or manufacturing or imports, it all just seems a little choppy to me. Not terrible, but not great. Jeff, do you want to comment?

The funny thing -- and I think even somebody else, one of the other competitors on their calls said the same thing. Is, one week we feel real good about one area, and then the next week it changes, and then it changes back. It's extremely choppy. And I think it varies by parts of the country depending on the week or the next week. I wouldn't say there is any huge strength anywhere and there is not any significant weakness anywhere. It's just up and down all over the place.

And April's been more of the same?

Yes.

If you think about it, Alex, manufacturing continues to limp along, slightly growing, certainly not lighting the world on fire. Retail continues to do better. Consumer sentiment actually is up. And you saw the jobless report come out today pretty good. It goes with the media almost, in some sense.

I see. I appreciate your time. Thank you guys.

Thom Albrecht with BB&T.

Good morning, everyone. A couple of questions. James, I want to make sure I heard you correctly on something regarding equipment. I think you said 20% of your trucks and freight now, line haul, are 2012 and '13 models. Is that correct?

Yes, sir.

And then over 3,000 trailers have been upgraded?

They were correcting me, just for a second. It's 20% of the miles, not the equipment.

Okay. So, really, my question is then, regardless of the exact number of equipment, can you talk about what you plan to do this year? I know you don't want to talk about CapEx dollar-wise, but maybe where those miles can go on newer equipment, since that is one of the stigmas in the marketplace about you guys having older equipment.

It really shouldn't be a stigma. We are a couple years older than what we would like to be. When I am out on the road a lot, I see a lot of our competitors' [equipment] doesn't look any better than ours. We run a lot of miles at YRC Freight on our sleeper tractors, and those are our newest tractors. They're running seven days a week, 24 hours a day. Obviously, as we get the ability, we will continue to replace and upgrade equipment, as necessary. But I don't lose a lot of sleep over our fleet despite what the rhetoric is in the public. Our equipment is decent. It's not like fine wine. No, it doesn't get better with age, and we know that. But we certainly have plans, if we can continue to perform like we are, to make a lot of progress in that area.

Thom, this is Jamie, as well. If I might add, I said in the last couple calls that we are starting to get into a normal cadence on the CapEx. You are not going to see that really come onto the balance sheet as much as you are going to see it come on the road. Because we are going to start doing this on an operating lease basis. And we are actually very well maintained on the existing units. Candidly, we are doing better on a maintenance expense basis than we even forecast. But again, I think more than anything else you're not going to see it come on the balance sheet, you will see it come on the road as we start to put back into buying that equipment and actually rolling it out across all of our operating companies.

Okay. That's helpful. The only slight negative I saw was at Regional. This is the second quarter in a row where the operating ratio improvement was much smaller than what we were seeing. I am wondering how much of that is across the board or whether it's really centered in one of the three companies?

A couple of those companies really took a pounding with winter conditions; it's position. Overall, I was okay with the operating ratios at the Regionals, especially when you saw the impact that the winter weather had on one of them especially, but a couple of them in particular.

And what I'd say, Thom, as well, is that while it may be slowing, it's certainly still better than the market at whole. And the fact that they're unionized and we're comparing against non-unionized competitors. So they're still stroking it.

I know at one point one of the companies, I know you have not wanted to name names, lagged operationally from the other two. Is there still a significant gap in its execution and its profitability versus the other two?

No, it's improved. We're pleased with all three Regional companies.

Okay. All right. And then the last question. I want to make sure I don't infer too much. I don't know if it was you, James, or Jeff, that talked about, because of the service being restored, it almost seemed like you could read through that pricing might even begin to accelerate, because now your service is on par or better than some of your key competitors. Is that too much of a read through?

Yes, Thom, this is Jeff. A little bit. I would say it allows us to stay competitive with everybody else because our service has gotten back and is competitive. So I wouldn't expect our pricing to necessarily accelerate because our service is better. But it sure gives us a chance, along with everybody else, to be competitive from a pricing perspective.

Okay. I just thought of one more. How much does a dimensioner cost? I have heard all sorts of price points. I don't know if you can share approximately what you are spending in your initial foray.

No, we actually don't comment on the cost of those actual units.

Okay. Thank you.

I would now like to turn the conference back to James Welch for any final remarks.

Thanks again for joining us for the call today. I think you all know our strategy. We're going to return the Company back to its roots. We're truckers. We're proud to be the original LTL company. We've made steady consistent progress. Our team knows that we need do better. We've termed the year 2013 as the year of performance. We are not where we want to be, or where the team wants to be, but we're focused and we're heading in the right direction. So we appreciate again you listening. That concludes our call today. If you have any questions please contact Stephanie and she'll be glad to help you out. And we'll be glad to help you out. Operator, I will turn the call back over to you.

This concludes today's conference call. You may now disconnect.