Yellow Corp (YELL) 2016 Q3 法說會逐字稿

Good afternoon and welcome to YRC Worldwide's third-quarter 2016 earnings call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Tony Carreno, Vice President, Investor Relations. Please go ahead Sir.

Thank you, operator, and good afternoon, everyone. Welcome to YRC Worldwide's third-quarter 2016 earnings conference call. James Welch, Chief Executive Officer at YRC Worldwide, Jamie Pierson, CFO at YRC Worldwide, and Darren Hawkins, President of YRC Freight will provide comments on the third-quarter 2016 results and will be available during the question-and-answer portion of today's call.

Before we begin, I must remind you of the inherent uncertainties in any forward-looking statements in our discussion this afternoon. 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 or future events, and intentions or 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 afternoon's earnings release in our most recent SEC filings, including our Forms 10K 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.

Finally in conjunction with today's earnings release, we have issued a presentation which will be referenced during the call. The presentation was filed in an 8K along with the earnings release and is available on our website at yrcw.com. I will now turn the call over to James.

Thanks, Tony, and good afternoon everyone. I will make a few comments followed by Jamie who will discuss our financial results and Darren who will provide an update on YRC Freight.

Our results for the quarter were impacted by the economic environment, especially on the industrial front. For the third quarter of 2016, we reported adjusted EBITDA of $85.5 million compared to the $99.1 million for the same period in 2015.

Factors impacting the quarterly results compared to a year ago included the low price of fuel and its impact on the associated fuel surcharge, softer volume with year-over-year tonnage per day results that were unfavorable but declined at a more moderate rate compared to recent quarters, increased operating lease expense for revenue equipment, and increases in contractual wages and health care costs.

Overall, we believe the pricing environment remains rational in the LTL space. Consistent with the industry, our four operating companies implement a general rate increases of 4.9% in early September.

On a segment basis, YRC Freight actually improved its operating ratio by 60 basis points and its operating income by 25% to now over $21 million in the third quarter. The regional segment reported a 2.6% decline in revenue, primarily driven by a decrease in fuel surcharge. However, total operating expenses remained flat when compared to the third quarter of 2015, and were impacted by increases in operating lease expense and contractual wages and health care costs.

Keep in mind that the regional segment reported a strong third-quarter 2015 including an operating ratio of 92.6 compared to a solid 95.1 this year. On a broader basis and in some pockets of the country, we are also working through some driver shortages.

To mitigate this issue, we are working with our military partnerships, conducting driving schools, using online and social media campaigns, and adjusting routes when possible.

One of the investments that you've heard us talk about recently is the addition of ANCAP safety technology, which consisted of retrofitting our fleet of approximately 15,000 tractors and acquiring new tractors with the latest accident avoidance technology.

While it is still fairly early in the information getting process, we are nonetheless encouraged by the preliminary results that we're seeing. So far, the types of accidents that we expected to mitigate are down approximately 30% across the YRCW family of companies compared to last year.

We will need to collect more data as we move forward but we believe the preliminary results are a direct benefit from our investment.

In addition to improving safety on our road rage and reducing costs, the information that we're getting will allow us to better train our drivers and, in some cases, exonerate them when they are not at fault.

As we look ahead, we are in the process of piloting our new pickup and delivery route optimization solution that a handful of YRC Freight locations with a larger rollout planned in 2017. You will hear more about this from Darren but we expect this initiative to deliver measurable results. We remain committed to reinvesting in our company with several other technology projects as well and we are encouraged about what the future holds with expected efficiency gains from these types of investments.

Earlier this month, YRC Freight added a new terminal in South Atlanta to its already expensive network. Across our four operating companies, we have more than 380 trembles serving North America in a way that positions us to move freight either 30 miles or 3,000 miles. When you consider the potential capacity constraints from government regulation and driver shortages in addition to the rapid changes that are taking place throughout the supply chain distribution process, we believe that our networks and coverage will allow us to continue providing the service that our customers expect.

Finally, while the financial results in the third quarter did not meet our expectations, our four operating companies, YRC Freight, Holland, Reddaway and [New Pen], continue to focus on what they can control in this economic environment and are holding their own.

Our plan is to manage through the near-term headwinds while executing on the long-term strategy by reinvesting in the Company, delivering award-winning customer service, enhancing the safety of our employees, and improving productivity. The investments that we've made over the past couple of years and continue to make today position our companies so that when capacity tightens and the industrial economy improves, we believe that our talented employees and networks that cover North America put our company in a strong position to respond and deliver results.

With these comments I will now turn the call over to Jamie for the review of our financial results.

Thanks, James. Good afternoon, everyone, and thank you for joining us.

For the third quarter of 2016, we reported consolidated revenue of $1.22 billion, down from the $1.24 billion reported in the third quarter of 2015. The decrease can primarily be attributed to a decline in fuel surcharge revenue where the price of diesel decreased approximately 10% in the third quarter of 2016 compared to the same period in 2015.

In terms of consolidated operating results, we reported operating income of $38.8 million including a $200,000 loss on property disposals compared to $47.7 million reported in the third quarter of 2015 that included a $900,000 loss on property disposals. We also reported adjusted EBITDA of $85.5 million or a 14% decrease compared to this $99.1 million reported in 3Q 2015. Our consolidated adjusted EBITDA margin was 7% this quarter compared to 8% for the same period last year.

As Tony mentioned, we posted a presentation on our website and filed it in an 8K along with the earnings release that includes most of our key stats. However, there are a few stats that I would like to highlight.

First, YRC Freight's tonnage per day was down 1.3% this quarter when compared to the third quarter of 2015. This was comprised of year-over-year decreases of 0.8% in July, 1.2% in August, and 1.8% in September. And before you ask, through yesterday, YRC Freight's tonnage per day was down approximately 0.1% or essentially flat on a year-over-year basis.

Revenue per hundredweight including fuel surcharge decreased by 1.4% this quarter while revenue per hundredweight excluding fuel surcharge was up by 0.3% when compared to last year.

Second, at the regional segment, tonnage per day was down 1.5% compared to the third quarter of 2015. This was comprised of year-over-year decreases of 2.4% in July, 1.1% in August, and 1.1% in September. Through earlier this week, the regional segments tonnage per day was down approximately 2.6% when compared to this same period last year.

Revenue per hundredweight including fuel surcharge increased by 0.3% this quarter while revenue per hundredweight, excluding fuel surcharge, was up by 1.5% when compared to last year. Now, for the third-quarter 2016 financial results by segment.

YRC Freight's operating income was $20.8 million compared to the $16.7 million in the third quarter of 2015. Adjusted EBITDA for the quarter was $45.3 million for a margin of 5.8% compared to $45.2 million and a 5.10% margin in the same period last year.

The regional segment reported operating income of $21.9 million for the third quarter of 2016 compared to $33.6 million in the third quarter of 2015, and adjusted EBITDA of $40.2 million for a margin of 9.1% compared to a strong third quarter of 2015 when it reported $52.9 million and 11.6% margin.

In terms of liquidity, our cash, cash equivalents, and managed accessibility under the ABL facility at September 30, 2016 was $290.1 million, which was an increase of $45 million compared to a year ago.

And as usual, I would like to leave you with a few parting takeaways.

First, we are firmly focused on reinvesting back into the Company. And the preliminary results from the [end cap] safety technology that you heard from James are a good example of why this is such an important part of our strategy. We believe we are seeing some of the expected safety benefits from this recent investment and eventually expect to see this translate to cost savings once the results begin to impact the liability claims reserves through the actuarial process.

In the third quarter of 2016, we invested $72.2 million in CapEx and new operating leases for revenue equipment, which is equivalent to about 6% of our third-quarter revenue. The $72.2 million is an increase of $10.1 million over the third quarter of 2015 and more than 2.5 times increase compared to the third quarter of 2014.

We took delivery of approximately 220 lease tractors and 680 lease trailers during the third quarter. And since the beginning of 2015, we have taken delivery of more than 1,800 tractors and 3,800 trailers.

Second, given the economic environment, while we are disappointed with this quarter's financial results, we are not that surprised either. Tonnage has been comping down for the entire LTL space for the past several quarters and while the year-over-year impact is moderating, fuel surcharge is still lower on a year-over-year basis.

As we finish out the year, we intend to weather the storm by focusing on what we can control and staying committed to investing in our Company and our future.

Finally, we ended the quarter with a gross debt to adjusted EBITDA of 3.45 times against the maximum credit facility covenant of 3.75 times, which gave us a $25 million cushion. But everyone knows the covenant types at quarter turn to 3.5 at the end of the year and another quarter turned to 3.25 times at the end of March at 2017 and stays there until decreasing again to 3 times at the end of 2017.

I'm pretty certain I shared this with you guys on one of the previous calls but we update our annual forecast every 30 days. And we call this our outlook. And given the continued soft industrial economic environment, and the resulting tonnage decline for the industry for the past five quarters, and the fuel surcharge headwinds, our forecast now indicates that as to corrective actions, we may not be in compliance with our leverage covenant in one or more quarters over the next 12 months.

The good news is as a result of our improved cash flow from operations and the restricted cash that was freed up as a result of our ABL amendment earlier this year, our liquidity position has improved to a point to where we are now considering the repurchasing or paying down a portion of our term loan in addition to continuing our commitment of reinvesting back into the business. We are pleased that the results of our operations over the past several years have put us in a position to consider this option as we continue focusing on our operational turn around, focusing on what we can control, and eagerly awaiting a more robust industrial economic environment.

At this point, I will turn the call over to Darren to discuss YRC Freight results.

Thanks, Jamie, and good afternoon, everyone. YRC Freight delivered Q3 2016 adjusted EBITDA results that were in line with Q3 2015 as we continue to work through the sluggish economic environment. While shipments were down for the quarter, our weight per shipment was up and our year-over-year declines in tonnage per day continued to moderate sequentially.

Solid cost controls along with improvements in productivity's and yield enabled us to improve our profitability levels even with the lower tonnage and contractual wage and benefit increases.

Operational highlights in Q3 included, first, YRC Freight's new accelerated service that continues to meet our expectations while our standard service remains a staple in the marketplace for long-haul economy service. Customers have embraced our faster accelerated service, and we believe it to be an important part of our service portfolio going forward.

From an efficiency standpoint, the YRC Freight operations team delivered year-over-year improvement in dock, city pickup and delivery, office operations, and linehaul load average metrics for the second consecutive quarter. These improvements helped to partially offset higher wage and health care costs for our union employees. We also continued to benefit from improved maintenance expense and fuel efficiency from the ongoing upgrades to our fleet.

On the investment front, technology and change management work continues in our two largest cost buckets which are linehaul and pickup and delivery operations. Benefits from these investments will come in phases during the rest of the year and throughout 2017 with the linehaul project being further along at this point.

As James mentioned, we have begin piloting our new pickup and delivery route optimization solution. The software from [Quinte] will allow us to optimize trailer loading and route sequencing by interfacing dispatch with the dock to help prioritize how trailers should be loaded, based on the order that the freight needs to be delivered.

This termination of the loading sequence impacts how the trailer will be unloaded. It will also help us know when we have pickups throughout the day that get called in at the last minute and who is the closest driver that has capacity on their trailer to pick up that freight on the most timely basis.

Over time, we are confident that this should help us increase our stocks per day, decrease our miles per trip, and enhance our customer experience.

The final operational highlight that I want to mention is we were also very pleased to make an investment that will benefit both our customers and YRC Freight. We opened our 259th terminal in the South Atlanta city of Conley, Georgia. It is a 75 door facility that has over 80 employees. This facility should allow us to strengthen our customer service in and around the congested Atlanta area in a cost-effective manner and is a good example of our ability to strategically grow and invest in our Company when we identify the right opportunity.

I would like to thank all of our employees at YRC Freight for their continued efforts to improve our results and enhance our award-winning customer experience. They have the right attitude about being safe, being reliable, and making a difference for themselves, our customers, and our communities. Thanks for your time this afternoon.

We will now be happy to answer any questions that you may have.

(Operator Instructions) David Ross, Stifel.

A few questions. I guess, start with the regionals. That was the biggest negative surprise in the quarter.

What was going on there in terms of why the costs were not able to flex down with the lower volume? Because it was more than just the one fewer working day that was at issue there.

Good question. Number one, we got a fuel surcharge headwind. Obviously number two, $6 million of the $12 million reduction came from an increased utilization in PT and then operating leases. Thirdly we had some driver shortages in some certain markets at two out of the three companies. They were very service-oriented companies. They continue to apply whatever resources they needed to keep networks moving and deliver the service that their customers expect -- that resulted in higher over time, extra labor, and certainly had our results. Obviously the wage and benefit inflation factor played in there.

I guess I would say overall, David, that our past guidance has indicated that we plan to get the regional operating companies operating in that 93 to 94 range. Certainly they had a [92.6] last year. As you pointed out, that was a great quarter.

But the weak economic environment that we're having -- 95.1 is not a great quarter, but it is still solid. So if I can encapsulate your question at about those six items that I discussed.

And can you talk a little bit more about the driver shortages, whether they were near-term just for a month or two. Have they been resolved? Are they getting worse? How are the regional companies looking at that issue and addressing it?

Good question. Yes, I think these will be ongoing driver shortages because they are not broad in a sense, but they are isolated to some specific areas of their networks where they have just had a harder time trying to find drivers out of Southern California, Chicago, especially -- they are certainly working with military partners, driving schools to driver programs, but that shortage did cause them to have to use some increased local cartage and increased PT.

I think two out of the three companies that I referred to have done a really nice job over the last several months of bringing on drivers, so I will feel much better today than I felt at the beginning of summer. But I suspect this will be a problem that we will continue to have to emphasize and work on as we move forward.

I get it. That led my next question which was why the PT costs went up on lower volumes and, in theory, lower pricing in the truckload sector. That was mainly concentrated in the regionals?

Yes, it was. And at one of the regional companies, PT and those particular lanes that they were short in, it was actually more expensive than running our own long-haul schedule. So that doubly hurt us.

And then, just a little nit on the YRC Freight average length of haul. Where did it end up in 3Q? I think it was [1306] third quarter last year.

David, this is Darren. We landed at [1278], but when you look at an apples to apples comparison year-over-year, our link the call was down by 0.6%. So relatively flat.

And David, this is James. One interesting trend about where I see freight is that they are weight per shipment continues to block the overall industry trend. For example, they were up another 1% in the third quarter 2016, and they have seen that trend really bucking the industry trend over the last several quarters.

So we like our revenue per shipment numbers that we are turning and we like the freight mix that we are starting to develop. You might recall back in 2014 and 2015, that the Company went on a pretty good effort to exit less than 300 pounds shipments and so I like how they have managed their freight mix and I know everyone looks at yield and revenue per hundredweight, but we think also revenue per shipment is an important factor to look at as well.

So I like the conflict that YRC Freight is starting to handle. Still have a ways to go, but it's certainly better than what it was three or four years ago.

Yes, and then YRC Freight is also close or at least month to date to seeing some positive tonnage comps. (multiple speakers)

David, those would be welcomed.

All right, well, thank you very much.

Scott Group, Wolfe Research.

Can you share with us what you're seeing on pricing renewals right now?

Our pricing renewals continue to be in that 3% to 4%, Scott, and they are harder to come by than they were certainly a year ago or certainly two years ago but we still try to position that increase or those increases the best that we can but we're still seeing increases in that 3% to 4%.

So can you help me bridge that 3% to 4% with what we're seeing in terms of the yields? I think 100 basis -- basically flat I think per shipment up 1%. So why are we seeing the reported yields come in a lot lower than that?

Well, certainly, as you have heard on some of the other calls so far. The customer-specific increases that you get don't always flow through. Sometimes you lose or gain business during that process.

The other thing I think that is hurting us is we are coming off some awfully big comps last year. For example, at Freight, revenue per hundredweight was up 5.8% excluding fuel surcharge in the third quarter of 2015. Revenue per shipment was up 7%, so we are coming off of some pretty big comps from year ago that were some of the best in the industry.

Your weight per shipment is different. Freight mix continues to change as the industry evolves and changes but those would be the primary factors.

Yes, what I would also say, Scott, is that I think the way the industry reports it and we certainly do is that 3% to 4% is a gross basis and that's what you get in the contract. As the business comes on, some of that business rotates out and so it will net down probably about 102 points from there. At least that's what we've seen. It evolves over time. So I think the most recent trend is what we are seeing on a net number. Probably something closer to 2% once it's all said and done.

Okay, that's helpful. And then Jamie, do you have -- I know you gave October tonnage. Do you have October yield trends?

I thought you were about to ask me for November. No, we are not public with that, Scott. I think what we have reported with -- the tonnage trends is pretty consistent with what we've done in the past. I think where we are relative to where we have been in the past is certainly moderating where we've been. And I think it's actually positively comping (inaudible) where the space is to date.

Okay. One more, Jamie. Just in terms of the covenant issues that you are talking about, are you -- I know you said one of the options is paying down debt but maybe can you talk --? Are you in discussions with the banks about getting amendments sooner rather than later and confidence in your ability to get that?

We ended the quarter at a little less than 3.5 -- about 3.45 times on a covenant of 3.75 that gives a cushion of $25 million. And I think it would be premature to start talking about any formal negotiations.

As I said on the call, you guys know how the covenant trends -- maybe even report it in the 10-Q. It's 3.5 at the end of the year. 3.25 for the next three quarters, and the decreases again to 3 starting at the end of 2017. That really probably is -- it's probably the tightest point. I also mentioned, our liquidity has improved to a point where we are now considering paying down the debt and, for the first time in a long time, have the optionality deleveraging the balance sheet just a little to maintain compliance where they are still reinvesting back in the business. So from my perspective, it's truly a win-win.

So you are saying you're comfortable in the next -- it's more a few quarters out. So you are kind of think -- EBITDA can be flattish fourth quarter or growth fourth quarter as tonnage is stabilizing?

What I'm saying is that we've got almost $300 million of liquidity at our disposal that if we needed to would certainly help deleverage the balance sheet and that would help us maintain compliance.

All right, thank you, guys.

You know we don't give guidance so I can't give you the denominator of that equation.

Understand, thank you guys.

[Jeff Goslin], Aegis Capital.

You addressed my -- I had one question on the rent and PT. I was just surprised it was up so much and I think you are attributing most of that to the shortage of drivers that you had. Was there anything else that was driving that up?

So there's two pieces of this equation, Jeff. One, that is where we put our traditional over the road cartage in rail, but we also -- that's where we put our operating lease expenses as we consolidate the results. So this is a strange quarter where we have seen some increases in traditional PT the way that most people look at it, but we also continue to see an increase in operating lease expense as we continue to take on the equipment.

That hasn't probably changed in the last year or two and I don't anticipate it could change in the foreseeable future either.

Okay and that's also where you have the intermodal PT, correct?

Yes.

Okay. And what are the trends in that?

We have a max that we can use per our contract with the MRU. We can use 26% of our over the road miles via rail, and our purchase transportation, and we can't -- over the road purchase transportation. And we can't exceed over the road purchase transportation of more than 6%.

So it depends on how we want to round our intermodal and over the road purchase transportation operations, depending on time of the year, time of the month, time of the week, etc.

Was there any weather-related impacts? I know a lot of companies has told us about the effect of flooding in the South in the range that we are hitting Louisiana, Texas, some in South Carolina. Was that negligible or did that drive PT a little bit?

It was negligible. We used some PT, Jeff, but overall it's very proud of how we communicated with our customers and our employees and thank goodness we had no facilities or no employees [farmed] in any meaningful way, but it had some effect but not material.

Okay, I just want to switch gears for a sec. Weight per shipment. I have always thought of this as potentially being an economic bellwether. You go from 49 to 50 boxes of widgets on the pallet, the pallet gets a little heavier. But I also understand you've been focused on improving utilization, so this increase in weight per shipment -- you haven't had one in a while.

Do you read into this at all from an economic standpoint that the weight per shipment is starting to go up again? Or do you think it's more a function of your ability to control your utilization?

Yes, I will make a couple comments and then let Jamie speak. You're absolutely right. Historically it has been a bellwether for judging are things getting better from an economic standpoint or a freight standpoint. But I will let Jamie jump in with some other comments about specifics.

Yes, if you look only at YRC Freight, so we can also give you the regional numbers as well, but if you look at YRC Freight as an indicator of that, there's only been two of the last three quarters where it's been negative. You go back one, two, three, four, five, six, seven, eight, nine, 10, 11, 12 -- the last 14 quarters before that, we have actually positively comped the industry wafer shipment for YRC Freight has been positive including this most recent quarter -- the first quarter and second quarter of 2016 are the only outliers to that.

So to answer your question directly, on the economic leading indicators, kind of what I think you are saying is I think it's 100% validates what we've been saying what's going on with the type of recovery or the type of economy we are operating in the cause retail sales for the quarter were up 1.9%, yet if you look at PMI and you excluded utilities and mining, I can make a very strong argument that the industrial economy shrank by probably 2%. So I think that's what you are seeing manifesting in the interesting numbers.

What we've got going on is specific to YRC Freight and their ability to better manage the mix of their freight.

Okay, well, Jamie, thank you and congratulations.

Brad Delco, Stephens.

I am curious about the driver turnover challenges in light of reduced tonnage. What is driving that? What do you perceive is driving that?

I think there are several things and our driver turnover has crept up some. Certainly the age of our employees has facilitated some of that turnover. In some parts of the country, some employees have left for higher wage paying driving jobs.

It's been harder to recruit -- some people decide they want to do it, then after a month or two or three, they decide they don't want to do it. Subtle think anything has materially changed over the last six months or year other than it keeps us on our toes and in some specific areas, we are challenged, but in others we have plenty of drivers.

And so, we are continuously looking at our network and linehaul flow and looking how do we run different routes in different ways to be sure that we've got the right kind of manpower to handle our service. But I will let Darren comment if he has anything specific about YRC Freight he wants to talk about.

I think this is a good example -- when you look at regional operations versus national, we see shortage opportunities just in specific markets.

So in the third quarter, YRC Freight, we hired over 1,500 employees. We still have driver turnover that is in the high single digits, which is very good from an LTL industry aspect and excellent compared to any other parts of trucking.

So we can get the drivers in areas and many of those we create the driver by the Adopt a Driver program, pop-up driver training schools and permanent driver training schools. So we've made the investment, but it is more difficult to get drivers versus previous times that we've seen in this industry, especially over the last 18 months.

But we're certainly prepared for the future on that aspect. We can get the drivers we need, but it does take more work and time to place those drivers, especially in some of the markets that James mentioned earlier.

And these are mostly linehaul drivers, is that correct?

We've got some city driver challenges in some of those specific areas I called out as well. But primarily it's over the road drivers, yes.

Okay. And then, Jamie, just a question -- another question on the balance sheet, I understand the liquidity and what you have available under the ABL facility. Would that not count in the numerator of total debt?

No, it's gross. The test for us is gross, not net.

Okay, so drawing on your ABL facility wouldn't necessarily increase your --

No, if we draw on it, it absolutely would. But right now what I'm saying is that we've got -- have $270 million of cash. There's only like $14 million or $15 million of that -- of the $290 million that's coming off the ADL. Very, very, very small.

Okay, got you. And your point was, if you felt like all else being equal you are going to trip a covenant, you would be willing to use cash to pay down debt to prevent that from occurring in the next 12 months?

It's absolutely an option to us that we probably didn't have in the past. If you look at it, Brad, on a net basis and some of the companies in the space do, that probably takes our gross debt minus total cash and liquidity, which is probably closer to 2.5, maybe 2.7 times.

Yes, yes, okay, that makes sense. And then I don't know who's best to answer this. Jamie, maybe you, because I know you are a good numbers guy, but hypothetically speaking, tonnage remains flat based on the investments you are making and let's assume a stable LTL pricing environment where we are now.

Do these investments help you offset inflationary cost pressures and margins stay flat? Or do these investments actually help not only offset inflationary cost pressures but will allow you to drive margin improvement?

Flat tonnage.

Brad, this is Darren, and I will speak to that just as YRC Freight as an example without giving any forward guidance but just looking back at the improvements from YRC Freight. That's where they have come from, regardless of what was happening in the economy even in a downward tonnage environment which typically -- it is very difficult to improve productivity and efficiency. And we just did that two quarters in a row.

So I think that's a good example of what these type of investments will do. And then the two investments that I mentioned, just the [B&D] and the linehaul, would that be in our largest two cost buckets? It's definitely putting the dollars in the right place at the right time regardless of what the economic future looks like.

Brad, this is James, I might add just in those two important categories at YRC Freight, B&D, and linehaul, over a two-year period, we are going to be investing about -- around between $20 million and $25 million just in linehaul optimization and B&D ride optimization. So we expect for it to have measurable benefits and we're certainly going hold ourselves accountable towards that end.

And you know better than most people, Brad, that to be able to improve productivities as Darren has done in an environment where tonnage is actually decreasing is incredibly difficult. It usually doesn't even happen.

So I think the investments we've made over the last two years are foundational to actually put these companies in a position that when we do get incremental density in the networks, they will disproportionately translate to the bottom line.

No, that makes sense. I guess maybe just a point that if you could in the future, I know you're making investments in tractors, linehaul optimizations, [P&D] optimization. To the extent you could ever put numbers around -- here is an example, MPG is here today and based on these investments, we think we are getting this in our newer tractors. I think it would help investors bridge say excluding what's going on in the macro environment, there's still a lot of self-help cost-saving opportunities in the story. But this -- just a thought.

Brad, that's not lost on us at all. It is actually very helpful because I'll tell you, one of the areas that we will be able to do that, I think probably in the middle part, 2017 is what we would get going on the [in Cat]. If you look across the YRCW family of companies knowing that they have rolled the technology out into different phases, we are already seeing results that, on a year-over-year basis, are 30% better than they were the year prior.

Now that doesn't immediately translate into the income statement because as we've discussed, the actuaries are generally pretty slow to respond to the trend, but there is no reason in my mind that within a year or so of that trend persisting, assuming that chain does persist, we will be able to see that shift in the financial statement and then we will be able to share with you what we believe those returns are.

So that is a very good direction. That's something that we will be able to do.

Thanks guys for the time. Appreciate it.

David Ross, Stifel.

Real quick on the length of all again, Darren, you said it was down 0.6% year-over-year, but the number I have for last year was 13.6%. That means it's now 2.1% if it dropped to [12.78%]. Is that a wrong number from a year ago or what is --

No, it's not David. And that is something that Tony can probably take it with you after the call. It's actually the data source on the 2.1%. That's why I said the apples to apples on the 0.6%. So the data source that that comes from. The adjustment in it caused the actual reduction was 0.6% but Tony can close that gap for you.

Yes, what we will do Dave is when we follow up with you guys too, sometimes we quote LTL stats and sometimes we quote total stats. So we will clean that up with you post call.

All right. And in the October weakness at regional -- October looks to be good at freight but then it dropped off in the regional side. Was that concentrated in any one of the companies or how do you read that?

It's more in one company than the other two. But it has been hard for them to really forecast these last couple of months. Bounced around throughout the quarter and then it got a little worse in October but 2 October is getting a little better. So it's -- and one particular company has been down a little bit more.

But also I think you have some of that -- some of that, David, maybe because they are pushing on yield, then they are on the tonnage piece. So -- look, we hate quoting on the interim month stat. We're not monthly investors. We're not even quarterly investors. We are long-term investors.

And we think that doing it at a point in time is difficult. But we understand how you guys build your model and we're just trying to be responsive.

Great, thank you.

The conference is now concluded -- I'm sorry, this concludes our question-and-answer session. I would like to turn the conference back over to the Company for any closing remarks.

Thanks, operator. This is James. In closing, we will continue to focus on the things that we can control to have the best impact that we can have on the Company. Obviously we would love to see some improvement in the economy once we get past the Presidential election and as many companies start planning for 2017. Like to shout out to our employees. We have some of the best and most experienced freight employees in the industry. I appreciate their efforts to continue providing an award-winning customer service.

We appreciate all of you taking the time to join our call today. Contact Tony if you have any other questions and we look forward to talking to you during the quarter. Thanks a lot. I will turn the call back over to you, operator.

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