Q1 2021 Yellow Corp Earnings Call
[music].
Good day and welcome to the Yellow Corporation first quarter 2021 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded I would now like to turn the conference over to Tony Carreno.
Vice President of Investor Relations. Please go ahead.
Thank you operator, and good afternoon, everyone welcome to Yellow Corporation's first quarter 2021 earnings conference call.
Joining us on the call today are Darren Hawkins, Chief Executive Officer, Dan Olivia Air Interim Chief Financial Officer, and Daryl Harris President.
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 therefore actual results may differ materially.
Format of this call does not allow us to fully discuss all of the risk factors.
Bill discussion of the risk factors that could cause our results to differ please refer to this afternoon's earnings release, and our most recent SEC filings, including our forms 10-K and 10-Q.
These items are also available on our website at my yellow Dot com.
Additionally, please see today's release for a reconciliation of net income or loss to adjusted EBITDA.
In conjunction with today's earnings release, we issued a presentation, which may be referenced during the call.
Presentation on filed in an 8-K, along with the earnings release is available on our website.
I'll now turn the call over to Darren.
Thanks, Tony and good afternoon, everyone. Thank you for joining our call Bill.
Before I get into the details on the Q1 results I would like to congratulate Darryl for his promotion to president of Yellow Corporation.
He joined the company last year as executive Vice President of strategic initiatives with the primary responsibility of overseeing our enterprise transformation and his new role barrels leadership will guide all aspects of our transformation to becoming one yellow.
During his 25 year career. He has built a solid track record of success with extensive LDL experience price.
Here to joining yellow. He most recently served as Chief Executive Officer of Express Global systems Day.
Darryl is an inspirational leader, who has experience energy and innovative ideas will help guide the company's future I look forward to working with him in his new role.
Turning to Q1 severe winter weather had a significant impact on our network with the recovery lasting into March true.
<unk> is an outdoor sport that requires us to work through challenging weather and it can take a while for our expansive North American network to fully recover one of the benefits of completing the transformation to one yellow in 2022 will be the recovery time from similar weather events is expected to be much quicker.
As we look ahead the economy continues to build momentum as it recovers from the impact of the COVID-19, pandemic industrial demand and consumer optimism are contributing the tight trucking capacity and a strong yield environment.
<unk> year over year pricing trends have carried into Q2 for the month of April the yellow companies averaged around 7% on contract negotiations.
Another contributing factor to the tight trucking capacity is an industry wide shortage of qualified drivers and the need to hire more drivers unfavorably impacted our purchase transportation expense in Q1, we have launched a nationwide recruiting drive that includes holding more than two dozen hiring advance folk.
Just on recruiting drivers mechanics and dock workers.
We have also expanded the number of driver Academy locations to 17. In addition to offering good jobs and competitive benefits as on <unk>. Most of our drivers can be at home with their families every night on <unk>.
Important asset is our team of nearly 30000 freight professionals and we are working aggressively to add new members.
During the first quarter, we made headway on one of the largest fleet refreshes in our company's history by taking delivery of more than 1100 tractors more than 1600 trailers and over 140 containers most of which were added late in the quarter. These investments will have a positive impact on the age.
And efficiency of our fleet and should also help mitigate maintenance expense over time for.
For 2021, our capital expenditure guidance remains between 450 and 550 Milligan.
Next I would like to share what one yellow means it means going to market as one yellow brand that provides customers with choice simplicity speed visibility and reliability are roughly 200000 customers will interact with one yellow sales team.
Whose shipments will move through one yellow network.
There will be one bill of lighting and the customers will receive one yellow invoice culturally one yellow also means continuing to do the right thing for our customers and our employees, we are making steady progress towards this vision and the multiyear enterprise transformation to one yellow remain.
Zone schedule for completion in the middle of 2022.
This is also a critical step in aligning our cost structure with other large single brand LPL carriers.
In March the American Rescue Plan Act of 2021 was passed and signed into law. The passage is followed by a 120 day rulemaking period to finalize the application process for the pension plans the pension benefit Guaranty Corporation rulemaking is expected to.
To be completed this summer day.
The act will strengthen eligible multiemployer pension plans that are severely underfunded and substantially mitigate their unfunded liabilities for the next 30 years.
<unk> and the relief that provides will protect the hard earned benefits of retirees for many companies and many industries, including members of the yellow team.
I will now turn the call over to Dan who will share additional details about the quarter.
Thank you Darren and good afternoon, everyone.
For the first quarter 2021, operating revenue was $1 2 billion compared to 1.15 billion in 2020.
Operating loss for the first quarter was $27 6 million, which included a 1 million net loss on property sales compared to operating income of $28 million in the prior year, which included a $39 3 million net gain on property sales.
Excluding net gains and losses on property sales the operating loss in the first quarter 2021 was $26 6 million compared to a loss of $11 3 million in the first quarter of 2020.
Adjusted EBITDA for the first quarter with $13 2 million compared to $34 1 million in the first quarter 2020.
As Darren mentioned from severe weather events during the first quarter had a significant impact on our network.
And while we always anticipate higher costs and operational impacts during the first quarter events in mid to late February that impacted many southern states and spanned across the south central corridor of the U S. <unk>.
Materially impacted our financial results.
We estimate the operating income and adjusted EBITDA impact of those weather events to be approximately $16 million.
Our revenue for the first quarter reflected year over year LCL tonnage per day growth of <unk>, 5% and.
In <unk> weight per shipment was down one 2%.
Sequential LCL tonnage per day trends compared to the prior year, whereas follows.
January of two 5%.
We worry down five 5% in March up three 8%.
On a preliminary basis April LCL tonnage per work day was up approximately 24%.
Excluding fuel surcharge LCL revenue per hundredweight was up six 9% and <unk> revenue per shipment was up five 6% compared to the prior year.
Including fuel surcharge <unk> revenue per hundredweight was up six 7% and <unk> revenue per shipment was up five 4%.
Total liquidity at the end of the first quarter was $423 million compared to $118 million at the end of the first quarter of 2020.
Total capital expenditures for the first quarter were $202 million compared to only $13 million in the first quarter of 2020 as.
As you heard from Darren we still expect our 2021 capital expenditures to be in the range of $450 million to $550 million.
During the second quarter, we plan on continuing our strong levels of capex, including the purchase of approximately 1100 tractors 800 trailers and 400 rail containers.
Now for a brief update on the U S Treasury loans first to 300 million tranche a loans.
As a reminder, all $300 million of the tranche a loan was drawn down as of the end of 2020, and there was $26 million remaining to be used as expected we use that $26 million during the first quarter and as such there will be no further trust activity.
Related to the 400 million tranche B loan.
As of the end of the first quarter, we had drawn down $251 million of tranche B and in April we received for the next $130 million.
So as of now we have drawn down a total of $381 million of the 400 million total and we expect to draw the remaining $19 million in the back half of 2021.
And finally on last quarter's earnings call. We discussed the elevated purchase transportation costs will persist and be a financial headwind through the first half of 2021 with.
With continued strong economic demand combined with an industry wide driver shortage, we still expect that to be true.
However, we also remain confident that we are taking the prudent actions necessary to mitigate those costs and we continue to be optimistic about our financial performance as we move forward through 2021.
With that I will turn the call over to Darryl.
Thank you Dan and good afternoon, everyone.
I want to begin by saying, how honored and proud I am to serve as president of Yellow Corporation.
It's a very exciting time to be with our company and I look forward to working alongside our 30000 freight professionals, who are committed to meeting our customers' expectations.
As Darren mentioned, we are well on our way to becoming one yellow.
The journey began in 2019, when we align the sales on operational structures of our <unk> brands.
This provided our customers with a single point of contact making it easier to do business with us while also eliminating redundancies in our network.
Earlier this year, we officially renamed the holding company to Yellow Corporation and.
In anticipation of a companywide rebrand to yellow.
And currently we are in the process of moving all brands to one technology platform.
This will streamline the flow of information for operations sales customer service human resources maintenance and in cash safety on to one shared technology solution.
As one yellow.
We will continue to improve our service get.
Get faster create more next day lanes.
And offer regional service and locations, we never have before.
And we will give our customers access to all the yellow can offer in the easiest most efficient way possible.
The integration to one yellow network will strengthen asset and network efficiencies, while providing customers with a broader network of yellow surfaces.
On our multi year enterprise transformation is complete next year.
We will go to market as one yellow laser focused on meeting the needs of our customers and growing our business.
In addition to the progress we are making with our enterprise transformation. We are in the process of implementing one of the largest capital expenditure plans on our company's history.
It really is incredible to see the volume of equipment that we are placing into the network in 2021.
In the first quarter, we took steps to restore appropriate service levels for our customers contributing to already elevated purchase transportation in short term rental expense.
With the weather disruption behind us we've taken firm actions to reduced purchase transportation and short term rental expense going forward.
These actions include.
Requiring the immediate return of short term rental equipment in most locations as we gained momentum in the arrival of our new equipment.
We have also bolstered hiring in locations utilizing high levels of purchase transportation due to the lack of delivery drivers.
And lastly, we've made adjustments within our line haul network to minimize the impact of rising purchased transportation expense in certain lanes.
In summary, as president of yellow.
My initial priorities are very straightforward.
Number one consistently meeting our customers' expectations.
Number two the successful execution of our hiring and retention strategies, which will allow us to take full advantage of the strong pricing environment, while tightly managing our cost structure.
And number three completing the enterprise transformation to one yellow as planned in 2022.
In closing.
Could not be more excited about our future here at yellow.
We have plenty of work to do but we're on the right path and I fully expect us to take advantage of the strong freight environment.
I want to thank our 30000 freight professionals, who continue to deliver for our customers each and every day.
They truly are what makes this company special and I look forward to working alongside them on the journey to becoming one yellow.
I will now turn the call back over to Darren for some closing comments.
Thank you Daryl.
As you heard this afternoon, we are all excited about the road ahead. Despite the weather in the first quarter in the near term purchase transportation headwinds. We are encouraged by the strong yield momentum. We saw at the end of March and in April with our multiyear enterprise transformation progressing one of the largest capex.
<unk> plans on our company's history, along with tight <unk> capacity.
High expectations from our team and I remain confident that we are well positioned for 2021 and beyond thanks for your time. This afternoon, we would now be happy to answer any questions that you may have.
And we will now begin the question and answer session. If you'd like to ask a question. Please pick up your handheld device to provide optimum zone quality.
At this time, we will pause momentarily to assemble the roster.
Our first question today will come from Jack Atkins with Stephens. Please go ahead.
Great.
Afternoon, and thank you for taking my questions sure thing Jack great to hear from him well.
Darren if we could maybe start for a moment and I guess, let's kind of think about.
The quarter on how it trended sequentially.
Weather was a pretty big impact your network in February and into early March you made that you made that pretty clear.
<unk> got yield momentum there could you.
From my first question, maybe focus on the expense side because it looks like you had some expenses that came back.
On a pretty material way, particularly around operating supplies and expenses and also also head count or just salaries and wages could you maybe talk a little bit about what drove the significant increase in those two expense buckets as you move from the fourth quarter into the first quarter and was that.
Pandemic related cost reduction, maybe coming back into the business in preparation for a recovery.
Demand in 'twenty one.
Yes, certainly Jack and I will start this first of all not pleased with these Q1 results even when you look at excluding the property sales.
On the op loss in Q1 of $26 million versus $11 million in 2020, and you put it in the $16 million for whether it's essentially flat and in this yield environment I'm not pleased with that however.
I will say that when you think about.
On the yield progression moving forward and I'll ask Dan to give you some revenue per hundredweight.
<unk> fuel surcharge metrics for each month of the quarter just to reinforce where we're at on pricing.
And then also from an expense standpoint the.
On the proper utilization of purchase transportation is key to our network. It also allows us to run our line haul operations as needed as Darren mentioned in the script to Alon and take great care of our customers now we did get into an area.
Using some expensive regional purchased transportation to get the right things done for the customer, but optimizing that out is key in Q2 of moving forward without driving that expense on the wrong direction, but the proper use of purchase transportation is essential to our networks. So from an expense cash.
<unk> that was non highest level of concern and that's why we called it out on our last earnings call, but also have been pointing our hiring advance to that exact.
Reducing our exposure to the most expensive lanes I would like Dan to further comment, but Dan if you would start with the yield numbers by months for Q1, just to give everyone perspective of how we are.
Trending and keep in mind as Dan gives these yield numbers for Q1 my comments about April debt, we're still seeing strong contract renewals as well. So then take it from there yes I think they are in my opening comments, obviously, you heard that our total yield including fuel surcharge was up six 7% for the quarter.
And our mid quarter update we reported that in January.
We were up one 8% in February were up six 3% March as Darren touched on is our yield accelerated March we were up 11, 5%.
Clearly continues to be our if not our one of our top priorities. We're happy with the performance up to this point and contract renewals are averaging between 7% to 8% we would expect that to continue.
A couple of other things Jack on the cost items that you mentioned.
First of all the $16 million weather impact that naturally the kind of falls into that bucket a lot of it in the salaries wages and benefits and operating expenses. So that's really where a lot of that impact it.
And then just one other point on that the quarter itself. The first quarter had three more working days than the fourth quarter did.
Just from a total cost perspective that has an impact there as well.
Okay.
That makes that makes.
More sense and I appreciate that additional color on.
Going back to the to the contract rate.
Commentary for April, but that was really interesting plus 7% is there any way to maybe talk about the contract renewals on average that you saw in the first quarter just to kind of compare compare that yes, Jack as we came through the first quarter. They were seven to eight percentage. So the contract renewals were building, Spain as.
We took our general rate increase in February of this year as well. So we started to see that benefit in those contract renewals have remained strong so that 7% to 8% is a good guide and they continue to accelerate as well.
Okay. Okay understood and then just kind of sticking with you for a moment.
Contract rate increases are up and up.
Alright.
Seven plus percent range, which makes a lot of sense, we're hearing similar ranges from other carriers.
Yeah.
Are there opportunities on the accessorial side as well.
You may be talk about that.
Potential area to drive higher revenue per shipment.
Yes, absolutely the accessorial pace and is crucial to us on all LPL carriers, but the actual recording and collection of those is something that we've become much better at and.
Recent times handhelds.
<unk> on other devices allow us to capture that attention and since the beginning of the pandemic and also continuing into this year with what's been happening in the retail sector and explosive growth with E. Commerce trailer availability has continued to be an opportunity for us and others as.
Large customers tie those trailers up to customers arent doing an intentionally theyre doing it because of a lot of disruptions and we've even seen on the trucking side with foreign teens vaccinations weather impacts container shortages all of those things put together.
So we're seeing a willingness for them to pay those retention rates and then also on multiple areas of other accessorial, including Hazmat phase residential deliveries.
Much higher compliance rate than what we've seen in the past with capacity being so tight.
Okay, Alright got it.
Darryl I guess this one's for you and congratulations on your on your promotion.
Obviously, a lot of a lot of areas.
<unk> focus within the business.
As you sort of think about the next 12 months.
Are you going to be your number one number two priorities.
At the highest level impact.
Initiatives that you think you can undertake to really drive improved profitability here and then capture capture the strength that we're seeing on the freight market.
Jack Thank you and it's a pleasure to meet year via phone.
Yes.
Your point I mean, as we just.
So I'm really focused almost successful execution of our transformation plan on one yellow I mean, we're well underway, obviously with the component we discussed relative to our technology, but thats really the key to our future and our success and it's on track.
We're going to provide our customers with easy access to both the regional and long haul services that our brands offer with one call one truck in one drop and Thats extremely important both for our customers and for our employees.
But to your point initial focus as I mentioned, we've got a line of sight daily to.
The reduction of cost and purchase transportation expense I mean, we have a great environment here from a yield perspective, and our focus of course is on the fundamentals of the business and cost controls necessary to drive the profit margins that we should have in this market.
Okay.
Last question I'll turn it over when we think about your hiring efforts could you.
No it's still early.
You guys are putting out press releases I think pretty regularly but could you just talk about.
What the pipeline looks like for new recruits and when do you think that's going to start having an impact either in terms of the level of purchase transportation expense or just overall.
Overall level of profitability for the <unk>.
On the enterprise and Thats something that we should start seeing in the second half of this year or do you think the pipeline is building a good impact on second quarter, Yes, Jack I'll jump in on that one then.
Dan's comments.
In our prepared script.
Certainly going to see the purchase transportation headwinds in the first half of the year, but we're making progress in that area as Daryl address certainly getting.
The PT on the right lanes and to your point about pipeline, we've got an internal pipeline this crucial to us and when we talk about 2017, driving academies that internal pipeline as our dock workers. So we move our the career path is come in as a dock worker you move into the driving academy, while Youre still getting paid.
You can also go the box truck route and that's where we get the conversion from dockworker box trucks to full balance CBL class a driver. So we've got that targeted in those areas. That's why we've continued to expand the number of driving academies. It goes beyond that with pop up academies, if we get three or four.
Dockworkers in one area then it makes sense for us to put the instructors there with them.
<unk> over to box trucker, CDL and benefit accordingly, so that's why on we're being strategic in the areas that we're putting these employees into first.
So that piece, we have confidence that.
Youre going to see improvement in Q2 around those basis. Okay. Thanks again for the time guys I appreciate it I appreciate it Jack so long.
And our next question will come from Scott Group with Wolfe Research. Please go ahead.
Hey, good evening guys, it's Rob on for Scott.
Typically from the first quarter to the second quarter, we see about a three to 400 basis point improvement in the operating ratio in light of.
The headwinds you guys experience from weather in the first quarter as well as some of the purchased transportation initiatives that you were just discussing.
Should we think about kind of or seasonality in <unk>.
<unk> this year.
Yes, Scott this is Dan I'll take a stab at that one well you know we don't provide.
<unk> specific guidance or targets around profitability, our ore, but when you talk about and think about.
The sequential margin, especially from <unk> to <unk> <unk>.
Touched on it historically, we improve about three 5% to four percentage points from Q1 to Q2.
Considering the significant weather that we talked about and Thats behind us now.
Considering that in the economic environment that we're in and some of those actions, we're taking to mitigate our purchase transportation costs I would expect that we'd had a chance to perform at or even a little bit better than that historical trend and Rob.
Part I like about your question as it goes into the areas that we're facing forward on so when we think about that we're in the middle of one of the largest capex plans on our 100 year history as you heard from Darren one yellow zone track matter of fact on the tech side of one yellow, we just move new pan over to.
The yellow technology that went well without any customer disruption right away on Holland coming over next that'll be done actually this year the networks out of one yellow completes in the first half of 'twenty two.
Also on the positive news front, our Union Multiemployer pensions Theyre. Good for the next 30 years with recent legislation in our non union single employers. They are fully funded with no significant contribution.
Moving forward you mix that with Dan's comments on the yield environment and the acceleration, we're seeing that's where our confidence lies facing forward.
That's a nice segue into the pension reform.
Darren you had kind of alluded that debt now you've got kind of full funding for.
For decades at this point.
Which probably means a little bit less cost inflation, but can you walk us through kind of how how this impacts yellows cash.
Cash flow.
Yes.
Tools for for for pension expense to your rank and file as well as some of the contingent liability that we have historically seen listed in the 10-K. Our view is that this isn't really a non event from a from a cash flow from operating expense standpoint.
Things down kind of future cost inflation as well as.
Sure.
We could potentially see that contingent withdrawal liability disclosure come down over over time, but I'd be curious to get your thoughts on.
As we're looking out to the 10-Q and ultimately a 10-K later this year to get filed.
As usual you've done your homework very well and your comments are right on and <unk> got a very good understanding of how the supplies at yellow.
First thing I would say as far our retirees and our current employees. This this is very good development and allows them access to the pensions that they've all worked very hard floor. As you know our pension rates are part of the collective bargaining agreement. So those are locked in for.
For the life of our current agreement, which goes through 2024.
You've already called out.
How this really from a financial standpoint, and the way, we accrue for it but I'll, let Dan take that pace before I get over my skis on that subject. So Dan certainly on any theres not many blanks left let me go ahead and fill in anything that we may have and I think Darren.
Scott Youre right on from a financial perspective, we expect to continue making a required contractual contribution that all of the multi employer pension plan.
<unk>, two and the collective bargaining agreement.
Ever since we have not withdrawn from any of those plans in the past, we don't carry any of that unfunded pension liability or potential obligations on our balance sheet. So to your point exactly there is no immediate financial impact to us on that and then once we see what happens in the rulemaking period that I mentioned in the prepared comments then we'll continue to update.
As we move forward once we all understand more of the impacts together over time.
Okay. That's helpful on and my final question before I turn it over to someone else's.
You've obviously you took delivery of a bunch of tractors and trailers in the first quarter.
I think I heard that you guys are going to be taking delivery of north of a thousand in the second quarter. So if I can just get kind of the total number that you guys will be receiving.
For tractors and trailers and QQ and if you're if there's any sort of difference in terms of your expected timing because of <unk>.
Some of the supply chain issues like semiconductors that were hearing from you.
Hearing a lot about in the news.
Be helpful on.
Rob I'll start with the back half of your question on issues, we have not run into any at this time. The production dates we've had the two Oems who are using they've done a great job in providing down and others. We did run into a few issues with some of the additional.
Equipment that we add like electronic logging devices and others, but we got we were able to overcome those so we didn't see any delays on taking delivery of the unit so at.
At this point in time, we're in good shape, and we have not been impacted by chip shortages and other things that you've mentioned I'll, let Dan go into the numbers side go ahead, Dan Yes. Thanks, Darren we really started taking delivery of tractors and trailers already going back to the fourth quarter. So when you think about I'll just give you the accumulative role here in the fourth quarter.
We took delivery of.
300 tractors 200 trailers in the first quarter.
<unk> 1100, tractors, and 2500 trailers as Darren and Ed mentioned that brings us up to 1400 tractors 2800 trailers through Q1, and then as I mentioned in Q2 or within the next two to three months, we would expect that we'd be bringing.
Bringing on another 1100 tractors and 800 trailers.
So once we're through with that we will be.
At a total of 2500 tractors 3600 trailers.
And what's the plan in terms of total tractor and trailer purchases for this year for you guys.
Sure.
Total tractors, we're looking at between 'twenty, three 'twenty 400, and total trailers, probably about 36% to 3700.
I appreciate the time guys.
Rob.
And our next question will come from Jeff Kauffman with vertical research partners. Please go ahead.
Thank you very much everybody Hello.
Hey, I don't know if theres any questions left.
We've covered we've covered a lot of ground here, Jeff Thats for sure.
Well, let me, let me see what I can come up with here.
So youre going to bring on all this new equipment can you talk about how this is going to correct.
Hey.
And cash flow as you are bringing in higher value equipment than what you probably have on your books.
Well certainly the oldest equipment goes out and though we have not discussed publicly our fleet age you can tell where these kind of numbers that Dan shared roughly 2400 class eights and bill another 100 box trucks.
Straight trucks and to give us 2500 tractors for the year, that's going to bring the fleet age down significantly and the fleet age when you look at it.
Those oldest units going out and our new issue and that's going on.
Ask mileage lanes, then naturally fuel miles per gallon uptime maintenance expanse.
All of those pieces benefit over time with the warranty programs.
Although our Q1 deliveries came on late in the quarter, we should see a consistent cash.
<unk> of equipment into the network over the remaining quarters on the year. So that will definitely have a very positive impact on our financials moving forward and as we discussed.
Big part.
Our plan, while we're going through this transition to one yellow so.
Dan anything else there that I missed on that front I would just go back to the DNA part of <unk>.
Question Jeff.
We've generally is used.
The useful life of 15 years for both tractors and trailers the while I don't have the specific number in front of me that you can apply our.
Our capex total as it pertains to that new equipment and kind of do the math on that.
Okay. Thank you and.
Hate to ask the obvious question, but even if I adjust for the real estate gains here.
In the prior year.
And give me credit per whether I mean, everybody got affected by the weather this quarter. Your purchase transportation costs really wasn't up a whole lot more than most other LPL carriers. This quarter your labor costs came in lower.
Your yields were right in line with the rest of the industry. Yet your margins went down 130 basis points, whereas the rest of the industry went up about 200 8300 basis points. So.
What do you believe was causing this underperformance financially versus the rest of the industry was a big year tonnage was down about 253% nobody else's was.
I am just trying to understand your metrics really werent debt out of line from.
Any other LDL company, that's reported this quarter yet your P&L was meaningfully lower.
Jeff certainly fair question and when I made my initial comments.
And I spoke about cost and also the need to move to one yellow.
<unk>.
Having.
One of our.
Current brands behind.
In line behind another one of our brands at a customer's location is a difficult proposition when you've got regional networks that can recover much quicker from winter storms than national networks that still use a hub and spoke system.
Those things become glaringly apparent during stressful times like prolonged weather events that happened in parts of the country that aren't accustomed tool. So when we put all that together it just reinforces that our one yellow strategy is exactly the right thing to do and the direction to go.
Our network will be less complex, but it'll be more agile and able to recover as we open more and more velocity centers throughout and across the country. We started this process already you see what we did in Texas, what we've done in Richmond, what we've done in little rock.
Those are territories, where we havent had regional presence that we're providing regional service right now through wire sea freight so just.
Few quarters and by the first half of 2022, so on a few quarters. We will have the technology based on Red away Holland, New Penn is already on the yellow technology, but all of the companies will be on one technology. This year, we'll have visibility across all of the long haul networks all the terminals with one.
On technology system for all employees to use all drivers to benefit from and then by the first half of 2022, we'll have the networks connected in the environment that I just talked about what we've done in Texas regimen in little rock, we've already got the regional service, where we have regional carriers present, but we will remove.
Having two of our company drivers at the same customer and two trucks to trailers et cetera.
On asset utilization side of this is going to be huge our cost structure does not align well right now with large single brand LPL carriers and that's exactly what we're on a mission to fix.
So end of the day, we still have inefficiency and redundancy on the network.
That may explain some of that difference and then you've got these transition costs with the systems changeover in those never go as smoothly as we'd all like to believe is that a fair assessment.
Yes, we did an excellent job summarizing that.
Alright last question I wanted to go back to the.
Okay.
To the to the yields.
I mean, just an unbelievable environment for yields sustainable, but on the other hand, not going away anytime soon.
What percentage of your 2021 contracts had been re priced at this point and I know you said you just took the eri, but whats remaining to be repriced.
Bill for this year, yes, Jeff. This is something we've looked a lot of that as you know the contractual piece is so much bigger than the contractual piece, we're pretty well balanced across quarters. So if you look at the number of negotiations, we do theyre pretty evenly balanced between each quarter of the year and also the way we staff.
<unk> to handle that is you know the volume of that is thousands and thousands of customers as a majority business now is under contract.
So we've still got.
Lot of.
Good pricing in front of us and those renewals are going very well naturally we're working with our customers is not an ambush were communicating ahead of time, everyone understands the environment, It's no secret what's going on.
In transportation right now and these negotiations.
Are moving in the right direction for US and also working with our customers to make sure Theyre freights in the right lanes, so that their transportation budgets.
They are all going up but also that they can run their businesses effectively so we're we're pretty even across each quarter.
Alright. Thank you bring on this and we started in Q4 in a strong way so.
You could really Marcus.
Right at the halfway point.
Jeff Dill Asia.
No I'm good. Thank you I just just passengers on it. Thank you okay. Thank you Jeff.
And this will conclude our question and answer session I would like to turn the conference back over to management for any closing remarks.
Thank you operator, and thanks again to everyone, who participated and joined with US today. Please contact Tony with any additional questions that you may have this concludes our call and operator I'm turning the call back to you.
And this does conclude today's call. Thank you for attending today's presentation. At this time you may now disconnect your lines and have a great day.
Okay.
Yes.
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Yes.
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Good day and welcome to the Yellow Corporation first quarter 2021 earnings Conference call all participants will be in a listen only mode.
Need assistance. Please signal a conference specialist professional Starkey followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded I would now like to turn the conference over to Tony Carreno, Vice President of Investor Relations. Please go ahead.
Thank you operator, and good afternoon, everyone.
Welcome to Yellow Corporation's first quarter 2021 earnings conference call.
Many of US on the call today are Darren Hawkins Chief Executive Officer.
Dan Olivia Air interim Chief Financial Officer, and Daryl Harris President <unk>.
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 on a number of risks and therefore actual results may differ materially.
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 our results to differ please refer to this afternoons earnings release on our most recent SEC filings, including our forms 10-K and 10-Q.
These items are also available on our website at my yellow Dot com.
Additionally, please see today's release for a reconciliation of net income or loss to adjusted EBITDA.
Juncture with today's earnings release, we issued a presentation, which may be referenced during the call. The presentation on filed in an 8-K along with the earnings release is available on our website.
I will now I'll turn the call over to Darren.
Thanks, Tony and good afternoon, everyone. Thank you for joining our call.
Before I get into the details on the Q1 results I would like to congratulate Darryl for his promotion to president of Yellow Corporation.
He joined the company last year as executive Vice President of strategic initiatives with the primary responsibility of overseeing our enterprise transformation and his new role there of leadership will guide all aspects of our transformation to becoming one yellow.
During his 25 year career. He has built a solid track record of success with extensive L. T L experience price.
Our eyes are joining yellow. He most recently served as Chief Executive Officer of Express Global systems.
Darryl is an inspirational leader, whose experience energy and innovative ideas will help guide the company's future I look forward to working with him in his new role.
Turning to Q1 severe winter weather had a significant impact on our network, where the recovery lasting into March trucking is an outdoor sport that requires us to work through challenging weather and it can take a while for our expansive North American network to fully recover one of the benefits of completing.
The transformation to one yellow and 2022 will be the recovery time from similar weather events is expected to be much quicker as we look ahead. The economy continues to build momentum as it recovers from the impact of the COVID-19, pandemic industrial demand and consumer opt.
Some of them are contributing the tight trucking capacity and a strong yield environment favorable year over year pricing trends have carried into Q2 for the month of April the yellow companies averaged around 7% on contract negotiations.
Another contributing factor to the tight trucking capacity as an industry wide shortage of qualified drivers and the need to hire more drivers unfavorably impacted our purchase transportation expense in Q1, we have launched a nationwide recruiting drive that includes holding more than two dozen hiring advance folk.
Just on recruiting drivers mechanics and dock workers.
We have also expanded the number of driver Academy locations to 17. In addition to offering good jobs and competitive benefits as on LCL care. Most of our drivers can be at home with their families every night on <unk>.
Most important asset is our team of nearly 30000 freight professionals and we are working aggressively to add new members during.
During the first quarter, we made headway on one of the largest fleet refreshes in our company's history by taking delivery of more than 1100 tractors more than 1600 trailers and over 140 containers most of which were added late in the quarter. These investments will have a positive impact on the age.
And efficiency of our fleet and should also help mitigate maintenance expense over time for.
For 2021, our capital expenditure guidance remains between 450 and $550 million.
Next I would like to share what one yellow means it means going to market as one yellow brand that provides customers with choice simplicity speed visibility and reliability are roughly 200000 customers will interact with one yellow sales team.
<unk>, whose shipments will move through one yellow network, there will be one bill of lighting and the customers will receive one yellow invoice culturally one yellow also means continuing to do the right thing for our customers and our employees, we are making steady progress towards this vision.
In the multi year enterprise transformation to one yellow remains on schedule for completion in the middle of 'twenty 'twenty two.
This is also a critical step in aligning our cost structure with other large single brand L. T L carriers.
In March the American Rescue Plan Act of 2021 was passed and signed into law. The passage is followed by 120 day rulemaking period to finalize the application process for the pension plans the pension benefit Guaranty Corporation rulemaking is expected to.
To be completed this summer the act will strengthen eligible multiemployer pension plans that are severely underfunded and substantially mitigate their unfunded liabilities for the next 30 years.
<unk> and the relief that provides will protect the hard on benefits of retirees for many companies and many industries, including members of the yellow team.
I will now turn the call over to Dan who will share additional details about the quarter.
Thank you Darren and good afternoon, everyone for the first quarter 2021 operating revenue was $1 2 billion compared to 1.15 billion in 2020.
Operating loss for the first quarter was $27 6 million, which included a 1 million net loss on property sales compared to operating income of $28 million in the prior year, which included a $39 3 million net gain on property sales.
Excluding net gains and losses on property sales the operating loss in the first quarter 2021 was $26 6 million compared to a loss of $11 3 million in the first quarter of 2020.
Adjusted EBITDA for the first quarter was $13 2 million compared to $34 1 million in the first quarter 2020.
As Darren mentioned, the severe weather events during the first quarter had a significant impact on our network.
And while we always anticipate higher costs and operational impacts during the first quarter day event in mid to late February that impacted many southern states and spanned across the south central corridor of the U S materially impacted our financial results.
We estimate the operating income and adjusted EBITDA impact of those weather events to be approximately $16 million.
Our revenue for the first quarter reflected year over year LCL tonnage per day growth of <unk>, 5%.
And <unk> weight per shipment was down one 2%.
Sequential LCL tonnage per day trends compared to the prior year, whereas follows Jim.
Annual rate of two 5%.
February down five 5% in March up three 8%.
On a preliminary basis April LCL tonnage per work day was up approximately 24%.
Excluding fuel surcharge LCL revenue per hundredweight was up six 9% and <unk> revenue per shipment was up five 6% compared to the prior year.
Including fuel surcharge LTM revenue per hundredweight was up six 7% and LCL revenue per shipment was up five 4%.
Total liquidity at the end of the first quarter was $423 million compared to $118 million at the end of the first quarter 2020.
Total capital expenditures for the first quarter were $202 million compared to only $13 million in the first quarter 2020.
As you heard from Darren we still expect our 2021 capital expenditures to be in the range of $450 million to $550 million.
Now for a brief update on the U S. Treasury loans first to 300 million tranche a loans as a reminder, all $300 million of the tranche a loans was drawn down as of the end of 2020, and there was $26 million remaining to be used as expected we use that $26 million during the first quarter and as such there will be no further.
Trust activity.
Related to the 400 million tranche b loan as of the end of the first quarter, we had drawn down $251 million of tranche B and in April we received at the next $130 million.
So as of now we have drawn down a total of $381 million of the 400 million total and we expect to draw the remaining $19 million in the back half of 2021.
And finally on last quarter's earnings call. We discussed the elevated purchase transportation costs will persist and be a financial headwind through the first half of 2021 with.
With continued strong economic demand combined with an industry wide driver shortage, we still expect that to be true.
However, we also remain confident that we are taking the prudent actions necessary to mitigate those costs and we continue to be optimistic about our financial performance as we move forward through 2021.
With that I will turn the call over to Darryl.
Thank you Dan and good afternoon, everyone.
I want to begin by saying, how honored and proud I am to serve as president of Yellow Corporation.
It's a very exciting time to be with our company and I look forward to working alongside our 30000 freight professionals, who are committed to meeting our customers' expectations.
As Darren mentioned, we are well on our way to becoming one yellow.
The journey began in 2019, when we align the sales on operational structures of our <unk> brands.
This provided our customers with a single point of contact making it easier to do business with us while also eliminating redundancies in our network.
Earlier this year, we officially renamed the holding company to Yellow Corporation.
In anticipation of a companywide rebrand to yellow.
And currently we are in the process of moving all brands to one technology platform.
This will streamline the flow of information for operations sales customer service human resources maintenance and in cash safety onto one shared technology solution.
As one yellow.
We will continue to improve our service get.
Get faster create more next day lanes.
And offer regional service and locations, we never have before.
And we will give our customers access to all the yellow can offer in the easiest most efficient way possible.
The integration to one yellow network will strengthen asset and network efficiencies, while providing customers with a broader network of yellow services.
On our multi year enterprise transformation is complete next year.
We will go to market as one yellow laser focused on meeting the needs of our customers and growing our business.
In addition to the progress we are making with our enterprise transformation. We are in the process of implementing one of the largest capital expenditure plans on our company's history.
It really is incredible to see the volume of equipment that we are placing into the network in 2021.
In the first quarter, we took steps to restore appropriate service levels for our customers contributing to already elevated purchase transportation in short term rental expense.
With the weather disruption behind us we've taken firm actions to reduce purchase transportation and short term rental expense going forward.
These actions include.
Requiring the immediate return of short term rental equipment in most locations as we gain momentum in the arrival of our new equipment.
We have also bolstered hiring in locations utilizing high levels of purchase transportation due to the lack of delivery drivers.
And lastly, we've made adjustments within our line haul network to minimize the impact of rising purchased transportation expense in certain lanes.
In summary, as president of yellow.
My initial priorities are very straightforward.
Number one consistently meeting our customers' expectations.
Number two the successful execution of our hiring and retention strategies, which will allow us to take full advantage of the strong pricing environment, while tightly managing our cost structure.
And number three completing the enterprise transformation to one yellow as planned in 2022.
In closing.
Could not be more excited about our future here yes.
We have plenty of work to do but we're on the right path and I fully expect us to take advantage of the strong freight environment.
I want to thank our 30000 freight professionals, who continue to deliver for our customers each and every day.
They truly are what makes this company special and I look forward to working alongside them on the journey to becoming one yellow.
I will now turn the call back over to Darren for some closing comments.
Thank you Daryl.
As you heard this afternoon, we are all excited about the road ahead. Despite the weather in the first quarter and the near term purchase transportation headwinds. We are encouraged by the strong yield momentum. We saw at the end of March and in April with our multiyear enterprise transformation progressing one of the largest capex.
Plans on our company's history, along with tight <unk> capacity.
Expectations from our team and I remain confident that we are well positioned for 2021 and beyond thanks for your time. This afternoon, we would now be happy to answer any questions that you may have.
And we will now begin the question and answer session. If you'd like to ask a question. Please pick up your handheld device to provide optimum sound quality.
At this time, we will pause momentarily to assemble the roster.
Our first question today will come from Jack Atkins with Stephens. Please go ahead.
Good afternoon, and thank you for taking my questions sure thing Jack Great to hear from you well I guess you know Darren if we could maybe start for a moment.
Let's kind of think about.
The quarter on how it trended sequentially on obviously weather was a was a pretty big impact your network in February and into early March you made debt you made that pretty clear.
Got yield momentum there could you.
From my first question, maybe focus on the expense side because it looked like you had some expenses that came back.
On a pretty material way, particularly around operating supplies and expenses and also also head count or just salaries and wages could could you maybe talk a little bit about what drove the significant increase in those two expense buckets as you move from the fourth quarter into the first quarter and was that pandemic related cost reduction maybe coming back into the business in.
<unk> for a recovery in demand in 'twenty one.
Yes, certainly Jack and I will start this first of all not pleased with these Q1 results even when you look at excluding the property sales.
Op loss in Q1 on $26 million versus $11 million in 2020, and you put it in the $16 million for whether it's essentially flat and in this yield environment.
Not pleased with that however.
We'll say that when you think about.
On the yield progression moving forward and I'll ask Dan to give you some revenue per hundredweight.
<unk> fuel surcharge metrics for each month of the quarter just to reinforce where we're at on pricing.
And then also from an expense standpoint the.
On the proper utilization of purchase transportation is key to our network. It also allows us to run our line haul operations as needed as Daryl mentioned in the script to Alon and take great care of our customers now we did get into an area.
Using some expensive regional purchase transportation to get the right things done for the customer, but optimizing that out is key in Q2 of moving forward without driving that expense on the wrong direction, but the proper use of purchase transportation is essential to our network. So from an expense cash.
<unk> that was my highest level of concern and that's why we called it out on the last earnings call, but also have been pointing our hiring advanced to that exact piece of reducing our exposure to the most expensive lanes I would like Dan to further comment, but Dan if you would start.
With the yield numbers by month for Q1, just to give everyone perspective of how we are.
Trending and keep in mind as Dan gives these yield numbers for Q1 my comments about April that we're still seeing strong contract renewals as well so Dan take it from there yes, I think they are in my opening comments, obviously, you heard that our total yield including fuel surcharge was up six 7% for the quarter.
And our mid quarter update we reported that in January.
We were up one 8% in February were up six 3% March as Darin touched on is our yield accelerated in March we were up 11, 5%.
Clearly continues to be our if not our one of our top priorities, we're happy with the performance up to this point.
Contract renewals or avenue between 7% to 8%, we would expect that to continue.
A couple of other things Jack on the cost items that you mentioned.
First of all of the $16 million weather impact that naturally it kind of falls into that bucket a lot of it in the salaries wages and benefits and operating expenses. So that's really where a lot of that impact it.
And then just one other point on that the quarter itself. The first quarter had three more working days than the fourth quarter did.
From a total cost perspective that has an impact there as well.
Okay.
That makes that makes.
More sense and I appreciate that additional color on going back to the to the contract rate.
Commentary for April, but that was really interesting plus 7% is there any way to maybe talk about the contract renewals on average that you saw in up in the first quarter just to kind of compare compare that Jack.
As we came through the first quarter, they were 7% to 8%. So the contract renewals were building, Spain. As you know we took our general rate increase in February of this year as well. So we started to see that benefit in those contract renewals have remained strong so that 7% to 8%.
Good God and they continue to accelerate as well.
Okay. Okay understood and then just kind of sticking with yield for a moment.
Contract rate increases are up in the call it.
Seven plus percent range, which makes a lot of sense. We're hearing similar range is from other carriers.
Are there opportunities on the accessorial side as well could.
Could you maybe talk about that.
Potential area to drive higher revenue per shipment.
Yes, absolutely the accessorial pace and is crucial to us on how LPL carriers, but the actual.
Recording and collection of those is something that we've become much better at.
Just recent times a handheld <unk>.
<unk> on other devices allow us to capture that attention and since the beginning of the pandemic and also continuing into this year with what's been happening in the retail sector and explosive growth with ecommerce trailer availability has continued to be an opportunity for us and others.
Large customers tie those trailers off the customers arent doing an intentionally theyre doing it because of a lot of those disruptions and we've even seen on the trucking side with foreign teens vaccinations weather impacts container shortages all of those things put together.
So we're seeing a willingness for them to pay those retention rates and then also on multiple areas of other accessorial, including Hazmat phase residential deliveries, there's a much higher compliance rate than what we've seen in the past with capacity being so tight.
Alright got it.
Darryl I guess this one is for you and congratulations on your on your promotion.
Obviously, a lot of a lot of areas debt.
<unk> focus was on the business.
As you sort of think about the next 12 months.
What are you going to be your number one number two priorities.
At the highest level impact.
The initiatives that you think you can undertake to really drive improved profitability here and then capture capture the strength that we're seeing on the freight market.
Yes, Jack Thank you and it's a pleasure to meet you here via phone.
Yes.
Your point as we discussed I'm really focused on the successful execution of our transformation plan on one yellow I mean, we're well underway, obviously with the component we discussed relative to our technology, but thats really the key to our future and our success and it's on track.
We're going to provide our customers with easy access to both the regional and long haul services that our brands offer with one call one truck in one drop and that's extremely important.
Both for our customers and for our employees.
But to your point initial focus as I mentioned, we've got a line of sight daily.
To reduction of cost and purchase transportation expense I mean, we have a great environment here from a yield perspective, and our focus of course is on the fundamentals of the business and cost controls necessary to drive the profit margins that we should have on this mark.
Okay.
Yes last question I'll turn it over when we think about your hiring efforts could you on that.
I know it's still early.
Guys are putting out press releases I think pretty regularly but could you just talk about what.
What the pipeline looks like for new recruits and when when do you think that's going to start having an impact either in terms of the level of purchase transportation expense or just overall overall.
Overall level of profitability for you.
For the enterprise is that something that we should start seeing in the second half of this year or do you think the pipeline is building and could impact the second quarter GAAP Jack I'll jump in on that one then.
Dan's comments in.
In our prepared.
Script.
Certainly going to see the purchased transportation headwinds in the first half of the year, but we're making progress in that area as Daryl address certainly getting.
On the PT on the right lanes and to your point about pipeline. We've got an internal pipeline this crucial to us and when we talk about 17, driving academies that internal pipeline as our dock workers. So we move our the career path as you come in as a dock worker you move in to the driving Academy, while Youre still getting paid.
You can also go to the box truck route and that's where we get the conversion from dockworker box trucks to full balance CBL class a driver. So we've got debt targeted in those areas. That's why we've continued to expand the number of driving academies. It goes beyond that with pop up academies.
Net three or four dockworkers in one area then it makes sense for us to put the instructors there with them.
<unk> over to a box truck, our CDL and benefit accordingly, So that's why on we're being strategic in the areas that we're putting these employees into first.
So that piece, we have confidence that.
Youre going to see improvement in Q2 around those basis. Okay. Thanks again for the time guys I appreciate it I appreciate it Jack so long.
And our next question will come from Scott Group with Wolfe Research. Please go ahead.
Hey, good evening guys, it's Rob on for Scott.
Typically from the first quarter to the second quarter, we see about a three to 400 basis point improvement in the operating ratio in light of.
The headwinds you guys experience from weather in the first quarter as well as some of the purchase transportation initiatives that you were just discussing how should we think about kind of or seasonality one cubic.
<unk> this year.
Yes, Scott this is Dan I'll take a stab at that one well we don't provide.
<unk> specific guidance or targets around profitability or or but when you talk about and think about.
The sequential margins, especially from <unk> to <unk> <unk>.
Touched on it you know historically, we improved about three 5% to four percentage points from Q1 to Q2.
Considering the significant weather that we talked about and Thats behind us now.
Considering that in the economic environment that we're in and some of those actions, we're taking to mitigate our purchase transportation costs I would expect that we'd had a chance to perform at or even a little bit better than that historical trend and Rob.
Part I like about your question as it goes into the areas that we're facing forward on so when we think about that we're in the middle of one of the largest capex plans on our 100 year history.
As you heard from Darren one yellow zone track matter of fact on the tech side of one yellow, we just move new pan over to the yellow technology that went well without any customer disruption right away on Holland coming over next that'll be done actually this year the networks out of one yellow completes in the first half of 'twenty.
To Paul.
Also on the positive news front, our Union Multiemployer pensions Theyre. Good for the next 30 years with recent legislation in our non union single employers. They are fully funded with no significant contribution moving forward you mix that with Dan's comments on the yield environment and the acceleration.
<unk>, we're seeing that's where our confidence lies facing forward.
That's a nice segue into the pension reform.
Darren you kind of alluded debt now you've got kind of full funding for you know for decades at this point.
Which probably means a little bit less cost inflation, but can you walk us through kind of how how this impacts yellows cash.
Cash flow.
Yeah accruals for.
For pension expense to your rank and file as well as some of the contingent liability that we have historically seen listed in the 10-K are our view is that this isn't really a non event from a from a cash flow from operating expense standpoint, but brings down kind of future cost inflation.
As well as.
We could potentially see that contingent.
Withdrawal liability disclosure come down over over time, but I'd be curious to get your thoughts on <unk>.
As we're looking out to the 10-Q and ultimately a 10-K later this year to get filed.
Rob as usual you've done your homework very well and your comments are right on and you've got a very good understanding of how the supplies and yellow. The first thing I would say as far our retirees and our current employees. This this is very good development and allows.
Then on access to the pensions that they've all worked very hard for as you know our pension rates are part of the collective bargaining agreement. So those are locked in for the life of our current agreement, which goes through 2024.
You've already called out.
How this really from a financial standpoint, and the way, we accrue for it but I'll, let Dan take that pace before I get over my skis on that subject. So Dan certainly on any theres not many blanks left but go ahead and fill in anything that we may have.
Scott Youre right on from a financial perspective, we expect to continue making a required contractual contributions to all of the multi employer pension plan.
<unk>, two and the collective bargaining agreement on.
Ever since we have not withdrawn from any of those plans in the past, we don't carry any of that unfunded pension liability or potential obligations on our balance sheet. So to your point exactly there is no immediate financial impact to us on that and then once we see what happens in the rulemaking period that I mentioned in the prepared comments then we'll continue to update.
As we move forward once we all understand more of the impacts together over time.
Okay. That's helpful. On my final question before I turn it over to someone else's.
You've obviously you took delivery of a bunch of tractors and trailers in the first quarter.
I think I heard that you guys are going to be taking delivery of north of 1000 in the second quarter. So if I can just get kind of the total number that you guys will be receiving.
For tractors and trailers and QQ and if you're if there's any sort of difference in terms of your expected timing because of some of the supply chain issues like semiconductors that were hearing from here.
Hearing a lot about in the news.
Helpful.
Rob I'll start with the back half of your question on issues, we have not run into any at this time. The production dates we've had the two Oems who are using they've done a great job and providing them and others. We did run into a few issues with some of the additional <unk>.
Equipment that we add like electronic logging devices and others, but we got we were able to overcome those so we didn't see any delays on taking delivery of the units. So.
At this point in time, we're in good shape, and we have not been impacted by chip shortages and other things that Jim mentioned I'll, let band go into the numbers go ahead, Dan Yeah. Thanks, Darren we really started taking delivery of tractors and trailers already going back to the fourth quarter. So when you think about I'll just give you the cumulus have role here in the fourth quarter.
We took delivery of.
300 tractors 200 trailers in the first quarter.
1100 tractors in 1600 trailers as Darren mentioned that brings us up to 1400 tractors 2800 trailers through Q1, and then as I mentioned in Q2 or within the next two to three months, we would expect that we'd be bringing on another 1100 tractors and 800 trailers.
So once we're through with that will be.
At a total of 2500 tractors 3600 trailers.
And what's the plan in terms of total tractor and trailer purchases for this year for you guys.
Total tractors, we're looking at between 'twenty, three 'twenty 400, and total trailers.
<unk> 36 to 3700.
I appreciate the time guys.
Thank you Rob.
And our next question will come from Jeff Kauffman with vertical research partners. Please go ahead.
Thank you very much everybody Hello.
Hey, I don't know if there's any questions left.
We've covered we've covered a lot of ground here, Jeff that's for sure.
Let me see what I can come up with here.
So.
You are going to bring on all this new equipment can you talk about how this is going to affect.
DNA.
And cash flow as you're bringing in the higher value equipment than what you probably have on your books.
Certainly the oldest equipment goes out and though we have not discussed publicly our fleet age you can tell with these kind of numbers that Dan shared roughly <unk> 400 class eights and do another 100 box trucks.
Strike trucks and to give us 2500 tractors for the year.
That's going to bring the fleet age down significantly.
On the fleet age when you look at what those oldest units going out and our new issue that's going on the highest mileage Lange's then naturally.
Bill miles per gallon uptime maintenance expense.
All of those pieces benefit over time with the warranty programs.
And although our Q1 deliveries came on late in the quarter, we should see a consistent.
Cascade of equipment into the network over the remaining quarters on the year. So that will definitely have a very positive impact on our financials moving forward and as we discussed that's a big part of our plan, while we're going through this transition to one yellow so.
Dan anything else there that I missed on that front that would just go back to the DNA part of the question Jeff.
We generally as a useful life of 15 years from both tractors and trailers. So while I don't have the specific number in front of me that you can apply R. R.
Our capex total as a percent debt new equipment and kind of do the math on that.
Okay. Thank you.
And.
I hate to ask the obvious question, but even if I adjust for the real estate gains here.
In the prior year.
And give me credit for weather I mean, everybody got affected by the weather this quarter your purchase transportation costs really wasn't up a whole lot more than most other LPL carriers. This quarter your labor costs came in lower.
Your yields were right in line with the rest of the industry. Yet your margins went down 130 basis points, whereas the rest of the industry went up about 200 8300 basis points. So.
What do you believe was causing this on your performance financially versus the rest of the industry. It was a big year tonnage was down about 253% nobody else's was on.
Just trying to understand your metrics really weren't that out of line from any other LDL company. That's reported this quarter yet your P&L was meaningfully lower.
Jeff certainly a fair question and when I made my initial comments.
And I spoke about cost and also the need to move to one yellow.
Having.
One of our.
Current brands behind and land behind another one of our brands at a customer's location is.
A difficult proposition when you've got regional networks that can recover much quicker from winter storms that national networks that still use a hub and spoke system.
Those things become glaringly apparent during stressful times like prolonged weather events that happen in parts of the country that aren't accustomed to them. So.
When we put all that together it just reinforces that our one yellow strategy is exactly the right thing to do and the direction to go our network will be less complex, but it'll be more agile and able to recover as we open more and more velocity centers.
Throughout and across the country. We started this process already you see what we did in Texas, what we've done in Richmond, what we've done in little rock those are territories, where we havent had regional presence that we're providing regional service right now through wire seats right. So just.
On a few quarters and by the first half of 2022. So on a few quarters. We will have the technology based on Red away Holland, New Penn is already on the yellow technology, but all of the companies will be on one technology. This year, we will have visibility across all of the long haul networks all of the terminals.
With one technology system for all employees to use all drivers to benefit from and then by the first half of 2022, we'll have the networks connected in the environment that I just talked about what we've done in Texas Regiment in little rock, we've already got the regional service, where we have regional carriers present, but we will.
Remove having two of our company drivers at the same customer and two trucks trailers et cetera.
The asset utilization side of this is going to be huge our cost structure does not align well right now with large single brand LPL carriers and that's exactly what we're on a mission to fix.
So end of the day, we still have the inefficiency and redundancy on the network.
That may explain some of that in Brooklyn, and then you've got these transition costs with the systems changeover in those never go as smoothly as we would all like to believe is that a fair assessment.
Yes, you did an excellent job summarizing that.
Alright last question I wanted to go back to the.
To the to the yields.
I mean, just an unbelievable environment for yields sustainable, but on the other hand, not going away anytime soon what percentage of your 2021 contracts have been re priced at this point and I know you said you just took the eri, but whats remaining to be re.
Rice still for this year, yes, Jeff. This is something we've looked a lot of that as you know the contractual piece is so much bigger than cri and the contractual piece, we're pretty well balanced across quarters. So if you look at the number of negotiations Wayne do theyre pretty evenly balanced between each quarter of the year and also.
The way we staff to handle that is you know the volume of that is thousands and thousands of customers as a majority business now is under contract.
We've still got a.
A lot of.
Good pricing in front of us and those renewals are going very well naturally we're working with our customers is not an ambush were communicating ahead of time, everyone understands the environment, It's no secret what's going on.
In transportation right now and these negotiations.
Moving on the right direction for US and also working with our customers to make sure they're freights on the right range, so that their transportation budgets.
They are all going up but also that they can run their businesses effectively so.
We're pretty even across each quarter.
Alright. Thank you. Please go on.
And we started in Q4 in a strong way so.
You can really Marcus.
On right at the halfway point.
Jeff Dill Asia.
No I'm good. Thank you I just just pass it on thank you okay. Thank you Jeff.
And this will conclude our question and answer session I would like to turn the conference back over to management for any closing remarks.
Thank you operator, and thanks again to everyone, who participated and joined with US today. Please contact Tony with any additional questions that you may have this concludes our call and operator I'm turning the call back to you.
And this does conclude today's call. Thank you for attending today's presentation. At this time you may now disconnect your lines and have a great day.