Q4 2022 Yellow Corp Earnings Call
Speaker 2: Really.
Speaker 3: And time.
Speaker 4: answer session. Please note this event is being recorded.
Speaker 5: I would now like to turn the conference over to Tony Carino, senior vice president of Treasury and investor relations. Please go ahead.
Speaker 6: Thank you, operator, and good afternoon, everyone. To Yella Corporation's fourth quarter 2022 earnings conference call.
Speaker 7: Joining us on the call today are Darren Hawkins, Chief Executive Officer, and Dan Olivier, Financial Officer.
Speaker 8: During this call, we may make some forward-looking statements within the meeting of federal securities 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 number of risks.
Speaker 9: and therefore extra results might differ materially.
Speaker 10: The format of this call does not allow us to fully discuss all these risk factors.
Speaker 11: For a full discussion of the risk factors that could cause the 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.
Speaker 12: These items are also available on our website at myyellow.com.
Speaker 13: Additionally, we see today's release for reconciliation of net income or loss to adjust the data.
Speaker 14: In conjunction with TAsR&D release, we issued a presentation which may be referenced during the call. The presentation was filed in an AK along with the Erniez release and is available on our website.
Speaker 15: I will now turn the call over to Derek.
Speaker 16: Thanks, Tony, and good afternoon, everyone. Thank you for joining our call. In Q4, we saw a notable drop in demand for LTL capacity as the economy continued to cool down. With fully stocked inventories, the retail sector had already begun to require less capacity to move to market.
Speaker 17: from supply chain prior to Q4. During the quarter, the manufacturing sector also began to slow down following several quarters of growth. In response, we kept our focus on meeting our customers needs while adjusting our cost structure to help mitigate the near-term headwind.
Speaker 18: The adjustments including reducing the size of our workforce to align with demand in addition to closely managing the use of purchase transportation.
Speaker 19: We also benefited from again on the sale of an excess terminal no under needed as a result of the efficiencies from phase one of our network transformation.
Speaker 20: We use the net proceeds from the sale of 8-0 portion of the term loan.
Speaker 21: Even in the face of an economic slowdown and declining tonnage, this is one of the most stable LTL pricing environments we have experienced in many years. We have stayed consistent with our strategy of improving yield on the freight moving through Yellows Network to improve profitability and offset inflationary cost pressures.
Speaker 22: In Q4, year-over-year LTL revenue per hundredweight, including fuel, increased 21.1 percent. So the month of January , yellow averaged between 5 and 6 percent on contract negotiations.
Speaker 23: Despite the economic slowdown later in the year.
Speaker 24: the company made significant financial improvement in 2022 and reported its best operating income and operating ratio since 2006.
Speaker 25: Turning to Phase 1 of the Network Optimization in the Western U.S.
Speaker 26: The real-end and optimized terminal coverage positioned us closer to the customers, which is enabled us to make pickups and deliveries more efficient and tom-wear, both of which are critical to the yellow customer experience.
Speaker 27: Concerning the Phase II network optimization in the eastern US, we are following the same contractual process as Phase I. The Phase II recommended changes have been mailed to the local unions and we are in process of meeting with those unions to field any questions.
Speaker 28: are concerned around the optimization. We plan to communicate externally when an implementation date is determined.
Speaker 29: Looking ahead, our priorities in 2023 include continuing to enhance our customer experience with technology investments to provide new transactional capabilities and self-service features on our website. We also planned to provide a streamlined suite of service offerings.
Speaker 30: utilizing the speed of our super regional network.
Speaker 31: Serving our customers in a first-class fashion will help us grow shipments count and possibly grow our company.
Speaker 32: Thank you again for joining us today. I will now turn the call over to Dan, who will share additional details about the quarter.
Thank you, Darren, and a good afternoon, everyone. A whole year 2022 operating revenue was 5.24 billion compared to 5.12 billion in 2021.
Operating income in 2022 was 197.8 million, which included a 38 million net gain on property disposable service.
This compares to operating income of 103.6 million in 2021.
Adjusted EBITDA for full year 2022 was 343.1 million compared to 306 million in 2021.
For the fourth quarter of 2022, operating revenue was 1.2 billion compared to 1.31 billion in 2021.
And operating income was 40.3 million, including a net gain on property disposal 28.2 million.
This compares to operating income of 55.8 million in a prior year.
Adjusted the Epe Daffer the 4th floor of 2022 was 54.6 million compared to 115.5 million in 2021.
The 8.3% decrease in year-over-year operating revenue in the fourth quarter was attributable to lower volume, partially offset by continued strong yield performance, and higher fuel surcharge revenue.
including fuel surcharge, fourth quarter LCL revenue per hundredweight was up 21.1 percent and LCL revenue per shipment was up 17.8 percent compared to a year ago.
Exploding fuel search are charged. LTO revenue per 100 weight was up 12.4% and LTO revenue per cent was up 9.3%.
LTO finers per day in the fourth quarter with down 25.1%. Driven by a 23% decrease in LTO shipment per day, and a 2.8% decrease in LTO weight per
The Quencil LTL sentence per day trend, compared to the prior year, was followed.
October , down 23.9%. November , down 24.8%.
December down 27.1%.
On a preliminary basis, January LTL punish per workday was down approximately 17% compared to last year.
On a sequential basis from December to January , our LTL tonnage per day was up approximately 98% compared to our historical trend of down roughly 1%.
Capital expenditures for the fourth quarter were 51.1 million compared to 54.7 million a year ago.
Total capital expenditures for 2022 were $191.8 million compared to $497.6 million in 2021.
Total liquidity at the end of the fourth quarter is 241.89, compared to 358.8 million at the end of fourth quarter 2021.
As a reminder, in December , we paid the remaining 42.8 million due for the deferral of certain payable taxes under provisions of the CARES Act.
In early January , we paid the remaining $66 million due on the CDA notes that matured at the end of 2022, consistent with the terms of the agreement.
The payoffs of the CDA notes combined with 32 million of net proceeds from the sale of excess facilities used to pay down the term loan have reduced our outstanding debt by nearly 100 million in the fourth quarter through early January .
Much like the extension of our asset-based funding facility in October , we continue to strengthen and simplify our capital structure.
I will now turn the call back over to Darren for some closing comments.
Thank you, Dan. 2022 was another year of tremendous progress at Yellow. When I think about our team's accomplishments, I'm very proud of our employees' dedication and passion to meeting the needs of our customers and executing one of the largest network changes ever implemented by a unionized LTL carrier.
We expect customers, shareholders, and employees to benefit from the execution of this multi-year strategy.
as we head into 2023, which is just a year away from the company's 100-year anniversary.
We couldn't be more excited about the future of this company.
Thanks for your time this afternoon. We would now be happy to answer any questions that you may have.
We will now begin the question and for session.
The first question today comes from Jack Atkins with Stevens. Please go ahead.
Okay, good afternoon. Deer and Dan, thanks for taking my question.
Good afternoon, Jeff. I'm going to have more than one, I promise. So good afternoon. So I guess maybe if we could start, I don't know who wants to take this with January . January , I think we kind of heard pretty consistently for most folks was a little bit better than expected or better than feared.
You're seeing January up better than normal seasonality. Anything that you would attribute that to? Maybe an easy comp versus December ? Just better weather? Just if you could maybe talk a little bit about that, that'd be great.
Certainly, Jack, this is Darren. We were pleased with the direction of January , especially from a pricing standpoint as well as those contractor nules were up 5 to 6 percent and what we saw there was positive from a customer aspect. I felt I was in power of Richard Ack, starts out a really weird way, but right now it's working. I mean, anything went the wrong way and you don't believe the problem was. I happened to have a lot of ??? for it No matter how much money.
I'll talk just a little bit about TONUS trends, as I mentioned in my opening remarks.
LT-AL-10 is per day on a year of year basis. For the fourth quarter it was down 25.1% and that was roughly an 11% sequential decline from Q3 compared to our historical sequential decline of approximately 4%. Specifically November and December sequential declines were...
We're certainly more pronounced than what we would have expected. However, as you could call out, the sequential increase from December to January was up 8%, which was much better than the historical average of a 1% decline. So when I think about the first quarter and the entire, you know, our historical sequential change in LTL times per day from Q-
Okay, that's really helpful commentary. I guess maybe kind of thinking about the...
that the bottom line impact from that, you know, I know that the original plan would have been the performance line supervisor did not County went for it.
normal seasonality, if I'm not mistaken, in the fourth quarter, but obviously the market had a different idea, just given how challenging November , December were. Now that it feels like maybe things have stabilized a bit here in the first quarter.
You're gonna have the benefits maybe of...
One yellow kind of showing up perhaps a bit more. I mean, the kidney maybe help us think Dan about the seasonality of operating ratio versus the fourth quarter.
The SIRJACO, our OR for the fourth quarter was 96.6, which included the $28 million gain on property disposal. So, excluding that, you know, OR would have been right at about 99, which is you call it out, is little worse than we would have expected driven, like I said, by the tonnage . . .
which was a little better than we expected. But then also considering though that we're still incurring some costs.
associated with the execution of phase one and in preparation for phase two.
And now without it expecting really any benefit from phase two during the first quarter, you know, I would expect we would probably be in line with that historical sequential change.
Okay.
Oh, okay, I appreciate that color. And I guess maybe kind of shifting gears and kind of thinking about one yellow for a minute. I mean, if we go back...
to the third quarter call. I think the idea was to be effectively wrapped up with phase two by this point. You maybe kind of walk us through what's maybe...
dragging that process out a bit and you know can it kind of walk well kind of just explain that for a moment to be great
For phase two, we're working through a similar planning process as we did with the successful implementation of phase one, and that's to ensure we have the best execution strategy.
Phase 2 includes approximately 70% of our network and three of our legacy operating companies.
compared to phase one at about 20% of the network and two legacy operating companies.
We're using the lessons learned from Phase 1 to execute this much larger phase. The phase 2 recommended changes. We've been through two maillings on that, the most recent mailing to the local unions and we're in the process of meeting with those unions.
and filled any questions or concerns around the optimization. So we do plan to communicate externally when the implementation date is set, but phase two is still moving forward and with the number of employees, local unions, and also the importance of the number of customers involved.
were certainly being very stable and focused in the way we're approaching phase two.
Okay, okay, that sounds good.
you know i guess you know there in you know it turns the communicating externally
At what point do you think you'll be in a position or maybe communicate to the market?
the impact that the one yellow kind of cumulatively could have on the cost structure or your stability to kind of be more competitive in the broader market. I mean, do you think that's something that this year you guys will feel more comfortable talking about more broadly?
Just any sort of thoughts around that.
Sure. You know, the asset utilization we're already seeing in Phase 1 in the West, the customer convenience of not having the congestion of having two of our brands at their facilities at the same time, already seeing the reduction in pickup and delivery miles driven.
the cost benefit on our dock and of course the pickup and delivery operation along with better customer on time service. All of those things together along with the reduction in debt from freeing up facilities that are just creating redundancy.
Keep in mind, we're not giving up any geography and we're only improving transit times through this process. So, absolutely, we'll be able to lay out the benefits in all of those categories as we do this significantly larger change in the coming weeks.
Okay, maybe one last question for me and I'll hop back in Q, but Dan, can you maybe talk a little bit about...
interest expense this year. You're paying down debt, which is good. You've been able to rework some things on the balance sheet, you know, in terms of, you know, refining a couple things.
But overall, you know, interest rates are rising. How should we be thinking about interest expense on the PNL in 2023? Any kind of way to think about that broadly?
Yeah, so I'm starting an interest expense for the fourth quarter was 45.9 million and was 162.9 million for the full year.
Our current run rate right now is between 180 and 190 million per year of interest expense. Now cash interest.
For Q4 was $24.6 million.
and 127 million for full year 2022 and our current run rate for cash interest is between 135 and 145 million per year.
The interest rates on our term loans of course have a LIBOR component with a floor of 1%.
So naturally like you've called out we are incurring incremental interest expense right now and
interest compared to the prior year and that's reflected in the annual run rate I just provided.
Okay, I'll turn it over but I'll hop back in queue with some maybe some follow-up questions. Thanks again for the time guys.
I'll turn it over, but I'll hop back in queue with maybe some follow-up questions. Thanks again for the time, guys. Thank you, Jack.
The next question comes from Scott Group with Wolf Research. Please go ahead.
Hey, thanks. Afternoon, guys.
Can you give us an update on where you are in the terminal count where you think you'll be end of the year and then any cat-backed skydance case I missed it.
Scott, this is Darren. As of today, we're at 308 when we are complete with phase two. We will be at 200 in mag.
Yeah, I'll jump in and scout on the cat-back of that afternoon.
So we start with 2022, total CAPEX came in at 192 million.
We did have about $14 million of so related detractors that carried over into 2023, just based on timing and deliveries. Those would have been delivered as expected. We would have been within that 210 to 230 million guidance range we provide on the third quarter call.
For 2023, we aren't quite in a position yet where we feel comfortable providing full-year a catastrophic guidance.
Once we get through the completion of Phase II and maybe have somewhat of a clearer picture of the economic environment, we'll have a better line of sight as to what our 23 requirements will be specifically for equipment.
Okay, just taking a step back, obviously last year, a lot of price gave up a lot of volume. What's the plan this year? Are we hoping to regain volume? Are we...
Can we keep pushing price? Do we have to give up a little price to get some volume back? What do we have to go in the market?
This is Darren and we continue to prioritize yield. As I said in the script, we're finding the yield equation across LTL to be strong and certainly to cover the cost and the inflationary cost, we'll continue to prioritize that.
The One Yellow efforts are truly about a growth story. We've got capacity in this network. As we eliminate the redundancies in phase two, we'll be poised and ready when the demand cycle changes. You know, when I think about...
What's going on in America right now with the infrastructure investments, the number of the 600,000 jobs that are going to be involved in that, being direct competition for driving jobs. I think we've got an opportunity to see the man exceed capacity and yellow will certainly be ready for that while also protecting.
our value proposition by holding the land on price. I think, you know, after today, earlier, there's some concerns about the competitive dynamic meeting some guys going after and sharing with national carriers. You seeing anything that that troubles you from a competitive dynamic right now?
Our contract renewals in January , I was pleased with where they landed. We took our general rate increase back in October . I was glad to see other carriers be around that 6% range as that typically sets the pace for the larger contract negotiations.
I'm encouraged with what I'm seeing from the yellow perspective and I haven't seen predatory pricing that has me concerned.
Okay, good. And then just last thing, can you just remind us...
just in this environment, what other covenants we should just be keeping an eye on.
Yeah, the only covenant we have right now is LTM.
$200 million of EBITDA.
And does it stay there? Does it step up at some point?
No, it stays at 200.
Can you feel how we...
I guess.
We'll need to start growing EBITDA from where we are Q4, Q1 run rate to maintain that, but hopefully we can...
It's better and we can start getting back to those run rates.
I think.
Okay, great. Thank you guys. Appreciate the time.
Thank you, Scott.
The next question comes from Jeff Kaufman with Vertical Research Partners. Please go ahead. Thank you very much. Hello everybody. I want to follow up a little bit on Scott's question. You know, down 25% tonnage, that's not a little number.
And it was a lot bigger than the rest of the industry. And I know there's some strategic review and the focus on yield. But can you talk about, you know, not all tonnages the same, you know, what kind of tonnage is falling away more in this number? And, you know, there's been some debate as to whether what we're seeing is...
You know, simply a very large inventory correction or is there something a little more nefarious going on Beneath the hood and you did a loot in your comments to a bit of a slowing environment that you saw Particularly on the manufacturing side so can you kind of address A the bigger picture what you think is really happening
is that mix going to change? Good afternoon Jeff, this is Darren and I'll start with the part of your question about how I see things. I'm bullish on America and I'm bullish on LTL. I think there's incredible opportunity for national carriers.
that it will have capacity available as we see in the coming months the supply chain really starting in America again. So that is an incredible opportunity and the mode around these national LTL carriers, I still see it as strong.
In the meantime, with the tonnage that we no longer move through our networks, we're certainly adjusting our costs to match the tonnage that we are moving. The water line we're currently at is okay with me with the very large Phase II implementation coming up. I think that is an ideal time to make that.
transformation in the eastern part of the United States. As far as the business that's no longer with us, we certainly saw a decline in our retail shipments in Q4, right at the end of Q3 and into Q4. Yellow's business is pretty evenly divided. In the past, we've voted more than a quarter of the world's
But a lot of that that we've adjusted over time.
was in retail and then also on the industrial side as far as the business is no longer with us. If it's not operating and adding to the profitability of this company, we're better off pulling back on purchase transportation and other areas.
and focusing on the business that operates well for yellow. As our value proposition expands with the completion of phase two, I think we're going to be uniquely positioned. So, we don't have to add any terminals, or build any terminals, or lease any terminals. We will have the capacity.
to bring on a tremendous amount of shift my count and through our driving schools we've proven that we can bring the drivers on to handle that increased capacity. So I think we're positioned well and certainly we'll continue to watch the cost line until we're through the other side of phase two implementation.
And then our value proposition will do the work on expanding and growing our business as demanded proves.
All right, that's my question. Thank you very much.
Thank you, Jeff.
The next question comes from Jack Ackin with the first go ahead. Okay, great. I guess maybe two questions. One, just following up on Jeff's kind of question on the demand outlook. I mean, you know, there's a thought that, you know, we're going to see the markets, free markets generally stabilized here, you know, around the second quarter. Okay.
and maybe start to build back a bit in the second half of the year once we get through this D-stock phase. You know, Darren, I just be curious to get your take on that. Is that something you're willing to underwrite or is it just too early to tell?
Hello again, Jack, and absolutely you know that I will typically share what I believe is going to play out. And as I said, I'm bullish on America and I'm bullish on LTL and I think nearshoring, reshoring...
From an industrial standpoint, we're going to have a great awakening in America that's going to be a big benefit to the LTL industry over time. Now certainly the timing of those things...
come into play and more near term, we're going to get our phase two implemented, work through those processes and be prepared for when demand exceeds capacity. And I do want to comment on the infrastructure investments that's going to happen.
is I personally believe that this summer and with 600,000 jobs being added in that capacity good jobs and we know that that construction area is the number one competitor for drivers to the LTL and drug load industry. So I think we're right back in a situation where there will be a shortage of drivers and we'll see capacity challenge.
competitors about fighting ways to you know on their conference called it may be fine ways to collaborate with other unionized carriers in a way to you know reduce costs improve efficiency improve density that sort of thing uh... you know you guys really are leaving no stone unturned in your effort to uh...
to get yellow back on track. What do you think about that? Is that something you guys would be willing to explore? Do you think it makes sense? Just be curious to get your thoughts on it.
yellow umbrella for the last five years. So we're well down the road on a lot of that discussion just right here at home with the companies that we're part of. And where it's been a multi-year transformation for us.
And we're in the final year of that and we're just terribly excited about what's going on at Yellow. I don't really have any input for those competitor comments. But we've had four companies that we're working through and we're proud of where we're landing here.
So there's enough wood to chop it you know with with your own organization before thinking about maybe collaborating with with other unionized carriers. I mean that makes sense I just kind of wanted to get your thoughts on it's been on folks mind. So the moat that's and I think the reason so many people are interested in LTL.
The barriers to entry are so high, which you're aware of and everyone that follows and as part of the industry is aware of. But we just simply got a real estate portfolio that cannot be replicated. And as we're approaching our Centennial anniversary next year, that real estate portfolio and those 30,000 employees we've got back in it.
that we hadn't seen in over 16 years, so it's just exciting time to be at yellow. Okay, that sounds great. Thanks again for the time, guys. Really appreciate it.
You're there.
This concludes our question and answer session. I would like to turn the conference back over to the company for any closing remarks.
Thank you, Operator. And thanks again to everyone for joining us today. Please contact Tony with any additional questions you may have. This concludes our call of Operator. I'm turning the call back to you.
The conference is now concluded. Thank you for attending today's presentation. So thank you for attending.
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Good afternoon and welcome to Yellow Corporation fourth quarter 2022 earnings call.
Our participants will be in a listen only mode.
After today's presentation, there will be a question and answer session.
Please note, this event is being recorded.
I would now like to turn the conference over to Tony Carino, senior vice president of Treasury and investor relations. Please go ahead.
Thank you, operator. Good afternoon, everyone. Welcome to Yellow Corporation's fourth quarter, 2022, Ernie's conference call.
Joining us on the call today are Darren Hawkins, Chief Executive Officer and Dan Olivia, Chieforiginal mistake report.
During this call, we may make some forward-looking statements within the meaning of Federal Securities favor and LugarEE,yr.com.
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 extra results may differ materially.
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 a results differ, please refer to this afternoons. Est blij enitos reform, regulations , roll 43,
and our most recent SEC filings, including our forms 10K and 10Q.
These items are also available on our website at myyellow.com. Additionally, we see today's release where reconciliation and income are lost to a just come.
In conjunction with Taze Runnj release, we issued a presentation which may be referenced during the call.
The presentation was filed in an AK along with the earnings release.
and as available on our website. I will now turn the call over to Derek.
Thanks, Tony, and good afternoon, everyone. Thank you for joining our call.
In Q4, we saw a notable drop in the man for LTL capacity as the economy continued to cool down. With fully stocked inventories, the retail sector had already begun to require less capacity from supply chain prior to Q4. During the quarter, the manufacturing sector also began to slow down.
following several quarters of growth. In response, we kept our focus on meeting our customers needs.
while adjusting our cost structure to help mitigate the near-term headlands. The adjustments including reducing the size of our workforce to align with demand in addition to closely managing the use of purchase transportation. We also benefited from again on the sale of an excess terminal no longer needed as a result of the efficiencies.
from phase one of our network transformation. We use the net proceeds from the sale of eight-hour portion of the term line.
Even in the face of an economic slowdown and declining tonnage, this is one of the most stable LTL pricing environments we have experienced in many years.
We have stayed consistent with our strategy of improving yield on the freight moving through the Yellows network.
to improve profitability and offset inflationary cost pressures. In Q4, year-over-year LTL revenue per 100 weight, including fuel, increased 21.1%. For the month of January , yellow averaged between 5 and 6% on contract negotiations.
Despite the economic slowdown later in the year, the company made significant financial improvement in 2022 and reported its best operating income and operating ratio since 2006.
Turning to Phase 1 of the Network Optimization in the Western U.S.
The real-end and optimized terminal coverage positioned us closer to the customers, which is enabled us to make pickups and deliveries more efficient and tom-wear, both of which are critical to the yellow customer experience.
Concerning the Phase 2 network optimization in the Eastern US, we are following the same contractual process as Phase 1. The Phase 2 recommended changes have been mailed to the local unions, and we are in process of meeting with those unions to fill to any questions.
are concerned around the optimization. We plan to communicate externally when an implementation date is determined. Looking ahead, our priorities in 2023 include continuing to enhance our customer experience with technology investments to provide new transactional capabilities.
and self-service features on our website. We also planned to provide a streamlined suite of service offerings utilizing the speed of our super regional network.
Serving our customers in a first-class fashion will help us grow shipment count and profitably grow our company.
Thank you again for joining us today. I will now turn the call over to Dan, who will share additional details about the quarter.
Thank you, Darren, and a good afternoon everyone. A full year 2022 operating revenue was 5.24 billion compared to 5.12 billion in 2021.
Operating income in 2022 was 197.8 million, which included a 38 million net gain on property makes 2,000 million.
This compares to operating income of 103.6 million in 2021.
Adjusted EBITDA for full year 2022 was 343.1 million compared to 306 million in 2021.
For the fourth quarter of 2022, operating revenue was $1.2 billion compared to $1.31 billion in 2021.
And operating income was 40.3 million, including a net gain on property disposal 28.2 million.
This compares to operating income of 55.8 million in a prior year.
Adjusted EPDOT for the fourth quarter 2022 was $54.6 million compared to $115.5 million in 2021.
The 8.3% decrease in year-over-year operating revenue in the fourth quarter was attributable to lower volume, partially offset by continued strong yield performance and higher fuel surcharge revenue.
including fuel surcharge fourth quarter LCL revenue per 100 weight was up 21.1% and LCL revenue per shipment was up 17.8% compared to a year ago.
Exploding fuel search arge, LTO revenue per 100 weight was up 12.4% and LTO revenue per cent with up 9.3%.
LTO finished per day in the fourth quarter with down 25.1%, driven by a 23% decrease in LTO shipments per day and a 2.8% decrease in LTO weight per ship.
The Quencil LTL sentence per day trends, compared to the prior year, were as follows.
October , down 23.9%. November , down 24.8%.
and December down 27.1%.
On a preliminary basis, January LTL tonnage per workday was down approximately 17% compared to last year.
On a sequential basis from December to January , our LTL tonnage per day was up approximately 8% compared to our historical trend of down roughly 1%.
Capital expenditure is for the fourth quarter for 51.1 million compared to 54.7 million years ago.
Total capital expenditures for 2022 were $191.8 million compared to $497.6 million in 2021.
Total liquidity at the end of the fourth quarter is $241.8 million compared to $358.8 million at the end of fourth quarter 2021.
As a reminder, in December , we pay the remaining 42.8 million due for the deferral of certain payable taxes under provisions of the CARES Act.
In early January , we paid the remaining $66 million due on the CDA notes that matured at the end of 2022, consistent with the terms of the agreement.
The payoff of the CDA notes, combined with $32 million of net proceeds from the sale of excess facilities used to pay down the term loan, have reduced our outstanding debt by nearly $100 million in the fourth quarter through early January .
Much like the extension of our asset-based funding facility in October , we continue to strengthen and simplify our capital structure.
I will now turn the call back over to Darren for supposing comments.
Thank you, Dan. 2022 was another year of tremendous progress at Yellow. When I think about our team's accomplishments, I'm very proud of our employees' dedication and passion to meeting the needs of our customers and executing one of the largest network changes.
ever implemented by a unionized LTL carrier. We expect customers, shareholders, and employees to benefit from the execution of this multi-year strategy. As we head into 2023, which is just a year away from the company's 100-year anniversary.
We couldn't be more excited about the future of this company.
Thanks for your time this afternoon. We would now be happy to answer any questions that you may have.
We will now begin the question and first session.
The first question today comes from Jack Aston with Stevens. Please go ahead.
Okay, good afternoon. Deer and Dan, thanks for taking my question. Question. Good afternoon, Jeff. I'm going to have more than one, I promise. Good afternoon. So I guess maybe if we could start, I don't know who wants to take this with January . January .
I think we kind of heard pretty consistently from most folks was a little bit better than expected or better than feared You know You're seeing January up better than normal seasonality anything that you would attribute that to maybe an easy comp versus December Uh, just you know better weather just if you could maybe talk a little bit about that. That'd be great
Certainly, Jack, this is Darren. We were pleased with the direction of January , especially from a pricing standpoint as well as those contractor nules were up 5 to 6 percent and what we saw there was positive from a customer aspect. I'll also comment.
Now that we've got our entire Salesforce on the Salesforce technology, I'm also encouraged with the pipeline that I'm seeing for Q1. I think there's opportunity for yellow and the value proposition we're bringing to the market. Dan, I'll let you get into any more specifics. Yeah, good afternoon, Jack. I'll talk just a little bit about TONUS trends. As I mentioned in my opening remarks.
LT-AL-T on a year-over basis for the fourth quarter was down 25.1% and that was roughly an 11% sequential decline from Q3 compared to our historical sequential decline of approximately 4% in specifically November and December .
sequential declines were certainly more pronounced than what we would have expected. However, as you just called out, the sequential increase from December to January was up 8% which was much better than the historical average of a 1% decline. So when I think about the first quarter and then
It entirely, you know, our historical sequential change in LTL time is per day from Q4 to Q1 is typically about a 3% decline.
In January after forming that, and of course we don't yet know how weather could impact the remainder of the quarter, but I believe we have a decent chance to outperform that historical 3% of the time.
Okay, no that's really helpful commentary. I guess maybe kind of thinking about the bottom line impact from that, you know, I know that the original plan would have been to perform in line with normal seasonality if I'm not mistaken, you know, in the fourth quarter, but obviously...
of one yellow kind of showing up, perhaps a bit more. I mean, can you maybe help us think, Dan, about the seasonality of operating ratio versus the fourth quarter?
The SIRJECO, our OR for the fourth quarter was 96.6, which included the $28 million gain on property disposal. So excluding that, you know, OR would have been right at about 99, which is what you call it out, is little worse than we would have expected driven, like I said, by the tonnage decline we saw in November to December .
though that we're still incurring some costs.
associated with the execution of phase one and in preparation for phase two. And now without it expecting really any benefit from phase two during the first quarter, I would expect we would probably be in line with that historical sequential change.
Okay, okay, I appreciate that color and I guess maybe kind of shifting gears and kind of thinking about one yellow for a minute. I mean if we go back...
to the third quarter call. I think the idea was to be effectively wrapped up with phase two by this point. Can you maybe walk us through what's maybe...
dragging that process out a bit and you know can it kind of walk well kind of just explain that for a moment it'd be great
Jack, this is Darren. So for Phase 2, we're working through a similar planning process as we did with the successful implementation of Phase 1, and that's to ensure we have the best execution strategy.
Phase two includes approximately 70% of our network and three of our legacy operating companies.
compared to phase one at about 20% of the network and two legacy operating companies.
We are using the lessons learned from Phase 1 to execute this much larger phase. The Phase 2 recommended changes. We have been through two mailings on that, the most recent mailing to the local unions and we are in the process of meeting with those unions and fielding any questions or concerns around the optimization.
So we do plan to communicate externally when the implementation date is set. But Phase 2 is still moving forward and with the number of employees, local unions, and also the importance of the number of customers involved, we're certainly being very stable and focused in the way we're approaching Phase 2.
Okay, okay that that that sounds good. You know, I guess you know Darren, you know in terms of communicating externally.
What point do you think you'll be in a position and maybe communicate to the market?
the impact that the one yellow kind of cumulatively could have on the cost structure or your stability to kind of be more competitive in the broader market. I mean, do you think that's something that this year you guys will feel more comfortable talking about more broadly?
Just any sort of thoughts around that? Sure. The asset utilization we're already seeing in phase one in the West. The customer convenience of not having the congestion, of having two of our brands at their facilities at the same time, already seeing the reduction and pick up and delivery miles driven.
They call SpinaFeed on our dock and of course the pickup and delivery operation along with better customer on-time service. All of those things together along with the reduction in debt from bringing up facilities that are just creating redundancy.
And keep in mind, we're not giving up any geography and we're only improving transit times through this process. So absolutely, we'll be able to lay out the benefits in all of those categories as we do this significantly larger change in the coming weeks.
Okay, maybe one last question for me and I'll hop back in Q, but Dan, can you maybe talk a little bit about...
interesting expense this year you're paying down debt which is good you've been able to rework some things on the balance sheet you know in terms of you know refining a couple things
But overall interest rates are rising. How should we be thinking about interest expense on the PNL in 2023? Any kind of way to think about that broadly? Yes, so I'll start. Interest expense for the fourth quarter was 45.9 million. It was 162.9 million for the full year. Our current run rate right now is between 180 and 190 million.
So naturally like you've called out, we are incurring a criminal interest expense right now and...
cash interest compared to the prior year and that's reflected in the annual run rate I just provided. Okay, I'll turn it over but I'll hop back in queue with some maybe some follow-up questions. Thanks again for the time, guys.
and that's reflected in the annual run rates I just provided. Okay. I'll turn it over, but I'll hop back in queue with maybe some follow-up questions. Thanks again for the time, guys. Thank you, Jack. Give a aggro.
The next question comes from a Scott group with Wolf Research. Please go ahead. The next question comes from a Scott group with Wolf Research. Please go ahead.
Thanks about a little guys.
Can you give us an update on where you are in the terminal count where you think you'll be end of the year and then any cat-x guidance case I missed it.
Scott, this is Darren. As of today, we're at 308 when we are complete with phase two. We will be at 200 in mag.
Yeah, I'll jump in and Scott on the cat-backs of that afternoon. You know, let's start with 2022. Total cat-backs came in at $192 million. We did have about $14 million dollars of so related detractors that carried over into 2023 just based on timing and deliveries. If those would have been delivered as expected, we would have been within that.
210 to 230 million guidance rates we provide on the third quarter call. For 2023, we aren't quite in a position yet where we feel comfortable providing full year CapEx guidance.
Once we get through the completion of Phase II and maybe have somewhat of a clearer picture of the economic environment, we'll have a better line of sight as to what our 23 requirements will be specifically for equipment.
Okay, just taking a step back. Obviously last year a lot of price gave up a lot of volume. What's the plan this year? Are we hoping to regain volume? Are we...
Can we keep pushing price? Do we have to give up a little price to get some volume back? What do we have to go in the market?
Yeah, this is Darren and we continue to prioritize yield. As I said in the script, we're finding the yield equation across LTL to be strong. And certainly to cover the cost and the inflationary cost, we'll continue to prioritize that. The one yellow efforts are truly about a growth.
story. We've got capacity in this network, as we eliminate the redundancies in phase two, will be poised and ready when the demand cycle changes. When I think about what's going on in America right now, with the infrastructure investments, the number of the 600,000 jobs that are going to be involved in.
by holding the Lano price.
I think, you know, after today, earlier, there's some concerns about the competitive dynamic, maybe some guys going after share with national carriers. You seeing anything that troubles you from a competitive dynamic right now?
Our contract renewals in January , I was pleased with where they landed. We took our general rate and increased back in October . I was glad to see other carriers be around that 6% range. Is that typically sets the pace for the larger contract negotiations?
I'm encouraged with what I'm seeing from the yellow perspective and I haven't seen predatory pricing that has made concern. Good. And then just last thing, can you just remind us just in this environment, what are the covenants we should just keep in line?
Yeah, the only covenant we have right now is LPM $200 million of EBITDA. And does it stay there? Does it step up at some point?
Yeah, the only covenant we have right now Scott is LTM 200 million dollars of EBITDA. And does it stay there? Does it step up at some point? No, it stays at 200.
And you feel how we, I guess, I guess,
we'll need to start growing EBITDA from where we are Q4, Q1 run rate to maintain that. Hopefully we can... Hello, K Kn big future revealedram determine.
It's better and we can start getting back to those run rates.
we can start getting back to those run rates.
Okay, great. Thank you guys. Appreciate the time.
Great. Thank you guys. Appreciate the time. Thank you, Scott.
The next question comes from Jeff Kaufman with Vertical Research Partner. Please go ahead. Thank you very much. Hello, everybody. I want to follow up a little bit on Scott's question. You know, down 25% tonnage, that's not a little number. And it was a lot bigger than the rest of the industry. And I know there's some strategic review.
more nefarious going on beneath the hood and you did a loot in your comments to a bit of a slowing environment that you saw, particularly on the manufacturing side. So can you kind of address a, the bigger picture what you think is really happening is 80% of what we're seeing just the timing issue on.
inventory that'll come back, and then kind of talk about the tonnage that is in your down 25. You know, is there a difference in the tonnage that's down more than the others, and when tonnage starts to come back, how is that mix going to change?
Good afternoon, Jeff. This is Darren. I'll start with the part of your question about how I see things.
I'm bullish on America and I'm bullish on LTL. I think there's incredible opportunity for national carriers that will have capacity available. As we see in the coming months, the supply chain really starting in America again. So that is an incredible opportunity.
and the mode around these national LTL carriers, I still see it as strong in the meantime with the tonnage that we no longer move through our networks. We're certainly adjusting our costs to match the tonnage that we are moving. The waterline we're currently at is okay with me with the very large phase two implementation.
Delos business is pretty evenly divided. In the past, we've coded more of a 6040 range. It would actually be closer to 5050 on retail and industrial. The retail customers tend to be very large shippers, and there's portions of that business that do very well in our network and operate well for us.
But a lot of that that we've adjusted over time was in retail and then also on the industrial side as far as the business is no longer with us. If it's not operating and adding to the possibility of this company.
We're better off pulling back on purchase transportation and other areas and focusing on the business that operates well for yellow. As our value proposition expands with the completion of phase two, I think we're going to be uniquely positions where we don't have to add any terminals, or build any terminals, or lease any terminals. We will have the capacity to bring on a tremendous amount of shipment counts.
All right, that's my question. Thank you very much.
Thank you, Jeff. The next question comes from Jack Ackin with... Here, go ahead. Okay, great. I guess maybe two questions. One, just following up on Jeff's kind of question on the demand outlook. I mean, you know, there's a thought that, you know, we're going to see the markets, free markets generally, stabilized here, you know, around the second quarter.
and maybe start to build back a bit in the second half of the year once we get through this You know, Darren, I just be curious to get your take on that. Is that something you're willing to underwrite or is it just too early to tell? Hello again, Jack. And absolutely, you know that I will typically...
share what I believe is going to play out. And as I said, I'm bullish on America and I'm bullish on LTL and I think you're short and reshoring from an industrial standpoint. We're going to have a great awakening in America that's going to be a big benefit to the LTL industry over time. Now,
And I do want to comment on the infrastructure investments that's going to happen. Is I personally believe that this summer and with 600,000 jobs being added in Mexico has the good jobs. We know that that construction area is the number one competitor for drivers to the LTL and drug load industry.
So I think we're right back in a situation where there will be a shortage of drivers and we'll see capacity challenged and that's an opportunity that we'll be watching for a yellow. Okay, okay, that's great and I think we're all kind of pulling for that same build back in the second half. Well, last question for me and I'll let you guys go but...
There was discussion earlier this week with one of your unionized competitors about finding ways to, you know, on their conference call, maybe find ways to collaborate with other unionized carriers in a way to reduce costs, improve efficiency, improve density, that sort of thing. You guys really are leaving no stone unturned.
of Reliff for the last five years. So we're well down the road on a lot of that discussion just right here at home with the companies that we're part of. And we're, it's been a multi-year transformation for us and we're in the final year of that and we're just terribly excited about what's going on at Yellow.
we're thinking about maybe collaborating with other unionized carriers. I mean, that makes sense. I just kind of wanted to get your thoughts on it. It's been on folks' minds. The mode that's in that thing, the reason so many people are interested in LTL, but there's the entry or so have, which you're aware of, and everyone that follows and is part of the industry is aware of.
But we've just simply got a real estate portfolio that cannot be replicated. And as we're approaching our Centennial anniversary next year, that real estate portfolio, and then those 30,000 employees, we've got back in it up. We've got tremendous opportunity right here in front of us at Yellow, and that's what we're holding close to.
Okay, that sounds great. Thanks again for the time, guys. Really appreciate it.
You bet. This concludes our question and answer session. I would like to turn the conference back over to the company for any closing remarks. Thank you, operator, and thanks again to everyone for joining us today. Please contact Tony with any additional questions that you may have.
This concludes our call and operator turning the call back to you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.