Yellow Corporation

Stephanie D. Fisher - Vice President and Controller James L.

Welch - Chief Executive Officer and Director James G. Pierson - Chief Financial Officer and Executive Vice President Jeffery A.

Rogers - President

Scott H. Group - Wolfe Trahan & Co.

Jack Waldo - Stephens Inc., Research Division Thomas S. Albrecht - BB&T Capital Markets, Research Division David G.

Ross - Stifel, Nicolaus & Co., Inc., Research Division Justin B. Yagerman - Deutsche Bank AG, Research Division Christopher J.

Ceraso - Crédit Suisse AG, Research Division

Good morning. Thank you for joining us for the YRC Worldwide Third Quarter 2012 Earnings Call.

James Welch, Chief Executive Officer of YRC Worldwide; Jamie Pierson, our CFO; and Jeff Rogers, President of YRC Freight, will provide comments this morning. James, Jamie, and Jeff will be available for questions following our comments.

Now, for our disclaimers. During this call, we may make some forward-looking statements within the meaning of federal securities law.

These forward-looking statements and all other statements that might be made on this call which are not historical facts are subject to uncertainty and a number of risks, and thus, actual results may differ materially. This includes statements regarding the company's expectations, assumptions of future events and intentions on strategies regarding the future.

The format of this call does not allow us to fully discuss all of these risk factors. For a full discussion of the risk factors that could cause the results to differ, please refer to this morning's earnings release and our most recent SEC filings, including our Forms 10-K and 10-Q.

Additionally, please see today's release for a reconciliation of our GAAP measures to non-GAAP measures, such as our reconciliation of operating income and loss to adjusted operating income and loss and adjusted EBITDA, and the reconciliation of adjusted EBITDA to net cash flow from operating activities and adjusted free cash flow deficit. During this call, we may refer to the non-GAAP measure of adjusted EBITDA simply as EBITDA.

I'll now turn the call over to James for some introductory comments, after which time, Jamie will walk you through the third quarter results.

Thanks, Stephanie, and good morning, everyone. First, I'd like to highlight the continued dedication and efforts of all the employees of YRC Worldwide who have been working hard at each one of our operating companies to provide the service that our customers have come to demand from us.

And equally as important, continue to march in restoring this company as one of the leading providers of LTL services in North America. With this call today, I am pleased to say that we will be resuming our quarterly earnings calls, and are excited to share with you not only what we have accomplished in the last 12 months since our last call, but also, results of the actions we have since implemented.

Given the state of the economy, one could certainly question the timing of coming back online with these calls, but we're confident, as the new management team, that we have stripped away many of the distractions that we inherited when we took over. We're focusing on North American LTL market, providing a market competitive service and value proposition and executing on our internal sales and operating objectives.

As everyone is aware and remembers, in July of 2011, we completed a difficult but necessary financial restructuring that allowed the company to seat an absolutely world-class board, replace the previous management team and significantly increase liquidity and financial flexibility by pushing out the maturities of most of our major debt obligations. It required an unprecedented level of cooperation from our employees, lenders, the international brotherhood of Teamsters, pension funds and shareholders.

That level of cooperation, I am proud to say, has not only continued, but improved since the current management team took over. Before Jamie reviews with you our financial results in a few minutes, I first want to say how pleased I am with the improved performance at our regional transportation group.

Holland, New Penn and Reddaway are excellent companies, and have quickly proved that they can compete very effectively in the market space they serve. And at YRC Freight, while I'm encouraged by the improving results, I am far from being satisfied.

As most of you know, company integrations in this industry have been, at best, difficult. We inherited a poorly and partially integrated company, and we still have a lot of work to do in order to restore operating performance to a level with which we are satisfied.

Jeff will discuss YRC Freight in a bit, but I can absolutely assure you that we will continue to change the company in several different ways to improve our operating ratio. As many of you know, I spent 29 years with this company prior to leaving in 2007.

And being in this industry for that long, one learns the importance of timing and sequence in order to create the right balance and flow. This not only applies to operations but to our turnaround as well.

To that end, many of you have heard us speak about the concept of the flywheel and momentum at our company, and we've worked diligently to get our momentum spinning in the right direction. Winning the hearts and minds of our employees was one of the first things we had to accomplish after our team came on board.

Without committed employees, there was no chance to reverse the negative momentum occurring when we arrived. Changing the strategy, direction, trajectory, culture and morale of a $5 billion company with over 32,000 employees requires a lot of intestinal fortitude, mental discipline and a little patience.

The mindset is more of one of a marathon runner, not a sprinter. However, we have balanced this with the need for quick, swift action where warranted.

And when you look at what we have accomplished over the last 12 months, we have proven that we're capable of making difficult decisions on a timely basis, and that we have an unwavering commitment to our mission. We have exercised a tremendous amount of restraint and discipline as we reenergized the core of this company and put it back on the path of regaining our market leadership position.

I believe we have made a lot of progress over the last 12 months, some of which made its way to the trade press, some of which did not. So I would like to take this opportunity to outline some of the more meaningful achievements.

We immediately established a focused strategy on North American LTL operations, which included getting back to our roots, bringing in the ranks and investing in our core business, not trying to be all things to all people or spending money and resources in China or some other non-core business adventure or venture, as we call it around here. We sold the assets of Glen Moore and China-based Jiayu.

We also sold some excess properties that had not been used and were never going to be used and fenced in those results to help settle work comp claims, made good use of those resources. And all done to keep our focus on regaining strength in our operating companies.

We pushed the day-to-day decision-making responsibility back down to the operating companies, as they have a much better pulse on the markets and customers that they serve than we do at the corporate office. The company presidents were asking for more authority, and this empowerment definitely helped to reenergize the employee base at each of our operating companies.

However, with the authority to make decisions and the autonomy to manage their respective businesses comes the responsibility to deliver results. To that end, we largely dismantled the YRCW holding company and transferred approximately 1,600 of the 2,000 corporate employees down into the 4 operating companies, and challenged the presidents to justify their value or exit them from the business if needed to improve the respective margins.

We also exited many extraneous C-suite executives and rebuilt the leadership team of the company to be less bureaucratic, allowing for decisions to be made faster by those closest to the action. We made the difficult decision to close the former Roadway headquarters in Akron, Ohio and either exited or moved a substantial number of employees to our headquarters here in Overland Park.

Now, we have 1 headquarters with one culture, one vision and one mission under 1 roof. We increased safety by decreasing the number of lost-time injuries, and over a year-over-year basis across the operating companies, while decreasing the number of work comp claims, we have significantly increased the number of claims settled, which has had, and we anticipate will continue to have, a positive impact on our results, as there are fewer and fewer claims.

Further, since we are resolving them faster, the claims are not allowed to develop as much as they have in the past. Based on those achievements, we reported the highest operating income and EBITDA for the company in the last 4 years, excluding second quarter of 2010, which included an $83 million noncash reduction in equity-based compensation expense.

For those of you who know me, you know credibility is very important to me, and I can assure you it's important to our management team. An accomplishment that I am personally proud of is the fact that over the last 12 months, we have built a track record of not only meeting or exceeding the goals of our financial plan, but also delivering on the qualitative commitments we have made to our various stakeholders.

And while we remain focused on our turnaround with achievement of positive operating income for each of the last 2 quarters, I believe we have eliminated most of the remnants of a prior broken strategy that could distract us from doing what we do best, moving from a marketing and brand-driven focus to a sales and operations-driven organization. Today and for the foreseeable future, we will be equally focused on operational execution and reinvesting in both new technologies and our people to drive increasingly better results.

Before I turn it over to Jamie for a review of our third quarter, I'd like to touch on Hurricane Sandy and our operations in the Northeast. While Holland and Reddaway are largely unaffected, YRC Freight and New Penn are part of the recovery efforts.

The storm has led to significant supply chain disruptions. However, we have a network team working around-the-clock to make sure we are positioned to support the recovery efforts.

As many of you know, our team consists of long-tenured freight professionals. Many are veterans of early hurricane relief efforts, and they certainly were able to hit the ground running.

Our regional distribution centers in the Northeast are fully operational, and we are experiencing heavy inbound freight volumes at some of those locations. The situation within the line terminals in the region varies, as some are fully operational and others are beginning to come back online.

Some of our facilities directly in the storm's path did sustain damage. However, we were able to work around these locations as our network engineers have devised new operational plans.

Manpower issues in the region exist but were not a major issue. For sure, this will be a long-term recovery effort for the region, and our team will rise to the challenge.

Our thoughts and prayers are with those in the areas of destruction. We will be here to do what we do best, and that is connecting our customers with people who need our products to recover and rebuild.

With that, I'll turn the call over to Jamie to cover what was yet another good year-over-year and sequentially comparative quarter.

Thanks, James, and good morning, everyone. Our performance continued to improve year-over-year, especially when you compare the most recent softness in the economy.

The good news is, for the second consecutive quarter, we reported positive consolidated operating income. And for the first time in 4 years, we reported positive operating income at each of our operating segments, excluding the second quarter of 2010 which included an $83 million noncash reduction in equity-based compensation expense.

Our operating improvements are a result of pricing discipline, customer mix management and productivity improvements across all of our business lines. As for the stats, regional tonnage per day was up 0.3% as compared to the prior year.

YRC Freight's tonnage per day was down 4.6% year-over-year. The regional carriers revenue per shipment grew at 3.6% in 3Q '12 versus 3Q '11, which included an increase of 2.9% in revenue per hundredweight, an increase in 0.7% in weight per shipment.

YRC Freight increased its revenue per shipment by 3.2% and its revenue by hundredweight by 3.4%, its weight per shipment actually decreased by 0.2% year-over-year. Moving onto our earnings.

Our regional carriers reported operating income of $27.2 million, an increase of 119% and an operating ratio of 93.5%, which represents a 340 basis point improvement over 3Q '11. Additionally, the reported adjusted EBITDA of $44.4 million, which is an increase of 27% from the third quarter of '11.

For the 9 months of 2012, the regional carriers improved their operating ratio by 270 basis points to 95.1% and improved their adjusted EBITDA to $114.2 million, an increase of 45% over the comparable prior-year period. While the regional carriers are making better progress in YRC Freight, we believe that there is still room for continued improvement in their profitability.

As for YRC Freight, they've reported operating income of $2.8 million and operating ratio of 99.7%, which represents an improvement of 230 basis points versus 3Q '11. Additionally, YRC Freight reported adjusted EBITDA of $37.2 million, an increase of 134% over the third quarter of 2011.

For the 9 months of 2012, YRC Freight's operating loss improved by $3.4 million when compared to 2011. Customer mix management, pricing improvement and cost actions all contributed to this positive operating performance trend.

Adjusted EBITDA for the 9 months ended September 30, 2012 was $55.5 million, which is an increase of 75% over the same period in 2011. Again, we are pleased with the progress, but we are far from being satisfied with these results.

Turning to cash flows and liquidity. We ended the third quarter with balance sheet cash and ABL availability of $238 million, which is only $11 million lower than the last quarter.

Our ability to sustain liquidity at these levels is due to our continued operational improvement and active management of our balance sheet and working capital. It is important to note that the borrowing base in our $400 million ABL was $376 million at September 30.

Which means if we are able to grow our revenues, we'll have incremental availability under the ABL and we'll be able to tap into that liquidity to support our working capital needs. Again, while we're pleased with our improved performance, the next several quarters will most likely prove to be challenging.

Especially in line of Hurricane Sandy and the hit to the northeast, the current economic softness and the pending seasonally slow shipping season. Now I will turn it over to Jeff Rogers to talk about YRC Freight.

Thanks, Jamie. Year 1 of our turnaround has been focused on getting YRC Freight back to the fundamentals of the business.

As James indicated, the integration of this company had many challenges and we are making progress. Going forward, our focus will be on how the company executes and delivers better financial results.

We have worked extremely hard in the areas of safety, service and cargo claims. And I'm pleased to say YRC Freight has made excellent progress in these important pieces of our business.

James mentioned earlier about the immediate need we had to win back the hearts and minds of our employees. I can confidently say that we would not have achieved these improved results in the previously mentioned areas without our employees stepping up to the plate.

Now I'd like to share some things YRC Freight has been working over the past year. In conjunction with redefining the culture at what was once known as our national subsidiary, we rebranded YRC to YRC Freight to signify a return to our roots and an acknowledgment that freight is not a dirty word.

It is what we do and what we do best. We implemented the change of operations, which has allowed us to decrease our state of transit times in certain lanes and to direct load more shipments, resulting in less touches, lower claims and stable or improved operating efficiencies.

We realigned our sales team to allow us to focus on growing business that fits with what we do best and improves our profitability. We implemented a new costing model that allows us to understand our cost and price on a much more granular, lane and customer-specific basis than ever before.

We increased on-standard service by 15 to 20 percentage points while decreasing the standard transit times in almost half of our lanes and have held service very consistent while doing so. We have worked diligently to improve our mix of business.

There is absolutely no doubt that when we took over, YRC Freight was handling some business that was outside of our core competencies. This mix change, among other factors, led to a decline in tonnage during the third quarter.

Changing mix is hard work. We have made a lot of progress, and we are now positioned to grow the right type of business.

We have made a conscious effort to return to our roots at YRC Freight and focus on what we do best, which is long-haul expedited North American LTL. Our intention is to continue improving so that we can regain our position of leadership in this industry.

Lastly, our network is still not where we want or need it to be. There is no doubt the 2009 integration left us with a network that was not right-sized or set up for efficiencies in the areas of terminal density, lane density, ability to direct load with minimal handling, nor did it provide the service capabilities we now have.

We have a clear vision of what we want YRC Freight to look like and how we want it to operate going forward. With these comments, James, Jamie and I are ready to take your questions.

So a couple of things here. First, just in -- can you give us, Jim, what's going on -- the share count increased materially in the quarter.

What happened there and how do we think about that going forward?

What I'd say, Scott, is this is really more of an accounting nuance than anything else. As opposed to getting bogged down into the increase in diluted shares, is that what you're referring to, why don't you just give us a call and we'll take that offline?

Because it really has, more than anything else, the fact that we had positive EPS and we had to throw some interest in there, and conversion of our prior notes.

Got you. Okay, perfect.

So in terms of CapEx. So you've got -- you've spent kind of basically 0 on that CapEx year-to-date.

What's your view of maintenance CapEx for the company? And maybe give us some thoughts on how old the tractor and trailer fleets are?

And when do you think you need to start spending capital again?

Yes. I don't look at it in terms of net CapEx, Scott.

Candidly, I mean, we were fortunate enough to be able to have some excess assets to sell. Look at it more on a gross basis and our reinvestment back into the business.

I understand where you're going that in terms of where we are today and where we'll going to be in the next couple of years, we do not give guidance on CapEx. The only think I would say is that we'll be getting back into a much more normal cadence of that CapEx maybe in the next couple of years.

So I mean, I guess that's where we should count. We can break it down and put it into gross and net proceeds.

So the gross is I think $48 million, $49 million year-to-date. What's your view of maintenance CapEx for the company?

Yes, Scott, we don't give guidance on CapEx.

Okay. And then maybe on the proceeds, though.

How much more is there to sell? And is there anything in terms of covenants of what you keep versus what you give to the banks?

Where do we stand there?

Yes, I wouldn't say that we have a lot more to sell covenant ability, but we actually did the excess real estate auction early this year. We continued to close on some of those properties but we haven't received all of the proceeds to date.

So I think we'll still have some incremental in there. But it won't be the same magnitude that we've had year-to-date.

Is the China sale in the numbers yet or will that show up in the fourth quarter?

We believe that'll show up in the fourth quarter.

Is that a big number or pretty small?

No, it's not meaningful, Scott.

Okay. And then, can you give us an update on where you stand on your EBITDA covenants and where those go from here?

Sure. If you look in the back of the 10-Q -- actually, it's probably in the middle of the 10-Q, it actually shows the step-up.

And relative to the $165 million that we were -- at least that was the covenant was this quarter, obviously we've got about a $50 million cushion over that right now.

Oaky. So when I look at the breakout on freight for national and regional -- so regional, I can't help but note, 93.5% OR would be the second best OR of any LTL, public LTL out there this quarter.

Correct.

Is there a way -- I mean, is there any way to separate these 2 businesses and then spin off regional and figure out somehow to keep all the pension liabilities with the freight? Is that possible?

Our goal is to see YRC Freight regain momentum at this operating ratio and keep the regionals and leverage what we're doing as a corporation and move forward. So that's our intent today.

Scott, sorry to cut you off. We need to move on and give these other guys a chance as well.

I had 2 questions. My first one, I know that one of your big focuses has been on improving service levels to places where you think they need to be.

I was just wondering how you're progressing there. Are you satisfied with where service is now?

And how comparable do you think where you are now is to the overall market? And how much improvement have you made?

This is James, I'll make a couple of comments and let Jeff jump in there. But yes, we made a lot of progress with our service improvement at YRC Freight.

With this change of operations in April, we were able to kick our expedited effort back into high gear and are pleased with the progress we're making there. So as Jeff said in his comments, we're not where we want to be with our service from a network standpoint, but we have made gigantic strides.

And I think we match up pretty well, certainly towards the end of the week, I think we're very, very competitive. But we still have work to do.

Jeff, you want to make some other comments there?

Sure, James. I would say that we're extremely competitive in the areas where we compete well.

And what our strengths are, and that's what we've really been focused on, trying to get our network and, James mentioned, expedited which I think we match up very, very well with. And we're really just trying to get our network to fit, and our service capabilities to match what we're best at.

So I would say we absolutely are competitive.

Got you. And then my last question is one a little bit more longer-term.

Where do you envision your national and regional units going over time? Are their paths going to be similar as it pertains to growth or profit...

Hey, Jack, we're having difficulty hearing you, can you speak a little closer to the mic?

My last question was a little bit longer-term. Where do you envision YRC national and regional going over time?

Are their paths going to be similar or different? And on that, is the operating strategy and game plan for each unit different as it pertains to growth or profitability or size or anything of that nature?

Well, we like the regional business. We like what the regional carriers are doing.

New Penn, Holland and Reddaway, as I said earlier, excellent companies. We think that they are well-positioned in their particular markets to compete very competitively, very effectively.

By certainly looking at the third quarter, we think that piece proves out. YRC Freight, we still have a long ways to go.

I can't emphasize enough to the folks on the phone that what we inherited was certainly not what either the old Yellow or the old Roadway companies looked like. It was kind of a discombobulated mess in a lot of ways, and Jeff and his team have worked diligently.

And we think we are absolutely on the cusps of making some good strides and good improvements in the business. And ultimately, what we want to see is the regionals doing what they do and YRC Freight competing much more effectively in the market in which it competes.

And that's what we're tirelessly working towards. Jeff, you got anything else you want to add there?

Yes, the only comment I would say is, we're really going to leverage the assets and do what they do best. The regionals are great regional carriers.

And we're going to get YRC Freight back to being the best long-haul carrier and then utilizing those assets well.

Jeff, this may be a question more towards you. But as I think about YRC Freight, so you're 99%-and-change now in the OR.

Probably in the next year, maintenance cost probably are not going to be a big source of how the OR gets better. But how are you doing on things like P&D stops per hour and P&D bills per stop, things like that?

Where are you? What's a number on those 2 metrics that you think gets you maybe towards a 95% OR?

Well, I would say, Tom, is that we definitely stabilized a lot of those. We've invested a ton in improving our service, and with that comes some pressure on some of those metrics.

But I think we've stabilized it. We've definitely got room to grow -- get better in our productivities.

And that's part of why we've changed things up, and part of why we brought Maynard in to really take a focused approach at what we're doing from an operations perspective. So I think our improvements are going to come from a lot of different things, whether it be just the continued discipline on pricing as well as operational efficiencies as well.

What's like a good number for those? Even if you don't want to reveal where you are today, P&D stops per hour and P&D bills per hour, what would be kind of the gold standard that you'd like to push your organization towards?

I'm just going to leave that at we're going to get better.

Okay. And then, in terms of line haul miles, since you made the operational changes, can you give us a sense of maybe how many miles you've taken out of the system, whether it be line haul only or maybe cumulative miles?

I can't give you real specifics on the percent of miles. I mean, we've got that data -- there's no question part of the previous change of ops we did in April took out miles.

But it was really focused on providing a network that enables us to get better from a service perspective, as well. But we've definitely taken miles out and we've got room to take more miles out, so there will be a reduction of overall line haul miles going forward.

Tom, what I'd say is looking at it, you can actually see where we took expenses out. We actually break it out into 3 major categories.

So and you look at where -- we spend the majority of our cash which is -- web, OpEx and PT, we break down the dollar amounts in there, so you can see how much back statement we took out.

Yes, I've got it open here, but haven't gone through everything yet. So, okay, I'll look at that a little bit more.

Looks to be like the customer mix management is finally taking hold. Very happy to see the yields are popping up a little bit in the quarter.

Maybe at the expense of some volume? Is that what you would attribute most of the tonnage declines to?

And YRC Freight would be just more of forced tonnage decline?

I think that's a good observation. And I'd like to stress -- you really can't imagine some of the types of freight that we were handling when we first got back, and Jeff set out a course of action to certainly try to get that straightened up.

But that takes a lot of time and effort and energy and focus and I think that's starting to pay off. I do think that YRC Freight was kind of caught in a little bit of a Catch-22 because they, in February, some of those started working on exiting bad business, and the economy for some parts of the country started slowing down a little bit in April or May.

So they kind of got caught in a gap there. But I think they've done a nice job.

But still a lot of work left to do. There was no doubt after the financial news and the momentum that was against the company in '08 and '09, that this company ended up handling a lot of business that some of our competition didn't want to handle.

And to work through that mix management exiting business, while trying to get better business at the same time is no easy task. But, I'll let Jeff jump in on that.

Yes, not just say that it’s a big chunk of what our volume decline was year-over-year. Not all of it, but it definitely had a big impact on that.

And that it's what the strategy was, we've talked about that before. That's what we were going and trying to do and it is definitely taking hold.

And have you had any of those customers come back to you? A lot of times, we see carriers take a firm stance on pricing, customer leaves, goes elsewhere, is unsatisfied with the new carrier they are using and comes back at a higher price?

Yes, absolutely. And keep in mind, typically in mixed management, we're looking at locations.

Not necessarily to eliminate that entire customer's portfolio. And in a lot of cases, we still have business with that customer, it's just in different location in what fits better for us from a profitability perspective.

So we've absolutely got business back and still have business with some of the customers that we've mix managed.

And plus they've done a really good job for the customer-specific negotiating increases. We tracked that on a very detailed basis, and the sales team has rallied and has gotten better and we've been able to negotiate some good price increases at customers where we needed it.

So...

And so is PCG really where you want it at Freight? And has it also been implemented in the regional side for pricing?

PCG has been with a couple of regional companies for quite some time. We just implement it earlier this year.

So with any costing model, there's a lot of work that you do to constantly refine it and make sure that it's giving you really, really good information and make sure that we're putting really, really good information into it. So I like what I see, but we still have work to do.

That's good. And with the tonnage decline in national right now and getting into a softer period in the fourth quarter, first quarter, how is the network setup in terms of infrastructure and capacity?

Is there more to come out in terms of terminal network infrastructure? Or do you kind of think that you're at where you want to be from a service level standpoint and service center standpoint?

No, as I've said, we're sure not where we want to be. We can always get better.

And obviously, our results have to get better. So I think the network and capacity and all that plays into it going forward.

So we're going to continue to look at where we need to improve.

And then Jamie, if could you just talk real quick about the decline in other operating expenses? Because the OpEx -- you mentioned a bunch of improvements you guys made on the cost side, but I guess I just want to focus more on what's in that other operating expenses line that had a pretty decent decline in percent of revenue?

Hey, Dave, can we get back to you on that particular piece?

Yeah, no problems. Do you have length of haul year-over-year YRC Freight?

We don't disclose that, David.

I wanted to chat on regional for a second here. Obviously, strong results, better than even one of your non-union competitors out there.

How are you feeling about market share in that regional market right now? I mean, it looks like you guys are taking some, how are you thinking about the price versus market-positioning proposition for that company right now?

I mean, I would assume you're pretty pleased with the progress, but just curious about the go-forward strategy there?

Sure, this is James, Justin. First of all, the operating ratio was better than anyone except I think one competitor on at least the industry peers that we look at.

So we're very proud of the regionals. I think they're all 3 positioned very well, they're all 3 in different geographical areas, they all provide overnight and second day service, other than New Penn, who basically delivers everything next day.

So I like the way they're positioned from a network standpoint. I like the way the network's run.

They have worked really, really hard on selling that service proposition. They're all 3 very respected, the carriers in their niches.

But no doubt, it's a very competitive market space as well, and so they're having to battle hard to make these results. But I like the way that they're positioned for the future.

I don't see us tweaking...

Is it the big guys or the small guys that you guys are taking market share from right now? I mean, in those regions?

That's hard to say. We battled every one, no matter if it's big or small.

But I think we match up well with everyone from a service standpoint, no doubt about it. These 3 companies know how to give service.

Yes. And on the national side, on the freight side, rather.

You talked about the revenue base, which you've been actively calling and making sure that you're getting the right type of freight in there. Where are we in that process?

I don't know if I heard you guys say. Is that an ongoing thing that we're going to continue to see for the next several quarters?

Or is that something that now we stabilized then you feel like you've got the right base to start growing off of again?

This is Jeff. I would say we definitely have the right base to start growing from.

The key has been when I touched -- we've refocused the sales force, reorganized to really get after what we do best and get them focused to grow. I think -- and I'm not going to call it mix management, but I'll call it disciplined yield and making sure -- disciplined pricing -- to making sure that we're bringing on a business that's conducive to what we want to do.

So that's can be an ongoing process. It's just a normal course of business in my mind, how I want to run this company.

But I don't think you'll see as aggressive mix management going forward. Because I think we've done a lot of that work already, and now it's just about really growing the right type of business.

Okay. That's fair.

And then, I guess the last question, then I'll turn it over to someone else. Heard a lot in the LTL, and in the transportation space generally, about systems and systems management, and investment and how that's played improved asset efficiency for a lot of companies.

I'm sure that's something you guys have taken a hard look at and have used over the course of this improvement, where do you see YRC right now from a systems standpoint? What upgrades are you going to be making over the next 12 months?

Or what upgrades have you made, and how much you think all of that costs?

Well, as you might suspect, this company got -- well behind, way behind, on the technology investments in the period of the years 2008, '09, '10, even last year. And we have certainly started to invest in those areas.

I don't want to particularly give a number on what that's going to be. But the technology at the regional companies is in better shape than it is at YRC Freight.

A part of that integration issue that we've had to deal with is just how the 2 companies were put together and what came out of all that. And the technology is lacking, no doubt about it.

But that's what is so encouraging about our story, is that we're kind of brute-forcing our way down the operating ratio chain just by being better at what we do from a cost perspective and adjusting the network and getting better in sales and reorganizing the sales effort. But we definitely have got to get more enabled by better technology and we're currently working on that.

I think you'll see over the next couple of years some fairly substantial changes in the technology side. But I don't want to get into how much it cost.

Yes. And are you using the handhelds and the racking systems that we hear from so many other companies, either having been used for a while now or being more fully implemented?

Well, keep in mind, we've had handhelds for our P&D drivers for quite a while. And we're getting ready to move forward with some new ones going into this next year that will give us some additional capabilities.

And part of the advantage of not investing in technology for many years is we're at a place now where there's some very good technology that will help us from an operations perspective that's very reasonable and really fits. There is some advantage to not investing for many years, and that's kind of where we're at.

And everything has a bleeding edge, yes.

That's right. We've got some things that we can do going forward that really make a lot of sense for us.

And those new handhelds are probably rolling out about 10,000 next year, the drivers.

And how much are your freights being re-weighed these days?

To be honest with you, our goal is to re-weigh everything, every shipment. So I would say that percentage is very, very high.

We're not getting 100%, but it's pretty doggone high.

Can you give us a sense on what October tonnage was?

Yes, we don't comment or quote anything on a inter-quarter basis, Scott. We're only doing it quarter-to-quarter.

Okay. And then just maybe, I don't know if you're comfortable talking about this.

I think I heard you mention that you're towards the end of calling out some of the lower margin stuff that was hurt in the mix. When you think about next year, do you think -- is the goal to grow tonnage or you think it's more to keep it flat?

And what kind of pricing do you think about targeting next year?

Well, certainly, our goal is to grow but grow in the right manner with the right kind of freight. So it's going to continue to be a balanced approach, but it's very important to us that we do the things necessary to set the companies up to continue to grow.

So that's definitely a big piece of what we're trying to do. But we need to do it in the right way.

Yes, exactly. I'll jump right in.

So in that case, we're not going to chase the market share, Scott. We're going to chase profitability, and we're going to chase cash flow and we're going to chase the ones that actually fit into our network.

And you feel comfortable that you've got the service to get both tonnage and pricing right now?

I do. Certainly, the service at the regional companies is just outstanding.

And as we've commented, we made a lot of progress at YRC Freight. This time a year ago, the service is absolutely terrible.

But we've definitely have moved boulders out of the way to get our service back up to a very respectable and competitive level at YRC Freight.

I had a question about working capital. With the big outflow in the quarter, what was behind that?

And what's kind of the normal inflow or outflow that you expect in terms of your working capital going forward?

Yes, for the quarter, the main components -- there are really 3 main components for this individual quarter. First and foremost, payments to the single employer pension plan.

And then the other 2, they're a little bit smaller. But I'm going to say, probably equally if not more important is payments on workers comp and probably injury claims.

So to the extent that we continue to accelerate the settlement of those claims, as James said earlier in his prepared remarks, that it allows for us to I guess settle those claims before they have a chance to negatively develop on us. And that's an investment that we've talked about -- I've probably, on one our last call, which is investing in the P&L and not necessarily in the balance sheet, that actually is now starting to come back and pay dividends.

To settle the workers comp claims you just talked about, does that reduce liabilities on the balance sheet? Are we seeing that come down at all in conjunction with the cash outflows?

That's exactly what -- Chris' question. If you look at what's going on with working capital, that liability count's coming down.

Okay. And what line item is that?

Is that the other current accrued liabilities?

It actually comes across in 2, we've got a current and a long-term.

Okay. And then for the claims, you've got cargo claims, workers comp claims and the final injury claims.

Has there been a difference in improvement in any of those 3 segments? Or is there still one that's lagging that needs more focus?

Yes, those are 3 very different questions, Dave. Can we -- I'll take workers comp and BI, then I'll let James and Jeff tag-team cargo.

In terms of workers comp, huge strides. If you've heard us talking about our investment again in the P&L, and our investment in our people and doing things safely so they go home every night.

What we have experienced is the investments we've made, literally 12 to 18 months ago, are not only still paying dividends, but if anything else, gaining momentum. You're changing the culture and the safety culture of 32,000 employees takes time.

We have a group that is maniacally focused on improving our culture and our safety claims. So to the extent that we can stop the claims from coming in and settle the old claims before they develop on us and actually settle the new claims before they actually have a chance to develop on us, that's exactly where we need to be.

And that's something that the company hadn't really done prior to probably 24 months ago because of our liquidity situation. And the same thing applies to the BIPs of the equation as well.

And on the cargo claims, we've made a lot of progress there. Absolutely at the regional companies, they offer quality and a service that's second to none.

Their claim ratios are very, very low. And I think, industry-leading in some ways.

At Freight, part of that whole problem that we inherited with us, just handling a lot of bad freight, freight that we shouldn't have in our company. It has been a challenge.

But we've put a lot of time and energy and effort towards that. And really have kind of couched safety, quality, and claims, all is kind of one big effort.

And I think we've made a lot of progress there.

And what's the margin opportunity at YRC Freight if they were to get to YRC regional level of claims ratios?

It would be substantial.

Like a couple hundred basis points?

No. It will be meaningful.

Hey, Dave. Just a follow-up on your earlier question.

I'm actually kind of goes in line with the comments that James and Jamie just made on that other operating expenses line decrease. Most of that is actually related to the decrease in our bodily injury and property damage expense, as well as our cargo claim expense.

Okay. So workers comp would be in the salaries, wages and benefits, and then other 2 would be in the operating expenses line?

That's correct.

Oaky. And was the salary, wages and benefits kind of improvement more a function of the better workers comp claims?

Or was there a labor management element to it as well?

Yes, both.

Okay. Thanks.

Appreciate it again, you guys, for all you taking the time to listen to our call. I believe our third quarter performance shows that we are capable of delivering improved results even though we are clearly not finished with our changes, as we've discussed on the call.

The next several quarters will be challenging, as Jamie said. And even the best of times when operating well, a company can be challenged during the November to February time frame.

While coming back online, we wanted to be sure and take the time to discuss both how we have accomplished and what we're doing to move forward. While I'm encouraged about the things we have been over the last 12 months, I am certainly fully aware of the things we still need to do.

Our employees are up to the challenge, our management team is fully committed and capable of continuing to lead this turnaround and we intend to keep steadily moving forward.

Thank you, James. That concludes our call for today.

Thanks everyone for joining us. Please feel free to contact me with any follow-up questions you may have.

Scott, I'm turning the call back over to you.