Yellow Corporation

Stephanie Fisher – Vice President and Controller James Welch – Chief Executive Officer and Director Jamie Pierson – Chief Financial Officer and Executive Vice President Darren Hawkins – President of YRC Freight

David Ross – Stifel Nicolaus Thom Albrecht – BB&T Capital Markets Art Hatfield – Raymond James Scott Group – Wolfe Research Rob Salmon – Deutsche Bank

Thank you. Good afternoon.

Thank you for joining us for the YRC Worldwide Third Quarter 2015 Earnings Call. James Welch, Chief Executive Officer of YRC Worldwide; Jamie Pierson, CFO of YRC Worldwide; and Darren Hawkins, President of YRC Freight, will provide comments this afternoon.

James, Jamie and Darren will be available to answer questions following our comments. Now for our disclaimers.

During this call, we may make some forward-looking statements within the meaning of Federal Securities laws. These forward-looking statements and all other statements that might be made on this call which are not historical facts are subject to uncertainties 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 afternoon'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 net income and loss to adjusted EBITDA on a consolidated basis and operating income and loss to adjusted EBITDA on a segment basis.

During this call, we may refer to our non-GAAP measure of adjusted EBITDA simply as EBITDA. I'll now turn the call over to James to provide comments on our third quarter earnings.

Thank you, Stephanie, and good afternoon, everyone. We're pleased to be reporting and discussing our results with you today, because on a sequential basis, our third quarter results are similar to our previous second quarter results.

On a consolidated basis, YRCW reported a 96.2 OR, which represents an improvement of 180 basis points versus the 98 OR reported in the third quarter of 2014. YRC freight improved their OR by 110 basis points to 97.9 and the Regional carriers turned in a 92.6 OR, an improvement of 230 basis points.

For the third quarter adjusted EBITDA of YRCW increased $17.5 million, or 21% to $99 million our best third quarter since 2008. Our trailing 12 month EBITDA has improved $118 million from $226 million in the third quarter of 2014 to $344 million in 2015, the highest in over seven years.

Our number one priority has been to improve freight mix and revenue per shipment and this strategy has clearly paid off with much better operating results for YRC Freight, Holland, Reddaway and New Penn and even though the economy has been more or less stagnant we have continued to secure the right kind of price adjustments with our customers who value the different service offerings, that our four operating companies provide. While tonnage trends are down at both operating segments, we are pleased with the work that we've done to improve our yield performance.

I know, it has been a hot topic the last few days, but from my perspective, the LTL pricing environment remains steady throughout the third quarter and that trend has continued in October, and we will implement a 4.9% GRI effective November 2nd. For YRC Freight, the progress has been steady and consistent over the last five quarters.

As Darren will discuss, we are confident in our operations, service and sell strategies and they are the right ones that should keep the momentum of the Company moving forward. YRC Freight's continued improvement is a key to our future success and we know that there are still opportunities we should capitalize on by improving operating fundamentals.

The excellent results generated by Holland, Reddaway and New Penn prove that they can compete very effectively in the marketplace. These three companies continue to provide market-leading service in their respective networks along with generating strong profitability.

I'm very pleased with the Regional carry results and the leadership teams at each operating company and they remain focused on their respective strategies to position our companies to continue producing these types of results. We have continued to reinvest in our business at the highest level in terms of capital and capital equivalent dollars in seven years.

We have been able to invest in new equipment and by the end of this December, we anticipate taking delivery of approximately 950 tractors and 1,700 new trailers. We have invested in additional dimensioners, new and better technology, facilities and most importantly our people, and we're going to be making a sizable capital investment in safety throughout this quarter and the first quarter of 2016 by installing NCAP safety technology in approximately 14,000 tractors.

These investments show that our Company is on solid financial ground and making the important decisions that should set us up for additional operating improvement as we move forward. Lastly, I want to recognize and appreciate the 20,000 employees at YRC Freight and the 12,000 employees at the Regional carriers for their efforts.

Our employees are working safer and are actively participating in our goal to be the safest carrier on the road. I also sincerely thank them for all that they do on a daily basis to effectively serve our valuable customers.

With that, I'll turn the call over to Jamie for discussions about our financial results.

Thanks James and good afternoon, everyone. For the third quarter of 2015, we reported revenue of $1.25 billion, down slightly from the $1.32 billion reported in 3Q '14 largely due to the decline of fuel surcharge revenue and tonnage, offset by improved pricing at both of our segments.

In terms of consolidated operating income, it increased $21 million from approximately $27 million in 3Q '14 to $48 million. As for adjusted EBITDA, it increased $18 million in the quarter at $99 and an 8% margin.

For the year-over-year third quarter stats, YRC Freight's tonnage per day was down at 6.2%, which was comprised of a 5.8% decrease in July, 6.9% in August and 6% in September. On the contrary, revenue per shipment including fuel surcharge was up by 0.7% and revenue per hundredweight including fuel surcharge was down slightly by 0.4%, while weight per shipment was up by 1.2%.

Excluding fuel surcharge, revenue per shipment was up by 7% and revenue per hundredweight was up by 5.8%. Consistent with YRC Freight, the regional carriers also experienced a decline in tonnage per day for the quarter with a total decrease of 3.5%, which was comprised of a 4.9% decrease in July, 3.6% in August and 2.3% in September.

Revenue per shipment including fuel surcharge was down slightly by 0.7%, which included an increase in the weight per shipment of 0.9% and a decrease in revenue per hundredweight including fuel surcharge of 1.5%. Again, excluding fuel surcharge, revenue per shipment was up by 5% and revenue per hundredweight was up by 4.1%.

Turning to the results. For the third quarter of 2015, YRC Freight nearly doubled its operating income from approximately $9 million in 3Q '14 to $17 million, and reported adjusted EBITDA of $45 million, a $7 million increase over the third quarter of last year.

The improvement in profitability is primarily due to the continued disciplined pricing strategy, offset by tonnage and fuel surcharge decreases and increased vehicle leasing as we continue to refresh the fleet. On a year-over-year basis, our regional segment reported an operating income increase of 38% to approximately $34 million and on an adjusted EBITDA basis reported a 22%, increase to $53 million.

The increase is largely driven by yield growth and several small operating improvements offset by tonnage and fuel surcharge decreases and incremental operating lease expense. In terms of our liquidity, our cash and cash equivalents and managed accessibility under our ABL facility at September 30, 2015 was up approximately $32 million to $245 million for the same period last year.

As usual, I'd like to leave you with a few parting takeaways. First, during the quarter, in honouring our commitment to reinvest back into the business, we spent approximately $29 million on CapEx and excluding the sleeper units we normally lease, we entered into operating leases for an additional $26 million of capital value equivalent, for a total investment of $55 million, almost double the total investment of $28 million this time last year.

Second, as a result of these investments and improved pricing and operating performance, we've been able to drive down our leverage ratio from 4.94 times just 12 months ago to 3.15 times this quarter. Personally speaking, I am proud of that accomplishment as S&P recently recognized the continued de-levering of our capital structure on a funded debt to EBITDA basis, and continued de-risking of the balance sheet with a ratings upgrade.

As most of you know, this is no small feat and one that recognizes the operational and financial improvements we've made to date. Finally, as we start to anniversary the pricing increases that started in the second quarter of last year, we expect to start facing tougher yield and revenue per shipment cost going forward.

This is especially true on an ex-fuel basis. Obviously, including fuel, we along with everybody else in the space are already facing those year-over-year headwinds, but as you can tell from our results, we are holding our own on that front.

Additionally, and I know we've discussed a couple of these points before, I would like to remind everyone that we continue to refresh our fleet. We anticipate incurring the increased lease expense that goes along with it.

This incremental lease expense will pressure adjusted EBITDA margins going forward, and along with several other companies in the space, we also anticipate having to continue with higher healthcare, recruiting and training expenses as we compete for an incredibly scarce resource in the form of qualified CDL drivers. So, going forward, it is still our intent to continue reinvesting the incremental EBITDA and free cash flow back into the business to increase the value of this Company and drive shareholder return.

At this point, I'll turn the call back over to Darren to discuss YRC Freight's results.

Thanks Jamie and good afternoon, everyone. In the third quarter, our focus on people, pricing and operational processes drove continued positive results for YRC Freight.

In Q3, the team effort and performance of all 20,000 YRC Freight employees continued the trend of solid EBITDA results. The year-over-year improvement string is now at five straight quarters and 14 straight months with trailing 12 month EBITDA improving more than $100 million.

We are not yet satisfied with this financial performance but we're certainly encouraged by the improvements we've achieved thus far. On the technology front, we now have actual dimensions on over 35% of our shipments largely due to the deployment of our 50 dimensioners.

This change along with other technology improvements in our pricing processes, along with providing market competitive service, all contributed to our yield improvement. Our contractually negotiated increases average 5% to 6% in the third quarter of 2015, and we still see pricing is stable in October.

New tractor and trailer onboarding continues and should bring with it improvements in safety, maintenance cost and fuel efficiency. Cube utilization in our over the road network should benefit from the new logistics posed trailers.

Positive safety trends continued in Q3 with year-over-year improvement in our lost time injury rate and a reduction in accidents. YRC Freight has 400 peer safety trainers that are driving this performance through awareness, communication and intervention.

YRC Freight is investing in the efficiency of our sales force by utilizing deployment model technology that allows us to segment our territories based on market potential. This investment along with our customer relationship management software being fully implemented has us well suited to continue the right freight, right price strategy with appropriate balance between price, volume and network optimization.

YRC Freight employees have the right attitude about being safe, being reliable and making a difference for themselves, our customers and our communities. I appreciate all their actions that continue to move us in the right direction.

With those comments, we are ready to take your questions.

Good afternoon, everyone.

Hey Dave. How are you doing buddy?

Doing great. Doing great.

Glad to see things are heading in the right direction and pricing's remaining firm in the marketplace. Just a couple of questions on the cost side.

Labor increase. Are you -- I guess, could you remind me of what we're set up for going in 2016 in terms of contractual increases on the wage and benefit side?

Yeah so, on the wage basis it's $0.34 per straight time hour.

Is that like a 3% increase roughly or --?

A little less than 2%.

Okay, and are there benefit increases that go along with that to kind of take the SWB line up?

There is on the healthcare side. There's a collar on that date.

So, it's not a set number. Some of the funds can come back to us.

I'll tell you that -- I think we're experiencing probably in that 4% to 7% range increase on healthcare and on the pension side there's no increase there. That's fixed at $1.75 per straight time hour.

Okay, and then others have talked about healthcare being an issue. It's spiking up recently.

Is there anything you can do to kind of minimize those healthcare costs? Whether it's kind of increased co-pay or doing something different with the plan?

There's probably two different things Dave. We've got the unionized side of the house and then the non-unionized side, which we basically self-insure.

I think we did a very good job on what we can control. On the unionized side it's less in our control and the fact that there are some contractual minimums in there, but I'll tell you by and large, that's one of our desecrating [ph] factors when it comes to recruiting drivers.

All in the balance, that's not essentially a bad thing.

Okay, and then the timing of that, is that in the spring still? Like an April increase just for the straight time hour jump?

[indiscernible] is in August and wages is in April. That's right.

Okay, and then you mentioned recruiting retention as a cost it continues to be pressured because of the driver environment. We've always viewed YRC as having one of the more stable driver forces or just general work forces.

Then now the tonnage is down, I guess, why do you see this recruiting retention being pressured so much?

Hey Dave, this is James and you're right. We've been fortunate over the years to have very low turnover rates and we still do, but as you'll recall when we put Reddaway and [indiscernible] together we have an aging workforce and so we'll see continued retirements that will leak out of that Company as these employees get older.

So, that will cause a lot of our challenges and efforts to move forward but we've taken some really good steps to mitigate those issues and we feel like we're in good shape.

The last question is a housekeeping one on the length of haul at YRC Freights, where did that fall versus a year ago?

David, that's at 1,306 for third quarter 2015. That's up by 2.4% or 30 miles.

Excellent. Thanks Darren.

Hey guys. Congratulations on a great quarter.

I appreciate all the color. Jamie, can you give us a little insight into October's tonnage per day at Freight and Regional?

You know, I would say it's a continuation of the trend that we've experienced in the third quarter. If anything, I'd say marginally better, but not significantly.

That's right. Absolutely.

Tonnage and pricing are similar to Q3 so far in October and [indiscernible].

That's same with the Regionals too. In fact, it's been proved a little bit at the regionals.

Do you have a sense when your tonnage figures may turn positive?

Yeah, we're not going to speculate on that because we can't predict what the economy's going to be. The winter weather may impact that and some things, but just know that we're working hard to be sure that we're starting to balance the field equation and our need to get the right freight on at the right price.

Okay, and I appreciate the transparency with the worker's comp. How about BIPD?

Was that a little bit of a help or a little bit of a hindrance to the bottom line?

Sideways. Going back to what I said, I think the last couple of quarters, work comp and BIPD together plus or minus $5 million and we're squarely right in the middle of that range.

Okay, and then Darren what sort of load factor increase were you able to see at Freight?

Thom, we don't go into detail on the load factor but the trailers we've invested in are doing exactly what we expected.

I'm trying to remember, I think though at one point, conceptually you thought you could drive a 6% or more increase in load factor. Is that bad memory on my part?

Has that played out? I mean, even if you don't get the exact number.

Thom, I don't recall making an exact percentage on that. With our service cycle, on the way it's set up, load factor is certainly an advantage at our carrier.

So, from that aspect, YRC Freight's in a great position for load factor.

Now Thom, this is James. I'll just say that we're very pleased with what they're doing at YRC Freight with load average.

Okay, good and then, I guess, last question would be, operationally, let's set aside the economy, because clearly we've been through either the beginning or recession or another one of these Obama soft patches and what are the initiatives, I guess Darren or whoever that we -- the three or four things that we need to continue to pay the most attention to that can happen regardless of what's going on with the economy.

Thom, what I like about the position YRC Freight is in as you know, our tonnage decline started a little earlier than the industries did. So, the cost control side of the house and certainly driving the efficiencies has been a focus for us all year.

So, we've done a good job in adjusting our labor to match the tonnage that's moving through the system and certainly our focus on the service cycle and us providing market competitive service is crucial. We make those investments but we're also able to create that efficiency, certainly through load average and the progress we're seeing in areas of bringing on new equipment that impacts maintenance, safety, fuel all those items or areas that we would anticipate moving in the right direction.

And Darren the decline in the purchased transportation at the consolidated level, I don't know what went on between the two companies, but is that, at $8 million, is that mostly fuel? I mean, do you have a figure [indiscernible] miles as a percentage of your line haul at either company?

Is it beginning to trend down?

Yup. That would be fuel and miles, and Thom I'll also make a comment, we all know how important drivers are for 2016, regardless of what the economy does and we're going to protect our drivers all through the winter months.

Okay. All right.

I'll jump back in queue. Thank you.

Afternoon everybody. Hey, great quarter.

Thanks for taking my questions. I must have been not been paying attention or maybe you didn't give it, but Jamie did you give tonnage within freight and regional by month in the quarter?

I sure did.

Can you give it to me again? I apologize.

Yeah. That's quite all right.

Let me get the numbers back in front of me, so YRC Freight tonnage was down for the quarter by 6.2% in total, and as you go through the quarter that was a 5.8% decrease in July, 6.9% in August and 6% in September. Those exact same numbers for the regionals was at 3.5% decrease for the entire quarter and it was 4.9% decrease in July, 3.6% in August and 2.3% in September.

Thanks. Touching on that a little bit, it looks like -- and I can't remember what your comps were in teach of the months, but it appears that your September was a little bit better than what we've heard from some of your peers, do you think or do you get a sense that as you have been able to reinvest in the business, you stabilized your operating situation, improved your service a little bit that you're back in the market taking a little bit of market share?

Hey Art. This is James.

I wouldn't say that we're actively and aggressively trying to take market share. What we're trying to do is make sure that the freight that we are handling is paying its way and we're trying to attract freight that obviously meets the characteristics of what we want to do moving forward and it's interesting to note that while some of our competition is reporting weight per shipment decreasing YRC Freight's weight per shipment was 1.2% and the Regionals was up 1.1% during the quarter.

So, we're trying to be selective about what we're handling and we're trying to service the heck out of it and we're giving just absolutely great service at the regional companies and I'm just really, really pleased and boy, by what we have been able to accomplish at YRC Freight this year, they're giving much better service, very competitive and so we like being at a position to be able to be more aggressive with selling the value in the marketplace and being confident about doing it.

Great. Thanks for that color.

Just looking at -- thinking about yield as we go forward, Jamie, you had made some comments too on when you started the cycle some of the pricing actions that you guys are taking, but if I think about fuel, fuel remains flat from here just as a can of thought process, when do you start to cycle fuel being a headwind against yield?

Well, it's been a headwind. I think starting in the easier comp is in the back half of the third quarter, which is going in really, I mean the last couple of months of this quarter and really into the fourth and first quarters of this year and next year.

It really -- if you look at the price per gallon of diesel, you take a couple of steps down, it really went down in November, December last year and took a massive step-down in January until it started to level out.

Right, so, it still remains a head wind for the next couple of months and then does it ease up or does it ease up in fourth quarter --?

I would say the first normal quarter would probably be a clean quarter, would be 2Q '16. I still think there's going to be a step-down at least in the first half of 1Q '16.

Then can you just clarify your comments you had made on the yield side regarding pricing action? I think, did you say that you had started this second quarter of last year or second quarter of this year?

We started that the second quarter of 2014.

So, when did it really start to ramp up and show up in your yield numbers? Is it --?

Probably about August.

So, we're starting to cycle through that, so that becomes a little bit more of a headwind in '16.

Could be, but the results that we continue to turn in with our customer specific negotiated increases are very encouraging and we continue to take that as a priority moving forward. So, we'll have to see how we move forward here, but it's certainly not our intent to back off of getting the right kind of price in the marketplace.

Did you mention on this call again, I apologize if you did and I missed it but, I actually am listening by the way --

You could've fooled us.

Did you mention what you were getting recently on contract renewals?

We've been getting between 5 and 6.

Okay. Thanks.

I'll get off and listen harder going forward.

Hey thanks. Afternoon guys.

Quick question, I think you said that you did a 4.9% GRI at Freight in November 1st or 2nd, what was the GRI for Regional?

That's 4.9 across all four operating companies.

Okay, perfect. Great.

On this pricing discussion, so we've had two guys earlier this week talk about kind of chinks in the armour and now we've had two guys today say we're not seeing any signs of it. What do you make of this James and discrepancy of what we're hearing and because I'm not sure what to think of it.

Yeah, if you recall Scott, I made a comment during the last quarterly conference call that we see oscillated essences where there's some pricing that makes you scratch your head and then when we're at your meeting in Philadelphia a couple of weeks ago, you asked me kind of some of the same types of questions and I said again, I think overall it's rational, but I think it was one of our friendly competitors have said, sometimes you see somebody doing something stupid in the marketplace and we've seen some of that in isolated spots, on some bid packages that are -- you don't have a specific lane pricing on, but overall, I think the industry role is that it has to be in a position to continue recapitalizing and investing in the business whether it's equipment or technology or people. So, I'm like you, I'm scratching my head a little bit, about why in the world anybody would want to be doing predatory pricing overreaching pricing in the environment that we're in but all in all, we still feel like it's pretty stable.

Yeah I know. I think we have agreed it doesn't make sense, but it doesn’t mean that it's not happening.

Your point about some isolated instances, is that any different than you would've said six months ago or a year ago or you had isolated instances that time too?

I think it's pretty much still the same thing. I think you've seen maybe a little bit more activity at some 3PLs or some carriers may be looking for some different types of freight balances or balances in different freight lanes but I could be dead wrong here in 60 or 90 days, who knows, but from where I sit today, it's still pretty much like it was in the third quarter or the second quarter, excuse me.

Then just last question, kind of along those lines. So, the sequential tonnage trends at Regional, getting better each month looks good.

If I look at the yields, the reported revenue per hundredweight at Regional, it got a little bit worse second quarter to third quarter, is that just mix of the tonnage that's coming back or is there something else going on there?

Yeah, one of the regional companies weight per shipment jumped up and that drove some of it and then some issues with what has happened in the mid-west part of the country with some manufacturing slowdowns, but I don't think it's anything that we're losing sleep over.

Going back to what James said earlier, if you go back to the third quarter of '14, there was a 4% year-over-year increase there. So, we're starting to get into a little bit of more difficult comps and we'll actually experience that I think in the next couple of quarters as well Scott.

Okay, that makes sense. All right, thank you guys.

Hey, good evening guys. With regard to the yield update that you had provided with the contractual renewals in October, are you still seeing that kind of 5%, 6% increase you'd indicated you were seeing in Q3?

So far, between, 5%, 5.5%, 6% in some situations, but it's just holding pretty strong.

And Jamie your comments about just kind of the comps getting tougher as we look out for yield, if we parched out the benefit you're getting from some upgrade with regard to historical pricing, should I think about more of a contractual normalized increase in kind of the 3% to 4% range or should I still be thinking something in the 4% to 5% range here?

As far as YRC Freight is concerned, I anticipate that remaining stable. There's nothing that's showing me that we won't be able to accomplish that based on what we've done throughout the year.

So, certainly tonnage comps improve over time, but with our focus and also the technology we've built around that and with our dimensioners allowing us to understand exactly how to price a square of space on our trailers. I still have a level of confidence in YRC Freight.

That makes a lot of sense. I guess, continuing at YRC, you guys are doing a great job on the pricing side of things.

If I assume that that offsets cost inflation in 2016, if we're seeing tonnage declines, is it still possible to expand margins through operational enhancements or does that become a bit more challenging as the network stands today?

Rob, we have tremendous opportunity in those areas to continue to improve and that was part of the comments I made opening up, it's driven right at that piece as we have tremendous opportunity in moving forward in those areas.

Rob, this is James. Also, even at the Regionals and at Freight, I mean, we're investing in opportunities on the P&D side that get us more efficiency from a technology standpoint.

We're looking at new and enhanced technology on the line haul side, the investments that we made in our pricing models have certainly helped us to make better pricing decisions. The NCAP safety technology we know is going to help us improve our safety.

So, as Jamie has said for a while, we still think there's legs left in this turnaround that we've been working on for a pretty good while, but there's opportunities for us to continue to improve. No doubt.

It's a great year, I mean to see the type of improvements drop into the bottom line despite the declines in tonnage I think speaks to that. So hopefully looking forward, we see a little bit more of a tailwind from tonnage and kind of the comps getting less bad if you will continue, so --

The interesting thing would be if we had a repeat of what happened on 2014 with -- if energy sector does come back or as manufacturing improves or as exports improved, if anything happens with the dollar or what have you, if the inventory levels get worked down and things start moving again, we could -- entirely possible to be in a situation similar to what we had in 2014 and we think we can really capitalize on that opportunity if it did happen and really do well.

Makes a lot of sense. I'll kind of hop back into queue here.

Kelsie, I guess, I'll -- this is Jamie, I'll make the closing comments and then we'll get everyone back to their day and let Art surf the internet some more, kidding of course Art. I just wanted to thank everyone for sticking with us today.

I know it's been a long season. A bunch of conflicting noise and information coming out of everyone but, before we let you go, I'd like to introduce you to Tony Carreno who's our new Vice President of Investor Relations.

Tony actually is going to join us with over a decade in the Investor Relations and capital markets experience. Going forward, we'll put Tony's information out there.

Reach out to him as your principal contact and try not to be too hard on him. At the same time, I sincerely want to thank Stephanie for all of her hard work in [indiscernible] certainly stepped up, grabbed the rifle, stood opposed when we needed her and obviously she's not going anywhere and will remain our corporate controller and hopefully get some of her life back as we add Tony to the team.

So, please feel free to welcome Tony to the team, thank Stephanie for all of her hard work and thanks everyone and look forward to chatting soon. Operator, turn the call back over to you.