YRC Worldwide (YRCW) Q1 2021 Earnings Call Transcript

YRC Worldwide (YELL 0.61%)
Q1 2021 Earnings Call
May 05, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Yellow Corporation first-quarter 2021 earnings conference call. All participants will be in a listen-only mode. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.

I would now like to turn the conference over to Tony Carreno, vice president of investor relations. Please go ahead.

Tony Carreno -- Vice President of Investor Relations

Thank you, operator, and good afternoon, everyone. Welcome to Yellow Corporation's first-quarter 2021 earnings conference call. Joining us on the call today are Darren Hawkins, chief executive officer; Dan Olivier, interim chief financial officer; and Darrel Harris, president. During this call, we may make some forward-looking statements within the meaning of federal securities law.

These forward-looking statements and all other statements that might be made on this call, which are not historical facts, are subject to uncertainty and a number of risks and therefore, actual results may differ materially. The format of this call does not allow us to fully discuss all of these risk factors. For a full discussion of these risk factors that could cause the results to differ, please refer to this afternoon's earnings release and most recent SEC filings, including our Forms 10-K and 10-Q. These items are also available on our website at myyellow.com.

Additionally, please see today's release for a reconciliation of net income or a loss to adjusted EBITDA. In conjunction with today's earnings release, we issued a presentation, which may be referenced during the call. The presentation was filed in an 8-K, along with the earnings release, and is available on our website. I will now turn the call over to Darren.

Darren Hawkins -- Chief Executive Officer

Thanks, Tony, and good afternoon, everyone. Thank you for joining our call. Before I get into the details of the Q1 results, I would like to congratulate Darrel for his promotion to president of Yellow Corporation. He joined the company last year as executive vice president of strategic initiatives with the primary responsibility of overseeing our enterprise transformation.

In his new role, Darrel's leadership will guide all aspects of our transformation to becoming One Yellow. During his 25-year career, he has built a solid track record of success with extensive LTL experience. Prior to joining Yellow, he most recently served as chief executive officer of Xpress Global Systems. Darrel is an inspirational leader whose experience, energy, and innovative ideas will help guide the company's future.

I look forward to working with him in his new role. Turning to Q1. Severe winter weather had a significant impact on our network with the recovery lasting into March. Trucking is an outdoor sport that requires us to work through challenging weather and it can take a while for our expansive North American network to fully recover.

One of the benefits of completing the transformation to One Yellow in 2022 will be the recovery time from similar weather events is expected to be much quicker. As we look ahead, the economy continues to build momentum as it recovers from the impact of the COVID-19 pandemic. Industrial demand and consumer optimism are contributing to tight trucking capacity and a strong yield environment. Favorable, year-over-year pricing trends have carried into Q2.

For the month of April, the Yellow companies averaged around 7% on contract negotiations. Another contributing factor to the tight trucking capacity as an industrywide shortage of qualified drivers and the need to hire more drivers unfavorably impacted our purchase transportation expanse in Q1. We have launched a nationwide recruiting drive that includes holding more than two dozen hiring events focused on recruiting drivers, mechanics and, dock workers. We have also expanded the number of driver academy locations to 17.

In addition to offering good jobs and competitive benefits as an LTL care, most of our drivers can be at home with their families every night. Our most important asset is our team of nearly 30,000 flight professionals and we are working aggressively to add new members. During the first quarter, we made headway on one of the largest fleet refreshes in our company's history by taking delivery of more than 1,100 tractors, more than 1,600 trailers, and over 140 containers, most of which were added late in the quarter. These investments will have a positive impact on the age and efficiency of our fleet and should also help mitigate maintenance expenses over time.

For 2021, our capital expenditure guidance remains between $450 million and $550 million. Next, I would like to share what One Yellow means. It means going to market as One Yellow brand that provides customers with choice, simplicity, speed, visibility, and reliability. Our roughly 200,000 customers will interact with One Yellow sales team whose shipments will move through One Yellow network.

There will be one bill of lighting and the customers will receive One yellow invoice. Culturally, One yellow also means continuing to do the right thing for our customers and our employees. We are making steady progress toward this vision and the multi-year enterprise transformation to One Yellow remains on schedule for completion in the middle of 2022. This is also a critical step in aligning our cost structure with other large single brand, LTL carriers.

In March, the American Rescue Plan Act of 2021 was passed and signed into law. The passage is followed by a 120-day rulemaking period to finalize the application process for the pension plans. The Pension Benefit Guaranty Corporation rulemaking is expected to be completed this summer. The Act will strengthen eligible multi-employer pension plans that are severely underfunded and substantially mitigate their unfunded liabilities for the next 30 years.

The Act and the relief it provides will protect the hard-earned benefits of retirees from many companies and many industries including members of the Yellow team. I will now turn the call over to Dan who will share additional details about the quarter.

Dan Olivier -- Interim Chief Financial Officer

Thank you, Darren, and good afternoon, everyone. For the first quarter, 2021 operating revenue was $1.2 billion, compared to $1.15 billion in 2020. Operating loss for the first quarter was $27.6 million, which included a $1 million net loss on property sales, compared to operating income of $28 million in the prior year, which included a $39.3 million net gain on property sales. Excluding net gains and losses on property sales, the operating loss in the first quarter of 2021 was $26.6 million compared to a loss of $11.3 million in the first quarter of 2020.

Adjusted EBITDA for the first quarter was $13.2 million, compared to $34.1 million in the first quarter of 2020. As Darren mentioned, severe weather events during the first quarter had a significant impact on our network. And while we always anticipate higher costs and operational impacts during the first quarter, the events in mid to late February that impacted many Southern states and spanned across the South Central Corridor of the U.S. materially impacted our financial results.

We estimate the operating income and adjusted EBITDA impact of those weather events to be approximately $16 million. Our revenue for the first quarter reflected year-over-year LTL tonnage per day growth of 0.5%, and LTL weight per shipment was down 1.2%. Sequential LTL tonnage per day trends compared to the prior year were as follows: January up 2.5%, February down 5.5%, and March up 3.8%. On a preliminary basis, April LTL tonnage per workday was up approximately 24%.

Excluding fuel surcharge, LTL revenue per hundredweight was up 6.9%, and LTL revenue per shipment was up 5.6% compared to the prior year. Including fuel surcharge, LTL revenue per hundredweight was up 6.7%, and LTL revenue per shipment was up 5.4%. Total liquidity at the end of the first quarter was $423 million, compared to $118 million at the end of the first quarter of 2020. Total capital expenditures for the first quarter were $202 million, compared to only $13 million in the first quarter of 2020.

As you heard from Darren, we still expect our 2021 capital expenditures to be in the range of $450 million to $550 million. During the second quarter, we plan on continuing our strong level of capex including the purchase of approximately 1,100 tractors, 800 trailers, and 400 rail containers. Now for a brief update on the U.S. Treasury loans.

First, the $300 million tranche A loan. As a reminder, all $300 million of the tranche A loan was drawn down as of the end of 2020, and there was $26 million remaining to be used. As expected, we use that $26 million during the first quarter, and as such, there will be no tranche A activity. Related to the $400 million tranche B loan, as of the end of the first quarter, we had drawn down $251 million of tranche B.

And in April, we received the next $130 million. So as of now, we have drawn down a total of $381 million of the $400 million total. And we expect to draw the remaining $19 million in the back half of 2021. And finally, on last quarter's earnings call, we discussed the elevated purchase transportation costs were -- would persist and be a financial headwind through the first half of 2021.

With continued strong economic demand combined with an industrywide driver shortage, we still expect that to be true. However, we also remain confident that we are taking the prudent actions necessary to mitigate those costs and we continue to be optimistic about our financial performance as we move forward through 2021. With that, I will turn the call over to Darrel.

Darrel Harris -- President

Thank you, Dan, and good afternoon, everyone. I want to begin by saying how honored and proud I am to serve as president of Yellow Corporation. It's a very exciting time to be with our company and I look forward to working alongside our 30,000 freight professionals who are committed to meeting our customers' expectations. As Darren mentioned, we're well on our way to becoming One Yellow.

The journey began in 2019 when we align the sales and operational structures of our LTL brands. This provided our customers with a single point of contact making it easier to do business with us while also eliminating redundancies in our network. Earlier this year, we officially renamed the holding company the Yellow Corporation in anticipation of a companywide rebranding to Yellow. And currently, we are in the process of moving all brands to one technology platform.

This will streamline the flow of information for operations, sales, customer service, human resources, maintenance, and intact safety onto one shared technology solution. As One Yellow, we will continue to improve our service, get faster, create more next-day lanes, and offer regional service in locations we never had before. And we'll give our customers access to all that Yellow can offer in the easiest most efficient way possible. The integration to One Yellow network will strengthen asset and network efficiencies while providing customers with a broader network of Yellow services.

When our multi-year enterprise transformation is complete next year, we will go to market as One Yellow -- laser-focused on meeting the needs of our customers and growing our business. In addition to the progress we are making with our enterprise transformation, we are in the process of implementing one of the largest capital expenditure plans in our company's history. It really is incredible to see the volume of equipment that we are placing into the network in 2021. In the first quarter, we took steps to restore appropriate service levels for our customers contributing to already elevated purchase transportation and short-term rental expense.

With the weather disruption behind us, we've taken firm actions to reduce purchase transportation and short-term rental expense going forward. These actions include requiring the immediate return of short-term rental equipment in most locations as we gain momentum and the arrival of our new equipment. We've also bolstered hiring in locations utilizing high levels of purchase transportation due to the lack of delivery drivers. And lastly, we've made adjustments within our line haul network to minimize the impact of rising purchase transportation expense in certain lanes.

In summary, as president of Yellow, my initial priorities are very straightforward. Number one, consistently meeting our customers' expectations. Number two, the successful execution of our hiring and retention strategies, which will allow us to take full advantage of the strong pricing environment while tightly managing our cost structure. And number three, completing the enterprise transformation to One Yellow as planned in 2022.

In closing, I could not be more excited about our future here at Yellow. We have plenty of work to do but we are on the right path and I fully expect us to take advantage of the strong freight environment. I want to thank our 30,000 freight professionals who continue to deliver for our customers each and every day. They truly are what makes this company special, and I look forward to working alongside them on the journey to becoming One Yellow.

I will now turn the call back over to Darren for some closing comments.

Darren Hawkins -- Chief Executive Officer

Thank you, Darrel. As you heard this afternoon, we are all excited about the road ahead. Despite the weather in the first quarter and the near-term purchase transportation headwinds, we are encouraged by the strong yield momentum we saw at the end of March and in April. With our multi-year enterprise transformation progressing, one of the largest capex plans in our company's history, along with tight LTL capacity, I have high expectations from our team and I remain confident that we are well-positioned for 2021 and beyond.

Thanks for your time this afternoon. We would now be happy to answer any questions that you may have.

Questions & Answers:

Operator

And we will now begin the question-and-answer session. [Operator instructions] Our first question today will come from Jack Atkins with Stephens. Please go ahead.

Jack Atkins -- Stephens Inc. -- Analyst

Great. Good afternoon and thank you for taking my questions.

Darren Hawkins -- Chief Executive Officer

Sure thing, Jack. Great to hear from you.

Jack Atkins -- Stephens Inc. -- Analyst

Well, so I guess, you know, Darren if we can maybe start for a moment, and I guess, let's kind of think about the quarter and how it trended sequentially. Obviously, weather was a pretty big impact to your network in February and into early March. You made that pretty clear. You've got yield momentum there, could you -- I'd like for my first question maybe focus on the expense side.

Because it look like you had some expenses that came back, you know, in a pretty material way, particularly around operating supplies and expenses and also headcount or just salaries and wages. Could you maybe talk a little bit about what drove the significant increase in those two expense buckets as you move from the fourth quarter into the first quarter end? Was that pandemic-related cost reduction may be coming back into the business in preparation for recovery and demand in '21?

Darren Hawkins -- Chief Executive Officer

Yes, certainly, Jack. And I'll start this, first of all, not pleased with these Q1 results. Even when you look at excluding the property sales , you know, the op loss in Q1 of $26 million versus $11 million in 2020, and you put in the $16 million for weather, it's essentially flat. And in this yield environment, I'm not pleased with that.

However, I will say that when you think about the yield progression moving forward, and I'll ask Dan to give you some revenue per 100 weight, including fuel surcharge metrics for each month of the quarter, just to reinforce where we're at on pricing. And that also from an expense standpoint, the proper utilization of purchase transportation is key to our network. It also allows us to run our linehaul operation as needed, as Darrel mentioned in the script to align and take great care of our customers. Now we did get into an area of using some expensive regional purchase transportation to get the right things done for the customer, but optimizing that out is key in Q2 moving forward without driving that expense in the wrong direction.

But the proper use of purchase transportation is essential to our network. So from an expense category, that was my highest level of concern. That's why we called it out on the last earnings call, but also have been pointing our hiring advance to that exact piece of reducing our exposure to the most expensive lanes. I would like Dan to further comment.

But Dan if you would, start with the yield numbers by month for Q1 just to give everyone a perspective of how we're trending. And keep in mind, as Dan give these yield numbers Q1, my comments about April that we're still seeing strong contract renewals as well. So Dan, take it from there.

Dan Olivier -- Interim Chief Financial Officer

Yeah. Thanks, Darren. And my opening comments, obviously, you heard that our total yield including fuel surcharge was at 6.7% for the quarter. In our mid-quarter update, we reported that in January, we were up 1.8%.

In February, we're up 6.3%. March, as Darren touched on as our yield accelerated, March we were up 11.5%. So yield clearly continues to be our -- if not our -- one of our top priorities. We're happy with the performance up to this point.

And contact renewals are averaging between 7% and 8%. We would expect that to continue. A couple other things, Jack, on the cost items that you mentioned. First of all, the $16 million weather impact that naturally kind of falls into that bucket, a lot of it in the salaries, wages and benefits and operating expenses.

So that's really where a lot of that impacted. And then just one other point on that -- the quarter itself, the first quarter had three more working days than the fourth quarter did, it's just from a total cost perspective that has an impact there as well.

Jack Atkins -- Stephens Inc. -- Analyst

OK. Now that makes more sense and I appreciate that additional color. Going back to the contract rate commentary for April, I thought that was really interesting plust 7%, is there any way to maybe talk about the contract renewals on average that you sign up in the first quarter just to kind of compare that?

Darren Hawkins -- Chief Executive Officer

Yeah. Jack, as we came through the first quarter they were 7% to 8%. So the contract renewals were building stain. As you know, we took our general rate increase in February this year as well.

So we started to see that benefit and those contract renewals have remained strong. So that 7% to 8% is a good guide and they continue to accelerate as well.

Jack Atkins -- Stephens Inc. -- Analyst

OK, understood. And then just kind of sticking with yield for a moment. You know, if contract rate increases are up in the, call it, seven-plus-percent range, which makes a lot of sense, we're hearing similar ranges from other carriers. You know, are there opportunities on the accessorial side as well? Could you maybe talk about that as a potential area to drive higher revenue per shipment?

Darren Hawkins -- Chief Executive Officer

Yes, absolutely. Their accessorial pace is crucial to us and all LTL carriers. But the actual recording and collection of those is something that we've become much better at. In just recent times, handheld ELDs and other devices allow us to capture that detention and -- since the beginning of the pandemic.

And also, continuing into this year, with what's been happening in the retail sector, an explosive growth with e-commerce, trailer availability has continued to be an opportunity for us and others as large customers tie those trailers up. The customers aren't doing it intentionally. They're doing it because of a lot of disruptions that we've ever seen on the trucking side with quarantines, vaccinations, weather impacts, container shortages, all those things put together. So we're seeing a willingness for them to pay those detention rates and then also on multiple areas of other accessorials including hazmats in residential deliveries, there's a much higher compliance rate than what we've seen in the past with capacity being so tight.

Jack Atkins -- Stephens Inc. -- Analyst

OK. All right. Got it. Darrel, I guess this one's for you and congratulations on your promotion.

You know, there are, obviously, a lot of areas that need focus within the business. As you sort of think about the next 12 months, what are you going to be your number one, number two, priorities that the highest-level impact initiatives that you think you can undertake to really drive improve profitability here and capture the strength that we're seeing in the freight market?

Darrel Harris -- President

Yeah, Jack, thank you. And it's a pleasure for me to hear you over the phone. Yeah, to your point, I mean, as we discussed, I'm really focused on the successful execution of our transformation plan to One Yellow, I mean, we're well under way, obviously, with the component we discussed, relative to our technology. But that's really the key to our future and our success and it's on track.

We're going to provide our customers with easy access to both the regional and long-haul services that our brands offer, with one call, one truck, and one driver. And that's extremely important, both for our customers and for our employees. But to your point, initial focus as I mentioned, we've got a line of sight daily to a reduction of costs and purchase transportation expense. We have a great environment here from a yield perspective.

And our focus, of course, is on the fundamentals of the business and the cost controls necessary to drive the profit margins that we should have in this market.

Jack Atkins -- Stephens Inc. -- Analyst

OK. I guess, last question. I'll turn it over. You know, when we think about your hiring efforts could you -- and I know it's too early, you guys are putting out press releases, I think pretty regularly, but could you just talk about what the pipeline looks like for new recruits? And when do you think that's going to start having an impact either in terms of the level of purchase transportation expense or just overall level of profitability for ythe enterprise? Is that something that we should start seeing in the second half of this year or do you think the pipeline is building a good impact in the second quarter?

Darren Hawkins -- Chief Executive Officer

Yep, Jack. I'll jump in on that one. And you know, per Dan's comments in the prepared script, certainly going to see the purchase transportation headwinds in the first half of the year. But we're making progress in that area as Darrel addressed.

Certainly, getting the PT on the right lanes and to your point about pipeline, we've got an internal pipeline that's crucial to us. And when we talk about 17 driving academies, that internal pipeline is our dockworker. So we move -- the career path is -- you come in as a dockworker, you move into the driving academy while you're still getting paid. You can also go the box truck route and that's where we get the conversion from a dockworker box truck to full grown CDL class A driver.

So we've got that target in those areas that's why we've continued to expand the number of driving academies that goes beyond that with pop-up academies. If we get three or four dockworkers in one area then it makes sense for us to put the instructors there with them, convert over to box truck or CDL, and benefit accordingly. So that's why we're being strategic in the areas that we're putting these employees into first. So that piece, we have confidence that you're going to see improvement in Q2 around those pieces.

Jack Atkins -- Stephens Inc. -- Analyst

OK. Thanks again for the time, guys. Appreciate it.

Darren Hawkins -- Chief Executive Officer

I appreciate it, Jack. So long.

Operator

And our next question will come from Scott Group with Wolfe Research. Please go ahead.

Rob Ginsberg -- Wolfe Research -- Analyst

Hey, good evening, guys. It's Rob on for Scott. Typically, from the first quarter to the second quarter, we see about 300 to 400 basis point improvement in the operating ratio. In light of the headwinds you guys experienced from the weather in the first quarter as well as some of the purchase transportation initiatives that you were just discussing, how should we think about the kind of overall seasonality Q1 to Q2 this year?

Dan Olivier -- Interim Chief Financial Officer

Yes. Scott, this is Dan. I'll take a stab at that one. Well, you know, we don't provide specific guidance or targets around profitability overall, but when you talk about and think about sequential margins, especially from Q1 to Q2, you touched on it.

Historically, we improved about 3.5 to 4 percentage points from Q1 to Q2. Considering the significant weather that we talked about and that's behind it now. Considering that in the economic environment that we're in, and some of those actions we're taking to mitigate our purchase transportation costs, I would expect that we'd had a chance to perform at or even a little bit better than that historical trend.

Darren Hawkins -- Chief Executive Officer

Yeah. And Rob, the part I like about your question is, you know, it goes into the areas that we're facing forward on. So when we think about that, we're in the middle of one of the largest capex plans in our 100-year history. As you heard from Darrel, One Yellow is on track.

Matter of fact, on the tech side of One Yellow, we just moved New Penn over to the Yellow technology, that went well without any customer disruption, right away in Holland coming over next, that'll be done actually this year, the network side of One Yellow complete in the first half of 2022. Also on the positive news front, our union multi-employer pensions, they're good for the next 30 years. With recent legislation and our non-union single employers, they're fully funded with no significant contribution moving forward. You mix that with Dan's comments on the yield environment, and the acceleration we're seeing.

That's where our confidence last facing forward.

Rob Ginsberg -- Wolfe Research -- Analyst

That's a nice segway into the pension reform. Darren, you kind of alluded that now you've got kind of full funding for, you know, for decades at this point, which probably means a little bit less cost inflation. But can you walk us through kind of how this impacts Yellow's cash flow, you know, accruals for pension expense to your rank and file, as well as some of the contingent liability that we've historically seen listed in the 10-K? Our view is that this is really a non-event from a cash flow, from an operating expense standpoint but brings down kind of future costs inflation as well as, you know, we can potentially see that, that contingent withdrawal liability disclosure comes down over time. But I'd be curious to get your thoughts as we're looking at to the 10-Q and ultimately a 10-K later this year to get filed?

Darren Hawkins -- Chief Executive Officer

Rob, as usual, you've done your homework very well and your comments are right on and you've got a very good understanding of how this applies at Yellow. The first thing I would say is for our retirees and our current employees, this is a very good development and allows them access to the pensions that they've all worked very hard for. As you know, our pension rates are part of the collective bargaining agreement. So those are locked in for the life of our current agreement, which goes through 2024.

You've already called out, how this really, from a financial standpoint and the way we accrue for it, but I will let Dan take that pace before I get over my skis on that subject. So Dan fill in any -- there's not many blanks left, but go ahead and fill in anything that we missed.

Dan Olivier -- Interim Chief Financial Officer

Yeah. Thanks, Darren. Look, Scott, you're right on from a financial perspective. We expect to continue making our required contractual contributions to all the multi-employer pension plan as agreed to in the collective bargaining agreement.

However, since we've not withdrawn from any of those plans in the past, we don't carry any of that unfunded pension liability or potential obligations on our balance sheet. So to your point, exactly, there's no immediate financial impact to us on that.

Darren Hawkins -- Chief Executive Officer

Yeah. And then once we see what happens in the rulemaking period that I mentioned in the prepared comments, then we'll continue to update you as we move forward once we all understand more of the impacts together over time.

Rob Ginsberg -- Wolfe Research -- Analyst

That's helpful. And my final question, before I turn it over to someone else's, you've obviously picked delivery of a bunch of tractors and trailers in the first quarter. I think I heard that you guys are going to be taking delivery of north of 1,000 in the second quarter. So if I could just get kind of the total number that you guys will be receiving for tractors and trailers in Q2, and if you're -- if there's any sort of difference in terms of your expected timing because of some of the supply chain issues like semiconductors that we're hearing from -- hearing a lot about in the news, that would be helpful.

Darren Hawkins -- Chief Executive Officer

Rob, I'll start with the back half of your question on issues. We have not run into any at this time. The production dates we've had, the two OEMs we're using, they've done a great job and providing them and others. We did run into a few issues with some of the additional equipment that we had like electronic logging devices and others.

But we got -- we were able to overcome those. So we didn't see any delays on taking delivery of the unit. So at this point in time, we're in good shape. And we have not been impacted by chip shortages and other things that you mentioned.

I'll let Dan go into the numbers. Go ahead, Dan.

Dan Olivier -- Interim Chief Financial Officer

Yeah. Thanks, Darren. We really started taking delivery of tractors and trailers already going back to the fourth quarter. So when you think about it -- I'm just giving you the accumulative role here.

In the fourth quarter, we took delivery of 300 tractors, 1,200 trailers. In the first quarter, 1,100 tractors and 1,600 trailers, as Darren had mentioned. That brings us up to 1,400 tractors, 2,800 trailers through Q1. And then as I mentioned in Q2 or within the next two to three months, we did expect that we'd be bringing on another 1,100 tractors and 800 trailers.

So once through with that, we will be at a total of 2,500 tractors and 3,600 trailers.

Rob Ginsberg -- Wolfe Research -- Analyst

And what's the plan in terms of total tractor and trailer purchases for this year for you guys?

Dan Olivier -- Interim Chief Financial Officer

Total tractors we're looking at between 2,300, 2,400 and total trailers about 3,600 to 3,700.

Rob Ginsberg -- Wolfe Research -- Analyst

I appreciate the time, guys.

Darren Hawkins -- Chief Executive Officer

Thank you, Rob.

Operator

And our next question will come from Jeff Kauffman with Vertical Research Partners. Please go ahead.

Jeff Kauffman -- Vertical Research Partners -- Analyst

Thank you very much. Hi, everybody.

Darren Hawkins -- Chief Executive Officer

Hello, Jeff.

Jeff Kauffman -- Vertical Research Partners -- Analyst

Hey. I don't know if there's any questions left.

Darren Hawkins -- Chief Executive Officer

Yeah. We've covered a lot of ground here, Jeff, that's for sure.

Jeff Kauffman -- Vertical Research Partners -- Analyst

Well, let me see what I can come up with here. So you're going to bring on all this new equipment. Can you talk about how this is going to affect D&A and cash flow as you're bringing in higher-value equipment than what you probably have on your books?

Darren Hawkins -- Chief Executive Officer

Well, certainly, the oldest equipment goes out and though we have not discussed publicly our fleet age, you can tell what these kind of numbers that Dan shared, you know, roughly 2,400 class As and though another 100 box trucks, straight trucks and to give us 2,500 tractors for the year. That's going to bring the fleet age down significantly. And the fleet age, when you look at it, with those oldest units going out and our newest units going on the highest mileage lanes, then naturally, fuel miles per gallon uptime, maintenance expands, and all those pieces benefit over time with the warranty programs. And although, our Q1 deliveries came in late in the quarter, we should see a consistent cascade of equipment into the network over the remaining quarters in the year.

So that will definitely have a very positive impact on our financials moving forward. And as we discussed, that's a big part of our plan, while we're going through this transition to One Yellow. So, Dan, anything else there that I missed on that front?

Dan Olivier -- Interim Chief Financial Officer

I just go back to the D&A part of the question, Jeff. You know, we generally use a useful life of 15 years of both tractors and trailers. So while I don't have a specific number in front of me, you can apply our capex total as a percent of that new equipment and kind of do the math on that.

Jeff Kauffman -- Vertical Research Partners -- Analyst

OK. Thank you. And I hate to ask the obvious question, but even if I adjust for the real estate gains here, in the prior year and give me credit for weather, I mean, everybody got affected by the weather this quarter. Your purchase transportation cost really wasn't up a whole lot more than most other LTL carriers this quarter.

Your labor costs came in lower, your yields were right in line with the rest of the industry, yet your margins went down 130 basis points, whereas the rest of the industry went up about 280, 300 basis points. So what do you believe was causing this underperformance financially versus the rest of the industry? Was that that your tonnage was down about 2.5%, 3% nobody else's was? I'm just trying to understand your metrics really weren't that out of line from any other LTL company has reported this quarter, yet your P&L was meaningfully lower?

Darren Hawkins -- Chief Executive Officer

Jeff, it's certainly a fair question and when I made my initial comments and I spoke about cost, and also the need to move to One Yellow. The idea of having one of our current brands behind inline, behind another one of our brands at a customer's location is a difficult proposition. When you've got regional networks that can recover much quicker from winter storms, the national networks that still use a hub-and-spoke system, those things become glaringly apparent during stressful times, like prolonged weather events that happen in parts of the country that aren't accustomed to. So when we put all that together, it just reinforces that our One Yellow strategy is exactly the right thing to do and the direction to go.

Our network will be less complex but it'll be more agile and able to recover as we open more and more velocity centers throughout and across the country. We started this process already. You see what we did in Texas, what we've done in Richmond, what we've done in Little Rock, those are territories where we haven't had regional presence, that we're providing regional service right now through YRC Freight. So just in a few quarters and by the first half of 2022, so in a few quarters, we'll have the technology pace time, Reddaway, Holland.

New plans are already on the Yellow technology, but all of the companies will be on one technology this year, we'll have visibility across all the longhaul networks, all the terminals with one technology system for all employees to use, all drivers to benefit from. And then by the first half of 2022, we'll have the network connected and the environment that I just talked about what we've done in Texas, Richmond, Little Rock, we've already got the regional service where we have regional carriers present, but we will remove having two of our company drivers at the same customer in two trucks, two trailers, etc. The asset utilization side of this is going to be huge. Our call structure does not align well right now with large single brand LTL carriers and that's exactly what we're on a mission to fix.

Jeff Kauffman -- Vertical Research Partners -- Analyst

All right. So at end of the day, we still have inefficiency and redundancy in the network. And you know, that may explain some of that difference and you've got these transition costs with the systems change over and those never go as smoothly as we'd all like to believe. Is that a fair assessment?

Darren Hawkins -- Chief Executive Officer

Yes, you did an excellent job summarizing that.

Jeff Kauffman -- Vertical Research Partners -- Analyst

All right, last question. I want to go back to the yields. I mean, just an unbelievable environment for yields. It's not sustainable, but on the other hand, not going away anytime soon.

What percentage of your 2021 contracts have been repriced at this point? And I know you said you just took the GRI, but what's remaining to be repriced still for this year?

Darren Hawkins -- Chief Executive Officer

Yeah, Jeff. This is something we've looked a lot at. As you know, the contractual piece is so much bigger than GRI. And the contractual piece were pretty well balanced across quarter.

So if you look at the number of negotiations, we do, they're pretty evenly balanced between each quarter of the year and also the way we staff to handle that. As you know, the volume of that is thousands and thousands of customers, as the majority of business now is under contract. So we've still got a lot of good pricing in front of us. And those renewals are going very well.

Naturally, we're working with our customers. It's not an ambush. We're communicating ahead of time. Everyone understands the environment.

Its no secret what's going on in transportation right now. And these negotiations are moving in the right direction for us. And also working with the customers to make sure they're freights in the right lane, so that their transportation budgets -- they're all going up, but also that they can run their businesses effectively. So we're pretty even across each quarter.

Jeff Kauffman -- Vertical Research Partners -- Analyst

All right. Thank you very much.

Darren Hawkins -- Chief Executive Officer

And we started this and we started in Q4, in a strong way. So you could really mark us right at the halfway point. Jeff, did I lose you.

Jeff Kauffman -- Vertical Research Partners -- Analyst

No, I'm good. Thank you. I was just passing it on. Thank you.

Darren Hawkins -- Chief Executive Officer

OK. Thank you, Jeff.

Operator

And this will conclude our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

Darren Hawkins -- Chief Executive Officer

Thank you, operator, and thanks again to everyone who participated and joined us today. Please contact Tony with any additional questions that you may have. This concludes our call and operator, I'm turning the call back to you.

Operator

[Operator signoff]

Duration: 44 minutes

Call participants:

Tony Carreno -- Vice President of Investor Relations

Darren Hawkins -- Chief Executive Officer

Dan Olivier -- Interim Chief Financial Officer

Darrel Harris -- President

Jack Atkins -- Stephens Inc. -- Analyst

Rob Ginsberg -- Wolfe Research -- Analyst

Jeff Kauffman -- Vertical Research Partners -- Analyst

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