UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



	(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~2019



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-12255

YRC Worldwide Inc.

(Exact name of registrant as specified in its charter)



Delaware		48-0948788
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

10990 Roe Avenue, Overland Park, Kansas		66211
(Address of principal executive offices)		(Zip Code)

(913) 696-6100

(Registrant’s telephone number, including area code)

~~None~~

~~(Former name, former address and former fiscal year, if changed since last report)~~Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	YRCW	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o	Accelerated filer	ý

Non-accelerated filer	o ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	o

		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class		Outstanding at October ~~27, 2017~~25, 2019
Common Stock, $0.01 par value per share		~~33,518,313~~36,251,688 shares

INDEX


Item		Page		Page
	PART I – FINANCIAL INFORMATION		PART I – FINANCIAL INFORMATION
1	Financial Statements	3	Financial Statements	4
	Consolidated Balance Sheets - September 30, 2017 and December 31, 2016	3	Consolidated Balance Sheets - September 30, 2019 and December 31, 2018	4
	Statements of Consolidated Comprehensive Income - Three and Nine Months Ended September 30, 2017 and 2016	4	Statements of Consolidated Comprehensive Income (Loss) - Three and Nine Months Ended September 30, 2019 and 2018	5
	Statements of Consolidated Cash Flows - Nine Months Ended September 30, 2017 and 2016	5	Statements of Consolidated Cash Flows - Nine Months Ended September 30, 2019 and 2018	6
	Statement of Consolidated Shareholders’ Deficit - Nine Months Ended September 30, 2017	6	Statements of Consolidated Shareholders’ Deficit - Nine Months Ended September 30, 2019 and 2018	7
	Notes to Consolidated Financial Statements	7	Notes to Consolidated Financial Statements	9
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
3	Quantitative and Qualitative Disclosures About Market Risk	29	Quantitative and Qualitative Disclosures About Market Risk	40
4	Controls and Procedures	29	Controls and Procedures	40
	PART II – OTHER INFORMATION		PART II – OTHER INFORMATION
1	Legal Proceedings	30	Legal Proceedings	41
1A	Risk Factors	30	Risk Factors	41
2			Not Applicable
3			Not Applicable
4			Not Applicable
5			Not Applicable
6	Exhibits	30	Exhibits	43
	Signatures	31	Signatures	44

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

YRC Worldwide Inc. and Subsidiaries

(Amounts in millions except share and per share data)


	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
	(Unaudited)						(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	160.8		$	136.7		$	121.3		$	227.6
Restricted amounts held in escrow	54.0			126.7			—			—
Accounts receivable, net	528.5			448.7			514.3			470.3
Prepaid expenses and other	66.6			68.7			44.3			58.7
Total current assets	809.9			780.8			679.9			756.6
Property and Equipment:
Cost	2,751.7			2,787.0			2,769.9			2,765.9
Less – accumulated depreciation	(1,932.6		)	(1,916.4		)	(1,987.5		)	(1,969.8		)
Net property and equipment	819.1			870.6			782.4			796.1
Intangibles, net	27.8			27.2
Restricted amounts held in escrow	—			12.3
Deferred income taxes, net	—			24.9
Operating lease right-of-use assets							400.4			—
Other assets	44.8			54.2			54.4			64.4
Total Assets	$	1,701.6		$	1,770.0		$	1,917.1		$	1,617.1
Liabilities and Shareholders’ Deficit
Current Liabilities:
Accounts payable	$	175.0		$	160.6		$	176.5		$	178.0
Wages, vacations and employee benefits	212.1			191.0			230.0			223.6
Deferred income taxes, net	—			24.9
Current operating lease liabilities							116.1			—
Claims and insurance accruals	116.0			114.9			118.4			112.8
Other accrued taxes	27.6			27.6			27.9			24.7
Other current and accrued liabilities	24.2			26.1			26.7			32.6
Current maturities of long-term debt	28.5			16.8			4.3			20.7
Total current liabilities	583.4			561.9			699.9			592.4
Other Liabilities:
Long-term debt, less current portion	913.0			980.3			860.7			854.2
Deferred income taxes, net	3.1			3.6			0.2			1.8
Pension and postretirement	316.3			358.2			189.2			202.9
Operating lease liabilities							267.1			—
Claims and other liabilities	289.5			282.2			280.7			271.3
Commitments and contingencies
Shareholders’ Deficit:
Preferred stock, $1 par value per share	—			—			—			—
Common stock, $0.01 par value per share	0.3			0.3			0.3			0.3
Capital surplus	2,322.1			2,319.2			2,332.0			2,327.6
Accumulated deficit	(2,221.1		)	(2,217.8		)	(2,297.1		)	(2,208.4		)
Accumulated other comprehensive loss	(412.3		)	(425.2		)	(323.2		)	(332.3		)
Treasury stock, at cost (410 shares)	(92.7		)	(92.7		)	(92.7		)	(92.7		)
Total shareholders’ deficit	(403.7		)	(416.2		)	(380.7		)	(305.5		)
Total Liabilities and Shareholders’ Deficit	$	1,701.6		$	1,770.0		$	1,917.1		$	1,617.1

The accompanying notes are an integral part of these statements.

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

YRC Worldwide Inc. and Subsidiaries

For the Three ~~Months~~ and Nine Months Ended September 30

(Amounts in millions except per share data, shares in thousands)

(Unaudited)


	Three Months					Nine Months						Three Months					Nine Months
	2017		2016			2017			2016			2019			2018		2019			2018
Operating Revenue	$	1,251.2	$	1,221.3		$	3,682.4		$	3,549.2		$	1,256.8		$	1,303.6	$	3,711.7		$	3,844.6
Operating Expenses:
Salaries, wages and employee benefits	726.8		715.8			2,188.1			2,132.6			756.2			743.0		2,256.7			2,228.7
Operating expenses and supplies	216.6		206.9			642.6			595.7
Fuel, operating expenses and supplies												218.9			233.6		683.1			705.8
Purchased transportation	169.1		156.8			463.2			409.0			160.7			183.4		465.0			516.0
Depreciation and amortization	36.7		40.3			111.0			119.5			37.2			34.9		115.7			110.2
Other operating expenses	60.6		62.5			187.4			194.2			59.0			65.6		180.2			188.8
(Gains) losses on property disposals, net	1.3		0.2			3.0			(11.2		)	1.0			1.9		(3.6		)	7.3
Impairment charges												—			—		8.2			—
Total operating expenses	1,211.1		1,182.5			3,595.3			3,439.8			1,233.0			1,262.4		3,705.3			3,756.8
Operating Income	40.1		38.8			87.1			109.4			23.8			41.2		6.4			87.8
Nonoperating Expenses:
Interest expense	25.9		25.6			77.0			77.9			27.9			26.6		83.1			77.7
Loss on extinguishment of debt												11.2			—		11.2			—
Non-union pension and postretirement benefits												2.0			6.9		2.8			6.0
Other, net	10.3		(1.2		)	13.0			(0.9		)	(0.8		)	0.1		(0.9		)	(0.8		)
Nonoperating expenses, net	36.2		24.4			90.0			77.0			40.3			33.6		96.2			82.9
Income (loss) before income taxes	3.9		14.4			(2.9		)	32.4			(16.5		)	7.6		(89.8		)	4.9
Income tax expense	0.9		0.5			0.4			3.4
Income tax expense (benefit)												(0.5		)	4.7		(1.1		)	2.2
Net income (loss)	3.0		13.9			(3.3		)	29.0			(16.0		)	2.9		(88.7		)	2.7
Other comprehensive income, net of tax	2.5		2.3			12.9			2.9			3.6			12.2		9.1			18.5
Comprehensive Income	$	5.5	$	16.2		$	9.6		$	31.9
Comprehensive Income (Loss)												$	(12.4	)	$	15.1	$	(79.6	)	$	21.2

Average Common Shares Outstanding – Basic	32,723		32,466			32,550			32,398			33,259			33,051		33,098			32,827
Average Common Shares Outstanding – Diluted	33,592		33,194			32,550			32,915			33,259			33,995		33,098			33,755

Income (loss) Per Share – Basic	$	0.09	$	0.43		$	(0.10	)	$	0.89
Income (loss) Per Share – Diluted	$	0.09	$	0.42		$	(0.10	)	$	0.88
Earnings (Loss) Per Share – Basic												$	(0.48	)	$	0.09	$	(2.68	)	$	0.08
Earnings (Loss) Per Share – Diluted												$	(0.48	)	$	0.09	$	(2.68	)	$	0.08

The accompanying notes are an integral part of these statements.

STATEMENTS OF CONSOLIDATED CASH FLOWS

YRC Worldwide Inc. and Subsidiaries

For the Nine Months Ended September 30

(Amounts in millions)

(Unaudited)


	2017			2016			2019			2018
Operating Activities:
Net income (loss)	$	(3.3	)	$	29.0		$	(88.7	)	$	2.7
Noncash items included in net income (loss):
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization	111.0			119.5			115.7			110.2
Noncash equity-based compensation and employee benefits expense	16.9			16.2
Deferred income tax benefit	(4.8		)	—
Lease amortization and accretion expense							124.7			—
Lease payments							(113.4		)	—
Equity-based compensation and employee benefits expense							14.4			16.2
(Gains) losses on property disposals, net	3.0			(11.2		)	(3.6		)	7.3
Gain on disposal of equity method investment	—			(2.3		)
Other noncash items, net	12.5			7.6
Impairment charges							8.2			—
Deferred income tax benefit, net							(2.3		)	—
Non-union pension settlement charge							1.7			7.2
Loss on extinguishment of debt							11.2			—
Other non-cash items, net							4.1			4.9
Changes in assets and liabilities, net:
Accounts receivable	(78.8		)	(49.7		)	(42.8		)	(58.9		)
Accounts payable	12.9			0.8			(3.1		)	32.9
Other operating assets	11.4			4.1			0.6			3.1
Other operating liabilities	(16.6		)	(28.0		)	(13.3		)	32.3
Net cash provided by operating activities	64.2			86.0			13.4			157.9
Investing Activities:
Acquisition of property and equipment	(70.8		)	(75.4		)	(111.5		)	(92.4		)
Proceeds from disposal of property and equipment	8.2			26.5			9.9			4.9
Restricted escrow receipts	95.0			112.1
Restricted escrow deposits	(10.0		)	(32.9		)
Proceeds from disposal of equity method investment, net	—			14.6
Net cash provided by investing activities	22.4			44.9
Net cash used in investing activities							(101.6		)	(87.5		)
Financing Activities:
Issuance of long-term debt, net of discounts							570.0			—
Repayments of long-term debt	(48.2		)	(26.5		)	(576.2		)	(20.9		)
Debt issuance costs	(14.3		)	(1.8		)	(11.1		)	—
Payments for tax withheld on equity-based compensation							(0.8		)	(2.0		)
Net cash used in financing activities	(62.5		)	(28.3		)	(18.1		)	(22.9		)
Net Increase In Cash and Cash Equivalents	24.1			102.6
Cash and Cash Equivalents, Beginning of Period	136.7			173.8
Cash and Cash Equivalents, End of Period	$	160.8		$	276.4
Net Increase (Decrease) In Cash, Cash Equivalents and Restricted Amounts Held in Escrow							(106.3		)	47.5
Cash, Cash Equivalents and Restricted Amounts Held in Escrow, Beginning of Period							227.6			145.7
Cash, Cash Equivalents and Restricted Amounts Held in Escrow, End of Period							$	121.3		$	193.2

Supplemental Cash Flow Information:
Interest paid	$	(78.7	)	$	(68.5	)	$	(77.8	)	$	(71.3	)
Income tax refund (payment), net	3.2			(4.1		)
Income tax payment, net							(2.6		)	(3.7		)

The accompanying notes are an integral part of these statements.

STATEMENT OF CONSOLIDATED SHAREHOLDERS’ DEFICIT

YRC Worldwide Inc. and Subsidiaries

For the Three and Nine Months Ended September 30 ~~2017~~

(Amounts in millions)

(Unaudited)



	Preferred Stock		Common Stock		Capital Surplus		Accumulated Deficit			Accumulated Other Comprehensive Loss			Treasury Stock, At Cost			Total Shareholders' Deficit
Balances at December 31, 2018	$	—	$	0.3	$	2,327.6	$	(2,208.4	)	$	(332.3	)	$	(92.7	)	$	(305.5	)
Equity-based compensation	—		—		1.6		—			—			—			1.6
Net loss	—		—		—		(49.1		)	—			—			(49.1		)
Pension, net of tax:
Amortization of prior net losses	—		—		—		—			3.2			—			3.2
Amortization of prior service credit	—		—		—		—			(0.1		)	—			(0.1		)
Foreign currency translation adjustments	—		—		—		—			0.4			—			0.4
Balances at March 31, 2019	$	—	$	0.3	$	2,329.2	$	(2,257.5	)	$	(328.8	)	$	(92.7	)	$	(349.5	)
Equity-based compensation	—		—		1.0		—			—			—			1.0
Net loss	—		—		—		(23.6		)	—			—			(23.6		)
Pension, net of tax:																—
Amortization of prior net losses	—		—		—		—			1.6			—			1.6
Amortization of prior service credit	—		—		—		—			(0.1		)	—			(0.1		)
Foreign currency translation adjustments	—		—		—		—			0.5			—			0.5
Balances at June 30, 2019	$	—	$	0.3	$	2,330.2	$	(2,281.1	)	$	(326.8	)	$	(92.7	)	$	(370.1	)
Equity-based compensation	—		—		1.8		—			—			—			1.8
Net loss	—		—		—		(16.0		)	—			—			(16.0		)
Pension, net of tax:																—
Amortization of prior net losses	—		—		—		—			2.5			—			2.5
Amortization of prior service credit	—		—		—		—			(0.1		)	—			(0.1		)
Settlement adjustment	—		—		—		—			1.7			—			1.7
Net actuarial gain	—		—		—		—			0.3			—			0.3
Foreign currency translation adjustments	—		—		—		—			(0.8		)	—			(0.8		)
Balances at September 30, 2019	$	—	$	0.3	$	2,332.0	$	(2,297.1	)	$	(323.2	)	$	(92.7	)	$	(380.7	)

Preferred Stock:
Beginning and ending balance $ —
Common Stock:
Beginning and ending balance $ 0.3
Capital Surplus:
Beginning balance $ 2,319.2
Equity-based compensation 2.9
Ending balance $ 2,322.1
Accumulated Deficit:
Beginning balance $ (2,217.8 )
Net loss (3.3 )
Ending balance $ (2,221.1 )
Accumulated Other Comprehensive Loss:
Beginning balance $ (425.2 )
Reclassification of prior net pension actuarial losses, net of tax 6.9
Foreign currency translation adjustments 6.0
Ending balance $ (412.3 )
Treasury Stock, At Cost:
Beginning and ending balance $ (92.7 )
Total Shareholders’ Deficit $ (403.7 )



	Preferred Stock		Common Stock		Capital Surplus		Accumulated Deficit			Accumulated Other Comprehensive Loss			Treasury Stock, At Cost			Total Shareholders' Deficit
Balances at December 31, 2017	$	—	$	0.3	$	2,323.3	$	(2,228.6	)	$	(355.8	)	$	(92.7	)	$	(353.5	)
Equity-based compensation	—		—		0.2		—			—			—			0.2
Net loss	—		—		—		(14.6		)	—			—			(14.6		)
Pension, net of tax:
Amortization of prior net losses	—		—		—		—			3.8			—			3.8
Amortization of prior service credit	—		—		—		—			(0.1		)	—			(0.1		)
Foreign currency translation adjustments	—		—		—		—			(1.7		)	—			(1.7		)
Balances at March 31, 2018	$	—	$	0.3	$	2,323.5	$	(2,243.2	)	$	(353.8	)	$	(92.7	)	$	(365.9	)
Equity-based compensation	—		—		3.1		—			—			—			3.1
Net income	—		—		—		14.4			—			—			14.4
Pension, net of tax:
Amortization of prior net losses	—		—		—		—			3.8			—			3.8
Amortization of prior service credit	—		—		—		—			(0.1		)	—			(0.1		)
Foreign currency translation adjustments	—		—		—		—			0.6			—			0.6
Balances at June 30, 2018	$	—	$	0.3	$	2,326.6	$	(2,228.8	)	$	(349.5	)	$	(92.7	)	$	(344.1	)
Equity-based compensation	—		—		0.2		—			—			—			0.2
Net income	—		—		—		2.9			—			—			2.9
Pension, net of tax:
Amortization of prior net losses	—		—		—		—			3.5			—			3.5
Amortization of prior service credit	—		—		—		—			(0.1		)	—			(0.1		)
Settlement adjustment	—		—		—		—			7.2			—			7.2
Net actuarial gain	—		—		—		—			0.7			—			0.7
Foreign currency translation adjustments	—		—		—		—			0.9			—			0.9
Balances at September 30, 2018	$	—	$	0.3	$	2,326.8	$	(2,225.9	)	$	(337.3	)	$	(92.7	)	$	(328.8	)

The accompanying notes are an integral part of these statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YRC Worldwide Inc. and Subsidiaries

(Unaudited)

Certain of these Notes to Consolidated Financial Statements contain forward-looking statements, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Cautionary Note Regarding Forward-Looking Statements.”

1. Description of Business

YRC Worldwide Inc. (also referred to as “YRC Worldwide,” the “Company,” “we,” “us” or “our”) is a holding company that, through ~~wholly owned~~its operating subsidiaries, offers its customers a wide range of transportation services. ~~YRC Worldwide has~~We have one of the largest, most comprehensive less-than-truckload (“LTL”) networks in North America with local, regional, national and international capabilities. Through our team of experienced service professionals, we offer expertise in LTL shipments and flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence. Our reporting segments include the following:

YRC Freight is the reporting segment that focuses on longer haul business opportunities with national, regional and international services. YRC Freight provides for the movement of industrial, commercial and retail goods, primarily through centralized management. This reporting segment includes ~~our~~ LTL subsidiaries YRC Inc. ~~(doing~~and YRC Freight Canada Company (both doing business as, and herein referred to as, “YRC Freight”) and ~~Reimer Express Lines Ltd.~~HNRY Logistics, Inc. (“~~YRC Reimer”~~HNRY Logistics”)~~. YRC Reimer is a subsidiary located in Canada that specializes in shipments into, across and out of Canada.~~, our customer-specific logistics solutions provider. In addition to the United States and Canada, YRC Freight also serves parts of Mexico and Puerto Rico.

Regional Transportation is the reporting segment for our transportation service providers focused on business opportunities in the regional and next-day delivery markets. Regional Transportation is comprised of USF Holland LLC (“Holland”), New Penn Motor Express LLC (“New Penn”), and USF Reddaway Inc. (“Reddaway”). These companies each provide regional, next-day ground services in their respective regions through a network of facilities located across the United States, Canada, and Puerto Rico.

At September 30, ~~2017,~~2019, approximately ~~78%~~79% of our labor force is subject to collective bargaining agreements, which predominantly expire inon March ~~2019.~~31, 2024.

2. ~~Principles~~Basis of ~~Consolidation~~Presentation

The accompanying Consolidated Financial Statements include the accounts of YRC Worldwide and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. We report on a calendar year basis. The quarters of the Regional Transportation companies (with the exception of New Penn) consist of thirteen weeks that end on a Saturday either before or after the end of March, June and September, whereas all other operating segment quarters end on the natural calendar quarter end. For ease of reference, the calendar quarter end dates are used herein.

We make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and notes. Actual results could differ from those estimates. We have prepared the Consolidated Financial Statements, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, we have made all normal recurring adjustments necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods included in these financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted from these statements pursuant to SEC rules and regulations. Accordingly, the accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2018.

~~Fair Value of Financial Instruments~~Revenue Disaggregation

~~The following table summarizes~~We considered the ~~fair value hierarchy of~~disclosure requirements for revenue disaggregation guidance in ASC Topic 606, Revenue from Contracts with Customers, and noted that our ~~financial assets and liabilities carried at fair value on a recurring basis as of~~ ~~September 30, 2017~~:

Fair Value Measurement Hierarchy
(in millions)
Total Carrying
Value

Quoted prices
in active market
(Level 1)

Significant
other
observable
inputs (Level 2)

Significant
unobservable
inputs
(Level 3)
Restricted amounts held in escrow-current $ 54.0
$ 54.0
$ —
$ —
Total assets at fair value $ 54.0
$ 54.0
$ —
$ —

~~Restricted amounts held in escrow are invested in money market accounts and are recorded at fair value~~segments disaggregate our revenues based on ~~quoted market prices. The carrying value of cash~~geographic and ~~cash equivalents, accounts receivable and accounts payable approximate their fair value due to the short-term nature of these instruments.~~

~~Equity Method Investment~~

~~On October 23, 2015, the Company entered into a sale and purchase agreement to sell its fifty percent equity interest in its Chinese joint venture, JHJ International~~time-based factors as our Regional Transportation Co., Ltd. (“JHJ”), for a purchase price of $16.3 million, which subsequently closed on March 30, 2016. At closing, we received proceeds of $16.3 million and paid transaction fees of $1.7 million. As of March 30, 2016, the carrying value of the investment was $22.7 million with an offsetting cumulative foreign translation adjustment of $10.4 million, resultingsegment carriers operate in a ~~net gain on~~smaller geographic footprint and have a shorter length of haul as compared to our YRC Freight segment. For additional information, see the transaction of $2.3 million. The gain on the transaction is included in “Nonoperating expenses - Other, net” in the accompanying statement of consolidated comprehensive loss for the three and nine months ended September 30, 2016.

~~Reclassifications Out of Accumulated Other Comprehensive Loss~~

For the three and nine months ended September 30, 2017, we reclassified the amortization of our prior net pension losses, net of tax, totaling $(0.9) million and $6.9 million, respectively, from accumulated other comprehensive loss to net income (loss). For the three and nine months ended September 30, 2016, we reclassified the amortization of our prior net pension losses, net of tax, totaling $3.5 million and $10.3 million, respectively, from accumulated other comprehensive loss to net income. This reclassification is a component of net periodic pension cost and is discussed in the “Employee Benefits”“Business Segments” footnote to the consolidated financial statements. ~~In addition, for the three~~The following table presents disaggregated revenue by revenue source between LTL shipments and ~~nine months ended September 30, 2016, we also reclassified foreign currency translation adjustments of $10.4 million related to our investment~~total. LTL shipments are defined as shipments less than 10,000 pounds. Beginning in ~~JHJ from accumulated other comprehensive loss to net income, as discussed in the “Equity Method Investment” section above.~~

~~Impact of Recently Issued Accounting Standards~~

~~In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-14,~~ ~~Revenue from Contracts with Customers, Deferral of the Effective Date,~~ ~~which defers the effective date of ASU 2014-9,~~ ~~Revenue from Contracts with Customers~~. The new standard introduces a five-step model to determine when and how revenue is recognized. The premise of the new model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard will be effective for2019, the Company disaggregated revenue for ~~its annual~~ reporting ~~period beginning January 1, 2018,~~of key operating metrics, including ~~interim periods within that reporting period. Entities are allowed to transition~~volume and yield metrics, due to the new standard by either recasting prior periods or recognizing the cumulative effect using a modified retrospective approach. The Company has completed the process of reviewing customer contracts and we believe the model in which our transportation revenue is recognized under the new standard will not be materially impacted. The Company will formalize an assessment, including the impacts ~~of new expanded disclosure requirements and the impacts on the Company’s internal control~~from shipments over ~~financial reporting, in the fourth quarter of 2017 and will adopt the new standard in the first quarter of 2018 using the modified retrospective transition approach.~~10,000 pounds.

~~In November 2015, the FASB issued ASU 2015-17,~~ ~~Balance Sheet Classification of Deferred Taxes~~, which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. The ASU allows entities to choose either prospective or retrospective transition. The Company adopted the standard in the first quarter of 2017 and elected prospective application; accordingly, historical periods were not adjusted. There was no material impact on its consolidated financial statements.



	Three Months				Nine Months
YRC Freight segment (in millions)	2019		2018		2019		2018
LTL revenue	$	739.4	$	756.1	$	2,162.0	$	2,212.8
Other revenue	63.8		66.0		185.8		188.2
Total revenue	$	803.2	$	822.1	$	2,347.8	$	2,401.0



	Three Months				Nine Months
Regional Transportation segment (in millions)	2019		2018		2019		2018
LTL revenue	$	421.6	$	443.7	$	1,264.8	$	1,326.3
Other revenue	32.0		37.8		99.2		117.5
Total revenue	$	453.6	$	481.5	$	1,364.0	$	1,443.8



	Three Months				Nine Months
Consolidated (in millions)	2019		2018		2019		2018
LTL revenue	$	1,161.0	$	1,199.8	$	3,426.8	$	3,539.1
Other revenue	95.8		103.8		284.9		305.5
Total revenue	$	1,256.8	$	1,303.6	$	3,711.7	$	3,844.6

Newly-Adopted Accounting Standards

In February 2016, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. ~~Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less.~~ Additional qualitative and quantitative disclosures, including significant judgments made by management, ~~will be~~are required. The new standard ~~will become~~became effective for the Company for its annual reporting period beginning January 1, 2019, including interim periods within that reporting ~~period and requires~~period. The Company adopted the standard using a modified retrospective ~~transition approach.~~ approach with the effective date of the standard as the date of initial application.

The Company ~~is currently evaluating~~elected the ~~impact~~package of three practical expedients which allows entities to not reassess initial direct costs, lease classification for existing or expired leases, and lease definition for existing or expired contracts as of the effective date of January 1, 2019. Additionally, the Company did not elect the hindsight method practical expedient which would have allowed us to reassess lease terms and impairment. For leases with a term of twelve months or less, the Company has made an accounting policy election in which the right of use lease (“ROU”) asset and lease liability will not be recognized on the consolidated balance sheet. The Company does not separate lease and non-lease components for its revenue equipment and real property leases. The Company reassessed the accounting for debt financing obligations under the new standard and determined the historical accounting remained appropriate under the new standard.

The adoption of this standard ~~will have~~impacted our consolidated balance sheet through the recognition of $378.8 million in ROU assets and liabilities as of January 1, 2019. Lease deposits in the amount of $25.4 million were reclassified from assets to a reduction of long-term ROU liabilities upon adoption of the new standard.

The new standard did not impact the calculation of our financial covenants defined under the terms of our credit agreements.

Impact of Recently-Issued Accounting Standards

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans. The guidance modifies disclosure requirements for defined benefit plans. This guidance is effective for fiscal years ending after December 15, 2020 and early adoption is permitted. The Company assessed the potential impact of ASU 2018-14 on its consolidated financial ~~statements.~~statement disclosures and does not expect it to be material.

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cos~~t, which requires companies to present the service cost component of net benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. All other components of net benefit cost are presented outside of any subtotal for operating income, if one is presented. The new standard is effective for the Company for its annual reporting period beginning January 1, 2018, including interim periods within that reporting period with retrospective application. Early application is permitted for the first quarter of 2017. The Company will adopt the standard in the first quarter of 2018. For the three and nine months ended September 30, 2017, the amount to be reclassified to “Other, net” in nonoperating expenses from “Salaries, wages and employee benefits” in operating expenses is $1.9 million and $5.7 million, respectively, if adopted. Accordingly, the Company does not believe the adoption of this standard will have a material impact on its consolidated financial statements.

3. Debt and Financing

Our outstanding debt as of September 30, ~~2017~~2019 consisted of the following:


As of September 30, 2017 (in millions)	Par Value			Discount			Debt Issuance Costs			Book Value			Stated Interest Rate			Average Effective Interest Rate
As of September 30, 2019 (in millions)																		Par Value			Discount			Debt Issuance Costs			Book Value			Average Effective Interest Rate
Term Loan	$	599.1		$	(11.0	)	$	(8.5	)	$	579.6		9.7	%	^(a)	10.1	%	$	600.0		$	(29.7	)	$	(11.0	)	$	559.3		10.7	%	^(a)
ABL Facility	—			—			—			—			N/A			N/A		—			—			—			—			N/A
Secured Second A&R CDA	26.9			—			(0.1		)	26.8			4.3-18.3%			7.5	%	26.8			—			(0.1		)	26.7			7.9	%
Unsecured Second A&R CDA	73.2			—			(0.3		)	72.9			4.3-18.3%			7.5	%	46.7			—			(0.2		)	46.5			7.9	%
Lease financing obligations	263.2			—			(1.0		)	262.2			9.0-18.2%			12.0	%	232.8			—			(0.3		)	232.5			16.4	%	^(b)
Total debt	$	962.4		$	(11.0	)	$	(9.9	)	$	941.5							$	906.3		$	(29.7	)	$	(11.6	)	$	865.0
Current maturities of Term Loan	(17.0		)	—			—			(17.0		)						—			—			—			—
Current maturities of lease financing obligations	(11.5		)	—			—			(11.5		)						(2.8		)	—			—			(2.8		)
Current maturities of Unsecured Second A&R CDA																		(1.5		)	—			—			(1.5		)
Long-term debt	$	933.9		$	(11.0	)	$	(9.9	)	$	913.0							$	902.0		$	(29.7	)	$	(11.6	)	$	860.7


(a)	Variable interest rate of 1, 3 or 6-month LIBOR, with a floor of 1.0%, plus a fixed margin of ~~8.50%~~7.5%.

(b) Interest rate for lease financing obligations is derived from the difference between total rent payment and calculated principal amortization over the life of lease agreements.

~~ABL Facility Availability~~New Term Loan

On September 11, 2019, the Company and certain of its subsidiaries, as guarantors (the “Term Guarantors”), amended and restated the existing credit facilities under the credit agreement dated February 13, 2014 (the “Prior Term Loan Agreement”) and entered into a $600.0 million term loan agreement (“New Term Loan”) with funds managed by Apollo Global Management, LLC acting collectively as lead lender, and Cortland Products Corp, as administrative agent and collateral agent. The obligations of the Company under the agreement governing (the “New Term Loan Agreement”) are unconditionally guaranteed by the Term Guarantors.

The New Term Loan has a maturity date of June 30, 2024, with a single payment due at maturity of the outstanding balance. The New Term Loan bears interest at LIBOR (subject to a floor of 1.0%) plus a margin of 7.5% per annum, payable at least quarterly in cash, subject to a 1.0% margin step down in the event the Company achieves greater than $400.0 million in trailing-twelve-month Adjusted EBITDA (defined in the New Term Loan Agreement as “Consolidated EBITDA”). Obligations under the New Term Loan are secured by a perfected first priority security interest in (subject to permitted liens) assets of the Company and the Term Guarantors, including but not limited to all of the Company’s wholly owned terminals, tractors and trailers, subject to certain limited exceptions.

The New Term Loan eliminated the total maximum leverage ratio covenant that the Company was subject to under the Prior Term Loan Agreement and introduced a new covenant that requires the Company maintain a minimum trailing-twelve-month Adjusted EBITDA of $200.0 million, measured quarterly. The New Term Loan is subject to repayment with, among other things, 100.0% of the net cash proceeds from the disposition of assets outside the ordinary course of business, except that the Company is permitted to keep the first $40.0 million in trucking terminal property sales over the term of the loan to reinvest in operations or other strategic initiatives, where applicable.

Borrowings under the New Term Loan may be voluntarily prepaid, provided however, that any such prepayment or mandatory prepayment (other than with respect to a prepayment with excess cash flow) will be subject to a 3.0% premium until the first anniversary date, a 2.0% premium from the first anniversary date until the second anniversary date, and a 1.0% premium from the second anniversary date until the third anniversary date, and 0.0% thereafter.

The New Term Loan resulted in an extinguishment of $11.2 million in capitalized issuance discount and unamortized deferred debt issuance costs relating to the prior term loan. The original issuance discount and transaction fees relating to the New Term Loan were capitalized and will be amortized through interest expense over the life of the New Term Loan.

Liquidity

Our principal sources of liquidity are cash and cash equivalents, available borrowings under our asset-based loan facility (the

“ABL Facility”) and any prospective net cash flow from operations. As of September 30, ~~2017,~~2019, our maximum availability under our ABL Facility was ~~$94.0~~$69.5 million. Our Managed Accessibility was $28.8 million, which represents the maximum amount we would access on the ABL Facility and is ~~derived by reducing the amount that may be advanced against~~adjusted for eligible receivables plus eligible borrowing base cash ~~by certain reserves imposed by the ABL Agent and~~measured at September 30, 2019. As of September 30, 2019, our $356.0 million of outstanding letters of credit. Of the $94.0 million in availability, we do not expect to access more than $49.0 million (“Managed Accessibility”) based on our springing fixed charge coverage ratio (as set forth in our ABL Facility). Our cash and cash equivalents and Managed Accessibility were $150.1 million.

For the December 31, 2018 borrowing base certificate, which was ~~$209.8~~filed in January of 2019, we transferred $25.0 million of cash into restricted cash to maintain the 10% threshold, as permitted under the ABL Facility, which transfer effectively put our cash and cash equivalents and Managed Accessibility to $203.8 million.

The table below summarizes cash and cash equivalents and Managed Accessibility as of September 30, ~~2017.~~2019 and December 31, 2018:

~~Term Loan Amendment~~



(in millions)	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	121.3	$	227.6
Changes to restricted cash	—		(25.0		)
Managed Accessibility	28.8		1.2
Total cash and cash equivalents and Managed Accessibility	$	150.1	$	203.8

On July 26, 2017, the Company entered into Amendment No. 4 (the “Amendment”) to the credit agreement (the “Term Loan Agreement”) governing our term loan facility (the “Term Loan”), which extended the maturity date to July 26, 2022 subject to the extension of the Secured and Unsecured Second Amended and Restated Contribution Deferral Agreement (the “Second A&R CDA”) on or before November 1, 2019 to a date that is at least 91 days after the final maturity date of the Term Loan.

If the Second A&R CDA is not extended, the maturity date of the Term Loan will spring back to November 1, 2019. The Amendment provided that the outstanding term loans under the Term Loan Agreement are satisfied and discharged in full and that the Company incurred new term loans in the aggregate principal amount of $600 million. The Amendment increased the annual principal

payments from 1% to 3% per annum and increased the applicable interest rate, at either the applicable LIBOR (subject to a floor of 1%), plus a margin of 8.50% or an alternative base rate (as defined in the Term Loan Agreement) plus a margin of 6.50%. In connection with the Amendment, the Company paid $35.2 million in principal and incurred $9.7 million in original issuance discount and an estimated $8.1 million in transaction costs for third party fees.

The Amendment resulted in a partial extinguishment of $1.5 million in capitalized original issuance discount and unamortized deferred debt issuance costs relating to the existing Term Loan. The $9.7 million in original issuance discount relating to the Amendment was capitalized and will be amortized through interest expense over the life of the Term Loan. Of the $8.1 million in transaction fees, $6.7 million was expensed as debt issuance costs in proportion to the Term Loan that was modified in the third quarter (presented within “Other, net” on the statement of consolidated comprehensive income) and the remaining $1.4 million was capitalized and will be amortized over the life of the Term Loan.

As a result of the extension in the maturity date under the Term Loan, the maturity date of the ABL will extend to June 28, 2021, as provided under Amendment No. 2 to the ABL, provided the final condition to the Term Loan’s extension is met upon the extension of the Second A&R CDA. Otherwise, the maturity date of the ABL is February 13, 2019.

~~Credit Facility~~ Covenants

The New Term Loan Agreement ~~governing our Term Loan has certain~~includes a financial ~~covenants, as amended on July 26, 2017, that, among other things, restrict certain capital expenditures and require us~~covenant requirement for the Company to ~~comply with~~maintain a ~~maximum total leverage ratio covenant (defined as Consolidated Total Debt divided by Consolidated~~minimum of $200.0 million trailing-twelve-month Adjusted EBITDA, ~~as defined below).~~

~~Our total maximum leverage ratio covenants are as follows:~~



~~Four Consecutive Fiscal Quarters Ending~~	~~Maximum Total~~ ~~Leverage Ratio~~	~~Four Consecutive Fiscal Quarters Ending~~	~~Maximum Total~~ ~~Leverage Ratio~~
~~September 30, 2017~~	~~3.75 to 1.00~~	~~September 30, 2019~~	~~3.25 to 1.00~~
~~December 31, 2017~~	~~3.50 to 1.00~~	~~December 31, 2019~~	~~3.00 to 1.00~~
~~March 31, 2018~~	~~3.50 to 1.00~~	~~March 31, 2020~~	~~3.00 to 1.00~~
~~June 30, 2018~~	~~3.50 to 1.00~~	~~June 30, 2020~~	~~3.00 to 1.00~~
~~September 30, 2018~~	~~3.50 to 1.00~~	~~September 30, 2020~~	~~2.75 to 1.00~~
~~December 31, 2018~~	~~3.50 to 1.00~~	~~December 31, 2020~~	~~2.75 to 1.00~~
~~March 31, 2019~~	~~3.25 to 1.00~~	~~March 31, 2021~~	~~2.75 to 1.00~~
~~June 30, 2019~~	~~3.25 to 1.00~~	~~June 30, 2021 and thereafter~~	~~2.50 to 1.00~~

measured quarterly. Consolidated Adjusted EBITDA, defined in our New Term Loan Agreement as “Consolidated EBITDA,” is a measure that reflects our earnings before interest, taxes, depreciation, and amortization expense, and is further adjusted for, among other things, letter of credit fees, equity-based compensation expense, net gains or losses on property disposals, restructuring ~~professional fees and other~~charges, transaction costs related to issuances of debt, non-recurring consulting fees, ~~expenses associated with certain lump sum payments to our union employees~~non-cash impairment charges, integration costs, severance, non-recurring charges and the gains or losses from permitted dispositions, discontinued operations, and ~~discontinued operations.~~certain non-cash expenses, charges and losses (provided that if any of such non-cash expenses, charges or losses represents an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period will be subtracted from Consolidated ~~Total Debt,~~EBITDA in such future period to the extent paid). The definition was further modified under the New Term Loan Agreement such that certain expenses that qualify as adjustments are capped at 10.0% of the trailing-twelve-month Adjusted EBITDA, in aggregate. Adjustments subject to the 10.0% cap include, but are not limited to, restructuring charges, integration costs, severance, and non-recurring charges. Additionally, all net gains from the disposition of properties are excluded from the definition of Adjusted EBITDA, therefore any gains previously recognized in Adjusted EBITDA, as that term was previously defined in our SEC filings, in accordance with its definition in the Prior Term Loan Agreement, will not be included in the calculation of Adjusted EBITDA under the New Term Loan Agreement.

The ABL Facility also contains certain covenants, including, but not limited to, annual limits on capital expenditures. The ABL includes a $200.0 million annual limit on capital expenditures but one year lookback is permitted. The annual capital expenditure limit covenant was removed from the ~~aggregate principal amount of indebtedness outstanding. Our total leverage ratio for the four consecutive fiscal quarters ending September 30, 2017 was 3.52 to 1.00.~~New Term Loan Agreement.

Risks and Uncertainties Regarding Compliance with Credit Facility Financial Covenants

We believe that our results of operations will ~~be sufficient to~~ allow us to comply with the ~~covenants~~minimum Adjusted EBITDA covenant in the New Term Loan Agreement ~~fund our operations, increase working capital as necessary to support our planned revenue growth and fund capital expenditures~~ for at least the next twelve ~~months. To maintain compliance~~months, subject to specific actions and cost savings initiatives we are taking in the fourth quarter of 2019 and the first quarter of 2020 to provide additional Adjusted EBITDA. These actions include headcount reductions commensurate with ~~the maximum total leverage ratio over the tenor~~our current volume levels, a hiring freeze on new and replacement positions, temporary elimination of ~~the Term Loan~~short-term incentive compensation and a reduction in discretionary spend. We are taking these actions because we have not been able to fully realize operational efficiencies arising from our new five-year national master contract (“New NMFA”) due to depressed volume levels. Our ability to satisfy our liquidity needs ~~we would have~~and meet our minimum Adjusted EBITDA requirement during the next twelve months and thereafter is dependent upon our ability to achieve operating results that reflect improvement over our first half 2019, which were negatively impacted by the process to obtain our five-year labor agreement scheduled to expire on March 31, 2019 and successfully ratified on May 14, 2019. Significant adverse conditions, which may result from changes in global trade policies or increased contraction in the general economy, may impact our ability to achieve a ~~slight improvement to our 2016~~minimum Adjusted ~~EBITDA.~~EBITDA above $200.0 million on a trailing-twelve-month basis. Means for improving our profitability ~~may~~ include ~~streamlining our support structure,~~accelerated

implementation of network optimization, specific initiatives in the areas of pricing and customer engagement, and other operational actions to improve productivity and efficiency, as well as ~~ongoing successful implementation and realization~~increased volume, all of ~~pricing, productivity and efficiency initiatives,~~which may not be within our control. If we are unable to achieve the improved results required to comply with this covenant in one or more quarters over the next twelve months, we may be required to take specific actions in addition to ~~increased volume, some of which are outside of~~those described above, including but not limited to, additional reductions in headcount, targeted procurement initiatives to reduce operating costs and accelerating terminal closures to reduce overhead and other operating costs, or alternatively, seeking an amendment or waiver from our ~~control.~~

lenders or taking other remedial measures.

Fair Value Measurement

The book value and estimated fair values of our long-term debt, including current maturities and other financial instruments, are summarized as follows:


	September 30, 2017				December 31, 2016				September 30, 2019				December 31, 2018
(in millions)	Book Value		Fair value		Book Value		Fair value		Book Value		Fair value		Book Value		Fair value
Term Loan	$	579.6	$	590.8	$	627.2	$	638.1
Prior Term Loan									$	—	$	—	$	559.4	$	546.0
New Term Loan									559.3		559.3		—		—
Lease financing obligations	262.2		212.3		268.6		259.1		232.5		234.7		242.2		234.7
Second A&R CDA	99.7		98.7		101.3		101.8		73.2		74.1		73.3		70.0
Total debt	$	941.5	$	901.8	$	997.1	$	999.0	$	865.0	$	868.1	$	874.9	$	850.7

The fair value of the New Term Loan was determined to be equivalent to the book value based on the closing date’s proximity to the balance sheet date. The fair values of the ~~Term Loan~~Second Amended and ~~the Second~~Restated Contribution Deferral Agreement (the “Second A&R ~~CDA were estimated based on observable prices (level two inputs for fair value measurements). The fair value of~~CDA”) and the lease financing obligations isare estimated using a publicly-traded secured loan with similar characteristics (level three input for fair value measurement).

4. Leases

AsThe Company determines if an arrangement is a lease or contains a lease at inception. We lease certain revenue equipment and real estate, predominantly through operating leases, and we have an immaterial number of ~~September 30, 2017, our~~leases in which we are a lessor. Operating leases are expensed on a straight-line basis over the life of the lease beginning on the lease commencement date. We determine the lease term by assuming the exercise of renewal options that are reasonably certain. The lease term is used to determine whether a lease is finance or operating and is used to calculate rent expense. Additionally, the depreciable life of leased assets and leasehold improvements is limited by the expected lease term. Operating lease balances are classified as operating lease ~~payment obligations through 2030 totaled $282.5 million~~right-of-use (“ROU”) assets and current and long-term operating lease liabilities on our consolidated balance sheet. We have an immaterial amount of finance leases that are ~~expected~~included in property and equipment, other current liabilities, and other long-term liabilities on our consolidated balance sheet.

ROU assets represent our right to ~~increase as we lease additional revenue equipment. Additionally,~~use an underlying asset for the ~~nine months ended September 30, 2017, we entered into new operating leases for revenue equipment totaling $26.2 million in future~~lease term and lease liabilities represent our obligation to make lease payments ~~payable~~arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an ~~average~~implicit rate, we use our incremental borrowing rate adjusted for duration and other factors to represent the rate we would have to pay to borrow on a collateralized basis based on the information available at commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease and we will adjust the life of the lease when it is reasonably certain that we will exercise these options.

We have lease agreements with lease and non-lease components, which are generally accounted for as a single lease component. We have variable lease components, including lease payments with payment escalation based on the Consumer Price Index, and other variable items, such as common area maintenance and taxes.

Key assumptions include discount rate, the impact of purchase options and renewal options on our lease term, as well as the assessment of ~~five years.~~residual value guarantees.

Our ~~capital expenditures~~revenue equipment leases generally have purchase options. However, in most circumstances we are not typically certain of exercising the purchase option as we may sign a new lease, return the equipment to the lessor, or exercise the option as circumstances dictate. Our revenue equipment leases often contain residual value guarantees, but they are not reflected in our lease liabilities

as our lease rates are such that residual value guarantees are not expected to be owed at the end of our leases. Wrecked units are expensed in full upon damage and paid out to the lessor.

Our real estate leases will often have an option to extend the lease, but we are typically not reasonably certain of exercising options to extend as we have the ability to move to more advantageous locations over time, relocate to other leased and owned locations, or discontinue service from particular locations over time as customer demand changes.



Leases (in millions)	Classification	September 30, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	400.4
Finance lease assets	Net property and equipment	2.6
Total leased assets		$	403.0
Liabilities
Current
Operating	Current operating lease liabilities	$	116.1
Finance	Other current and accrued liabilities	0.2
Noncurrent
Operating	Operating lease liabilities	267.1
Finance	Claims and other liabilities	3.4
Total lease liabilities		$	386.8




Lease Cost (in millions)	Classification	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost^(a)	Purchased transportation; Fuel, operating expenses and supplies	$	42.3	$	124.7
Short-term cost	Purchased transportation; Fuel, operating expenses and supplies	4.5		11.4
Variable lease cost	Purchased transportation; Fuel, operating expenses and supplies	1.9		5.2
Finance lease cost
Amortization of leased assets	Depreciation and amortization	0.1		0.3
Interest on lease liabilities	Interest expense	0.1		0.3
Total lease cost		$	48.9	$	141.9


(a)	Operating lease cost represents non-cash amortization of ROU assets and accretion of the discounted lease liabilities and is segregated on the statement of consolidated cash flows.



Remaining Maturities of Lease Liabilities	Operating Leases		Finance Leases		Total
(in millions)
2019	$	40.8	$	0.2	$	41.0
2020	147.8		0.6		148.4
2021	123.9		0.6		124.5
2022	72.8		0.6		73.4
2023	37.0		0.6		37.6
After 2023	47.9		4.2		52.1
Total lease payments	$	470.2	$	6.8	$	477.0
Less: Imputed interest	87.0		3.2		90.2
Present value of lease liabilities	$	383.2	$	3.6	$	386.8



Lease Term and Discount Rate	Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate
(years and percent)
Operating leases	3.8	11.0%
Finance leases	10.0	11.2%



Other Information	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
(in millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases ^(a)	$	37.9	$	113.1
Operating cash flows from finance leases	0.1		0.3
Financing cash flows from finance leases	0.1		0.3
Leased assets obtained in exchange for new operating lease liabilities	$	57.6	$	111.4


(a)	Payments arising from operating leases are reported in operating activities on the statements of consolidated cash flows.

Below is the Company’s contractual cash obligations table as of December 31, 2018, that disclosed operating lease payments for the ~~nine months ended September 30, 2017~~next five years and ~~2016 were $70.8 million and $75.4 million, respectively. These amounts were principally used to fund the purchase~~thereafter. We had no material capital leases as of ~~used tractors and trailers, to refurbish engines for our revenue fleet, and for capitalized costs to improve our technology infrastructure.~~December 31, 2018.



			Payments Due by Period
(in millions)	Total		Less than 1 year		1-3 years		3-5 years		After 5 years
Operating leases	$	429.2	$	138.4	$	212.0	$	63.3	$	15.5

4.5. Employee Benefits

Qualified and Nonqualified Defined Benefit Pension Plans

The following table presents the components of our Company-sponsored pension plan costs for the three and nine months ended September 30:30:


	Three Months						Nine Months						Three Months						Nine Months
(in millions)	2017			2016			2017			2016			2019			2018			2019			2018
Service cost	$	1.3		$	1.6		$	3.9		$	4.8		$	—		$	0.1		$	—		$	0.3
Interest cost	12.8			14.0			38.4			42.0			11.4			11.1			34.2			32.9
Expected return on plan assets	(14.8		)	(14.2		)	(44.4		)	(42.4		)	(14.3		)	(15.0		)	(42.9		)	(45.2		)
Amortization of prior service credit													(0.1		)	(0.1		)	(0.3		)	(0.3		)
Amortization of prior net pension loss	3.9			3.5			11.7			10.3			3.2			3.5			9.6			10.9
Total periodic pension cost	$	3.2		$	4.9		$	9.6		$	14.7
Settlement adjustment													1.7			7.2			1.7			7.2
Total net periodic pension cost													$	1.9		$	6.8		$	2.3		$	5.8

We expect to contribute ~~$54.1~~$9.9 million to our Company-sponsored pension plans in ~~2017~~2019, of which we have contributed ~~$39.9~~$7.7 million through September 30, ~~2017.~~2019.

5.6. Income Taxes

Our effective tax rate for the three and nine months ended September 30, ~~2017~~2019 was ~~23.1%~~3.0% and ~~(13.8)%~~1.2%, respectively, compared to ~~3.5%~~61.8% and ~~10.5%~~44.9%, respectively for the three and nine months ended September 30, ~~2016, respectively.~~2018. The significant items impacting the ~~2017~~2019 rates include a benefit recognized due to ~~the~~ application of ~~ASC 740,~~ ~~Income Taxes~~ ~~(“ASC 740”), guidance~~the exception to the rules regarding ~~intra-period~~intraperiod tax allocation, a provision for net state and foreign taxes, certain permanent items and a change in the valuation allowance established for the net deferred tax asset balance projected for December 31, 2019. The significant items impacting the 2018 rates include a provision for net state and foreign taxes, foreign withholding taxes related to ~~a dividend~~dividends from a foreign subsidiary, certain permanent items and a change in the valuation allowance established for the net deferred tax asset balance projected for December 31, 2017. The significant items impacting the 2016 rates include a provision for federal alternative minimum tax, a refund from a prior year amended return, a net state and foreign tax provision, certain permanent items, and a change in the

~~valuation allowance established for the net deferred tax asset balance~~ that had been projected for December 31, ~~2016.~~2018. We recognize valuation allowances on deferred tax assets if, based on the weight of the evidence, we determine it is more likely than not such assets will not be realized. Changes in valuation allowances are included in our tax provision in the period of change. In determining whether a valuation allowance is warranted, we evaluate factors such as prior years’ earnings history,

expected future earnings, loss ~~carry-back and~~ carry-forward periods, reversals of existing deferred tax liabilities and tax planning strategies that potentially enhance the likelihood of the realization of a deferred tax asset. At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, substantially all of our net deferred tax assets were subject to a valuation allowance.

~~6. Shareholders’ Deficit~~

~~The following reflects the activity in the shares of our common stock for the~~ ~~nine months ended September 30, 2017~~:



~~(shares in thousands)~~	~~2017~~
~~Beginning balance~~	~~32,473~~
~~Issuance of equity awards~~	~~253~~
~~Ending balance~~	~~32,726~~

7. Earnings (Loss) Per Share

We calculate basic earnings (loss) per share by dividing our net earnings (loss) available to common shareholders by our weighted-average shares outstanding at the end of the period. The calculation for diluted earnings (loss) per share adjusts the weighted average shares outstanding for our dilutive unvested shares and stock units using the treasury stock method. Our calculations for basic and dilutive earnings (loss) per share for ~~the~~ three and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 are as follows:


	Three Months				Nine Months					Three Months					Nine Months
(dollars in millions, except per share data, shares and stock units in thousands)	2017		2016		2017			2016
(dollars in millions, except per share data; shares and stock units in thousands)										2019			2018		2019			2018
Basic and dilutive net income (loss) available to common shareholders	$	3.0	$	13.9	$	(3.3	)	$	29.0	$	(16.0	)	$	2.9	$	(88.7	)	$	2.7

Basic weighted average shares outstanding	32,723		32,466		32,550			32,398		33,259			33,051		33,098			32,827
Effect of dilutive securities:
Unvested shares and stock units(a)	869		728		—			517		—			944		—			928
Dilutive weighted average shares outstanding	33,592		33,194		32,550			32,915		33,259			33,995		33,098			33,755

Basic earnings (loss) per share^(a)(b)	$	0.09	$	0.43	$	(0.10	)	$	0.89	$	(0.48	)	$	0.09	$	(2.68	)	$	0.08
Diluted earnings (loss) per share^(a)(b)	$	0.09	$	0.42	$	(0.10	)	$	0.88	$	(0.48	)	$	0.09	$	(2.68	)	$	0.08


(a)	Includes unvested shares of Common Stock, unvested stock units and vested stock units for which the underlying Common Stock has not been distributed.


(b)	Earnings (loss) per share is based on unrounded figures and not the rounded figures presented.

At September 30, ~~2017~~2019 and ~~2016,~~2018, our anti-dilutive unvested shares, options, and stock units were approximately ~~80,000~~319,000 and ~~213,000,~~54,000, respectively.

8. Business Segments

We report financial and descriptive information about our reporting segments on a basis consistent with that used internally for evaluating segment performance and allocating resources to segments. We evaluate segment performance primarily on external revenue, operating income (loss), and operating ratio.

We charge management fees and other corporate service fees to our reporting segments based on the benefits received or an overhead allocation basis. ~~Corporate~~Shared support functions include information technology, legal, financial services, revenue management, and other ~~operating losses represent~~company-wide services. Corporate represents residual operating expenses of the holding ~~company.~~company that are not attributable to any segment and remain unallocated. It also represents certain items that are permitted to be included in Adjusted EBITDA. Corporate identifiable assets primarily consist of cash and cash equivalents, restricted amounts held in escrow, and ~~restricted cash. Intersegment revenue primarily relates to transportation services between our~~information technology assets, which are offset by eliminations with the two business segments.

The following table summarizes our operations by business segment:


(in millions)	YRC Freight		Regional Transportation		Corporate/ Eliminations			Consolidated		YRC Freight		Regional Transportation			Corporate/ Eliminations			Consolidated
As of September 30, 2017
As of September 30, 2019
Identifiable assets	$	1,075.3	$	711.6	$	(85.3	)	$	1,701.6	$	1,276.1	$	740.8		$	(99.8	)	$	1,917.1
As of December 31, 2016
As of December 31, 2018
Identifiable assets	$	1,208.7	$	642.9	$	(81.6	)	$	1,770.0	$	973.6	$	626.4		$	17.1		$	1,617.1
Three Months Ended September 30, 2017
Three Months Ended September 30, 2019
Operating revenue										$	803.2	$	453.6		$	—		$	1,256.8
Operating income (loss)										$	31.6	$	(4.1	)	$	(3.7	)	$	23.8
Nine Months Ended September 30, 2019
External revenue	$	787.8	$	463.5	$	(0.1	)	$	1,251.2	$	2,347.8	$	1,364.0		$	(0.1	)	$	3,711.7
Operating income (loss)	$	20.3	$	21.5	$	(1.7	)	$	40.1	$	26.5	$	(8.5	)	$	(11.6	)	$	6.4
Nine Months Ended September 30, 2017
Three Months Ended September 30, 2018
Operating revenue										$	822.1	$	481.5		$	—		$	1,303.6
Operating income (loss)										$	24.7	$	18.4		$	(1.9	)	$	41.2
Nine Months Ended September 30, 2018
External revenue	$	2,306.2	$	1,376.5	$	(0.3	)	$	3,682.4	$	2,401.0	$	1,443.8		$	(0.2	)	$	3,844.6
Operating income (loss)	$	37.8	$	59.0	$	(9.7	)	$	87.1	$	44.6	$	52.8		$	(9.6	)	$	87.8
Three Months Ended September 30, 2016
External revenue	$	777.9	$	443.7	$	(0.3	)	$	1,221.3
Operating income (loss)	$	20.8	$	21.9	$	(3.9	)	$	38.8
Nine Months Ended September 30, 2016
External revenue	$	2,228.6	$	1,321.3	$	(0.7	)	$	3,549.2
Operating income (loss)	$	53.3	$	64.9	$	(8.8	)	$	109.4

9. Commitments, Contingencies and Uncertainties

~~California Labor Law Change~~Department of Defense Complaints

In ~~October 2015, California adopted new rules governing~~December 2018, the United States on behalf of the United States Department of Defense filed a Complaint in Intervention (“Complaint”) against the Company in the U.S. District in the Western District of New York captioned United States ex rel. James Hannum v. YRC Freight, Inc.; Roadway Express, Inc.; and Yellow Transportation, Inc., Civil Action No. 08-0811(A). The Complaint alleges that the Company violated the False Claims Act by overcharging the Department of Defense for freight carrier services by failing to comply with the contractual terms of freight contracts between the Department of Defense and the Company and related government procurement rules. The Complaint also alleges claims for unjust enrichment and breach of contract. Under the False Claims Act, the Complaint seeks treble damages, civil penalties, attorneys’ fees and costs of suit, all in unspecified amounts. The remaining common causes of action seek an undetermined amount for an alleged breach of contract or alternatively causes constituting unjust enrichment or a payment ~~of piece-rate compensation. New California Labor Code section 226.2 sets forth requirements for the payment of a separate hourly wage for “nonproductive” time worked~~ by ~~piece-rate employees, and separate payment for compensable rest and recovery periods to those employees.~~mistake. The Company ~~continues~~has moved to ~~assess~~dismiss the ~~impact of~~case, and the court heard oral arguments on the motion on August 12, 2019. Management believes the Company has meritorious defenses and intends to vigorously defend this ~~new law and ongoing compliance measures.~~action. We ~~believe~~are unable to estimate the possible loss, or range of possible loss, ~~is not material to our consolidated financial statements.~~associated with these claims at this time.

Class Action Securities Complaint

In January 2019, a purported class action lawsuit captioned Christina Lewis v. YRC Worldwide Inc., et al., Case No. 1:19-cv-00001, was filed in the United States District Court for the Northern District of New York against the Company and certain of our current and former officers. The complaint was filed on behalf of persons who purchased or otherwise acquired the Company’s publicly traded securities between March 10, 2014 and December 14, 2018. The complaint generally alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making false and misleading statements relating to its freight billing practices as alleged in the Department of Defense complaint described above. The action includes claims for damages, including interest, and an award of reasonable costs and attorneys’ fees. The co-lead plaintiffs filed an amended complaint on June 14, 2019, and the defendants moved to dismiss it on July 15, 2019. The motion is fully briefed and awaiting decision. Management believes the Company has meritorious defenses and intends to vigorously defend this action. We are unable to estimate the possible loss, or range of possible loss, associated with these claims at this time.

Shareholder Derivative Complaint

In May 2019, a putative shareholder filed an action derivatively and on behalf of the Company naming James L. Welch, Jamie G. Pierson, Stephanie D. Fisher, Raymond J. Bromark, Douglas A. Carty, William R. Davidson, Matthew A. Doheny, Robert L. Friedman, James E. Hoffman, Michael J. Kneeland, Patricia M. Nazemetz, and James F. Winestock individually as defendants and the Company as the nominal defendant. In an amended complaint, filed on October 15, 2019, Darren D. Hawkins was added as a defendant. The case is captioned Hastey v. Welch, et al., Case No. 2:19-cf-2266-KGG, and is pending in the United States District Court for the District of Kansas. The Complaint alleges that the Company was exposed to harm by the individual defendants’ purported conduct concerning its freight-billing practices as alleged in the Department of Defense Complaint and the Class Action Securities Complaint described above. The Complaint asserts that the individual defendants’ purported conduct violated Section 14(a) of the Securities Exchange Act of 1934 and that they breached their fiduciary duties, were unjustly enriched, and engaged in corporate waste. Motions to dismiss were filed on August 16, 2019 and, in response, Plaintiff filed the October 15, 2019 amended complaint. A motion to dismiss the amended complaint was filed on October 29, 2019. The Complaint seeks damages on behalf of the Company.

In October 2019, another putative shareholder filed an action derivatively and on behalf of the Company naming the same defendants as did the October 15, 2019 amended complaint in the Hastey case. The case is captioned Broughton v. Hawkins, et al. Case No. 1:19-cv-01958-UNA, and makes claims similar to those made in Hastey.

Other Legal Matters

We are involved in litigation or proceedings that arise in ordinary business activities. When possible, we insure against these risks to the extent we deem prudent, but no assurance can be given that the nature or amount of such insurance will be sufficient to fully indemnify us against liabilities arising out of pending and future legal proceedings. Many of these insurance policies contain self-insured retentions in amounts we deem prudent. Based on our current assessment of information available as of the date of these consolidated financial statements, we believe that our consolidated financial statements include adequate provisions for estimated costs and losses that may be incurred within the litigation and proceedings to which we are a party.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements included elsewhere in this report. This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Forward-looking statements include those preceded by, followed by or characterized by words such as “will,” “expect,” “intend,” “anticipate,” “believe,” “could,” “should,” “may,” “project,” “forecast,” “propose,” “plan,” “designed,” “estimate,” “enable” and similar expressions which speak only as of the date the statement was made. Forward-looking statements are inherently uncertain, are based upon current beliefs, assumptions and expectations of Company management and current market conditions, and are subject to significant business, economic, competitive, regulatory and other risks, uncertainties and contingencies, known and unknown, many of which are beyond our control. Readers are cautioned not to place undue reliance on any forward-looking statements. Our future financial condition and results could differ materially from those predicted in such forward-looking statements because of a number of factors, including (without limitation):

general economic factors, including (without limitation) customer demand in the retail and manufacturing sectors;

business risks and increasing costs associated with the transportation industry, including increasing equipment, operational and technology costs and disruption from natural disasters;

competition and competitive pressure on pricing;

the risk of labor disruptions or stoppages if our relationship with our employees and unions were to deteriorate;

changes in pension expense and funding obligations, subject to interest rate volatility;

increasing costs relating to our self-insurance claims expenses;

our ability to finance the maintenance, acquisition and replacement of revenue equipment and other necessary capital expenditures;

our ability to comply and the cost of compliance with, or liability resulting from violation of, federal, state, local and foreign laws and regulations, including (without limitation) labor laws and laws and regulations regarding the environment;

impediments to our operations and business resulting from anti-terrorism measures;

the impact of claims and litigation expense to which we are or may become exposed;

that we may not realize the expected benefits and costs savings from our performance and operational improvement initiatives;

our ability to attract and retain qualified drivers and increasing costs of driver compensation;

a significant privacy breach or IT system disruption;

risks of operating in foreign countries;

our dependence on key employees;

seasonality;

shortages of fuel and changes in the cost of fuel or the index upon which we base our fuel surcharge and the effectiveness of our fuel surcharge program in protecting us against fuel price volatility;

our ability to generate sufficient liquidity to satisfy our cash needs and future cash commitments, including (without limitation) our obligations related to our indebtedness and lease and pension funding requirements, and our ability to achieve increased cash flows through improvement in operations;

limitations on our operations, our financing opportunities, potential strategic transactions, acquisitions or dispositions resulting from restrictive covenants in the documents governing our existing and future indebtedness;

our failure to comply with the covenants in the documents governing our existing and future ~~indebtedness;~~indebtedness, including financial covenants under our credit facilities, in light of recent operating results;

fluctuations in the price of our common stock;

dilution from future issuances of our common stock;

our intention not to pay dividends on our common stock;

that we have the ability to issue preferred stock that may adversely affect the rights of holders of our common stock; and

other risks and contingencies, including (without limitation) the risk factors that are included in our reports filed with the SEC, including those described under “Risk Factors” in our annual report on Form 10-K and quarterly reports on Form 10-Q, including this quarterly report.

Overview

MD&A includes the following sections:

Our Business — a brief description of our business and a discussion of how we assess our operating results.

Consolidated Results of Operations — an analysis of our consolidated results of operations for the three and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018.

Reporting Segment Results of Operations — an analysis of our results of operations for the three and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 for our YRC Freight and Regional Transportation reporting segments.

Certain Non-GAAP Financial Measures — presentation and an analysis of selected non-GAAP financial measures for the three and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 and trailing twelve months ended September 30, ~~2017~~2019 and ~~2016.~~2018.

Financial Condition/Liquidity and Capital Resources — a discussion of our major sources and uses of cash and an analysis of our cash flows and aggregate contractual obligations and commercial commitments.

The “third quarter” and “first three quarters” of the years discussed below refer to the three and nine months ended September 30,, respectively.

Our Business

YRC Worldwide is a holding company that, through ~~wholly owned~~its operating subsidiaries, offers our customers a wide range of transportation services. YRC Worldwide has one of the largest, most comprehensive LTL networks in North America with local, regional, national and international capabilities. Through its team of experienced service professionals, YRC Worldwide offers industry-leading expertise in LTL shipments and flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods with confidence.

We measure the performance of our business on both a consolidated and reporting segment basis and ~~a reporting segment basis. We use~~using several ~~performance~~ metrics, but rely primarily upon (without limitation) operating revenue, operating income (loss), and operating ratio. We also use certain non-GAAP financial measures as secondary measures to assess our operating performance.

Operating Revenue: Our operating revenue has two primary components: volume (commonly evaluated using tonnage, tonnage per day, number of shipments, ~~and~~shipments per day or weight per shipment) and yield or price (commonly evaluated ~~on a dollar-per-hundred weight basis and a dollar-per-shipment basis)~~using picked up revenue, revenue per hundredweight or revenue per shipment). Yield includes fuel surcharge revenue, which is common in the trucking industry and represents an amount charged to customers that adjusts with changing fuel prices. We base our fuel surcharges on ~~a published national~~the U.S. Department of Energy fuel index and adjust them weekly. Rapid material changes in the index or our cost of fuel can positively or negatively impact our revenue and operating income ~~(loss) versus prior periods,~~ as ~~there is~~ a ~~lag~~result of changes in our ~~adjustment of base rates in response to changes in~~ fuel surcharge. We believe that fuel surcharge is an accepted and important component of the overall pricing of our services to our customers. Without an industry accepted fuel surcharge program, our base pricing for our transportation services would require ~~numerous~~ changes. We believe the distinction between base rates and fuel surcharge has blurred over time, and it is impractical to clearly separate all the different factors that influence the price that our customers are willing to pay. In general, under our present fuel surcharge program, we believe rising fuel costs are beneficial to us and falling fuel costs are detrimental to ~~us.~~us in the short term, the effects of which are mitigated over time.

Operating Income (Loss): Operating income (loss) is ~~our~~ operating revenue less operating expenses. ~~Our consolidated~~Consolidated operating income (loss) includes certain corporate charges that are not allocated to our ~~YRC Freight and Regional Transportation~~ reporting segments.

Operating Ratio: Operating ratio is a common operating performance ~~metric~~measure used in the trucking industry. It is calculated as (i) 100 percent (ii) minus the result of dividing operating income by operating revenue or (iii) plus the result of dividing operating loss by operating revenue, and is expressed as a percentage.

Non-GAAP Financial Measures: We use EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, to assess the following:


◦	EBITDA: a non-GAAP measure that reflects our earnings before interest, taxes, depreciation, and amortization expense. EBITDA is used for internal management purposes as a financial measure that reflects our core operating performance.

◦

Adjusted EBITDA: a non-GAAP measure that reflects EBITDA, and further adjusts for letter of credit fees, equity-based compensation expense, net gains or losses on property disposals, restructuring ~~professional fees and other~~charges, transaction costs related to issuances of debt, non-recurring consulting fees, ~~expenses associated with certain lump sum payments to our union employees~~non-cash impairment charges and the gains or losses from permitted dispositions, ~~and~~ discontinued operations, ~~among other~~and certain non-cash expenses, charges and losses (provided that if any of such non-cash expenses, charges or losses represents an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period will be subtracted from Consolidated EBITDA in such future period to the extent paid). All references to “Adjusted EBITDA” throughout this section and the rest of this report refer to “Adjusted EBITDA” calculated under our New Term Loan Agreement (defined therein as “Consolidated EBITDA” unless otherwise specified. Consolidated EBITDA is also a defined term in our ~~credit facilities.~~ABL Agreement and the definition there aligns with the prior definition of Consolidated EBITDA under the Prior Term Loan Agreement. Adjusted EBITDA is used for internal management purposes as a financial measure that reflects our core operating performance, to measure compliance with financial covenants in our credit facilities and to determine certain ~~executive~~management and employee bonus compensation.

We believe our presentation of EBITDA and Adjusted EBITDA is useful to investors and other users as these measures represent key supplemental information our management uses to compare and evaluate our core underlying business results both on a consolidated basis and across our business segments, particularly in light of our leverage position and the capital-intensive nature of our business. Further, EBITDA is a measure that is commonly used by other companies in our industry and provides a comparison for investors to evaluate the performance of the companies in the industry. Additionally, Adjusted EBITDA helps investors to understand how the company is tracking against our financial ~~covenants~~covenant in our term loan credit agreement as this measure is calculated as ~~prescribed~~defined in our term loan credit agreement and serves as a driving component of our key financial ~~covenants.~~covenant.

Our non-GAAP financial measures have the following limitations:


◦	EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or fund principal payments on our outstanding debt;

◦

Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to ~~fund restructuring professional fees and other transaction costs related to issuances of debt, non-recurring consulting fees, letter of credit fees,~~ service interest or fund principal payments on our outstanding debt, letter of credit fees, restructuring charges, transaction costs related to the issuance of debt, non-cash expenses, charges or ~~lump sum payments to our union employees required under the Memorandum of Understanding;~~losses, or nonrecurring consulting fees, among other items;


◦	Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will ~~often have~~generally need to be replaced in the future and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;


◦	Equity-based compensation is an element of our long-term incentive compensation package, although Adjusted EBITDA excludes employee equity-based compensation expense when presenting our ongoing operating performance for a particular period; and


◦	Other companies in our industry may calculate Adjusted EBITDA differently than we do, potentially limiting its usefulness as a comparative measure.

Because of these limitations, our non-GAAP measures should not be considered a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and use our non-GAAP measures as secondary measures. ~~For additional information~~

Business Strategy Overview

The Company has developed a comprehensive business strategy to achieve long-term profitability and ~~a reconciliation~~stability. Our strategic roadmap to improved profitability and stability is built upon the proven alliance of our ~~non-GAAP measures~~LTL regional and ~~GAAP~~national networks, as well as our recently launched multi-mode freight brokerage solutions, to provide a broad portfolio of freight and business services to our customers.

The key components to our multi-year strategic roadmap include:


1.	Labor contract ratification, along with implementation of operational efficiencies to achieve service excellence


2.	Capital structure improvement


3.	Network optimization


4.	Customer growth/engagement initiatives


5.	Capital investment in equipment and technology

Labor contract ratification and implementation of operational efficiencies: During the first half of 2019, the Company ratified the New NMFA for the employees of Holland, New Penn and YRC Freight. The New NMFA is a critical element to the comprehensive strategic plan as it provides the Company with important changes to create a foundation for revenue growth and operational excellence. The operational changes are expected to provide efficiencies in our workforce by introducing new job classifications and allowing us to employ more flexible work rules to optimize the use of our valuable employee resources. These changes allow us to improve labor mix which should result in reduced costs per labor hour. For example, prior to the New NMFA, we were unable to fill part-time positions in many key markets across our footprint due to a non-competitive wage package for part-time employees. With the New NMFA, we are now expanding our part-time work force which allows us to reposition our commercial driver’s license (“CDL”) drivers to freight delivery and to deploy part-time employees to dock positions, resulting in lower employee compensation expense and improved productivity. The expansion of purchased transportation that is permitted under the New NMFA provides us opportunities to plan and source our operations using more cost-effective resources and to expand our capacity consistent with our customer growth and engagement initiatives. The New NMFA also allows us to introduce new equipment, referred to as box trucks, into our LTL freight operations, which, along with new non-CDL driver classifications, permits us to provide a lower cost solution to local cartage or short-term rentals. Further, on September 27, 2019, the Company ratified a new two-year collective bargaining agreement for the employees of Reddaway, who were previously party to multiple bargaining agreements, have been combined into one collective agreement.

Capital Structure Improvement: The Company announced a refinancing of its term loan obligations on September 11, 2019 and entered into a New Term Loan Agreement, which provides for additional liquidity, less restrictive financial covenants, a lower interest rate and extends the maturity of the facility to June 2024. The New Term Loan eliminates the annual principal amortization of 3.0%, which approximated $18.0 million in principal payments per year, and provides the ability to reinvest the first $40.0 million in cash proceeds earned from the sale of certain owned properties.

Network Optimization: While ongoing investments in equipment and technology remain our primary use of excess operating cash flows, we understand the importance of balancing liquidity and our ongoing investments with the service capacity we need to bring to the market. In the initial phase of our network optimization plan, which spans 2019, two of our companies operate independently out of the same service center. Upon implementation of the New NMFA that was ratified on May 14, 2019, we may now consolidate service centers across our operating companies to optimize utilization of our assets and resources, and companies that operate in the same service territory will be serviced through one primary carrier. We believe service center consolidation presents the greatest opportunity for our network optimization initiative. We expect to launch our first consolidation in late 2019, with the majority of network consolidations occurring in 2020. By consolidating service centers, we expect to recognize cost savings in our linehaul and pick-up and delivery operations due to improved density, fewer miles driven and optimization of route planning and labor resources. Over time, this initiative should enhance service and strategically position our network for the growing demand of next-day services, provide productivity improvements and streamline our cost structure as we seek to eliminate redundancies across the network, both in facilities, infrastructure and human capital. As of the date of this filing, we have completed the consolidation of twelve service centers. Most recently, we have moved forward with certain headcount reductions to remain disciplined with our cost structure, including, but not limited to, the consolidation of the New Penn corporate services and the implementation of a new operations field structure.

Customer Growth/Engagement Initiatives: Creating simplified engagement for customers and an increased service offering are a critical part of our strategic focus on growth and engagement. We completed the final phase of our sales restructuring which consolidated our four distinct sales groups into one enterprise sales organization. This allows customers to buy regional, national and brokerage services from a single point of contact at YRCW while introducing existing customers to additional operating companies. The launch of our third-party brokerage solution, HNRY Logistics in late 2018 is the perfect complement to our LTL, asset-based companies and allows us to better service our customers with a full suite of logistics solutions.

Capital Investment: Capital allocation remains a top priority for us. We will continue to invest in revenue equipment to improve the age of our fleet as there is an immediate return in improved fuel miles per gallon, reduced vehicle maintenance expense and improved driver morale. Since 2015, approximately 37% of our tractor fleet and 28% of our trailer fleet have been upgraded. While the average age of our fleet still lags the industry, the average age of our fleet is no longer increasing.

New National Master Freight Agreement

On May 14, 2019, union employees at operating companies Holland, New Penn and YRC Freight ratified New NMFA, along with all supplemental agreements. The New NMFA outlines terms and conditions of employment that are customary in collective bargaining agreements and apply at a national level across the covered operations, such as wages, health benefits, multiemployer pension plan contribution rates, and various operational items. A few of the highlights in the New NMFA include:

Hourly wage increases in each year of the contract, beginning April 1, 2019 through 2023

Health and welfare and pension contribution rate increases

Restoration of an additional one-week of vacation

The expanded ability to utilize smaller trucks that can be operated by employees who do not have a CDL

The ability to utilize additional hours of service, in accordance with Department of Transportation regulations

The increased ability to utilize purchased transportation at YRC Freight and Holland

The increased ability to utilize employees in non-driving positions

A newly-structured performance bonus program for employees

The new wage improvements allow us to advance our driver hiring and retention efforts to ensure we are adequately staffed with professional CDL drivers and other key personnel at our service centers. The contractual wage increases under the New NMFA were paid retroactively to April 1, 2019 including the one week of vacation. Additionally, the Company incurred one-time vacation charges in second quarter operating results ~~see~~of $12.4 million to reflect the ~~“Certain Non-GAAP Financial Measures” section below.~~full year 2018 and first quarter 2019 vacation benefit increase.

The supplemental agreements cover more localized work rules and other terms and conditions of employment. The Company was unable to commence actions to implement the operational efficiencies until the New NMFA, and all supplements, were fully ratified on May 14, 2019.

Consolidated Results of Operations

Our consolidated results include the consolidated results of our ~~YRC Freight and Regional Transportation~~ reporting segments ~~as well as any~~and unallocated corporate charges. A more detailed discussion of the operating results of our reporting segments is presented in the “Reporting Segment Results of Operations” section below.

The table below provides summary consolidated financial information for the third quarter and first three quarters of ~~2017~~2019 and ~~2016:~~

2018:


	Third Quarter						First Three Quarters							Third Quarter							First Three Quarters
(in millions)	2017		2016		Percent Change		2017			2016		Percent Change		2019			2018		Percent Change		2019			2018		Percent Change
Operating revenue	$	1,251.2	$	1,221.3	2.4	%	$	3,682.4		$	3,549.2	3.8	%	$	1,256.8		$	1,303.6	(3.6	)%	$	3,711.7		$	3,844.6	(3.5	)%
Operating income	$	40.1	$	38.8	3.4	%	$	87.1		$	109.4	(20.4	)%	23.8			41.2		(42.2	)%	6.4			87.8		(92.7	)%
Nonoperating expenses, net	$	36.2	$	24.4	48.4	%	$	90.0		$	77.0	16.9	%	40.3			33.6		19.9	%	96.2			82.9		16.0	%
Net income (loss)	$	3.0	$	13.9	(78.4	)%	$	(3.3	)	$	29.0	*NM		(16.0		)	2.9		NM*		(88.7		)	2.7		NM*

~~(*) not meaningful~~


(*)	not meaningful

Third Quarter of ~~2017~~2019 Compared to the Third Quarter of ~~2016~~2018

Our consolidated operating revenue ~~increased $29.9~~decreased $46.8 million, or ~~2.4%~~3.6%, during the third quarter of ~~2017~~2019 compared to the same period in ~~2016~~2018. The ~~increase~~decrease in revenue is primarily attributed to a decrease in tonnage and fuel surcharge revenue, while partially offset by an increase in base yield excluding fuel ~~surcharge revenue and yield, combined with an improvement in volume at our Regional Transportation segment.~~surcharge.

Total operating expenses ~~increased $28.6~~decreased $29.4 million, or ~~2.4%~~2.3%, for the third quarter of ~~2017~~2019 compared to the third quarter of ~~2016,~~2018, and consisted primarily of ~~an increase in contractual~~lower purchased transportation expense as well as lower fuel, operating expenses and supplies, partially offset by increased salaries, wages and employee ~~benefit costs, higher fuel costs, and an increase in purchased transportation expense.~~benefits.

In spite of the increase in revenues, our third quarter 2017 results were negatively impacted by the hurricanes in late August and September. Our volume and tonnage were unfavorably impacted, primarily at YRC Freight and Holland, due to closures at our customer operations, as well as the closure or reduced operations at certain of our own terminals. Due to delayed deliveries and disruption within the network, our operating expenses were also negatively impacted, driven by the reduction in labor productivity, higher local purchased transportation costs, and an increase in costs to relocate revenue equipment, among other items.

Salaries, wages and employee ~~benefits.~~benefits. Salaries, wages and employee benefits increased ~~$11.0~~$13.2 million, or ~~1.5%~~1.8%, primarily due to a ~~$7.7~~$10.5 million increase in ~~wages~~benefits costs and ~~an $8.2~~a $7.2 million increase in ~~employee benefit costs,~~wage expense, as a result of higher contractual rates due to the New NMFA, which ~~are primarily related to contractual rate increases for union employees,~~were partially offset by a ~~$4.0~~$6.3 million decrease in ~~bonus~~short-term incentive compensation.

~~Operating~~Fuel, operating expenses and supplies. ~~Operating~~Fuel, operating expenses and supplies ~~increased $9.7~~decreased $14.7 million, or ~~4.7%~~6.3%, primarily due to a ~~$6.5~~$15.0 million ~~increase~~decrease in fuel expense, which was largely ~~driven by higher~~a result of lower fuel prices ~~on a per gallon basis~~ and ~~a $4.8 million increase in technology and operating supply costs.~~fewer miles driven.

Purchased transportation. Purchased transportation ~~increased $12.3~~decreased $22.7 million, or ~~7.8%~~12.4%, primarily due to a ~~$7.5~~$17.9 million ~~increase~~decrease in ~~vehicle rent~~rail and over-the-road purchased transportation expense ~~due to equipment shortages~~as a result of reduced shipping volumes and ~~higher~~a $3.4 million decrease from reduced usage of ~~operating leases for revenue equipment, a $4.1 million increase in~~ local purchased ~~transportation due to increased volume and hurricane-related impacts, and a $2.5 million increase in rail purchased transportation due to an increase in rail miles.~~transportation.

Other operating expense. Other operating expense decreased ~~$1.9~~$6.6 million, or ~~3.0%~~10.1%, primarily due to a ~~reduction~~$5.3 million decrease in ~~property damage and~~third-party liability claims expense ~~of $1.5 million~~largely due to ~~favorable development of current year claims.~~

~~Gains/losses on property disposals. Net losses on disposals of property were $1.3 million~~an unfavorable adjustment recorded in ~~the third quarter of 2017 compared to $0.2 million in the third quarter of 2016 primarily due to losses on the sale of revenue equipment.~~2018 with no similar adjustment during 2019.

Nonoperating expenses, net. Nonoperating expenses, net, increased ~~$11.8~~$6.7 million in the third quarter of ~~2017~~2019 compared to the third quarter of ~~2016~~2018, primarily driven by ~~$6.7~~an $11.2 million loss on extinguishment of debt, which was partially offset by a $4.9 million decrease in transaction costs related to the Term Loan Amendment, which is more fully described in the “Debt and Financing” footnote to the consolidated financial statements, and a $3.4 million increase in foreign currency transaction losses.non-union pension expense.

Our effective tax rate for the third quarter of ~~2017~~2019 and ~~2016~~2018 was ~~23.1%~~3.0% and ~~3.5%~~61.8%, respectively. ~~Significant~~The significant items impacting the ~~2017~~2019 rate include a benefit recognized due to application of ~~ASC 740 guidance~~the exception to the rules regarding ~~intra-period~~intraperiod tax allocation, a provision for a net state and foreign taxes, certain permanent items and a change in the valuation allowance established for the net deferred tax asset balance projected for December 31, 2019. The significant items impacting the 2018 rate include a provision for net state and foreign taxes, foreign withholding taxes related to a dividend from a foreign subsidiary, certain permanent items and a change in the valuation allowance established for the net deferred tax asset balance projected for December 31, 2017. The significant items impacting the 2016 rate include a provision for federal alternative minimum tax, a refund from a prior year amended return, a net state and foreign tax provision, certain permanent items, and a change in the valuation allowance established

~~for the net deferred tax asset balance~~ that had been projected for December 31, ~~2016.~~2018. We recognize valuation allowances on deferred tax assets if, based on the weight of the evidence, we determine it is more likely than not that such assets will not be realized. Changes in valuation allowances are included in our tax provision in the period of change. In determining whether a valuation allowance is warranted, we evaluate factors such as prior years’ earnings history, expected future earnings, loss ~~carry-back and~~ carry-forward periods, reversals of existing deferred tax liabilities and tax planning strategies that potentially enhance the likelihood of the realization of a deferred tax asset. At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, substantially all of our net deferred tax assets were subject to a valuation allowance.

First Three Quarters of ~~2017~~2019 Compared to the First Three Quarters of ~~2016~~2018

Our consolidated operating revenue ~~increased $133.2~~decreased $132.9 million, or ~~3.8%~~3.5%, during the first three quarters of ~~2017~~2019 compared to the same period in ~~2016.~~2018. The ~~increase~~decrease in revenue is primarily attributed to a decrease in tonnage and fuel surcharge revenue, while partially offset by an increase in ~~volume, fuel surcharge revenue, and~~base yield excluding fuel surcharge.

Total operating expenses decreased $51.5 million, or 1.4%, for the first three quarters of ~~2017 increased $155.5 million, or 4.5%,~~2019 compared to the ~~same period in 2016,~~first three quarters of 2018, and consisted primarily of ~~an increase in contractual~~lower purchased transportation expense as well as lower fuel, operating expenses and supplies, partially offset by increased salaries, wages and employee ~~benefit costs, higher fuel costs, and an increase in purchased transportation expense.~~benefits.

Salaries, wages and employee ~~benefits.~~ benefits. Salaries, wages and employee benefits increased ~~$55.5~~$28.0 million, or ~~2.6%~~1.3%, primarily due to a ~~$29.6~~$34.5 million increase in ~~wages and~~benefits costs which was largely driven by a ~~$26.4~~$21.3 million increase in ~~employee benefit costs, which are primarily related~~union vacation expense due to ~~contractual rate increases for union employees, combined with an~~restoration of benefits from the passage of the New NMFA, a $7.9 million increase in ~~shipping volumes, which required more employee hours to process freight.~~salaries expense, and a $3.8 million increase in workers’ compensation expense. These increases were partially offset by a $16.3 million decrease in short-term incentive compensation.

~~Operating~~Fuel, operating expenses and supplies. ~~Operating~~Fuel, operating expenses and supplies ~~increased $46.9~~decreased $22.7 million, or ~~7.9%~~3.2%, primarily due to a ~~$34.6~~$31.0 million ~~increase~~decrease in fuel expense, which was largely a result of fewer miles driven and lower prices, and was partially offset by ~~higher fuel prices on~~ a ~~per gallon basis. Also, operating expenses increased $13.3~~$7.3 million ~~due to higher technology~~increase in professional fees largely as a result of fees associated with our New NMFA and ~~operating supply costs.~~various other legal matters.

Purchased transportation. Purchased transportation ~~increased $54.2~~decreased $51.0 million, or ~~13.3%~~9.9%, primarily due to a ~~$26.1~~$52.1 million ~~increase in vehicle rent expense due to higher usage of leased revenue equipment and equipment shortages, a $16.5 million increase~~decrease in rail and over-the-road purchased transportation ~~due to~~expense as a result of reduced shipping volumes and an ~~increase in rail miles and higher rail rates which were impacted by increased fuel surcharges, and a $12.1~~$8.7 million ~~increase in the use~~decrease from reduced usage of local purchased transportation ~~due to higher usage of~~and short-term equipment rentals. Purchased transportation expense also includes a $10.4 million increase in third-party ~~providers.~~costs for customer-specific logistics solutions.

Other operating expense. Other operating expense decreased ~~$6.8~~$8.6 million, or ~~3.5%~~4.6%, primarily due to a ~~reduction~~$3.7 million decrease in ~~property damage~~operating tax expense as a result of fewer miles driven and ~~liability~~a $3.1 million decrease in cargo claims ~~expense of $9.3 million due to unfavorable development of prior year claims that negatively impacted 2016.~~expense.

~~Gains/losses~~(Gains)/Losses on property disposals. Net ~~losses~~gains on disposals of property were ~~$3.0~~$3.6 million in the first three quarters of ~~2017~~2019, which were primarily a result of the sale of real property as well as a deferred gain recognized from changes in contractual lease terms, partially offset by losses on the disposal of revenue equipment, as compared to ~~net gains of $11.2~~a $7.3 million loss in the first three quarters of ~~2016~~2018, primarily due to losses on the ~~sale~~disposal of ~~excess real properties.~~revenue equipment.

Impairment charges. During the first quarter of 2019, we recorded an $8.2 million impairment charge at YRC Freight that reflects the write-down of an intangible asset as a result of rebranding strategies, leading to discontinued use of a tradename.

Nonoperating expenses, net. Nonoperating expenses, net, increased ~~$12.9~~$13.3 million in the first three quarters of ~~2017~~2019 compared to the first three quarters of ~~2016~~2018, primarily driven by ~~a primarily driven by $6.7~~an $11.2 million ~~in transaction costs related to the Term Loan Amendment~~loss on extinguishment of debt, and a ~~$3.7~~$5.4 million increase in ~~foreign currency transaction losses~~interest expense due to higher variable interest rates, partially offset by a $3.2 million decrease in ~~2017. A $2.3 million gain on the disposal of JHJ was recorded in the first three quarters of 2016, with no corresponding gain in the first three quarters of 2017.~~non-union pension expense.

Our effective tax rate for the first three quarters of ~~2017~~2019 and ~~2016~~2018 was ~~(13.8)%~~1.2% and ~~10.5%~~44.9%, respectively. The significant items impacting the ~~2017~~2019 rate include a benefit recognized due to application of ~~ASC 740 guidance~~the exception to the rules regarding ~~intra-period~~intraperiod tax allocation, a provision for net state and foreign ~~tax provision, foreign withholding~~ taxes, ~~related to a dividend from a foreign subsidiary,~~ certain permanent items and a change in the valuation allowance established for the net deferred tax asset balance projected for December 31, ~~2017.~~2019. The significant items impacting the ~~2016~~2018 rate include a provision for ~~federal alternative minimum tax, a refund from a prior year amended return, a~~ net state and foreign ~~tax provision,~~taxes, foreign withholding taxes related to dividends from a foreign subsidiary, certain permanent items and a change in the valuation allowance established for the net deferred tax asset balance that had been projected for December 31, ~~2016.~~2018.

Reporting Segment Results of Operations

We evaluate our operating performance using our YRC Freight and Regional Transportation reporting segments:

~~YRC Reimer is a subsidiary located in~~Freight Canada ~~that specializes in shipments into, across~~Company (both doing business as, and ~~out of Canada.~~herein referred to as, “YRC Freight”) and HNRY Logistics, Inc. (“HNRY Logistics”), our customer-specific logistics solutions provider. In addition to the United States and Canada, YRC Freight also serves parts of Mexico and Puerto Rico.

Regional Transportation is the reporting segment for our transportation service providers focused on business opportunities in the regional and next-day delivery markets. Regional Transportation is comprised of Holland, New Penn and Reddaway. These companies each provide regional, next-day ground services in their respective regions through a network of facilities located across the United States, Canada, and Puerto Rico.

The Company uses key operating metrics to provide a comparison with industry peers. Two primary components include volume (commonly evaluated using tonnage, tonnage per day, total shipments, shipments per day or weight per shipment) and yield or price (commonly evaluated as picked up revenue, revenue per hundredweight, or revenue per shipment). With the enhanced focus of service and product expansion and the launch of HNRY Logistics in late 2018, our increase in shipments over 10,000 pounds is growing, impacting the year-over-year revenue per hundredweight metrics that we have historically presented for YRC Freight, which includes the results of operations for HNRY Logistics.

Therefore, the Company has updated its presentation of operating metrics to separately present LTL operating statistics, which represents shipments less than 10,000 pounds. Shipments greater than 10,000 pounds are primarily transported using third-party purchased transportation.

YRC Freight Results

YRC Freight represented ~~63.0%~~63.9% of consolidated operating revenue for the third quarter of ~~2017~~2019, as compared to ~~63.7%~~63.1% for the third quarter of ~~2016~~2018. YRC Freight represented ~~62.6%~~63.3% of consolidated operating revenue for the first three quarters of ~~2017,~~2019, as compared to ~~62.8%~~62.4% for the first three quarters of ~~2016.~~2018. The table below provides summary financial information for YRC Freight for the third quarter and first three quarters of ~~2017~~2019 and ~~2016~~2018:


	Third Quarter							First Three Quarters							Third Quarter							First Three Quarters
(in millions)	2017			2016			Percent Change	2017			2016			Percent Change	2019			2018			Percent Change	2019			2018			Percent Change
Operating revenue	$	787.8		$	777.9		1.3%	$	2,306.2		$	2,228.6		3.5%	$	803.2		$	822.1		(2.3)%	$	2,347.8		$	2,401.0		(2.2)%
Operating income	$	20.3		$	20.8		(2.4)%	$	37.8		$	53.3		(29.1)%	31.6			24.7			27.9%	26.5			44.6			(40.6)%
Operating ratio^(a)	97.4		%	97.3		%	(0.1) pp	98.4		%	97.6		%	(0.8) pp	96.1		%	97.0		%	0.9 pp	98.9		%	98.1		%	(0.8) pp


(a)	pp represents the change in percentage points

Third Quarter of ~~2017~~2019 Compared to the Third Quarter of ~~2016~~2018

YRC Freight reported operating revenue of ~~$787.8~~$803.2 million in the third quarter of ~~2017, an increase~~2019, a decrease of ~~$9.9~~$18.9 million, or ~~1.3%~~2.3%, compared to the same period in ~~2016~~2018. The ~~increase~~decrease in revenue is primarily attributed to ~~an increase~~a decrease in tonnage and fuel surcharge revenue, ~~combined with~~partially offset by an improvement in base LTL yield, excluding fuel surcharge. The table below summarizes the key revenue metrics for the YRC Freight reporting segment for the third quarter of ~~2017~~2019 compared to the third quarter of ~~2016:~~2018:



	Third Quarter
	2019		2018		Percent Change^(b)
Workdays	63.5		63.0

LTL picked up revenue (in millions)	$	740.2	$	752.2	(1.6	)%
LTL tonnage (in thousands)	1,230		1,270		(3.2	)%
LTL tonnage per day (in thousands)	19.36		20.17		(4.0	)%
LTL shipments (in thousands)	2,444		2,513		(2.7	)%
LTL shipments per day (in thousands)	38.49		39.88		(3.5	)%
LTL picked up revenue per hundred weight	$	30.10	$	29.61	1.7	%
LTL picked up revenue per hundred weight (excluding fuel surcharge)	$	26.59	$	25.87	2.8	%
LTL picked up revenue per shipment	$	303	$	299	1.2	%
LTL picked up revenue per shipment (excluding fuel surcharge)	$	268	$	262	2.3	%
LTL weight per shipment (in pounds)	1,006		1,011		(0.5	)%

Total picked up revenue (in millions)^(a)	$	794.7	$	805.0	(1.3	)%
Total tonnage (in thousands)	1,571		1,541		2.0	%
Total tonnage per day (in thousands)	24.75		24.46		1.2	%
Total shipments (in thousands)	2,483		2,547		(2.5	)%
Total shipments per day (in thousands)	39.10		40.43		(3.3	)%
Total picked up revenue per hundred weight	$	25.29	$	26.11	(3.2	)%
Total picked up revenue per hundred weight (excluding fuel surcharge)	$	22.41	$	22.85	(1.9	)%
Total picked up revenue per shipment	$	320	$	316	1.3	%
Total picked up revenue per shipment (excluding fuel surcharge)	$	284	$	277	2.6	%
Total weight per shipment (in pounds)	1,266		1,210		4.6	%

Third Quarter
2017 2016
Percent Change^(b)
Workdays 62.5
64.0

Total picked up revenue (in millions)^(a)
$ 776.3
$ 763.6
1.7 %
Total tonnage (in thousands) 1,592
1,620
(1.7 )%
Total tonnage per day (in thousands) 25.47
25.31
0.7 %
Total shipments (in thousands) 2,623
2,678
(2.1 )%
Total shipments per day (in thousands) 41.96
41.84
0.3 %
Total picked up revenue per hundred weight $ 24.38
$ 23.57
3.4 %
Total picked up revenue per hundred weight (excluding fuel surcharge) $ 21.81
$ 21.31
2.4 %
Total picked up revenue per shipment $ 296
$ 285
3.8 %
Total picked up revenue per shipment (excluding fuel surcharge) $ 265
$ 258
2.8 %
Total weight per shipment (in pounds) 1,214
1,210
0.4 %


	Third Quarter						Third Quarter
(in millions)	2017			2016			2019			2018
^(a)Reconciliation of operating revenue to total picked up revenue:
Operating revenue	$	787.8		$	777.9		$	803.2		$	822.1
Change in revenue deferral and other	(11.5		)	(14.3		)	(8.5		)	(17.1		)
Total picked up revenue	$	776.3		$	763.6		$	794.7		$	805.0


(a)	Does not equal financial statement revenue due to revenue recognition adjustments between accounting periods and the impact ~~of other revenue~~

of other revenue


(b)	Percent change based on unrounded figures and not the rounded figures presented

Operating income for YRC Freight was ~~$20.3~~$31.6 million in the third quarter of ~~2017~~2019 compared to operating income of ~~$20.8~~$24.7 million in the third quarter of ~~2016.~~2018. Operating expenses ~~increased $10.4~~decreased $25.8 million, or ~~1.4%~~3.2%, primarily due to ~~an increase~~decreases in ~~contractual~~purchased transportation expense and fuel, operating expenses and supplies. These decreases were partially offset by increased salaries, wages and employee ~~benefit costs, higher fuel costs and an increase in purchased transportation expense.~~benefits.

Salaries, wages and employee benefits. Salaries, wages and employee benefits increased ~~$1.2~~$5.7 million, or ~~0.3%~~1.3%, primarily due to a ~~$1.5~~$6.0 million increase in ~~employee~~ benefits ~~which are primarily related~~costs and a $3.3 million increase in wage expense as a result of higher contractual rates due to ~~contractual rate~~the New NMFA, partially offset by a decrease in tonnage that reduced the number of hours needed to process freight. These increases ~~for union employees.~~were offset by a $2.6 million decrease in short-term incentive compensation expense.

~~Operating~~Fuel, operating expenses and supplies. ~~Operating~~Fuel, operating expenses and supplies ~~increased $3.3~~decreased $9.2 million, or ~~2.5%~~6.3%, primarily due to ~~a $2.1~~an $8.6 million ~~increase~~decrease in fuel expense, which was largely driven by ~~higher~~lower fuel prices ~~on a per gallon basis.~~and fewer miles driven.

Purchased transportation. Purchased transportation ~~increased $7.9~~decreased $18.4 million, or ~~6.6%~~12.7%, primarily due to a ~~$4.8~~$13.3 million ~~increase in vehicle rent expense due primarily to equipment shortages, a $2.5 million increase~~decrease in rail purchased transportation expense due to reduced shipping volumes and a $4.4 million decrease from reduced usage of local purchased transportation.

Other operating expense. Other operating expense decreased $5.0 million, or 12.8%, primarily due to a $3.6 million decrease in third-party liability claims expense largely due to an ~~increase~~unfavorable adjustment recorded in ~~rail miles, and a $1.8 million increase in local purchased transportation due to increased volume and hurricane-related impacts.~~2018 with no similar adjustment during 2019.

First Three Quarters of ~~2017~~2019 Compared to the First Three Quarters of ~~2016~~2018

YRC Freight reported operating revenue of ~~$2,306.2~~$2,347.8 million in the first three quarters of ~~2017, an increase~~2019, a decrease of ~~$77.6~~$53.2 million, or ~~3.5%~~2.2%, compared to the same period in ~~2016.~~2018. The ~~increase~~decrease in revenue is primarily attributed to ~~an increase~~a decrease in ~~volume,~~tonnage and fuel surcharge revenue, ~~and~~partially offset by an improvement in base yield, excluding fuel ~~surcharge revenue.~~surcharge. The table below summarizes the key revenue metrics for the YRC Freight reporting segment for the first three quarters of ~~2017~~2019 compared to the first three quarters of ~~2016:~~2018:



	First Three Quarters
	2019		2018		Percent Change^(b)
Workdays	190.0		190.5

LTL picked up revenue (in millions)	$	2,167.2	$	2,216.4	(2.2	)%
LTL tonnage (in thousands)	3,612		3,833		(5.8	)%
LTL tonnage per day (in thousands)	19.01		20.12		(5.5	)%
LTL shipments (in thousands)	7,216		7,558		(4.5	)%
LTL shipments per day (in thousands)	37.98		39.67		(4.3	)%
LTL picked up revenue per hundred weight	$	30.00	$	28.91	3.8	%
LTL picked up revenue per hundred weight (excluding fuel surcharge)	$	26.46	$	25.34	4.4	%
LTL picked up revenue per shipment	$	300	$	293	2.4	%
LTL picked up revenue per shipment (excluding fuel surcharge)	$	265	$	257	3.1	%
LTL weight per shipment (in pounds)	1,001		1,014		(1.3	)%

Total picked up revenue (in millions)^(a)	$	2,324.2	$	2,373.6	(2.1	)%
Total tonnage (in thousands)	4,567		4,663		(2.0	)%
Total tonnage per day (in thousands)	24.04		24.48		(1.8	)%
Total shipments (in thousands)	7,325		7,664		(4.4	)%
Total shipments per day (in thousands)	38.55		40.23		(4.2	)%
Total picked up revenue per hundred weight	$	25.44	$	25.45	—	%
Total picked up revenue per hundred weight (excluding fuel surcharge)	$	22.50	$	22.33	0.8	%
Total picked up revenue per shipment	$	317	$	310	2.5	%
Total picked up revenue per shipment (excluding fuel surcharge)	$	281	$	272	3.3	%
Total weight per shipment (in pounds)	1,247		1,217		2.5	%

First Three Quarters
2017 2016
Percent Change^(b)
Workdays 190.0
191.5

Total picked up revenue (in millions)^(a)
$ 2,285.3
$ 2,208.9
3.5 %
Total tonnage (in thousands) 4,766
4,701
1.4 %
Total tonnage per day (in thousands) 25.08
24.55
2.2 %
Total shipments (in thousands) 7,976
7,875
1.3 %
Total shipments per day (in thousands) 41.98
41.12
2.1 %
Total picked up revenue per hundred weight $ 23.97
$ 23.49
2.0 %
Total picked up revenue per hundred weight (excluding fuel surcharge) $ 21.47
$ 21.34
0.6 %
Total picked up revenue per shipment $ 287
$ 280
2.2 %
Total picked up revenue per shipment (excluding fuel surcharge) $ 257
$ 255
0.7 %
Total weight per shipment (in pounds) 1,195
1,194
0.1 %


	First Three Quarters						First Three Quarters
(in millions)	2017			2016			2019			2018
^(a)Reconciliation of operating revenue to total picked up revenue:
Operating revenue	$	2,306.2		$	2,228.6		$	2,347.8		$	2,401.0
Change in revenue deferral and other	(20.9		)	(19.7		)	(23.6		)	(27.4		)
Total picked up revenue	$	2,285.3		$	2,208.9		$	2,324.2		$	2,373.6


(a)	Does not equal financial statement revenue due to revenue recognition adjustments between accounting periods and the impact ~~of other~~


	~~revenue~~

of other revenue


(b)	Percent change based on unrounded figures and not the rounded figures presented

Operating income for YRC Freight was ~~$37.8~~$26.5 million in the first three quarters of ~~2017~~2019 compared to ~~$53.3~~operating income of $44.6 million in the first three quarters of ~~2016.~~2018. Operating expenses ~~increased $93.1~~decreased $35.1 million, or ~~4.3%~~1.5%, primarily due to ~~an increase in contractual wages and~~

~~employee benefit costs, higher fuel costs, an increase~~a decrease in purchased transportation expense and ~~an increase in loss on property disposal expense.~~fuel, operating expenses and supplies. These decreases were partially offset by increased salaries, wages and employee benefits.

Salaries, wages and employee benefits. Salaries, wages and employee benefits increased ~~$22.8~~$20.9 million, or ~~1.8%~~1.6%, primarily due to a ~~$13.8~~$23.1 million increase in ~~wages and an $9.7~~benefits costs which was largely driven by a $13.9 million increase in ~~employee benefit costs, which are primarily related~~union vacation expense due to ~~contractual rate~~restoration of benefits from the passage of the New NMFA, and a $4.5 million increase in salaries expense. These increases ~~for union employees, combined with~~were partially offset by a $3.3 million reduction in short-term incentive compensation and a $1.7 million decrease in wage expense as a result of an increase in ~~shipping volumes,~~contractual wage rates due to the New NMFA, which ~~required~~was more ~~employee~~than offset by a decrease in tonnage that reduced the number of hours needed to process freight.

~~Operating~~Fuel, operating expenses and supplies. ~~Operating~~Fuel, operating expenses and supplies ~~increased $26.7~~decreased $19.2 million, or ~~7.0%~~4.3%, primarily due to ~~a $19.0~~an $18.4 million ~~increase~~decrease in fuel expense, which was largely driven by ~~higher fuel prices on a per gallon basis. Also, operating expenses increased by $8.5 million due to higher technology~~fewer miles driven and ~~operating supply costs.~~lower prices.

Purchased transportation. Purchased transportation ~~increased $39.4~~decreased $36.5 million, or ~~12.7%~~9.1%, primarily due to a ~~$16.5~~$38.6 million ~~increase~~decrease in rail purchased transportation due to an increase in rail miles and higher rail rates which were impacted by increased fuel surcharges. Vehicle rent expense increased $12.3 million due to higher usage of operating leases and short-term rental expense due to equipment shortages, and local and over-the-road purchased transportation expense ~~increased $8.9~~as a result of reduced shipping volumes and a $10.6 million ~~due to higher~~decrease from reduced usage of local purchased transportation and short-term equipment rentals. Purchased transportation expense also includes a $10.4 million increase in third-party ~~providers.~~costs for customer-specific logistics solutions and a $7.5 million increase in long-term equipment rentals in conjunction with the Company’s leasing strategy to reinvest in its fleet.

Other operating expense. Other operating expense decreased ~~$5.2~~$4.4 million, or ~~4.3%~~4.0%, primarily due to a ~~reduction~~$3.1 million decrease in ~~property damage and liability~~cargo claims ~~expense of $5.2 million due to unfavorable development of prior year claims that negatively impacted the second quarter of 2016.~~expense.

~~Gains/losses~~(Gains)/Losses on property disposals. Net ~~losses~~gains on disposals of property were ~~$1.7~~$2.0 million in the first three quarters of ~~2017~~2019 primarily as a result of a deferred gain recognized from changes in contractual lease terms, partially offset by losses on the disposal of revenue equipment, compared to ~~net gains of $12.0~~a $6.2 million loss in the first three quarters of ~~2016,~~2018, primarily due to losses on the ~~sale~~disposal of ~~excess real properties.~~revenue equipment.

Impairment charges. During the first quarter of 2019 an $8.2 million impairment charge was recorded that reflects the write-down of an intangible asset as a result of rebranding strategies, leading to discontinued use of a tradename.

Regional Transportation Results

Regional Transportation represented ~~37.0%~~36.1% of consolidated operating revenue for the third quarter of ~~2017,~~2019, as compared to ~~36.3%~~36.9% for the third quarter of ~~2016.~~2018. Regional Transportation represented ~~37.4%~~36.7% of consolidated operating revenue for the first three quarters of ~~2017,~~2019, as compared to ~~37.2%~~37.6% for the first three quarters of ~~2016.~~2018. The table below provides summary financial information for Regional Transportation for the third quarter and first three quarters of ~~2017~~2019 and ~~2016:~~

2018:



	Third Quarter							First Three Quarters
(in millions)	2019			2018			Percent Change	2019			2018			Percent Change
Operating revenue	$	453.6		$	481.5		(5.8) %	$	1,364.0		$	1,443.8		(5.5)%
Operating income (loss)	(4.1		)	18.4			(122.3) %	(8.5		)	52.8			(116.1)%
Operating ratio^(a)	100.9		%	96.2		%	(4.7) pp	100.6		%	96.3		%	(4.3) pp

Third Quarter First Three Quarters
(in millions) 2017 2016 Percent Change 2017 2016 Percent Change
Operating revenue $ 463.5
$ 443.7
4.5% $ 1,376.5
$ 1,321.3
4.2%
Operating income $ 21.5
$ 21.9
(1.8)% $ 59.0
$ 64.9
(9.1)%
Operating ratio^(a)
95.4 % 95.1 % (0.3) pp 95.7 % 95.1 % (0.6) pp


~~(a)~~	~~pp represents the change in percentage points~~

(a) pp represents the change in percentage points

Third Quarter of ~~2017~~2019 Compared to the Third Quarter of ~~2016~~2018

Regional Transportation reported operating revenue of ~~$463.5~~$453.6 million for the third quarter of ~~2017, an increase~~2019, a decrease of ~~$19.8~~$27.9 million, or ~~4.5%~~5.8%, from the third quarter of ~~2016.~~2018. The ~~increase~~decrease in revenue is primarily attributed to ~~an increase~~a decrease in ~~volume~~tonnage and fuel surcharge revenue, ~~while~~partially offset by an improvement in base yield, excluding fuel ~~surcharge, is comparable to prior year.~~surcharge. The table below summarizes the key revenue metrics for the Regional Transportation reporting segment for the third quarter of ~~2017~~2019 compared to the third quarter of ~~2016:~~2018:



	Third Quarter
	2019		2018		Percent Change^(b)
Workdays	62.5		63.0

LTL picked up revenue (in millions)	$	420.9	$	443.5	(5.1	)%
LTL tonnage (in thousands)	1,445		1,511		(4.4	)%
LTL tonnage per day (in thousands)	23.12		23.98		(3.6	)%
LTL shipments (in thousands)	2,304		2,417		(4.7	)%
LTL shipments per day (in thousands)	36.86		38.36		(3.9	)%
LTL picked up revenue per hundred weight	$	14.57	$	14.68	(0.8	)%
LTL picked up revenue per hundred weight (excluding fuel surcharge)	$	12.89	$	12.89	—	%
LTL picked up revenue per shipment	$	183	$	184	(0.4	)%
LTL picked up revenue per shipment (excluding fuel surcharge)	$	162	$	161	0.3	%
LTL weight per shipment (in pounds)	1,254		1,250		0.3	%

Total picked up revenue (in millions)^(a)	$	453.0	$	481.3	(5.9	)%
Total tonnage (in thousands)	1,769		1,891		(6.5	)%
Total tonnage per day (in thousands)	28.30		30.01		(5.7	)%
Total shipments (in thousands)	2,350		2,471		(4.9	)%
Total shipments per day (in thousands)	37.61		39.22		(4.1	)%
Total picked up revenue per hundred weight	$	12.81	$	12.73	0.6	%
Total picked up revenue per hundred weight (excluding fuel surcharge)	$	11.34	$	11.19	1.4	%
Total picked up revenue per shipment	$	193	$	195	(1.0	)%
Total picked up revenue per shipment (excluding fuel surcharge)	$	171	$	171	(0.3	)%
Total weight per shipment (in pounds)	1,505		1,530		(1.7	)%

Third Quarter
2017 2016
Percent Change^(b)
Workdays 62.5
63.0

Total picked up revenue (in millions)^(a)
$ 463.4
$ 443.6
4.5 %
Total tonnage (in thousands) 1,975
1,914
3.2 %
Total tonnage per day (in thousands) 31.60
30.38
4.0 %
Total shipments (in thousands) 2,631
2,622
0.3 %
Total shipments per day (in thousands) 42.10
41.62
1.1 %
Total picked up revenue per hundred weight $ 11.73
$ 11.59
1.2 %
Total picked up revenue per hundred weight (excluding fuel surcharge) $ 10.52
$ 10.49
0.3 %
Total picked up revenue per shipment $ 176
$ 169
4.1 %
Total picked up revenue per shipment (excluding fuel surcharge) $ 158
$ 153
3.2 %
Total weight per shipment (in pounds) 1,501
1,460
2.8 %


	Third Quarter						Third Quarter
(in millions)	2017			2016			2019			2018
^(a)Reconciliation of operating revenue to total picked up revenue:
Operating revenue	$	463.5		$	443.7		$	453.6		$	481.5
Change in revenue deferral and other	(0.1		)	(0.1		)	(0.6		)	(0.2		)
Total picked up revenue	$	463.4		$	443.6		$	453.0		$	481.3


(a)	Does not equal financial statement revenue due to revenue recognition adjustments between accounting periods


(b)	Percent change based on unrounded figures and not the rounded figures presented

Operating ~~income~~loss for Regional Transportation was ~~$21.5~~$4.1 million for the third quarter of ~~2017~~2019 compared to ~~$21.9~~operating income of $18.4 million for the third quarter of ~~2016.~~2018. Operating expenses ~~increased $20.2~~decreased $5.4 million, or ~~4.8%~~1.2%, primarily due to a decrease in fuel, operating expenses and supplies and purchased transportation expense. These decreases were partially offset by an increase in ~~contractual~~salaries, wages and employee ~~benefit costs, higher fuel costs and higher usage of purchased transportation.~~benefits.

Salaries, wages and employee benefits. Salaries, wages and employee benefits increased ~~$12.2~~$5.9 million, or 4.6%, primarily due to a $6.9 million increase in wages and a $6.9 million increase in employee benefit costs, which are primarily related to contractual rate increases for union employees, combined with an increase in shipping volumes, which required more employee hours to process freight.

~~Operating expenses and supplies.~~ ~~Operating expenses and supplies increased $6.4 million, or 7.9%~~2.1%, primarily due to a $4.3 million increase in benefits costs and a $3.8 million increase in wages which were largely driven by an increase in contractual

wage rates due to the New NMFA, and was partially offset by a decrease in tonnage that reduced the number of hours needed to process freight. Additionally, these increases were partially offset by a $2.1 million decrease in short-term incentive compensation.

Fuel, operating expenses and supplies. Fuel, operating expenses and supplies decreased $5.5 million, or 5.6%, primarily due to a $6.3 million decrease in fuel expense, which was largely driven by ~~higher fuel prices on a per gallon basis.~~fewer miles driven and lower prices.

Purchased transportation. Purchased transportation ~~increased $4.2~~decreased $4.4 million, or ~~11.7%~~11.2%, primarily due to a ~~$2.7~~$5.5 million ~~increase~~decrease in ~~vehicle rent expense due to higher usage of operating leases for revenue equipment, and a $2.3 million increase in local~~over-the-road purchased transportation expense ~~due to increased volume.~~as a result of reduced shipping volumes.

Other operating ~~expenses~~expense.. Other operating ~~expenses~~expense decreased ~~$0.7~~$1.5 million, or ~~2.9%~~5.8%, primarily due to a $1.7 million decrease in ~~our property damage and~~third-party liability claims ~~as a result of favorable development on current year claims which positively impacted the third quarter of 2017 and unfavorable~~expense largely due to improved development of prior year claims ~~that negatively impacted the third quarter of 2016, which was partially offset by increased cargo claims.~~during 2019 as compared to 2018.

First Three Quarters of ~~2017~~2019 Compared to the First Three Quarters of ~~2016~~2018

Regional Transportation reported operating revenue of ~~$1,376.5~~$1,364.0 million for the first three quarters of ~~2017, an increase~~2019, a decrease of ~~$55.2~~$79.8 million, or ~~4.2%~~5.5%, from the first three quarters of ~~2016.~~2018. The ~~increase~~decrease in revenue is primarily attributed to ~~an increase~~a decrease in ~~volume~~tonnage and fuel surcharge, ~~revenue, while~~partially offset by an improvement in base yield, excluding fuel ~~surcharge, is comparable to prior year.~~surcharge. The table below summarizes the key revenue metrics for the Regional Transportation reporting segment for the first three quarters of ~~2017~~2019 compared to the first three quarters of ~~2016:~~2018:



	First Three Quarters
	2019		2018		Percent Change^(b)
Workdays	189.0		190.5

LTL picked up revenue (in millions)	$	1,264.0	$	1,327.5	(4.7	)%
LTL tonnage (in thousands)	4,332		4,612		(6.1	)%
LTL tonnage per day (in thousands)	22.92		24.21		(5.3	)%
LTL shipments (in thousands)	6,879		7,335		(6.2	)%
LTL shipments per day (in thousands)	36.40		38.50		(5.5	)%
LTL picked up revenue per hundred weight	$	14.60	$	14.39	1.4	%
LTL picked up revenue per hundred weight (excluding fuel surcharge)	$	12.91	$	12.66	1.9	%
LTL picked up revenue per shipment	$	184	$	181	1.6	%
LTL picked up revenue per shipment (excluding fuel surcharge)	$	163	$	159	2.1	%
LTL weight per shipment (in pounds)	1,259		1,258		0.1	%

Total picked up revenue (in millions)^(a)	$	1,364.0	$	1,445.1	(5.6	)%
Total tonnage (in thousands)	5,332		5,806		(8.2	)%
Total tonnage per day (in thousands)	28.21		30.48		(7.4	)%
Total shipments (in thousands)	7,024		7,505		(6.4	)%
Total shipments per day (in thousands)	37.16		39.40		(5.7	)%
Total picked up revenue per hundred weight	$	12.79	$	12.44	2.8	%
Total picked up revenue per hundred weight (excluding fuel surcharge)	$	11.31	$	10.96	3.3	%
Total picked up revenue per shipment	$	194	$	193	0.9	%
Total picked up revenue per shipment (excluding fuel surcharge)	$	172	$	170	1.3	%
Total weight per shipment (in pounds)	1,518		1,547		(1.9	)%

First Three Quarters
2017 2016
Percent Change^(b)
Workdays 190.0
191.5

Total picked up revenue (in millions)^(a)
$ 1,378.8
$ 1,323.6
4.2 %
Total tonnage (in thousands) 5,935
5,794
2.4 %
Total tonnage per day (in thousands) 31.24
30.26
3.2 %
Total shipments (in thousands) 7,902
7,876
0.3 %
Total shipments per day (in thousands) 41.59
41.13
1.1 %
Total picked up revenue per hundred weight $ 11.61
$ 11.42
1.7 %
Total picked up revenue per hundred weight (excluding fuel surcharge) $ 10.43
$ 10.40
0.3 %
Total picked up revenue per shipment $ 174
$ 168
3.8 %
Total picked up revenue per shipment (excluding fuel surcharge) $ 157
$ 153
2.4 %
Total weight per shipment (in pounds) 1,502
1,471
2.1 %


	First Three Quarters				First Three Quarters
(in millions)	2017		2016		2019		2018
^(a)Reconciliation of operating revenue to total picked up revenue:
Operating revenue	$	1,376.5	$	1,321.3	$	1,364.0	$	1,443.8
Change in revenue deferral and other	2.3		2.3		—		1.3
Total picked up revenue	$	1,378.8	$	1,323.6	$	1,364.0	$	1,445.1


(a)	Does not equal financial statement revenue due to revenue recognition adjustments between accounting periods


(b)	Percent change based on unrounded figures and not the rounded figures presented

Operating ~~income~~loss for Regional Transportation was ~~$59.0~~$8.5 million for the first three quarters of ~~2017, as~~2019 compared to ~~$64.9~~operating income of $52.8 million for the first three quarters of ~~2016.~~2018. Operating expenses ~~increased by a $61.1~~decreased $18.5 million, or ~~4.9%~~1.3%, primarily due to a decrease in purchased transportation expense and fuel, operating expenses and supplies. These decreases were partially offset by an increase in ~~contractual~~salaries, wages and employee ~~benefit costs, higher fuel costs and higher usage of purchased transportation.~~benefits.

Salaries, wages and employee benefits. Salaries, wages and employee benefits increased ~~$30.5~~$13.9 million, or ~~3.8%~~1.6%, primarily due to an $11.6 million increase in benefits costs which was largely driven by a $7.4 million increase in union vacation expense due to restoration of benefits from the passage of the New NMFA, a $5.3 million increase in workers’ compensation expense, and a $2.0 million increase in salaries expense. These increases were partially offset by a $5.0 million decrease in short-term incentive compensation and flat wage expense which is a result of an increase in contractual wage rates due to the New NMFA, offset by a decrease in tonnage that reduced the number of hours needed to process freight.

Fuel, operating expenses and supplies. Fuel, operating expenses and supplies decreased $12.0 million, or 4.0%, primarily due to a ~~$15.2~~$12.6 million increase in wages and a $19.0 million increase in employee benefit costs, which are primarily related to contractual rate increases for union employees, combined with an increase in shipping volumes, which required more employee hours to process freight.

~~Operating expenses and supplies.~~ ~~Operating expenses and supplies increased $21.7 million, or 9.1%, primarily due to a $15.7 million increase~~decrease in fuel expense, which was largely driven by ~~higher fuel prices on a per gallon basis.~~fewer miles driven and lower prices.

Purchased transportation. Purchased transportation ~~increased $14.5~~decreased $14.6 million, or ~~14.7%~~12.6%, primarily due to a ~~$13.8~~$13.7 million ~~increase~~decrease in ~~vehicle rent~~over-the-road purchased transportation expense due to ~~higher usage of operating leases for revenue equipment.~~reduced shipping volumes.

Other operating ~~expenses~~expense.. Other operating ~~expenses~~expense decreased ~~$1.7~~$3.9 million, or ~~2.3%~~5.1%, primarily due to a ~~$4.1~~$2.5 million decrease in ~~our property damage and~~third-party liability claims ~~as a result of~~expense largely due to favorable ~~development on current year claims which positively impacted the first three quarters of 2017 and unfavorable~~ development of prior year claims, ~~that negatively impacted~~and a $1.3 million decrease in operating taxes as a result of fewer miles driven.

(Gains)/losses on property disposals. Net gains on disposals of property were $1.6 million in 2019 as a result of gains on the ~~first three quarters~~sale of ~~2016. This was~~real property, partially offset by ~~a $1.4~~losses on the disposal of revenue equipment, as compared to net losses of $1.1 million ~~increase~~ in ~~operating taxes,~~2018, primarily due to ~~more fuel gallons purchased, and a $1.1 million increase in cargo claims expense.~~losses on the disposal of revenue equipment.

Certain Non-GAAP Financial Measures

As discussed in the “Our Business” section, we use certain non-GAAP financial measures to assess performance. These measures should be considered in addition to the results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, our GAAP financial measures. For segment Adjusted EBITDA, we present the reconciliation from operating income (loss) to Adjusted EBITDA as it is consistent with how we measure performance.

Consolidated Adjusted EBITDA

The reconciliation of net income (loss) to EBITDA and EBITDA to Adjusted EBITDA (defined in our New Term Loan Agreement as “Consolidated EBITDA”) for the third quarter and first three quarters of ~~2017~~2019 and ~~2016~~2018, and the trailing twelve months ended September 30, ~~2017~~2019 and ~~2016,~~2018, is as follows:

Third Quarter First Three Quarters Trailing Twelve Months Ended
(in millions) 2017 2016 2017 2016 September 30, 2017 September 30, 2016
Reconciliation of net income (loss) to Adjusted EBITDA:
Net income (loss) $ 3.0
$ 13.9
$ (3.3 ) $ 29.0
$ (10.8 ) $ 5.5
Interest expense, net 25.9
25.5
76.7
77.6
102.1
103.8
Income tax expense (benefit) 0.9
0.5
0.4
3.4
0.1
(12.1 )
Depreciation and amortization 36.7
40.3
111.0
119.5
151.3
159.6
EBITDA 66.5
80.2
184.8
229.5
242.7
256.8
Adjustments for Term Loan Agreement:
(Gains) losses on property disposals, net 1.3
0.2
3.0
(11.2 ) (0.4 ) (10.8 )
Letter of credit expense 1.7
1.7
5.1
6.0
6.8
8.2
Restructuring professional fees —
—
2.2
—
2.2
—
Transaction costs related to issuances of debt 6.7
—
6.7
—
6.7
—
Permitted dispositions and other 0.3
2.2
1.1
1.8
2.3
1.9
Equity-based compensation expense 1.3
1.5
5.3
6.0
6.6
8.0
Amortization of ratification bonus —
—
—
4.6
—
9.1
Non-union pension settlement charge —
—
—
—
—
28.7
Other, net^(a)
3.6
(0.3 ) 7.5
3.1
6.5
3.9
Adjusted EBITDA $ 81.4
$ 85.5
$ 215.7
$ 239.8
$ 273.4
$ 305.8



	Third Quarter						First Three Quarters						Trailing Twelve Months Ended
(in millions)	2019			2018			2019			2018			September 30, 2019			September 30, 2018
Reconciliation of net income (loss) to Adjusted EBITDA^(a):
Net income (loss)	$	(16.0	)	$	2.9		$	(88.7	)	$	2.7		$	(71.2	)	$	(4.8	)
Interest expense, net	27.7			26.2			82.0			77.2			109.3			102.9
Income tax expense (benefit)	(0.5		)	4.7			(1.1		)	2.2			7.8			(5.5		)
Depreciation and amortization	37.2			34.9			115.7			110.2			153.2			146.9
EBITDA	48.4			68.7			107.9			192.3			199.1			239.5
Adjustments for Term Loan Agreement:
(Gains) losses on property disposals, net	1.0			1.9			(3.6		)	7.3			(31.7		)	3.7
Property gains on certain disposals^(b)	—			—			—			0.4			29.3			0.4
Non-cash reserve changes^(c)	(2.0		)	—			14.0			—			14.0			—
Impairment charges	—			—			8.2			—			8.2			—
Letter of credit expense	1.6			1.6			4.8			5.0			6.4			6.7
Transaction costs related to issuances of debt	—			—			—			—			—			1.4
Permitted dispositions and other	0.1			(0.4		)	(1.0		)	0.3			(1.0		)	0.4
Equity-based compensation expense	1.8			0.7			5.2			5.5			6.0			6.7
Loss on extinguishment of debt	11.2			—			11.2			—			11.2			—
Non-union pension settlement charge	1.7			7.2			1.7			7.2			5.4			14.8
Other, net^(d)	0.2			0.9			2.3			1.2			1.2			0.8
Amounts subject to 10% threshold^(e):
Nonrecurring consulting fees	1.9			2.0			6.2			5.2			8.7			5.2
Restructuring charges	(0.2		)	0.5			0.3			1.7			0.9			2.3
Nonrecurring item (vendor bankruptcy)	(2.5		)	—			1.2			—			5.5			—
Other, net^(d)	2.1			1.1			6.4			4.6			8.4			7.3
Adjusted EBITDA pursuant to Prior Term Loan Agreement	65.3			84.2			164.8			230.7			271.6			289.2
Less:
Property gains on certain disposals^(b)	—			—			—			(0.4		)	(29.3		)	(0.4		)
Adjustments in excess of 10% threshold^(e)	0.6			—			(1.5		)	—			(1.5		)	—
Adjusted EBITDA pursuant to New Term Loan Agreement	$	65.9		$	84.2		$	163.3		$	230.3		$	240.8		$	288.8


(a)	Certain reclassifications have been made to prior year to conform to current year presentation.


(b)	Certain property gains were added back in the calculation of Adjusted EBITDA pursuant to the Prior Term Loan Agreement which permitted gains from the sale of excess property with continuing operations. Under the New Term Loan Agreement, all gains attributable to property disposals must be deducted from Adjusted EBITDA.

(c)

Certain gains, losses, charges or expenses qualify for adjustment to EBITDA under more than one provision in the definition of “Consolidated EBITDA” of the New Term Loan Agreement (referred to herein as Adjusted EBITDA). The presentation of Adjusted EBITDA set forth above includes a modification to how certain gains, losses, charges or expenses were categorized in the presentation of Adjusted EBITDA furnished in our Current Report on Form 8-K filed on September 11, 2019. The Company has updated the presentation to reflect the net non-cash reserve charge for union and nonunion vacation (which includes the impact of the New NMFA for the one week of restored vacation), with such non-cash reserve adjustment to be reduced by cash charges in a future period when paid.


(d)	As required under both our Prior Term Loan Agreement and New Term Loan Agreement, Other, net shown above consists of the impact of certain items to be included in Adjusted EBITDA.


(e)	Pursuant to the New Term Loan Agreement, Adjusted EBITDA limits certain adjustments in aggregate to 10% of the trailing-twelve-month consolidated Adjusted EBITDA, prior to the inclusion of amounts subject to the 10% threshold, for each period ending. Such adjustments include, but are not limited to, restructuring charges, integration costs, severance, and non-recurring charges.

Segment Adjusted EBITDA

The following represents Adjusted EBITDA by segment for the third quarter and first three quarters of ~~2017~~2019 and ~~2016~~2018:


	Third Quarter				First Three Quarters						Third Quarter						First Three Quarters
(in millions)	2017		2016		2017			2016			2019			2018			2019			2018
Adjusted EBITDA by segment:
YRC Freight	$	42.6	$	45.3	$	105.8		$	119.3		$	52.8		$	48.6		$	116.8		$	124.8
Regional Transportation	38.7		40.2		110.3			121.3			13.3			35.7			47.4			105.1
Corporate and other	0.1		—		(0.4		)	(0.8		)	(0.2		)	(0.1		)	(0.9		)	0.4
Adjusted EBITDA	$	81.4	$	85.5	$	215.7		$	239.8		$	65.9		$	84.2		$	163.3		$	230.3

The reconciliation of operating income (loss), by segment, to Adjusted EBITDA for the third quarter and first three quarters of ~~2017~~2019 and ~~2016~~2018, is as follows:


	Third Quarter					First Three Quarters						Third Quarter					First Three Quarters
YRC Freight segment (in millions)	2017			2016		2017			2016			2019			2018		2019			2018
Reconciliation of operating income to Adjusted EBITDA:
Reconciliation of operating income to Adjusted EBITDA^(a):
Operating income	$	20.3		$	20.8	$	37.8		$	53.3		$	31.6		$	24.7	$	26.5		$	44.6
Depreciation and amortization	21.1			22.9		63.6			67.9			21.0			18.4		65.5			61.5
(Gains) losses on property disposals, net	1.0			—		1.7			(12.0		)	0.1			1.6		(2.0		)	6.1
Property gains on certain disposals^(b)												—			—		—			0.4
Non-cash reserve changes^(c)												(1.1		)	—		9.2			—
Impairment charges												—			—		8.2			—
Letter of credit expense	1.1			1.1		3.3			3.9			1.0			1.0		3.0			3.1
Amortization of ratification bonus	—			—		—			3.0
Other, net^(a)	(0.9		)	0.5		(0.6		)	3.2
Adjusted EBITDA	$	42.6		$	45.3	$	105.8		$	119.3
Non-union pension and postretirement benefits												(0.1		)	0.4		(0.5		)	1.5
Other, net^(d)												0.4			—		0.2			0.1
Amounts subject to 10% threshold^(e):
Nonrecurring consulting fees												1.6			1.9		5.4			5.0
Restructuring charges												—			—		—			0.1
Nonrecurring item (vendor bankruptcy)												(2.5		)	—		1.2			—
Other, net^(d)												0.3			0.6		1.1			2.8
Adjusted EBITDA pursuant to Prior Term Loan Agreement												52.3			48.6		117.8			125.2
Less:
Property gains on certain disposals^(b)												—			—		—			(0.4		)
Adjustments in excess of 10% threshold^(e)												0.5			—		(1.0		)	—
Adjusted EBITDA pursuant to New Term Loan Agreement												$	52.8		$	48.6	$	116.8		$	124.8



	Third Quarter					First Three Quarters
Regional Transportation segment (in millions)	2019			2018		2019			2018
Reconciliation of operating income (loss) to Adjusted EBITDA^(a):
Operating income (loss)	$	(4.1	)	$	18.4	$	(8.5	)	$	52.8
Depreciation and amortization	15.8			16.2		49.3			48.4
(Gains) losses on property disposals, net	0.9			0.3		(1.6		)	1.1
Non-cash reserve changes^(c)	(1.1		)	—		4.4			—
Letter of credit expense	0.5			0.6		1.6			1.7
Other, net^(d)	(0.2		)	—		(0.1		)	0.1
Amounts subject to 10% threshold^(e):
Nonrecurring consulting fees	0.3			—		0.8			—
Other, net^(d)	1.2			0.2		1.7			1.0
Adjusted EBITDA pursuant to Prior Term Loan Agreement	13.3			35.7		47.6			105.1
Less:
Adjustments in excess of 10% threshold^(e)	—			—		(0.2		)	—
Adjusted EBITDA pursuant to New Term Loan Agreement	$	13.3		$	35.7	$	47.4		$	105.1

Third Quarter First Three Quarters
Regional Transportation segment (in millions) 2017 2016 2017 2016
Reconciliation of operating income to Adjusted EBITDA:
Operating income $ 21.5
$ 21.9
$ 59.0
$ 64.9
Depreciation and amortization 15.6
17.4
47.4
51.6
Losses on property disposals, net 0.3
0.3
1.3
0.9
Letter of credit expense 0.5
0.6
1.6
2.0
Amortization of ratification bonus —
—
—
1.6
Other, net^(a)
0.8
—
1.0
0.3
Adjusted EBITDA $ 38.7
$ 40.2
$ 110.3
$ 121.3


	Third Quarter						First Three Quarters						Third Quarter						First Three Quarters
Corporate and other (in millions)	2017			2016			2017			2016			2019			2018			2019			2018
Reconciliation of operating loss to Adjusted EBITDA:
Operating loss	$	(1.7	)	$	(3.9	)	$	(9.7	)	$	(8.8	)	$	(3.7	)	$	(1.9	)	$	(11.6	)	$	(9.6	)
Gains on property disposals, net	—			(0.1		)	—			(0.1		)
Depreciation and amortization													0.4			0.2			0.9			0.3
Losses on property disposals, net													—			—			—			0.1
Non-cash reserve changes^(c)													0.2			—			0.4			—
Letter of credit expense	0.1			—			0.2			0.1			0.1			0.1			0.2			0.2
Restructuring professional fees	—			—			2.2			—
Permitted dispositions and other	0.3			2.2			1.1			1.8			0.1			(0.4		)	(1.0		)	0.3
Non-union pension and postretirement benefits													(0.2		)	(0.1		)	(0.6		)	(0.3		)
Equity-based compensation expense	1.3			1.5			5.3			6.0			1.8			0.7			5.2			5.5
Other, net^(a)	0.1			0.3			0.5			0.2
Adjusted EBITDA	$	0.1		$	—		$	(0.4	)	$	(0.8	)
Other, net^(d)													0.6			0.5			2.0			1.5
Amounts subject to 10% threshold^(e):
Restructuring charges													(0.2		)	0.5			0.3			1.6
Other, net^(d)													0.6			0.3			3.6			0.8
Adjusted EBITDA pursuant to Prior Term Loan Agreement													(0.3		)	(0.1		)	(0.6		)	0.4
Less:
Adjustments in excess of 10% threshold^(e)													0.1			—			(0.3		)	—
Adjusted EBITDA pursuant to New Term Loan Agreement													$	(0.2	)	$	(0.1	)	$	(0.9	)	$	0.4


(a)	Certain reclassifications have been made to prior year to conform to current year presentation.


(b)	Certain property gains were added back in the calculation of Adjusted EBITDA pursuant to the Prior Term Loan Agreement which permitted gains from the sale of excess property with continuing operations. Under the New Term Loan Agreement, all gains attributable to property disposals must be deducted from Adjusted EBITDA.

(c)


(d)	As required under both our Prior Term Loan Agreement and New Term Loan Agreement, Other, net shown ~~in the~~ above ~~tables~~ consists of the impact of certain items to be included in Adjusted EBITDA.


(e)	Pursuant to the New Term Loan Agreement, Adjusted EBITDA limits certain adjustments in aggregate to 10% of the trailing-twelve-month consolidated Adjusted EBITDA, prior to the inclusion of amounts subject to the 10% threshold, for each period ending. Such adjustments include, but are not limited to, restructuring charges, integration costs, severance, and non-recurring charges.

Liquidity and Capital Resources

Our principal sources of liquidity are cash and cash equivalents, available borrowings under our ~~ABL Facility~~asset-based loan facility and any prospective net cash flow from operations. As of September 30, ~~2017,~~2019, our maximum availability under our ABL Facility was ~~$94.0~~$69.5 million. Our Managed Accessibility was $28.8 million, which represents the maximum amount we would access on the ABL Facility and is ~~derived by reducing the amount that may be advanced against~~adjusted for eligible receivables plus eligible borrowing base cash ~~by certain reserves imposed by the ABL Agent and~~measured at September 30, 2019. As of September 30, 2019, our $356.0 million of outstanding letters of credit. Of the $94.0 million in availability, our Managed Accessibility was $49.0 million based on our springing fixed charge coverage ratio (as set forth in our ABL Facility). Our cash and cash equivalents and Managed Accessibility were $150.1 million.

The table below summarizes cash and cash equivalents and Managed Accessibility as of September 30, ~~2017.~~2019 and December 31, 2018:



(in millions)	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	121.3	$	227.6
Changes to restricted cash	—		(25.0		)
Managed Accessibility	28.8		1.2
Total cash and cash equivalents and Managed Accessibility	$	150.1	$	203.8

Outside of funding normal operations, our principal uses of cash include making contributions to various multi-employer pension funds and our single-employer pension plans, ~~and various multi-employer pension funds~~ and meeting our other cash obligations including, but not limited to, paying principal and interest on our funded debt, making payments on our equipment leases, and funding capital expenditures.

As of September 30, ~~2017,~~2019, we had ~~$962.4~~$906.3 million in aggregate par value of outstanding indebtedness, the majority of which matures in ~~3-5~~approximately three to five years. We also have future funding obligations for our ~~single-employer pension plans and~~ various multi-employer pension ~~funds.~~funds and single-employer pension plans. We expect our funding obligations for the remainder of ~~2017~~2019 for our multi-employer pension funds and single-employer pension plans ~~and multi-employer pension funds~~ will be ~~$14.2~~$34.7 million and ~~$23.8~~$2.2 million, respectively. In addition, we have, and will continue to have, operating lease obligations. As of September 30, ~~2017,~~2019, our operating lease payment obligations through 2030 totaled ~~$282.5~~$470.2 million and are expected to increase as we lease additional revenue equipment. ~~Additionally, for~~For the first three quarters of ~~2017,~~2019, we entered into new operating leases for revenue equipment totaling ~~$26.2~~$94.6 million in future lease payments, payable over an average lease term of ~~five~~four years.

Our capital expenditures for the first three quarters of ~~2017~~2019 and ~~2016~~2018 were ~~$70.8~~$111.5 million and ~~$75.4~~$92.4 million, respectively. These amounts were principally used to fund the purchase of new and used ~~tractors and trailers, to refurbish engines for our~~ revenue ~~fleet, and~~equipment, for capitalized costs to improve our technology ~~infrastructure.~~infrastructure and to refurbish engines for our revenue fleet. For the nine months ended September 30, 2019 we entered into new operating lease commitments for revenue equipment with a capital equivalent value of $113.3 million.

As of September 30, ~~2017,~~2019, our Standard & Poor’s Corporate Family Rating was “B-” with a stable outlook and Moody’s Investor Service Corporate Family Rating was ~~“B3”~~“B2” with a ~~positive~~stable outlook.

~~Credit Facility~~ Covenants

~~Our~~The New Term Loan Agreement ~~has certain~~includes a financial ~~covenants~~covenant requirement for the Company to maintain a minimum of $200.0 million trailing-twelve-month Adjusted EBITDA, measured quarterly. Consolidated Adjusted EBITDA, defined in our New Term Loan Agreement as “Consolidated EBITDA,” is a measure that reflects our earnings before interest, taxes, depreciation, and amortization expense, and is further adjusted for, among other things, ~~restricts~~letter of credit fees, equity-based compensation expense, net gains or losses on property disposals, restructuring charges, transaction costs related to issuances of debt, non-recurring consulting fees, non-cash impairment charges and the gains or losses from permitted dispositions, discontinued operations, and certain non-cash expenses, charges and losses (provided that if any of such non-cash expenses, charges or losses represents an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period will be subtracted from Consolidated EBITDA in such future period to the extent paid). The definition was further modified under the New Term Loan Agreement such that certain expenses that qualify as adjustments are capped at 10.0% of the trailing-twelve-month Adjusted EBITDA, in aggregate. Adjustments subject to the 10.0% cap include, but are not limited to, restructuring charges, integration costs, severance, and non-recurring charges. Additionally, all net gains from the disposition of properties are excluded from the definition of Adjusted EBITDA, therefore any gains previously recognized in Adjusted EBITDA, as that term was previously defined in our SEC filings, in accordance with its definition in the Prior Term Loan Agreement, will not be included in the calculation of Adjusted EBITDA under the New Term Loan Agreement.

The ABL Facility also contains certain covenants, including, but not limited to, annual limits on capital expenditures. The ABL includes a $200.0 million annual limit on capital expenditures ~~and requires us to not exceed a maximum total leverage ratio (defined as Consolidated Total Debt divided by Consolidated Adjusted EBITDA). These covenants were modified as part of~~but one year lookback is permitted. The annual capital expenditure limit covenant was removed from the New Term Loan ~~Amendment on July 26, 2017, which is more fully described in the “Debt~~Agreement.

Risks and ~~Financing” footnote to the consolidated financial statements. At September 30, 2017, we were in compliance~~Uncertainties Regarding Compliance with ~~all such covenants.~~Credit Facility Financial Covenants

We believe that our results of operations will ~~be sufficient to~~ allow us to comply with the ~~covenants~~minimum Adjusted EBITDA covenant in the New Term Loan Agreement ~~fund our operations, increase working capital as necessary to support our planned revenue growth and fund capital expenditures~~ for at least the next twelve ~~months. To maintain compliance~~months, subject to specific actions and cost savings initiatives we are taking in the fourth quarter of 2019 and the first quarter of 2020 to provide additional Adjusted EBITDA. These actions include headcount reductions commensurate with ~~the maximum total leverage ratio over the tenor~~our current volume levels, a hiring freeze on new and replacement positions, temporary elimination of ~~the Term Loan~~short-term incentive compensation and a reduction in discretionary spend. We are taking these actions because we have not been able to fully realize operational efficiencies arising from our New NMFA due to depressed volume levels. Our ability to satisfy our liquidity needs ~~we would have~~and meet our minimum Adjusted EBITDA requirement during the next twelve months and thereafter is dependent upon our ability to achieve operating results that reflect improvement over our first half 2019, which were negatively impacted by the process to obtain our five-year labor agreement scheduled to expire on March 31, 2019 and successfully ratified on May 14, 2019. Significant adverse conditions, which may result from changes in global trade policies or increased contraction in the general economy, may impact our ability to achieve a ~~slight improvement to our 2016~~minimum Adjusted ~~EBITDA.~~EBITDA above $200.0 million on a trailing-twelve-month basis. Means for improving our profitability ~~may~~ include ~~streamlining our support structure,~~accelerated implementation of network optimization, specific initiatives in the areas of pricing and customer engagement, and other operational actions to improve productivity and efficiency, as well as ~~ongoing successful implementation and realization~~increased volume, all of ~~pricing, productivity and efficiency initiatives,~~which may not be within our control. If we are unable to achieve the improved results required

to comply with this covenant in one or more quarters over the next twelve months, we may be required to take specific actions in addition to ~~increased volume, some of which are outside of our control. During the first half of 2017, the Company strategically identified opportunities~~those described above, including but not limited to, ~~streamline overhead~~additional reductions in headcount, targeted procurement initiatives to reduce operating costs and accelerating terminal closures to reduce ~~operational inefficiencies~~overhead and ~~those cost reductions continue to be expected through the remainder of 2017.~~other operating costs, or alternatively, seeking an amendment or waiver from our lenders or taking other remedial measures.

Cash Flows

Operating Cash Flow

Cash ~~flows~~ provided by operating activities ~~were $64.2~~was $13.4 million during the first three quarters of ~~2017,~~2019, compared to ~~$86.0~~$157.9 million of cash provided during the first three quarters of ~~2016.~~2018. The decrease in ~~operating~~ cash ~~flows~~provided was primarily attributable to a ~~$29.1 million increase in accounts receivable, impacted by growth in operating revenue and an increase to days sales outstanding, a $23.5~~$91.4 million decrease in ~~cash from net~~ income, ~~(adjusted for non-cash operating items), partially offset by a $30.8 million decrease to other working capital accounts~~and the remaining difference is primarily related to ~~the~~ timing ~~of payments.~~differences in working capital accounts.

Investing Cash Flow

Cash ~~flows provided by~~used in investing activities was ~~$22.4 million during the~~ ~~first three quarters~~ ~~of 2017 compared to $44.9~~$101.6 million during the first three quarters of ~~2016, largely driven by a net receipt of $85.0 million in restricted escrow refunds in 2017~~2019 compared to ~~a net receipt of $79.2~~$87.5 million ~~in 2016. Offsetting this increase, net proceeds from the disposal of property decreased $18.3 million~~ during ~~the~~ ~~first three quarters~~ ~~of 2017 as compared to~~ the first three quarters of ~~2016, and~~2018. The increase of $14.1 million was largely driven by higher revenue equipment acquisitions partially offset by higher cash ~~flows in 2016 included $14.6 million in net~~ proceeds from the sale of ~~JHJ with no similar~~real property.

Financing Cash Flow

Cash used in financing activities for the first three quarters of 2019 and 2018 was $18.1 million and $22.9 million, respectively. The payment of $11.1 million in deferred debt issuance costs and the favorable impact to cash ~~flow in 2017.~~of obtaining our New Term Loan reduced our cash used when compared to 2018, which consisted primarily of repayments on our long-term debt under our Prior Term Loan.

~~Financing Cash Flow~~

~~Cash flows used in financing activities for the~~ ~~first three quarters~~ of ~~2017~~ ~~and 2016 was~~ ~~$62.5 million~~ ~~and $28.3 million, respectively, which consists primarily of repayments on our long-term debt as well as the payment of debt issuance costs in 2017.~~

Contractual Obligations and Other Commercial Commitments

The following sections provide aggregated information regarding our contractual cash obligations and other commercial commitments as of September 30, ~~2017~~.2019.

Contractual Cash Obligations

The following table reflects our cash outflows that we are contractually obligated to make as of September 30, ~~2017~~:2019:


			Payments Due by Period										Payments Due by Period
(in millions)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
ABL Facility^(a)	$	28.4	$	7.1	$	14.3	$	7.0	$	—	$	13.6	$	6.8	$	6.8	$	—	$	—
Term Loan^(b)	865.8		75.6		148.5		641.7		—		877.8		58.6		116.9		702.3		—
Lease financing obligations^(c)	110.8		42.9		39.7		14.1		14.1		375.8		42.3		80.6		79.1		173.8
Pension deferral obligations^(d)	117.1		7.6		109.5		—		—		91.9		7.2		14.0		70.7		—
Workers’ compensation, property damage and liability claims obligations^(e)	365.8		99.0		117.1		52.0		97.7		362.6		105.2		115.4		50.0		92.0
Operating leases^(f)	282.5		99.7		127.2		41.7		13.9		470.2		153.6		216.9		64.6		35.1
Other contractual obligations^(g)	17.6		17.0		0.6		—		—		51.5		31.4		17.6		2.5		—
Capital expenditures and other ^(h)	101.2		101.2		—		—		—		15.4		15.4		—		—		—
Total contractual obligations	$	1,889.2	$	450.1	$	556.9	$	756.5	$	125.7	$	2,258.8	$	420.5	$	568.2	$	969.2	$	300.9


(a)	The ABL Facility includes future payments for the letter of credit and unused line fees and are not included on the Company’s consolidated balance sheets.


(b)	The Term Loan includes principal and interest payments but excludes unamortized discounts. ~~The extended maturity date to July 26, 2022 is subject to the extension of the Second A&R CDA.~~


(c)	The lease financing obligations include interest payments of ~~$70.9~~$342.4 million and principal payments of ~~$39.9~~$33.4 million. The remaining principal obligation is offset by the estimated book value of leased property at the expiration date of each lease agreement.


(d)	Pension deferral obligations includes principal and interest payments on the Second A&R CDA.


(e)	The workers’ compensation, property damage and liability claims obligations represent our estimate of future payments for these obligations, not all of which are contractually required.


(f)	Operating leases represent future payments ~~which include interest,~~ under contractual lease arrangements primarily for revenue ~~equipment and are not included on the Company’s consolidated balance sheets.~~equipment.


(g)	Other contractual obligations ~~includes~~include future service agreements and certain maintenance agreements and are not included on the Company’s consolidated balance sheets.

(h)

Capital ~~expenditure~~expenditures and other obligations primarily ~~includes~~include noncancelable ~~purchase and lease~~ orders for revenue equipment ~~not yet delivered~~the Company will either purchase or lease. If leased, the cash obligations will be scheduled over the multi-year term of the lease and ~~are not included in the Company’s consolidated balance sheets.~~ROU assets and liabilities will be recorded upon lease execution.

Other Commercial Commitments

The following table reflects other commercial commitments or potential cash outflows that may result from a contingent ~~event, such as a need to borrow short-term funds due to insufficient free cash flow.~~event.


			Amount of Commitment Expiration Per Period										Amount of Commitment Expiration Per Period
(in millions)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
ABL Facility availability ^(a)	$	94.0	$	—	$	—	$	94.0	$	—	$	69.5	$	—	$	69.5	$	—	$	—
Letters of credit^(b)	356.0		—		—		356.0		—		337.6		—		337.6		—		—
Surety bonds^(c)	128.7		115.2		13.5		—		—		120.8		112.4		8.4		—		—
Total commercial commitments	$	578.7	$	115.2	$	13.5	$	450.0	$	—	$	527.9	$	112.4	$	415.5	$	—	$	—


(a)	Availability under the ABL Facility is derived by reducing the amount that may be advanced against eligible receivables plus eligible borrowing base cash by certain reserves imposed by the ABL Agent and our outstanding letters of credit. ~~Managed Accessibility was $49.0 million.~~


(b)	Letters of credit outstanding are generally required as collateral to support self-insurance programs and do not represent additional liabilities as the underlying self-insurance accruals are already included in our consolidated balance sheets.


(c)	Surety bonds are generally required for workers’ compensation to support self-insurance programs, which include certain bonds that do not have an expiration date but are redeemable on demand, and do not represent additional liabilities as the underlying self-insurance accruals are already included in our consolidated balance sheets.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements ~~other than operating leases,~~except for other contractual obligations for service agreements and capital purchases, letters of credit and surety bonds, which are reflected in the above tables.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are primarily exposed to the market risk associated with unfavorable movements in interest rates, foreign currencies, and fuel price volatility. The risk inherent in our market risk-sensitive instruments and positions is the potential loss or increased expense arising from adverse changes in those factors. There have been no material changes to our market risk policies or our market risk-sensitive instruments and positions as described in our annual report on Form 10-K for the year ended December 31, ~~2016.~~2018.

Item 4. Controls and Procedures

As required by the Exchange Act, we maintain disclosure controls and procedures designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive and financial officers, has evaluated our disclosure controls and procedures as of September 30, ~~2017~~2019 and have concluded that our disclosure controls and procedures were effective as of September 30, ~~2017~~2019.

We are in the process of implementing the human resources and payroll modules of a new comprehensive enterprise resource planning (ERP) system across most of our operating companies, with a phased-in implementation approach, in which the first phase goes liveimplemented ASC 842, Leases, on January 1, ~~2018. The system implementation was designed, in part, to enhance the overall system of internal control over financial reporting through enhanced automation~~2019 and ~~streamlining business processes across operating companies. Although the processes that constitute our internal control over financial reporting will be affected by the implementation,~~ the Company is performing pre-implementation procedures as part of its assessment of the effectiveness of internal control over financial reporting. We do not believe that the implementation will have a material adverse effect on ourimplemented internal controls ~~over~~related to lease balances and disclosures on its consolidated financial ~~reporting.~~statements.

~~Other than as described above, there~~There were no other changes in our internal ~~controls~~control over financial reporting that occurred during the fiscal quarter ended September 30, ~~2017~~2019 that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal ~~controls~~control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We discuss legal proceedings in the “Commitments, Contingencies and Uncertainties” note to our consolidated financial statements included with this quarterly report on Form 10-Q, and that discussion is incorporated by reference herein.

Item 1A. Risk Factors

~~There were no material changes during the quarter~~In addition to the ~~Risk Factors disclosed~~other information set forth in this report, you should carefully consider the factors discussed below and as discussed in Part I, Item ~~1A -~~IA. “Risk Factors” in our ~~annual report~~Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018, which could materially affect our business, financial condition or future results. The risks described below and in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may eventually prove to materially adversely affect our business, financial condition and/or operating results.

Our failure to comply with the covenants in our New Term Loan Agreement could materially adversely affect out financial condition and liquidity.

The documents governing our indebtedness contain financial covenants, affirmative covenants requiring us to take certain actions and negative covenants restricting our ability to take certain actions. In particular, our New Term Loan Agreement contains a financial covenant that requires us to maintain minimum trailing-twelve-month Adjusted EBITDA of $200.0 million. For additional information, see the “Debt and Financing” footnote to the consolidated financial statements.

We believe that our results of operations will allow us to comply with the minimum Adjusted EBITDA covenant in the New Term Loan Agreement for at least the next twelve months, subject to specific actions and cost savings initiatives we are taking in the fourth quarter of 2019 and the first quarter of 2020 to provide additional Adjusted EBITDA. These actions include headcount reductions commensurate with our current volume levels, a hiring freeze on new and replacement positions, temporary elimination of short-term incentive compensation and a reduction in discretionary spend. We are taking these actions because we have not been able to fully realize operational efficiencies arising from our New NMFA due to depressed volume levels. Our ability to satisfy our liquidity needs and meet our minimum Adjusted EBITDA requirement during the next twelve months and thereafter is dependent upon our ability to achieve operating results that reflect improvement over our first half 2019, which were negatively impacted by the process to obtain our five-year labor agreement scheduled to expire on March 31, 2019 and successfully ratified on May 14, 2019. Significant adverse conditions, which may result from changes in global trade policies or increased contraction in the general economy, may impact our ability to achieve a minimum Adjusted EBITDA above $200.0 million on a trailing-twelve-month basis. Means for improving our profitability may include successful implementation of network optimization, specific initiatives in the areas of pricing and customer engagement, and other operational actions to improve productivity and efficiency, as well as increased volume, all of which may not be within our control. If we are unable to achieve the improved results, we may face challenges to comply with this covenant in one or more quarters over the next twelve months and, we may be required to pursue certain actions in addition to the ones described above for the fourth quarter of 2019 and the first quarter of 2020, including but not limited to, additional headcount reductions, targeted procurement initiatives to reduce operating costs and/or seeking other cost reductions. Some of those actions might adversely affect our operations and financial performance over the long-term.

Any covenant breach or other event of default could enable lenders thereunder to accelerate the repayment of amounts outstanding and exercise remedies with respect to the collateral. If our lenders under our credit facilities demand payment, we will not have sufficient cash to repay such indebtedness. In addition, a default under our credit facilities or the lenders exercising their remedies thereunder could trigger cross-default provisions in our other indebtedness and certain other operating agreements.

In addition, any covenant breach or event of default could harm our credit rating and our ability to obtain financing on acceptable terms. The occurrence of any of these events could have a material adverse effect on our financial condition and liquidity.

If our relationship with our employees and unions were to deteriorate, we may be faced with labor disruptions or stoppages or general uncertainty by our customers, which could have a material adverse effect on our business, financial condition and results of operations, result in a loss of customers, and place us at a disadvantage relative to non-union competitors.

Each of our operating subsidiaries has employees who are represented by the International Brotherhood of Teamsters (“IBT”). These employees comprised 79% of our workforce at September 30, 2019. Salaries, wages and employee benefits for both union and non-union employees compose over half of our operating costs. Each of our YRC Freight, New Penn, and Holland subsidiaries employ most of their unionized employees under the terms of a common, master collective bargaining agreement and related supplemental agreements that remain in effect through March 31, 2024, and Reddaway employs most of its unionized employees

under a collective bargaining agreement that expires March 31, 2021. The IBT also represents a number of employees at YRC Freight in Canada under more localized agreements, which have wages, benefit contributions and other terms and conditions that we believe better fit the cost structure and operating models of this entity.

Our subsidiaries are regularly subject to grievances, arbitration proceedings and other claims concerning alleged past and current non-compliance with applicable labor law and collective bargaining agreements. We cannot predict the outcome of any of these matters. These matters, if resolved in a manner unfavorable to us, could have a material adverse effect on our business, financial condition, liquidity and results of operations.

Item 6. Exhibits



~~10.1~~10.1*	Credit Agreement, dated as of September 11, 2019, by and among the Company, as borrower, the subsidiaries of the borrower party thereto from time to time, the lenders from time to time party thereto, and Cortland Products Corp., as administrative agent and collateral agent for the lenders.

10.2*	Amendment No. 45 to Loan and ~~Refinancing Amendment to Credit~~Security Agreement by and among the Company, certain of ~~its~~the Company’s subsidiaries party thereto, the lenders party thereto and ~~Credit Suisse AG, Cayman Islands Branch,~~Citizens Business Capital as ~~administrative agent (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K, filed on July 26, 2017, File No. 000-12255).~~agent.

31.1*	Certification of ~~James L. Welch~~Darren D. Hawkins filed pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002

31.2*	Certification of Stephanie D. Fisher filed pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002

32.1*	Certification of ~~James L. Welch~~Darren D. Hawkins furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002

32.2*	Certification of Stephanie D. Fisher furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002

101.INS*	XBRL Instance Document

101.SCH*	XBRL Taxonomy Extension Schema

101.CAL*	XBRL Taxonomy Extension Calculation Linkbase

101.DEF*	XBRL Taxonomy Extension Definition Linkbase

101.LAB*	XBRL Taxonomy Extension Label Linkbase

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

__________________________

* Indicates documents filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 ~~as amended,~~ the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		YRC WORLDWIDE INC.


Date: ~~November 2, 2017~~October 31, 2019		/s/ ~~James L. Welch~~Darren D. Hawkins
		~~James L. Welch~~Darren D. Hawkins
		Chief Executive Officer

Date: ~~November 2, 2017~~October 31, 2019		/s/ Stephanie D. Fisher
		Stephanie D. Fisher
		Chief Financial Officer

3144



Preferred Stock:
Beginning and ending balance	$	—
Common Stock:
Beginning and ending balance	$	0.3
Capital Surplus:
Beginning balance	$	2,319.2
Equity-based compensation	2.9
Ending balance	$	2,322.1
Accumulated Deficit:
Beginning balance	$	(2,217.8	)
Net loss	(3.3		)
Ending balance	$	(2,221.1	)
Accumulated Other Comprehensive Loss:
Beginning balance	$	(425.2	)
Reclassification of prior net pension actuarial losses, net of tax	6.9
Foreign currency translation adjustments	6.0
Ending balance	$	(412.3	)
Treasury Stock, At Cost:
Beginning and ending balance	$	(92.7	)
Total Shareholders’ Deficit	$	(403.7	)



			Fair Value Measurement Hierarchy
(in millions)	Total Carrying Value		Quoted prices in active market (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Restricted amounts held in escrow-current	$	54.0	$	54.0	$	—	$	—
Total assets at fair value	$	54.0	$	54.0	$	—	$	—