Q4 2019 Earnings Call
Quarter and full year 2019 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Mr., Doug Coal. Please go ahead Sir.
Thank you Brett.
Good morning, everyone welcome to size fourth quarter 2019 conference call.
With me for today's call a record Belsize Chief Executive Officer.
Holds great <unk>, President and Chief operating Officer.
Well, we began you should know that don't call. We may make forward looking statements within the meaning of the private Securities Litigation Reform Act 1995. These forward looking statements and all other statements that might be might on this call. They're not historical facts are subject to number but risks uncertainties and actual results may differ materially.
We refer you to our press release my most recent SEC filings for more information on the exact risk factors that could cause actual results to differ.
Well I would like to turn the call over to record though.
Well good morning, and thank you for joining us.
Please to report that we closed out 2019 with record full year results. Despite a fourth quarter that was somewhat disappointing.
Revenue in 2019 was a record $1.8 billion, surpassing last year's record by 8% operating income also grew by 8% to a record $153 million.
Fourth quarter revenue was a record $443 million. The quarter's results were negatively impacted by terminal opening and relocation costs as well as accident severity, which Doug will cover in more detail in a financial review.
Despite the challenges to the fourth quarter results associated with opening three new terminals and relocating three others in the period productivity for the full year actually improved modestly in both the dock and city operations.
Our line haul operation declining weight per shipment throughout the year led to a slight decline in load average, but we were able to reduce our line haul costs as a percent of revenues by 2.2% purchased transportation miles as it as a percent of total Whitehall mild dropped at 10.3% from 10.6% last year.
I'm pleased to report about longtime pick up and on time delivery metrics improved year over year. Despite all the terminal activity and the growth of our workforce.
Cargo claims ratio for the full year <unk> 0.76 was slightly improved from 0.77 last year. Despite again, all the new terminals and all the new employees.
It's 2020 began Sai operates 168 terminals across 43 states, having opened nine new locations in 2019 since May of 2017, we've opened 18, new terminals across new markets and the northeastern U.S.. Our expanded service offering has quickly resonated with our customer base.
Exiting the fourth quarter, where on an annualized run rate of over $280 million into and out of these new markets.
With enhanced geographic service offering and our consistent quality and reliability, we're raising our value proposition to customers.
Our yield rose, 3.7% and the fourth quarter, making our 30 eightth consecutive year over year improvement.
I'll now turn the call over to Doug for review key fourth quarter and full year financial highlights.
Thanks, Rick I'll start with a review the fourth quarter.
Revenue rose, 8.9% to 443 million.
Along with the yield improvement Rick mentioned revenue also benefited from shipments in tonnage growth of 6.3, and 4.3% respectively in the core.
Fuel surcharge revenue was up 2.2% year over year.
And it was 13% until revenue.
Despite a 1.9% decline of weight per shipment or revenue per shipment rose 1.8% to $238.
And im benefiting from the yield growth and also from 1.1% increase in Arlington Paul.
Operating income of 27 million the fourth quarter was down 18% year over year with much of the decline stemming from costs associated with three new term openings and three major terminal relocations, which occurred in the quarter.
Along with increased insurance reserves associated with accident severity.
Additionally, on the cost front I can offer a little bit more color on the quarter as follows.
Salaries wages and benefits rose by 10.7%, reflecting our average employee count being approximately 5% higher than the prior year.
July wage increase of approximately 3.5%.
Continued inflationary health care costs.
[noise] purchased transportation cost increased 10.1% year over year.
The combination of 7.1% growth in P.T. miles.
And 10.6% growth and purchase rail Myles.
Our overall P.T. miles were 9.8% of total miles compared to 9.6% of total miles in the fourth quarter last year.
Fuel expense fell by 0.8% in the quarter as National average diesel prices were 5% to 6% lower throughout the quarter compared to last year.
MPG across the fleet continues to improve as well and helped offset the fuel costs associated with our mileage growth of approximately 6%.
Claims in insurance expense spiked by 50% in the quarter due primarily to actually accident severity or cargo claims ratio, 0.83% was also up 3.75% a year ago, but improved through the quarter as continuous training efforts began to produce a benefit what our newest dock associates.
Depreciation expense of 31.9 million in the quarter was 17% higher than last year matching the trend we saw throughout the year and reflects our investments in revenue equipment properties in technology.
The average age or tractors is now less than five years.
Overall operating expenses grew by 11.3% quarter outpacing, our 8.9% revenue growth and fourth quarter operating ratio ratio deteriorated to 93.8 compared to 91.8 a year ago.
Our tax rate for the fourth quarter was 18.1% compared to 19.9% last year.
The tax rate was positively impacted by the Mac.
Turning to fuel tax credit fourth quarter. The cover 2018 2019 reporting periods.
Fourth quarter diluted earnings per share were 81 cents compared to 97 cents.
Our year [noise].
Previously mentioned fuel tax credit benefited fourth quarter EPS by seven cents.
Moving on to financial highlights for our full year in 2019.
Revenue was a record 1.8 billion and operating income of 153 million was also annual record.
Our operating ratio held flat in 2019, 91.5%.
For the full year 2019, our diluted earnings per share $4.30 versus $3, a 99 cents in 2018.
And again the reported 2019 bps benefited by seven cents as a result, the previously mentioned snack whenever the alternative fuel tax credit.
At December 31, 2019, our total that was 136 million and net debt to capital was 14.3%.
This compares to total debt of 123 million net debt to total capital 40.8% at December 31 2018.
Net capital expenditures in 2019 were $287 million, including equipment, we acquired with capital leases.
This compares to 252 million of net capital expenditures in 2018.
In 2020 net capital expenditures are forecast to be approximately 250 million.
Clooney investments in real estate terminal infrastructure improvement projects, our fleet and continued investments in technology.
Before we open the line up for questions I'd like to turn the call over to Fritz Holzgrefe for some closing remarks.
Thanks, Doug.
While we all will certainly like to close out the year were stronger operating margins I'm pleased with the company's growth trajectory power companies positions as we moved into 2020.
As mentioned the nine new terminal openings, we completed in 2019, but also like to highlight some major trimble relocations that position us for long term share gains a better service across our network.
In January of this past year was moved into a new own facility in Harrisburg, Pennsylvania more than doubling the size of our former lease terminal in that market. The new occasional service for years that comes as a major break facility in northeastern U.S.
Other major terminal upgrades occurred in Indianapolis, and Phoenix, where we relocated to new own troubles in both markets essentially doubling or door counts at both locations.
Sold Altria Newberg, New York Route we relocated the larger troubles, we outgrown the terminals opened in those markets. What's in the last two years, our total door count the northeast grew by 112% 29 Jade.
And 2020, our current plan calls for one new trouble opening in the first quarter and then we'd have a handful relocation slated for the balance of the year. The lions share of our capital expenditures enjoying Johnny 2020 will once again be directed towards our fleet as Doug mentioned, the average age where tractor fleet is now less than five years it should.
Below 40 years and 2020 based on our planned purchases.
Proved fuel mileage greater reliability, a full suite of in cap safety technology that comes from new tractors are all benefits of lowering the fleet age was new boss.
Finally, with respect to the current freight environment, we continue to view.
He is somewhat muted.
It was January is one of the softest most easily in our business. So I would read too much into one month against easing tops January shipments per day grew 8% well tonnage per day grew 7.7%. The most encouraging trend over the last couple of months as of the weight per shipment trends seems to be in a bottoming process wafer shipment.
And your Oreo was 1300 and four pounds inline with what we saw in November December.
We're excited about the investments today as we feel that position us for share margin improvement in 2020 and beyond.
That said ought to go ahead and open the call for questions operator.
Sorry.
Yes. Good question. Please.
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If you're using a speaker phone please make sure your mute function it's turned off.
<unk>.
Press Star one to ask a question.
Our first question comes from Jack Atkins Stephens incorporated.
Good morning, Thanks, very much for taking my questions.
Morning, Jack.
I guess just to start off.
First going back to your all your last comment on I, just sort of the underlying freight market could you.
Could you update us on what the December tonnage and should've been metrics were and then you know it seems like theres been a step up.
No and demand and in tonnage here over the last couple of months judging by December and January and just sort of curious what do you think striving that is that just purely a function of easier comps or do you feel like in the last maybe six to eight weeks things have begun to maybe stabilize to improve a bit out there.
I'll take the first part of that Jack.
I'll take you guys through the shipments and trying to grow throughout the quarter Oh.
I will start with October shipments were up 6.9%.
Tonnage was up 3.5%.
November shipments were up 2.7%.
And tonnage up 1.4%.
And then as you mentioned December you know things picked up a little bit our shipments were up 10%.
And our tonnage was up 9%.
And the December comparison.
It was up against negative shipments in tonnage a year ago.
Shipments a year ago November October November had been positive so the comps did get easier.
In terms right.
In terms of environment, we're saying I mean, it's the same numbers, you're saying I mean industrial production was down in December I think that was the you know the for the last six months, where it was down you know the PMI trends have been negative <unk> Oh for five or six months now once they turned negative so.
It's tough to say now anymore than that because January seasonally the weakest month of the quarter anyway. So it's kind of hard to call out any kind of.
No.
Differences Paisley environment, when it's when it's our seasonally softest.
Okay Gotcha Gotcha.
We just saw PMI.
50 here in January just spread so that's that's encouraging so I guess just shifting gears up to the margin fraud for a moment could you update us on your on your outlook for.
Our improvement in 2020, I think I'm, a third quarter call you were saying 100 150 basis points of improvement.
From margin perspective year over year. It 2020 versus 2019 is that is that still the plan and then can you help us sort of bridge to that number or whether its productivity improvements from having a younger and younger fleet age.
Then just sort of leverage that you expect to get all these investments I think just helping to bridge to that so that number would be would be very helpful for folks.
Okay I'll start and then maybe for its probably has some comments as well or Doug, but you know historically or historical seasonality for Q1, Q would have a modest deterioration there are about 20 basis points.
And but kind of given our current outlook January performance, we would expect at this point a modest improvement up to 100 basis points and again, we don't know what the whether it's going to be like the rest of corridor, we always have some self insurance volatility exposure, but.
Our our outlook would be in that range at this point in time and again there are some carry forward cost from the the Threeq and Fourq you terminal openings.
But we're confident now I think NR, Billy overtime to apply topline revenue to that and ER and and get though our improvements that we've talked about historically as well you want to add something else first yeah. The only thing I would add to that Jack is that as we know that the fleet and improvements that we've made last year and actually the last several years.
Into this year or does it creates a pretty big step up and depreciation over your year over year that we're gonna have to cover your we're obviously going to have inflationary cost and all the areas.
Got you typically would see though you'll be some market base wage inflation benefit costs, all that sort of thing but was that said you know we're tracking early on and we're not quite ready to give the highlights of it but investments in technology across not only to sleep, but then also our operations and planning systems, where we think we.
Can you know look for ways to drive productivity improvement, our dock city, and Whitehall operations and those Ah you know those investments that we have made in the last several quarters that you know we would hope to see helped drive that margin improvement in 2020 and frankly beyond.
As we start as we have moved move into these northeast markets. Those are as we know high cost markets and Ah the benefits or productivity certainly will help us drive those margin improvements into the coming here.
Got you sort of plan is still 100 150 basis points of margin improvement at 2020.
I think that's fair, yes, but it won't be linear across the quarters right, but I mean I think that's.
That would be our expectation I mean, we we clearly realize this is the show me here I mean, we've made the decision with I think is strategically correct.
Open something incremental terminals, but you know we made a lot investments and we expect to get an adequate return on it.
Okay, great. Thank you again for the time.
Thanks that.
Our next question comes from Todd Fowler with Keybanc capital markets.
Thanks, and good morning.
Congratulations officially on that on a new role.
Maybe just to start Fritz some comments were attributed to you in the release about the pricing environment remaining rational.
Yeah I was just hoping you can maybe expand on that and if you've seen any changes in behavior in the fourth quarter from the third quarter and maybe some comments about where contract renewals are right now.
Yes, so we've.
We see 20 or that the ended the year into next year to be a kind of competitive rational environment around pricing I mean, everybody has got to deal with the inflationary costs. So I think people or you know.
I have that backdrop and I think that as we continues in the marketplace. We see people be competitive but at the same time you see them are performing rationally. So that that's a continues to be a.
Good thing good part of our markets our strategy right now our contractual renewals in the quarter were 5.45, 0.4%.
Okay. So that's pretty consistent I think there around five and a half in the third quarter. So yes, I guess just to maybe put a little bit of a bowl on it sounds like that with where we're out in the cycle pricing behavior is kind of what you would expect but you're still seeing those those mid single digit contract renewals yep, so far okay.
And then just to just shift gears and talk about you know the expansion it sounds like that there's going be one terminal opening in 2020, I think that that brings you to about 19 in total you previously talked about 20 to 25 is there.
Is there a change in the number of terminals that you need in the northeast or is it just a timing where are you pulled forward some of the growth in to 19, you take a breather in 20, and then accelerate spoken in 21 can you just help us think about kind of the number of terminals and where you're at from a geographic expansion standpoint.
I think the way I would characterize as Todd is if you go back to when we launched our northeast a plan. We've talked about 20 to 25 terminals, probably gives us pretty good coverage overtime and that the great thing about an organic expansion as allows us to speed up or slow down as we see opportunities. So.
We.
Saw opportunities or last year, so we celebrated our pace.
And you know the timing or you know Q O Q3, Q4 that had obviously you had an impact on results, but you know we're looking at this is a long term sort of a investment so the quarter to quarter nature of it and that's part of the investment profile. You know I think as we look longer term in the northeast I mean, I think that sort of 20 to 25.
I've numbers, probably reasonable but at the same time, you could you know as that business evolves or you know we may see other opportunities to provide incremental coverage in that are in that market. You know as the market develops <unk> I don't know that I would say that we're you know at the end, but I think the worst continue to be opportunistic in that market, but this year.
In 2020 is we look at where we ours, it's an opportunity really to generate a return on all those investments we've made to date in the market, particularly in the last six months of 29 to.
Okay got it that makes sense, maybe just a last question for me and it's kind of along those lines, but the 280 million of run rate revenue in the northeast.
Do you care to share kind of a sense of what the margin profile and that is relative to the business and the John It's just for the questions. Obviously thinking about you know the drag a jet that's happening in in the opportunity of where that can go as you leverage the investment that you've made thanks.
Yeah. So I think the way I would characterize that as the you know the network business the impact of growth in the northeast touches all quarters of our company you know if I looked at specifically ask those the full.
Paul and Oh are for those that northeast in the fourth quarter. It was over and over 100, but that we also know that was an investment grade.
We know that overtime I think what this does it's going to drive our overall will be able to drive the overall award in that region to something more in line with the rest of the company, but at the same time the benefits of that incremental growth will impact the balance of the company as well. So I think that does that still intact the value.
The what we can drive out of that or is that doesn't change. It's just the expenses were pretty happy the last last half a year.
Got it now that that makes sense, especially with the.
He'll impact on the other the other region, so I'll jump back into queue. Thanks for the time.
Yep.
Our next question comes from Scott Group with Wolfe Research.
Hey, Thanks morning, guys.
Morning.
What I wanted to follow up on the full year or commentary. So first quarter doesn't imply implies flattish margins a second quarters got the toughest comp for the year, so so the or improvements sort of.
Backend loaded is that just the comps are a lot easier or is there anything about costs or anything that builds throughout the year just want to know I understand that the trajectory.
I think it's a combination of comps and some of our targeted cost improvements.
But it's primarily kind of driven by the comps right.
The set back half the year last well first quarter wasn't great either by the back half of the year was a you know margins work that we were making some investments we had some self insurance volatility combination of things I think or just.
Are you are easier in the back half and as we've commented we weren't particularly pleased with our fourth quarter performance I mean, it wasn't investment quarter, but you know what with the revenue growth that we're having you know we would expect to operate better than we did and certainly do going forward as well.
Okay, and then I'm not can you give us any sort of either revenue per day or yield trends to start the year I just want to understand them is the not the tonnage obviously picking up but is there any sort of.
Offset there in terms the yield slowing or anything.
Hi, just so it's one month writes about our yield trends were similar going into the first in first quarter as we had in the fourth quarter from an improvement perspective.
And then.
You can take that the tonnage we quoted.
Assuming a similar number you're going to get to the revenue.
Okay and then my last question on the you know that the pick up in weight per shipment can you tell what if anything is driving that is there any sort of pick up in the T. L rated freight or is it.
Just economy, what do you think striving to weight for shipment higher.
So Scott I'd say that.
Just kind of a broad base, there's not really a carl call out there.
You know for specific market or you know vertical or something like that you know as always we're gonna be focused on driving or identifying that that freight. That's good had the best characteristics and drive the incremental margin that are that our business that you know maybe there's some efforts there that are helping to drive that but I think overall it's.
Pretty broad based.
But you're not making a place to try and fill up the network with some T cell business or anything.
No not anymore than we are you know normally take advantage of that.
Alright, Thank you guys okay.
Our next question comes from.
Uh huh.
Thank you.
Thanks, Operator, hi, everybody congrats Doug as well Fritz just just a quick follow up <unk> depreciation expense and obviously stepped up quite a bit 19, what's the what's the run rate quarterly I assume it's flat SAB I know you got one additional in 2020 in terms of induce server center opening up or terminal opening up but anyhow.
There.
Yeah, I would just same unit.
2019, I guess for the full year, I mean depreciation was up almost 17%.
And.
The total Capex number yet was projected to come down in 2020, but with the having you know over 50% of it being on revenue equipment I'd say to depreciation in 2020 is probably likely to be up another 19 or 20% year over year.
Some 19 to 20, 20% up year over year.
Yes, yes, you got to have the lapping effect of what we added last year plus the new new equipment that comes online in 2020.
Okay interesting, okay. That's just a lot higher than I would've expected, but maybe I did something wrong. There. Okay, and then and then one other question, but I must admit I don't think anything was wrong, but I mean, we opened since mid September you know we opened.
Six new terminals and relocated four other ones and into new facilities. I mean, you know a lot of.
Best went there plus the equipment that goes and all those facilities. So like Fritz said, yes, it's just.
Hi, just modeled it wrong, yeah, I just modeled it wrong as its really my fault and then I just want to ask a question on the.
The decline in weight per shipment in the quarter.
Just wanted to I know, it's a little bit backward looking but it's a little bit of an outlier, especially when you think about north east stopping us dilutive to weight per shipment I think you said that before in the past. So were there any I guess what mix headwinds in the quarter. I know you talked about maybe November being particularly weak month in and out of Houston market Oh patch market.
Just talk about that and you know <unk> what is did that reverted at all or has that reverted at all as you started the year or so obviously it was a pretty big drag I guess in the month of November or at least.
No I mean year over year throughout the quarter, you know the weight per shipment [noise].
Call it declines from the prior year actually.
You know lesson right. So October way after it was down 3.2% November weight per shipment was down 1.2% and then you know December weight per shipment was down less than 1%. So.
I mean, you know year over year.
Order actually saw things get a little stronger. Unlike Rick mentioned earlier, I mean, we seem to be or Fritz mentioned, we seem to be bouncing along the bottom here I mean November and December weight per shipment was pretty much right where that here in January.
Okay right Yep Yep.
And then one one maybe bigger picture question for me I guess this is for recur Fritz as you know just given the I guess the margin opportunity in 2020, it's kind of I guess, it's kind of a unique here in terms of you know your ability to.
I realize you know margin improvement in structural cost absorption relative to past years, I guess, what do you guys doing from if anything from an operational execution oversight perspective, that's different in the past it means or anything that you're doing in terms of higher operational intensity oversight perspective that just.
Gives you a little bit more confidence or more confidence that the opportunity that you guys see over the next 12 months, that's you're gonna be realized you guys doing precision schedule [laughter] bodies or something like that.
Well I think that we've got a couple elements that we were building momentum around that were pretty we're excited about I mentioned earlier that we've made investments in technology across all the major.
Cost drivers in our operating and our network, which we feel like over the course of the year will will help us drive those sort of incremental margins I think the there's clearly we've invested a lot in our industrial engineering group in our operations and analytics group that rolled in the past, where I think we start to see some of the bed.
If it's that into this year.
I also think quite frankly that you know as part of the new England or sort of the new east northeast.
Benefit that we should see as we continue to execute our strategy there will be <unk> being a position to leverage those assets you know into 2020 and beyond where I think that that that will help those are the that'll be an accelerated pace compared to what we've dealt with in the in the third and fourth quarter simply as they mature so I think that it's the combination.
Technology investment and people will will help us drive those sort of incremental returns overtime.
Yeah, I would add to the same engine.
The set the same kinda engineering and some of our operations leadership, you know that was responsible for opening the terminals and training people and do it all those things you don't have some of those costs and then the focus of those Oh that team of people is more on executing throughout our geography as opposed.
<unk> traveling to the northeast and doing training.
And opening terminals yeah.
Yeah. That's a good point and then just falling back one very quick thing on the on the DNA does it step up from the current run rate in the first half and then kind of normalize in the back half is that the right cadence or does it just continues step up through the course of 2020.
Yeah I'd say.
I'd say.
That was my options, it's going to trend up throughout the year a little bit.
Yeah, as we're making a as as we take delivery of equipment and.
Got it we've got a few real estate projects going on just you know.
Shot opening a couple of new shops, we've got a couple of more relocations. This year. So I'd say no trend up through the year to that number.
Okay. That's helpful. Thanks, everybody appreciate the time.
Our next question comes from David what stifle.
Yes, good morning, gentlemen.
Morning.
Wanted to touch on insurance.
Then if there were on your side for a while often on and it's getting a lot of.
Attention on the truckload side of things these days.
Yeah.
When you look at 2020 do you have a decent a renewal coming up at any point I can't imagine. These accidents are helping any potential premium increase how do you think about insurance costs as we move into the new year.
Hey, David.
Obviously, I mean, you mentioned that I mean were done in a very tight markets in terms of truckers looking for insurance on the auto liability side.
That's been the case for the last two or three years, though.
Save MRC you know, while we did have an accident that you're referring to in Q4. This you know high on the severity list are our claims experience over the last few years as it's been as good as any I would imagine I've been on road a lot meeting with you know some of the perspective insurance companies and you know I really think.
After setting a lot of these meetings that.
We've got a best in class kind of approach to safety in terms of the technology, but we put in our tractors that these days.
You know our new buys as Fritz mentioned, you know they come in loaded with the full suite of you know everything from forward and then we're facing cameras to you know blind spot detection. This year for the first time will be buying factors that.
We have what they call level to autonomy. So nobody's doing more on that front I don't think than we are so our renewal were on March one renewal.
The process is well underway will continue to hold our you know deductible or attention and 2 million I don't see that changing.
But you know building out the towers inflationary.
But but again I think we're better positioned than most and we look for a successful renewed although some inflation as you get up into the tower.
So if you have better accident experience in terms of frequency and severity this year.
Good.
Even with the insurance increase you think you can hold insurance and claims expense flat year over year.
No it will be going up I mean, we had oh, we didn't have an abnormal you're in terms of celerity.
I mean.
The good thing for also is down in the lower part of the tower you know we're in a structured program. So we've got some rate consistency in the most expensive part of the tower. So the inflation, we're seeing is higher up the tower that what where there's less premium dollars at risk.
And then just turn it back to the business you know for Rick and friends.
You talked about expanding I guess, the Indian Phoenix facilities.
You look across the rest of your business outside of the northeast expansion, which is consumed a lot of time.
What.
Is the gross looking like there where are you seeing opportunities what parts of the country are stronger or weaker I do you think about the rest of the.
Portfolio.
Yes, so David what we typically try to do is you know we monitor a pretty closely our for operational door pressure I'm, you know, where we might need you know, it's either expand our footprint or you know replaced our footprint. So that's kind of an ongoing process. We also have pointed out overtime that in key markets. We.
Probably don't have the appropriate level of coverage. So Atlanta would be an example, a we have one term war Atlanta, it's on the South side will add a terminal north side, it's not going to be a 2020 opening and most likely will add it will start into 2021, most most likely.
You'll be replacing our Memphis facility this year and that's kind of on normal course, you know, we see an opportunity to expand that footprint drive some efficiency, particularly around the break operation. There. So ongoing I mean, we you know the northeast a if you look good so.
Size growth certainly that's something to highlight but we also think that if you looked at our legacy geography, there are a areas in which we can add incremental capacity the market, we better service our customers and yeah, it's kinda throughout the geography.
Excellent. Thank you.
Our next question comes from Jason Seidl with Cowen and company.
Thanks, operator morning, everybody.
Wanted to circle back to your January trends, obviously pretty good numbers, you mentioned, a they were up against easier comps could you remind us how the comps are looking versus 19 for both tonnage trends. Please.
Sure so to walk through the quarter I mean a shipments.
In the first quarter last year were just about flat down 0.1%.
And tonnage you know on the weight per shipment declines was down 3.5% in first quarter.
And moving into Q, you know ship yeah.
Yeah, Doug on a monthly basis.
Okay.
January shipments a year ago were down 8.1%.
February shipments were down 1.5%.
In March shipments were up 1.5 person.
Yeah, we're talking about <unk> tonnage was down 2.9% last January.
Down 3.2% in February and down 4.4% in March.
Okay that gives us the because a good sense of what to expect.
As I as they look at the model here, obviously your tax rates moved around you had some some good news at the end to end of year in both 19 and 20 for some tax credits what should we be modeling for Ah for 2020 and beyond.
Yeah, I mean, I think we walk into 2020 kind of expecting what we did in 2019 I think we're using about a 23.5% rate this year.
You know last year, you know with the fuel tax credit the full year end up coming in at 22.5%, but I think its right to model at 23.5%.
Okay.
Full year, Okay. That's what I had already also.
A little bit more conceptually looking at sort of the bigger picture.
I see your expansion has been going very well under the northeast the credit to you guys on that.
But it has been a drag on the earnings you know.
It is it right just sort of look at that and as we as we assume that to grow up continue to grow what above normal market paces.
You're going to get a swing in earnings potentially of you know upwards to a dollar share from the money that you lost the money that you could.
Get out of the northeast.
I'm not I'm not sure of all your the P.S. math, there, but I mean, it you'll remember you know beginning to Q. We you know we've just gotten to know.
But better than breakeven in the northeast and then we went in late in a bunch of new terminals in the second half.
So I'm not sure there's no the starting point.
If you're using to build up the you know the potential accretion but.
You know we certainly you know made all these investments you know is with a long term horizon and mine, where we were trying to optimize you know not 2019 or the first half a 2020 Arnie we wouldn't have no opened six terminals since the middle of last September but.
[laughter], maybe offline we can go through the cadence a little bit or.
I'm not sure that sure Yeah, No I was just assuming a modest loss on the 280 million and then sort of get growing that a little bit in the out years, and then coming to an or more in line of what you're looking for for the whole company and then looking at the differential but we can go offline.
Appreciate the jobs I was yes, I would I would just add there Jason what we do know about the northeast is we don't see that impediment there couldn't get to the board trend that you see for the entire the balance of the business right. So that we think that continues to be a great opportunity for us. So we get our representatives share of that market that I think that youve put that law.
On it I think it's pretty interesting for us.
Yep No I would agree gentlemen, thank you very much.
Yeah.
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Our next question comes from it's definitely been German Suntrust.
Hi, good morning, Thanks, a question.
Hi.
Good morning, I Wonder talk a little bit on pricing side, maybe you can talk a little bit about what you've been doing internally just from not only data analytic side, but also pricing really continue to focus on that so I'm. Just however stations that you're having go for it you can continue to see nice yield.
I'm just improvement so any kind of color there that we can kind of.
Yeah.
Helpful. Thanks.
Thanks, Stephanie I mean are cadence or are driving this area is really about continuing to refine our analytics around understanding what the cost drivers in the business are what the inflation is related to that what the you know as we expand the company you are Whitehall network evolves into being a you know.
In time, a 48 states Whitehall network, we got to understand exactly how those what the cost drivers are in that network and if you do that then you've got an opportunity to really effectively price to get the returns that we'd like to get identifying that it's a further refinement of what we always do which is identifying that freight within a cost.
<unk> book of business that makes sense Star network and as we continue to refine and drive our analytics, we have the opportunity to belts that as we evolve our cost structure around being a national carrier and then we price Accordingly, and you know quite frankly is our quality has continued to evolve.
Improve overtime or both on time and at our claims ratio being very very competitive that gives us the opportunity to continue to drive this pricing.
That national footprint also allows us to be it a position where we can bid on more freight or have the opportunity pursue more but we're not leveraged out because we don't have disturbs the customer might want so it's a it's a combination of all those things and you know I know those are things that we've highlighted overtime, but quite frankly and this is just.
Page, it's really about continue to drive those sort of incremental analytics to get that find that phrase the words besten or network.
And I guess, just a follow up on that.
So we see on analytics is that something that has been more recent initiatives are a big step up in the last year in 2018 or how can you frame maybe what inning are at in terms of that it really start to see some.
Return. Thanks, Yeah, I think it's been an ongoing a process for us over several years I think one other things do I highlighted earlier, which I think it's pretty exciting is that as we invested in technology around our.
Cost if you are operational costs around better planning and dock operation in Whitehall planning those are opportunities for us to better grass with the cost drivers are and optimize that cost. So we can be pricing most competitively and with the best margins. So I think as we continue to enhance the sort of data analysts.
Because overtime that gives us the opportunity to drive margins.
Great well, thanks again for the time.
Thank you.
Our next question comes from Tyler Brown with Raymond James.
Hey, good morning, guys, Hey, Tyler.
Hey, Hey, Rick I think you mentioned your dock in P.D. productivity was up in 19, I can you quantify that and just to be clear you speaking to the entire network or is that just the legacy piece.
No that entire network was up year over year just modestly.
But it's in the 1% to 2% range.
Okay. If you were to parse out say those 18, north eastern facilities, how far behind are they in terms of labor productivity, where where you would maybe want them to get steady state.
Are there it's more than 10% below the company average Oh yeah.
Okay. Okay. So lots of opportunity there, so maybe kind of putting that together, maybe for Doug or Fritz but I think you mentioned Q4 head count was up say, 5% in.
Here in Q4, but as you saturate those facilities you roll technology, and I know, it's gonna be a bit volume dependent but do you feel that there's latent labor capacity across the network do you think you can grow head count at a lower rate than say shipments.
Yeah, I would think so, particularly the northeast right. So in a in a in those markets and in many cases were were staffed to provide service rather than be most productive if that makes sense rights or.
Our P.D. operations aren't at capacity, so I think because there is as we.
Grow into that market, particularly the newest troubles, there's a real opportunity there for us to drive some incremental improvements maybe thinking about in total we've mentioned that the northeast as a on a fully allocated who are that's a drag and if you just compare that to the rest of the company for full year you'd say you know, there's an opportunity really drive some productivity there.
Around those operations and but you haven't it's not it's not just in the city in the dock because you know we're running a line haul schedules with parcels for service stood as you build density then you run your parcels or a smaller percentage as a whole.
Okay, Okay that makes sense, but do you feel that even in the legacy piece that there's still call. It latent labor you know opportunity as well.
Yes call it dock.
All three aspects I guess.
I would agree yes, correct. Okay. Okay. Thank you guys.
Yeah.
I will conclude our question and answer session I will now turn the conference back over to Mr., Doug coal for closing remarks.
Well, thank everybody for joining us on the call and a.
We'll get through winner and then of the stronger months here, we look forward to chat and again after Q1. Thank you.
This concludes today's call. Thank you for your participation.
Connect.
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