Q4 2019 Earnings Call
[music].
Good afternoon, and welcome to why RC Worldwide's fourth quarter and full year 2019 earnings call.
All participants will be in listen only mode. After today's presentation. There will be a question and answer session. Please note. This event is being recorded.
I would now like to turn the conference over to Eric Berg, Vice President of Investor Relations. Please go ahead.
Thank you operator, and good afternoon, everybody welcome to wire see worldwide fourth quarter and full year 2019 earnings conference call.
Joining us on the call today are Darren Hawkins, Chief Executive Officer, newly appointed Chief Financial Officer, Jamie Pierson TJ O'connor, our Chief operating officer will be available for the QNX.
During this call we will make some forward looking statements with the meaning of federal Securities law. The forward looking statements and all the statements that might be made on this call, which are not historical facts are subject to uncertainty and a number of risks and therefore actual results may differ materially the format of this call does not allow us to fully discuss all these risk.
Factors.
For full discussion of these risk factors that could cause results to differ please refer to this afternoons earnings release and our most recent SEC filings.
Including our form 10-K and 10-Q. These items are also available on our website that wire CW dot com.
Additionally, please see today's release for reconciliation to net loss to adjusted EBITDA on a consolidated basis and operating income and loss to adjusted EBITDA on a segment basis.
During this call we may refer to our non-GAAP measure of adjusted EBITDA simply as EBITDA.
In conjunction with today's earnings release, we issued a presentation, which will be referenced during the call. The presentation was filed an 8-K along with the earnings release and is available on our website I'll now turn the call over there.
Good afternoon, everyone and thanks for joining our fourth quarter and full year 2019 earnings conference call.
As everyone knows 2019 was a tough one for the entire LTL space, where the downturn on the industrial side of the economy, which also negatively impacted tonnage and yield for the wire see worldwide portfolio of companies.
Even with the challenging backdrop I'm proud of our accomplishments and several key areas one ratified a new five year labor contract to we refinanced the term loan with improved and more flexible terms and three we moved to a single and unified enterprise sales.
[noise] and operations structure that is inclusive of all our brands under one coordinated leadership team all rolling in the same direction with the same objectives and goals as I've been sharing for the last few quarters not vision and our strategy is to operate as one company.
One network and side very proud brands that provide exceptional service to our more than 200000 customers.
Our customers continue to rely on us to bring value to their supply chains and have clearly indicated that we are improving their experience and providing that value.
The enterprise transformation strategy remains consistent as we work through 2020 with the continuation of the following initiatives operational optimization and structurally improving the network to increase property and rolling stock asset utilization.
Expand service offerings and leverage operational Flexibilities gained with our new labor contract.
Next from a technology perspective, we intend to consolidate several different companies systems onto a single platform, which will in turn allow us to use one operating system with a single set of data from the same source all with the end goal of allowing us to improve the service we provide.
At our customers and increase the speed by which we do it.
Finally, we will continue evaluating our footprint and service areas and will rationalize the number of physical locations and the network, while maintaining geographic coverage and service offerings. While we may have fewer physical locations. We will continue to cover the same geographic service areas and.
Expect this will increase density reduce mileage facilities and equipment. We believe that this will be visible to our customers through continued improved service and satisfaction and should also have the added benefit of improved operating efficiencies and future financial results.
Having planned for this change for the better part of 29 team. Our path forward is clear and currently underway with the right team on the field and the right positions to aggressively execute the enterprise transformation strategy.
I will come back at the end with some closing comments, but would now like to reintroduce you to Jamie who will share some more details on the quarter and the year.
Thank you Karen and good afternoon, everyone of white jump in the numbers and bore you to get by reading the take let me begin by saying, it's great to be back.
Great fee familiar faces, great feedback quote unquote home and even great feedback and just crazy industry I look forward to reconnecting with everyone, which I will shortly after this call.
With that added away, let me run through the results and will end with a little more color as I know that's really what you want.
For the full year 2019 warranty worldwide reporting consolidated revenue at 4.87 billion, which is down from that $5.09 billion were 4.3% when compared to prior year.
Operating income for the full year with 16.2 million compared to 142.9 million for the full year 2018.
Additionally, the company reported adjusted EBITDA.
210.6 million for the full year 2019, compared to $307.8 million for their prior year, which as we stated from that previously reported 337.5 million to align with the new covenant definition.
For the fourth quarter 2019.
We reported consolidated revenue of 1.16 billion down from 1.25 billion in 2018, and operating income at 9.8 million, which included a $10.1 million net gain on property disposals compared to 55.1 million, which included a 28.1 mill.
Our net came from property disposals in Fourq, you 18, and finally, we reported adjusted EBITDA of 47.3 million this quarter compared to 77.5 million in Fourq you 18.
Turning to our operating results like these trade reporting fourth quarter 2019 year over year LTL tonnage per day, we got 6.6%.
We had an 8.5% decrease in LTL shipments per day, offset by 2.1% increase in weight per shipment.
Additionally year over year, LTL revenue per hundredweight, including fuel surcharge was down 1.1% and LTL revenue per 100 await excluding fuel surcharge was flat.
Finally year over year, LTL revenue per shipment, including fuel surcharge was up 1% and was up 2.1% when excluding fuel surcharge.
Moving to the regional segment, the fourth quarter 2019 year over year LTL tonnage per day was down 7.4%, which is due to a 7.9% decrease in shipments per day as weight per shipment was up 50 bips year over year.
Additionally year over year, LTL revenue per hundredweight, including fuel surcharge with got 70, Bips and LTL revenue per hundredweight, excluding fuel surcharge was up 20 basis.
Finally year over year LTL revenue per shipment, including fuel surcharge was down 20, Bips and was up 70 business when excluding fuel surcharge.
As for investment back into the company, we're committed to reinvesting in our fleet and during the year, we spent 143.2 million on capital expenditures.
Additionally, we entered into new leases for revenue equipment with a capital value 131.8 million for a total of 275 million or 5.7% of operating revenue.
Turning to liquidity, our cash cash equivalents and management capability at December 31, 2019 was 80.4 million, which is a decrease of $123.4 million when compared to December 31 2018.
Vast majority of the decrease because the result of our discipline and continued investment back into the business via Capex.
Now, let me projects that can catch our breath as I know everyone at 18 to get Q and eight that before we do I would like to make a few points didn't go above and beyond the numbers and answer some questions before yesterday.
One.
Why the held it I'd come back well I feel like I can make a difference actually want to be a part of something greater than myself and you might say I actually had some unfinished business.
Two.
What are my plan.
First of all I plan on keeping the financial runway clear sight darrin into sales and ops teams can focus on running the business.
Serving our customers and growing the top line.
Then I'm going to focus and support them and do it again, but better rents or wash and repeat.
Specifically I'm a focused organization in areas that moved the needle and support guaran into team and the other senior leadership in a transformation has a real possibility obtaining the trajectory of this company and it's an estimate profile. If we do those two things and do them well results should follow.
Third what about the covenant.
Everyone knows the covenant under our new term loan required us to maintain a minimal at 200 million an adjusted EBITDA now everyone knows that we ended the year at 211 million.
And every one also knows the seasonality of the industry and that the first quarter is the weakest one within the calendar year, however to various the blind stated to the obvious. Please keep in mind that is an LTM calculation. So it's important to compare the year over year change.
If we need to address anything I will absolutely, let you know, but right now we are in compliance and laser focused on the network and the operational optimization. There of again, if we do it right results should follow.
And lastly, as with the for Q 19, LTL tonnage by month and preliminary January results are as follows.
Whereas the freight.
Total LTL tonnage per day was down 4.5% in October down, 10.2% in November and down 4.7% in December for a quarter a decrease of 6.6%.
At the regional segment October was down 5.7% November was down 11.2% and December was down 6.0% for the quarter Bina, 7.4%.
As for January at least preliminarily for January where I see freight is only down 80 basis.
And the regional segment is only down 3.7%.
In closing if you can't tell I'm excited as hell be back.
I'm excited to do what I hand to help return this company to its rightful place as an industry leader and a formidable FFO it won't be perfect and I am but one but it starts with one.
One person one company one network, one team and five incredibly proud and powerful brand.
Ill now turn the call over to guarantee for some closing comments there. Thank you Jamie and once again welcome back home as CFO and also as our newest board member.
Alan New Pan and right away or three best in class Regional LTL brands, and then the size scope and analysts capabilities of wire sea freight to go anywhere in North America partnered with the edge, our non asset Henry Logistics gives me confidence about the continued expansion of the wire see worldwide that.
You proposition in 2020. Thanks for your time. This afternoon, we would now be happy to answer any questions that you might have.
Hello, Who's on line.
Hello, Yes.
Hey, operator can you talk to them up please.
One moment.
Our first question is from Scott Group with Wolfe Research. Please go ahead.
Hey, Thanks afternoon, welcome back Jamie I'm, a very scared about the technical difficulties there.
Oh, good so just I'm a monthly trends do you also have the total freight.
Monthly trends and just some thoughts on the improvement you're seeing in January and with what's causing it.
Yeah, we actually.
Kind of break it out Scott we've had the first that numbers I gave was freight so thats the negative four or 510 negative four seven and then the only slightly down 80 beds for January so from my perspective as you go through the fourth quarter, you'll see it being down you know that 40 10 range really closer to 6.6 for the quarter and then a pretty good reversal in the month.
In January.
Yeah, and I would just to add from.
After coming out 15 months of negative industrial activity, coupled with five months of negative I ask them and then getting some green shoots this way going I ask them, specifically that lined up with what we saw from a tonnage recover recovery in January also some favorable weather.
But just from clear that when you gave us for freight was LTL only or total tonnage Oh LTL, sorry got that's again [laughter] LTL tonnage per day.
Okay.
Right and you don't have the do you have the total tonnage yeah I'll give you the total tonnage as well so for the month of October is actually up 1.2% and must that November was down 2.9% and then for the month in December was up 70 bit.
In January there Yeah, let me get back with you I know that's the one number that I'm missing Scott, Okay, well, we can follow up.
So on the Covenant I'm, just I guess I understand your comments, but two questions.
Just remind us how gains on sales are included in that just so we understand that as a potential lever and then just more theoretically how do you think negotiations on covenant amendments may or may not be different with Apollo relative to a more traditional bank. If you have thoughts there yeah.
So in terms of the easier when technical answer to your question given cells are excluded under the definition of EBITDA under the new credit agreement now in terms of how negotiations go with the one lakh Apollo.
Scott I don't know a we haven't had those conversations we haven't had been need to have those conversations and candidly as we roll through the end of year being applied for more focused on the network in the optimization and customer service above and beyond anything else.
Is this something you've got comfort worth before deciding to come back.
You know what I've gotten comfort and his team I wouldn't say that that had any agita over the covenant a unfortunately, given my background, which I think it ran a call probably know you in particular I had a little expertise in this area.
Okay and then just last question on the liquidity below 100 million.
Where do we need where do we need that to be what can we what levers do we have to help get that going higher again, how do you think about first quarter I think that's usually a tougher seasonal quarter for liquidity.
Yeah, so liquidity and I'm not being cheap you know always want more right hitting it might be you always want more not less.
I think we I don't think I know we ended the year at about 80 million added.
As a 100 million isn't threshold and a levers that we have to pull really first and foremost is operations. So we've got is simply going to perform better outside of that being outside of our control on a macro economic basis. The ones that we have controllable by us the levers really had to do with me.
I think back into the business a if you look at the last two years.
We plan on another almost $300 million capex back into the business hundred 45 last year hundred 43 this year.
Thats, probably the single most controllable lever that we've got artist at our disposal.
What's the 2020 plan.
Oh, we haven't given any guidance on Capex just yet.
Alright, Thanks for the 10, guys really appreciate it and kind of care Scott.
The next question is from David Ross with Stifel. Please go ahead.
Yes. Good afternoon, everyone. Welcome back Mr. Pearson, Thank you Mr., Ross and Hello, David David and there Hey.
Let me just follow up on Scott's question about the 80 million of availability at the end of the year, where did that stand at the end of January.
We don't give inter quarter guidance on the liquidity I'd tell you when it was a give me one second.
I'll tell you when it was on quarterly basis, it's no secret that is the lowest amount that we've had a probably in the last two years, but if you roll through the first quarter. That's the one probably where we can have been most impact on in terms of shutting off capex to preserve liquidity as you go through the ended at first quick.
Order and then into the second quarter. They are increases which is the collateral for a deal we get a lot of availability back in and around that time is really happened to be a low point on that borrowing base.
And Jamie how is the average fleet age now versus when you.
We're left with the company.
It's still older than we would like I'm, David and are not reporting out on that but since 2015 with the addition of 5000 tractors and also a consistent investment last year.
Coinciding with the network optimization efforts that also frees up equipment, a I feel good about where we're standing on that naturally no secret we want to reduce our fleet age overtime.
And then do you have visibility into when the brand Mike disappear is the network it's consolidated into.
Looking more like one than five.
No the brands Oh, this is where the value as David from that aspect I can give an example, we put a theoretical example out a matter of fact, we started with that example at your conference last year around what a network optimization would look like on a brand consolidation and that would be where three or four.
Our terminals in the same service footprint would become a single brand that's no longer theoretical a we've got the that implemented in one location, that's a northern Michigan and then that footprint. A we had two wire sea freight terminals and two Holland terminals the wire sea freight terminals consolidated into the too high.
Alan terminals, which freed up those two buildings for wire sea freight the wire sea freight employees became Holland employees, and then the customers and northern Michigan that we're using wire sea freight they improve their service to next day in many lanes, where they were getting second and third day from wire Sea freight so any lane.
It was on the Holland footprint.
Immediately got the Hollering service and then anything that went into wire Sea freight network has just goes into a wire sea freight through a connector facility. So that's an example of being able to take buildings out take tractors outtake trailers out a allow the employees to transition to another company that.
Customer gets better service and we move forward with a better more streamlined cost structure and productivity.
Improvements as well so the five brands will stay intact. The holding company will take the one operating system from a technology standpoint, and the back office spaces as well.
Were you able to get better rates for that better service.
On the wire sea freight shipments the wire sea freight rates apply which end the regional network that works well regional shipments shorter length of haul shipments in wire sea freight network actually pays well.
Okay, because the customer is getting a better service. So I would expect them to pay more I get the other way it would work as if your cost to provide that better service is lower than the slower service, you're exactly right and from even though with the regional challenges in 2019 because of the volume situation there.
We were in David as just as you're aware and most other analyst the regional networks or a more efficient than wire see freights and there's a laugh a lesser cost of handling with better productivity.
Alright, Thank you for the time.
Thanks, David.
The next question is from Jeff Kauffman with loop capital markets. Please go ahead.
Thank you very much Hello, everybody and welcome back Jamie.
Afternoon, Jeff So.
Maybe kind of go with the carbon in question a different way.
We know you're about to 11, we see the calculation for adjusted EBITDA in the back of the presentation.
But can you give us an idea of what the adjusted EBIT da calculation would have been for first quarter 19 in second quarter 19. So we have an idea of how close it gets based on certain EBITDA generation.
Yeah give me one second yeah, so for the first quarter.
It would be $30 million second quarter 67 million, a third quarter 66 fourth quarter 47.
Okay. So even though we're we're close it some favorable comparisons in theory for the next two quarters.
Given everything you've got going on.
Henry logistics.
Can we get an update on that or I don't know if you comfortable disclosing run rate size or anything like that I don't know if you're thinking about disclosing Henry as a separate unit and 2020, but I just thought I ask Jeff I'm, a great question and yes since I a was public on some targets for Henry logistics last year.
We'll give you enough day 29 teams and instead of 140 million in revenue for Henry logistics from our target of 150 naturally in the truckload space Henry like with logistics did a great job of expanding their shipments with double digit growth rate or the revenue per shipment was down as ever.
No one knows and the brokerage area of the truckload segment, but the margins were good. So I'm pleased with enter logistics their performance and a expecting to see that growth continue you know a unique value proposition. There is you know we named Henry H. and ROI for holiday, New Pan right away wire sea freight specifically because.
So the power that Henry logistics garners from having for asset base brands behind it and a national enterprise sales for selling it on a daily basis. So every one of our salespeople now with the changes we made in 2019 when they go into a customer they represent all five brand. So we are.
Excited about that and anxious to see what inner logistics does in 2020.
Okay.
Jamie I think I interpreted your response to be.
Capital spending can be a bit over the safety valve as we work through the the typical first quarter liquidity.
You haven't given a a capital budget for 2020 yet.
But given the environment out there is there any urgency to continue to spend the way you're spending do you do you feel like there are certain areas of spending where your where are you need to be I know darrin alluded the depletes not quite there yet, but I thought it ask about other other projects.
Yeah, if and when to add anything to that Jeff is it fair investment back in the technology side of the how.
I think I don't think I know the returns on investment or much.
Greater depending on the actual space than we've had been in terms the company, but won't be go a lot of 2020 2021 event will be in the consolidation of the operation and in the network and transformation going around that so there's going to be a fair amount. It tech investment enrolled through 2000 2020.
21.
You can easily put on par with fee revenue equipment.
Okay. Thank you.
Congratulations and thank you very much.
Take care, Jeff Thanks, Jeff.
The next question is from Amit Mehrotra with Deutsche Bank. Please go ahead.
Thanks, Operator, hi, everybody. Thanks for taking the question I, just I wanted to follow up.
On the covenant, So I guess just based on some crude map. It just looks like the adjusted EBITDA in the first quarter can still be down you know 30, 31% year over your and you wouldn't dip below.
The 200 million dollar threshold, but that seems doable.
Just given the trends in January but maybe it would be helpful. Because you know the you're on your growth or decline and adjusted EBITDA accelerated dramatically in the fourth quarter to down like 40% and obviously the macro environment was lot weaker and maybe you're getting a little bit of a tailwind in January but you've also got the 60 to 80 million to savings some of that.
Volume depended maybe a lot of it is did you got the $25 million of employee headcount savings that I assume will will incrementally help first quarter just help us think about like the inflection in the first quarter on our year over year basis in the earnings power. The company based on kind of all those maybe positive things relative to what were you guys doing.
The fourth quarter end up just be helpful. Oh, Yeah. Good afternoon amidst a thank you for the question on the 60 to 80 million will start there a you know that blueprint. It remains intact, we're not wavering, but you know the industrial market slowdown and the corresponding negative impact on volumes in the industry certainly impact.
Timeline on the 60 to 80, the 25 million in cost reduction and is in play TJ and his team did a great job with that.
As we work through Q4, and we will remain lean until we see.
More green shoots than we've seen so far in January or certainly encouraging but a there's a lot of winter left I will stay focused we'll keep the operations type and we'll add back a the headcount a into our operations only one is justified by expanding shipment and tonnage levels. So with.
Oh, the network optimization that we're pursuing we were right on track with that as we closed out 29 team. We landed at our total facility count of 351. The 25 facility target that I gave we achieved that we've got the next 25 teed up right now and working through that with our team our team is experience.
We've got language contractually that allows us to pursue those timely and because of that I'm confident in what we're doing from an operational optimization standpoint, the previous investments that we made and our city pickup and delivery operations and also our line haul networks are still.
They are a and in play and certainly when volumes are declining productivities are challenged but one area that we continue to create density and and progress is our load average metrics on our longer length of hauls and also the new containers and purchased transportation faces.
Is.
That our contractual agreement allows us to do so with all those in play I think we're positioned well and certainly a watching things closely but we're a lean organization at the right time, and we will certainly stay lean until we see volumes return.
To a more normal state or even less bad if you will.
So I'm just going to ask a follow up a little bit I'm not asking it make it a little bit easier for us.
You know I mean, I mean guarantee just looking at it now I mean, EBITDA went down 40% in the fourth quarter.
Do you think who as you see it now that EBITDA will decline 15, 20% in the first quarter just based on all the trends you're seeing now I mean, what is what is the right calibration because it's just it's just hard to kind of you know put all the moving parts in order because there's just there's lot of things depending on volume and and it's just it's just hard looking out to from onsite in amid I'll, let Jamie.
He gave you some direction there as we're getting into guidance. So Jamie Oh go ahead and give some personnel. Yeah, you said it perfectly it so much dependent on volume so from my perspective, and we take care, we're only one mark and I agree not quarter and everyone. I was largely focused on this one.
From my perspective, you've got the magic already done it I can see that you've done it I know, we did 30 million in the first quarter of 19, 30% decrease but they get 20 that'd be counted in the threshold in the floor from my perspective, we really need some tailwind from that the macro Saturday the economy, specifically when you do manufacturing side to recover at least.
Rebound a little bit just as a reminder, meaning the contract in of itself, excluding or irrespective of volume on the new contracts and about 4% ran a more extensive and 2020 than it was in 2019. So we do have some headwind coming at it there so you've got two things.
That I think we would need be that we've been at least benefit actually done first quarter. One is a little bit a recovery on the manufacturing side and it and and I guess, he a lack of deterioration on the price.
Okay and.
Hi.
Well I don't want you want to lease out of the fact the contract more extensive disappointed it wasn't a year ago. This time.
Right. Okay. That's helpful. And then just one kind of maybe bigger picture question, because I feel like you know your company has as a pretty storied history and you know its five close to $5 billion revenue, but here, we are sitting at less than $100 million of equity value I mean, the equity is basically.
An option value territory and you have all these legacy issues whether its.
The price competition kind of 10 years ago as a result, the under investment in the asset base limited flexibility and work rules related to the unions, a large pension deficit, which you're managing and you can manage but nonetheless is structurally impaired. So why is it why isn't the right.
Just given where the equity is trading at today why isn't the right pathway just to pursue a large recapitalization of the company. So you could maybe more fully like invest for the long term or is that just something you feel you don't need to do right now because you have a pathway to like organically improve the business without diluting equity holders like help.
Think about that yeah, I mean, <unk>, hey, why he I agree in terms of $800 million did the option value at this point in time being a 5 billion dollar revenue at the top line. We already enterprise, we are making that we still have you patronising patients around the country. So from my perspective, the recapitalization has less to do with a $5 billion.
And it really had to do that back and we only spend about 110, maybe $115 million a year and interest expense assuming that we had no capital structure you only same about 100 $110 million at $2 a share or whatever it is now a I have no interest in issuing equity at that level.
Right.
Okay fair enough. Thanks, very much for taking my questions appreciate it.
How long do.
This concludes our earnings call I would like to turn the conference back over to the company for any closing remarks.
Thank you operator, and thanks again to everyone for joining US today, please contact Eric with any additional questions that you might have this concludes our call an operator I'm turning the call back to you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Good afternoon, and welcome to why RC worldwide fourth quarter and full year 2019 earnings call.
All participants will be in listen only mode. After today's presentation. There will be a question and answer session. Please note. This event is being recorded.
I would now like to turn the conference over to Eric Berg, Vice President of Investor Relations. Please go ahead.
Thank you operator, and good afternoon, everybody welcome to wire see worldwide fourth quarter and full year 2019 earnings conference call.
Joining us on the call today are Darren Hawkins, Chief Executive Officer, and newly appointed Chief Financial Officer, Jamie Pierson and TJ O'connor, our Chief operating officer will be available for the queuing it.
During this call we will make some forward looking statements with the meaning of federal Securities law. The forward looking statements and all other statements that might be made on this call, which are not historical facts are subject to uncertainties and a number of risks and therefore actual results may differ materially the format of this call does not allow us to fully discuss.
All these risk factors.
For full discussion of these risk factors that could cause results to differ please refer to this afternoons earnings release and our most recent SEC filings.
Including our form 10-K intend to these items are also available on our website at wire CW Dot com.
Additionally, please see today's release for reconciliation to net loss to adjusted EBITDA on a consolidated basis and operating income and loss through adjusted EBITDA on a segment basis.
During this call we may refer to our non-GAAP measure of adjusted EBITDA simply as EBITDA.
In conjunction with today's earnings release, we issued a presentation, which will be referenced during the call. The presentation was filed an 8-K along with the earnings release and is available on our website I'll now turn the call over there.
Good afternoon, everyone and thanks for joining our fourth quarter and full year 2019 earnings conference call.
As everyone knows 2019 was a tough one for the entire LTL space with a downturn on the industrial side of the economy, which also negatively impacted tonnage and yield for the wire see worldwide portfolio of companies.
Even with the challenging backdrop I'm proud of our accomplishments and several key areas one ratified a new five year labor contract to we refinanced the term loan with improved and more flexible terms and three we moved to a single and unified enterprise sales.
And operation structure that is inclusive of all our brands under one coordinated leadership team all rowing in the same direction with the same objectives and goals.
As I've been sharing for the last few quarters not vision and our strategy is to operate as one company with one network and side very proud brands that provide exceptional service to our more than 200000 customers.
Our customers continue to rely on us to bring value to their supply chains and have clearly indicated that we are improving their experience and providing that value.
The enterprise transformation strategy remains consistent as we work through 2020 with the continuation of the following initiatives operational optimization and structurally improving the network to increase property and rolling stock asset utilization.
Expand service offerings and leverage operational Flexibilities gained with our new labor contract.
Next from a technology perspective, we intend to consolidate several different companies systems onto a single platform, which will in turn allow us to use one operating system with a single set of data from the same source all with the end goal of allowing us to improve the service we provide.
At our customers and increase the speed by which we do it.
Finally, we will continue evaluating our footprint and service areas and will rationalize the number of physical locations and then that work while maintaining geographic coverage in service offerings. While we may have fewer physical locations. We will continue to cover the same geographic service areas and.
Aspect is well increased density reduce mileage facilities and equipment. We believe that this will be visible to our customers through continued improved service and satisfaction and should also have the added benefit of improved operating efficiencies and future financial results.
Having plans for this change for the better part of 2019, our path forward is clear and currently underway with the right team on the field and the right positions to aggressively execute the enterprise transformation strategy.
We'll come back at the end with some closing comments, but wed now like to reintroduce you to Jamie who will share some more details on the quarter and the year.
Thank you Karen and good afternoon, everyone before I jump in the numbers and bore you to debt by reading the tape, let me begin by saying it's great feedback.
Great to see familiar faces, great feedback quote unquote home and even greatly back and just crazy industry.
I look forward to reconnecting with everyone, which I will shortly do after this call.
With that another way, let me run through the results and will end with a little more color is I know thats really what you want.
For the full year 2019, wired worldwide reported consolidated revenue of 4.87 billion, which is down from the 5.09 billion EUR, 4.3% when compared to prior year.
Operating income for the full year was 16.2 million compared to 142.9 million for the full year 2018.
Additionally, the company reported adjusted EBITDA.
210.6 million for the full year 2019, compared to three of $7.8 million for the prior year, which is restated from the previously reported 337.5 million to align with the new Covenant definition.
For the fourth quarter 2019.
We reported consolidated revenue of 1.16 billion down from $1.25 billion in 2018, and operating income of 9.8 million, which included $810.1 million net gain on property disposals compared to 55.1 million, which included a 28.1.
Our net gain from property disposals in Fourq, you 18, and finally, we reported adjusted EBITDA of 47.3 million this quarter compared to 77.5 million in Fourq you 18.
Turning to operating results like these trade reporting fourth quarter 2019 year over year LTL tonnage per day, we've got 6.6%.
We had 8.5% decrease in LTL shipments per day, offset by 2.1% increase in weight per shipment.
Additionally year over year LTL revenue per hundredweight, including fuel surcharge was down 1.1% LTL revenue per hundredweight, excluding fuel surcharge was flat.
Finally year over year, LTL revenue per shipment, including fuel surcharge was up 1% and was up 2.1% when excluding fuel surcharge.
Moving to the regional segment, the fourth quarter 2019 year over year LTL tonnage per day was down 7.4%, which is due to a 7.9% decrease in shipments per day as weight per shipment was up 50 bips year over year.
Additionally year over year LTL revenue per hundredweight, including fuel surcharge was got 70.
And LTL revenue per hundredweight, excluding fuel surcharge was up 20 bids.
Finally, your LTL revenue per shipment, including fuel surcharge was down 20, Bips and was up 70 basis, when excluding fuel surcharge.
As for investment back into the company, we're committed to reinvesting in our fleet and during the year, we spent 143.2 million on capital expenditures.
Additionally, we entered into new leases for revenue equipment within capital value 131.8 million for a total of 275 million were 5.7% of operating revenue.
Turning to liquidity, our cash cash equivalents in managed accessibility Decemberthirty. One 2019 was 80.4 million, which is a decrease of $123.4 million when compared to December 31 2018.
Vast majority of it decreased as a result, if our discipline and continued investment back into the business via Capex.
Now, let me positive or is that can catch hybrid as I know everyone at 18 against Q anyway that before we do I would like to make a few points and go above and beyond the numbers and answer some questions before yes, though.
One.
Why the held it I come back well I still look I can make a difference actually want to be a part of something greater than myself and you might say I actually had some unfinished business.
Two.
After my plan.
First of all I plan on keeping the financial runway clear sight darrin into sales and ops teams can focus on running the business.
Serving our customers and growing the top line.
Then I'm going to focus and support them and do it again, but better rents wash can repeat.
Specifically I'm a focused organization in areas that moved the needle and support guaran into team and the other senior leadership in a transformation has a real possibility if kt the trajectory of this company and it's an estimate profile. If we do those two things and do them well results should follow.
Third.
What about the minute.
Everyone knows cabinet under our new term loan required us to maintain a minimal at 200 million an adjusted EBITDA now everyone knows that we ended the year at 211 million.
And every one also knows the seasonality of the industry and Thats a first quarter is that we just one within the calendar year. However to various have lasted into the obvious. Please keep in mind that isn't LCM calculation. So it's important to compare the year over year change.
If we need to address anything I will absolutely. Let you know right now we are in compliance and laser focused on the network and the operational optimization there.
Again, if we do it right result should follow.
And lastly, as with the Fourg 19, LTL tonnage by month and preliminary January results are as follows.
RFP for a.
Total LTL tonnage per day was down 4.5% in October.
On 10.2% in November and down 4.7% in December for a quarter a decrease of 6.6%.
At the regional segment October was down 5.7% November was down 11.2% and December was down 6.0% for the quarter Bina, 7.4%.
As for January at least preliminarily for January Wacky freight is only down 80, Bips and regional segment is only down 3.7%.
In closing if you can't tell I'm excited to tell we'll be back I.
Im excited to do what I can to help we turning this company to its rightful place as an industry leader and a formidable flow.
I don't be perfect and I'm, not one but it starts with one.
One person one company one network, one team and five incredibly proud powerful brands.
Ill now turn the call over here and for some closing comments there. Thank you Jamie and once again welcome back home as CFO and also as our newest board member.
Our new Pan and right away or three best in class Regional LTL brands, and then the size scope and analysts capabilities of wire sea freight to go anywhere in North America partnered with the agile non asset Henry Logistics gives me confidence about the continued expansion of the wire see worldwide.
Value proposition in 2020. Thanks for your time. This afternoon, we would now be happy to answer any questions that you might have.
[laughter].
No.
On one.
Hello, Yes.
Hey, operator can you give them up fleet.
One moment.
Our first question is from Scott Group with Wolfe Research. Please go ahead.
Hey, Thanks afternoon, welcome back Jamie I'm, a very Scott talked about.
Is there oh, good so just I'm a monthly trends do you also have the total freight.
Monthly trends and just some thoughts on the improvement you're seeing in January and with what's causing it.
Yeah, we actually.
Kind of break it out Scott when that the first that numbers I gave was freight so thats the negative for Pat can negative four seven and then the only slightly down 80 bids for January so from my perspective as you go through the fourth quarter, you'll see it being down you on that 14 range really closer to 6.6 for the quarter and then a pretty good reversal in them.
In January.
Yeah, and I would just to add from.
After coming all 15 months of negative industrial activity, coupled with five months of negative I ask them and then getting some green shoots this way going high a sound specifically that lined up with what we saw from a tonnage recover recovery in January also some favorable weather.
But just one quick that when you gave us for freight was LTL only or total tonnage Oh, LTL, sorry, I've had to get tested LTL tonnage per day.
Okay.
And you don't have the do you have the total tonnage, yes, I'll give you the total tonnage as well so for the month of October is actually up 1.2% and must that November was down 2.9% and then for the month of December was up 70 fit.
In January there Yeah, let me give back with you on how that's the one number that I'm missing Scott, Okay, well, we can follow up.
So on the Covenant I'm, just I guess I understand your comments, but two questions.
Just remind us how gains on sales are included in that just so we understand that as a potential lever and then just more theoretically how do you think negotiations on covenant amendments may or may not be different with Apollo relative to more traditional bank. If you have thoughts there.
So in terms of that you Havent technical answer to your question give yourselves are excluded under the definition of EBITDA under the new credit agreement.
In terms of high negotiations go with someone lack Apollo.
Scott I don't know.
We haven't had those conversations we haven't had been need to have those conversations and candidly as we roll through the end of year being a platform. We're focused on the network and the optimization and customer service above and beyond anything else.
Is this something you got comfort with before deciding to come back.
You know what I've got a comfort and his team I wouldn't say that that had any agita over the covenant.
Unfortunately, given my background, which I think event at call probably know you in particular I had a little expertise in this area.
Okay and then just last question on the liquidity below 100 million.
Where do we need where do we need that to be what can we what levers do we have to help get that going higher again.
How do you think about first quarter I think that's usually a tougher seasonal quarter for liquidity.
Yes, so liquidity and I'm not being you know always want more right hitting it might be you always want more not less.
I think we I don't think I know we ended the year at about 80 million added.
It's a 100 million is that threshold and a levers that we have to pull really first and foremost is operations. So it was good simply going to perform better outside of that being outside of our control on a macro economic basis and ones that we have controllable by us the levers really had to do with.
Back into the business.
If you look at the last two years, Scott we plan on another almost $300 million capex back into the business hundred 45 last year 143. This year, that's probably the single most controllable lever that we've got outage at our disposal.
What's the 2020 plan.
Oh, we haven't given any guidance on Capex just yet.
Alright, Thanks for the 10, guys really appreciate it thanks care Scott.
The next question is from David Ross with Stifel. Please go ahead.
Yes, good afternoon, everyone welcome back disappears.
Thank you Mr. rocks and Hello, David David if there a.
On the just follow up on Scott's question about the 80 million of availability at the end of the year, where did that standards into January.
We don't give inter quarter guidance on the liquidity I tell you when it was.
Give me one second.
Hey, when it was on quarterly basis, it's no secret that is the lowest amount that we've had.
Probably in the last two years, but his new role through the first quarter. That's the one probably when we can have been most impact on in terms of shutting up capex to preserve liquidity as you go through the ended at first quarter ended the second quarter. They are increases which has the collateral for a deal we get a lot of availability back in and around that.
I'm, just really happened to be on low point on that borrowing base.
And Jamie How's the average fleet age now versus when you.
We are last at the company.
It's still older then we would like David and not reporting out on that but since 2015 with the addition of 5000 tractors and also a consistent investment last year.
Coinciding with the network optimization efforts that also frees up equipment I feel good about where we're standing on that naturally no secret we want to reduce our fleet age overtime.
And there and do you have visibility into when the brands might disappear as the network at the consolidated into.
Looking more like one than five.
No the brands Oh, this is where the value as David from that aspect I can give an example, we put a theoretical example out a matter of fact, we started with that example at your conference last year around what a network optimization would look like on a brand consolidation and that would be where three.
For terminals in the same service footprint would become a single brand that's no longer theoretical we've got a that implemented in one location. That's in northern Michigan, and then that footprint. A we had two wire sea freight terminals and two Holland terminals the wire sea freight terminals consolidated into the too.
Holland terminals, which freed up those two buildings for wire sea freight the wire sea freight employees became Holland employees, and then the customers and northern Michigan that we're using wire sea freight they improve their service.
The next day in many lanes, where they were getting second and third day from wire Sea freight so any lane that was on the Holland footprint.
Immediately got the Hollow and service and then anything that went into wire Sea freight network as just goes into a wire sea freight through a connector facility. So that's an example of being able to take buildings out take tractors outtake trailers out a allow the employees to transition to another company that.
Customer gets better service and we move forward with a better more streamlined cost structure and productivity.
Improvements as well so the five brands will stay intact. The holding company will take the one operating system up from a technology standpoint, and the back office spaces as well.
And where are you able to get better rates for that better service.
On the wire sea freight shipments the wire sea freight rates apply which ended the regional network that works well regional shipments shorter length of haul shipments in wire sea freight network actually pays well.
Okay, Yeah, because the customer is getting a better service. So I would expect them to pay more I guess the other way it would work as if your cost to provide that better service is lower than the slower service, you're exactly right and from even though with the regional challenges in 2019 because of the volume situation there.
We were in David as just as you're aware and most other analyst.
The regional networks or a more efficient than wire see freights and there's a left a lesser cost of handling with better productivity.
Alright, Thank you for the time.
Thanks, David.
The next question is from Jeff Kauffman with loop capital markets. Please go ahead. Thank you very much Hello, everybody and welcome back Jamie.
Afternoon, Jeff So.
Maybe kind of go with the Covenant question a different way.
We know you're about to 11, we see the calculation for adjusted EBITDA in the back of the presentation.
But can you give us an idea of what the adjusted EBIT da calculation would have been for first quarter 19 in second quarter 19. So we have an idea of how close it gets based on certain EBITDA generation.
Yeah give me one second yes.
So for the first quarter.
It would be $30 million second quarter 67 million.
Third quarter 66 fourth quarter 47.
Okay. So even though we're we're close it some favorable comparisons in theory for the next two quarters.
Given everything you've got going on.
Henry logistics.
Can we get an update on that.
I don't know if you comfortable disclosing run rate size or anything like that I don't know if you're thinking about disclosing Henry as a separate unit and 2020, but.
Just thought I ask Jeff Greg question, and yes, since I was public on some targets for Henry Logistics last year I will give you enough day 29 teams and instead of 140 million in revenue for Henry logistics from our target of 150 naturally in the truckloads.
Face Henry linked with logistics did a great job of expanding their shipments with double digit growth rate or the revenue per shipment was down as everyone knows and the brokerage area of the truckload segment, but the margins were good so I'm pleased with inner logistics their performance and a expecting to see that growth continue.
A unique value proposition. There is you know, we named Henry H. and ROI for holiday, New Pan Reddaway wire sea freight specifically because of the power that Henry logistics garners from having for asset base brands behind it and a national enterprise sales for selling it on a daily basis. So.
Every one of our salespeople now with the changes we made in 2019 when they go into a customer they represent all five brands. So we're excited about that and anxious to see what henner logistics does in 2020.
Okay, Jamie I think I interpreted your response to be <unk> capital spending can be a bit of a safety valve as we work through the the typical first quarter liquidity.
You haven't given a capital budget for 2020 yet.
But given the environment out there is there any urgency to continue to spend the way you're spending do you do you feel like there's certain areas of spending where your where you need to be I know darrin alluded the depletes not quite there yet, but I thought it ask about other other projects.
Yes.
Add anything to that yes. It is their investment back in the technology side of the how.
I think I don't think I know the returns on investment are much.
A greater depending on the actual space than we invested in terms the company, but won't be go a lot of 2020 2021 event will be in the consolidation of the operations in the network and transformation that goes around that so theres going to be a fair amount at tech investment has been rolled through 2022.
21.
You can easily put on par with fee revenue equipment.
Okay. Thank you.
Well, congratulations and thank you very much.
Take care, Jeff Thanks, Jeff.
The next question is from Amit Mehrotra with Deutsche Bank. Please go ahead.
Thanks, Operator, hi, everybody. Thanks for taking the question.
Just I wanted to follow up.
On the covenant, So I guess just based on some crude map. It just looks like the adjusted EBITDA in the first quarter can still be down you know 30, 31% year over your.
And you wouldn't dip below.
The 200 million dollar threshold, but that seems doable.
Just given the trends in January but maybe it would be helpful. Because you know the you're on your growth or decline and adjusted EBITDA accelerated dramatically in the fourth quarter to down like 40% and obviously the macro environment was lot weaker and maybe you're getting a little bit of a tailwind in January but you've also got the 60 to 80 million to savings some of that.
Im depended maybe a lot of it is you got the $25 million of employee headcount savings that I assume will incrementally help first quarter just help us think about like the inflection in the first quarter on a year over year basis in the earnings power of the company.
Based on kind of all those maybe positive things relative to what were you guys did in the fourth quarter and should be helpful. Oh, Yeah. Good afternoon amidst a thank you for the question I wanted to 60 to 80 million will start there a you know that blueprint. It remains intact, we're not wavering, but you know the industrial market slowdown and the car.
Responding negative impact on volumes in the industry certainly impact that timeline on the 60 to 80, the 25 million in cost reduction is in play.
TJ and his team did a great job with that.
As we work through Q4, and we will remain lean until we see.
More green shoots than we've seen so far in January or certainly encouraging, but there's a lot of winter left I will stay focused we'll keep the operations type and we'll add back a the head count a into our operations only one is justified by expanding shipment and tonnage levels. So what.
The network optimization that we're pursuing a way we're right on track with that as we closed out 29 team. We landed at our total facility count of 351. The 25 facility target that I gave we achieved that we've got the next 25 teed up right now and working through that with our team our team is experience.
We've got language contractually that allows us to pursue those a timely and because of that I'm confident in what we're doing from an operational optimization standpoint, the previous investments that we made and.
Our city pickup and delivery operations and also our line haul networks are still there and in play and certainly when volumes are declining productivity. These are challenged but one area that we continue to create density and and progress is our load average metrics on our longer length of haul.
Falls and also the new containers and purchased transportation faces.
That our contractual agreement allows us to do so with all those in play I.
I think we're positioned well and certainly watching things closely.
What we're a lean organization at the right time, and we will certainly stay lean until we see volumes return.
To a more normal state or even less bad if you will.
So I'm just going to ask a follow up little bit I'm out since asking it make it a little bit easier for us.
You know I mean, I mean guarantee just looking at it now I mean, EBITDA went down 40% in the fourth quarter.
Do you think how did you see it now that EBITDA will decline 15, 20% in the first quarter just based on all the trends you're seeing now I mean, what is what is the right calibration because it's just it's just hard to kind of you know put all the moving parts in order because there's just there's lot of things depending on volume and it's just it's just hard looking outs from outside in amid I'll, let Jamie.
He gave you some direction there as we're getting in the data so Jamie Oh go ahead and give some personnel. Yeah, you said it perfectly it so much dependent on volumes. So from my perspective, we sit here, we're only one mark answer that dream up quarter and everyone else legally focused on this one.
From my perspective, you've gotten Matt already done it I can see that you've done it.
We did $30 million in first quarter of 19, 30% decrease with picket 20 that be Canada. The threshold of the floor from my perspective, we really need some tailwind from the macro Saturday the economy, specifically when you do manufacturing side to recover at least rebound a little bit.
Just a reminder, I mean, the contract in of itself, excluding or irrespective of volume.
[music] contracted about 4% ran on what extensive in 2020 than it was in 2019. So we do have some headwind coming at it there so you've got to thing.
I think we would need fee.
That would have been at least benefit us pretty good first quarter, one is a little bit of recovery on the manufacturing side and get a lack of deterioration on the price.
Okay.
And after that I don't want you want to lose had an effect in context more sent that this quarter that wasn't a year ago. This time.
Right. Okay. That's helpful. And then just one kind of maybe bigger picture question, because I feel like you know your company has as a pretty storied history and you know its five close to $5 billion revenue, but here, we are sitting at less than $100 million of equity value or I mean, the equity is basically.
As an option value territory and you have all these legacy issues whether its.
The price competition kind of 10 years ago as a result, the under investment in the asset base limited flexibility in work rules related to the unions, a large pension deficit, which you're managing and you can manage but nonetheless, a structurally impaired.
So so why isn't it why isn't the right you know just given where the equities trading at today why isn't the right pathway just to pursue a large recapitalization of the company. So you could maybe more fully like invest for the long term or is that just something you feel you don't need to do right now because you have a pathway to like organic.
Basically improve the business without diluting equity holders like help us think about that yeah, I mean, and hey, what he I agree with you in terms of $800 million that the option value at this point in time being the $5 billion revenue at the top line. We already enterprise, we are making that we still have you touched on my phone patients around the country. So from my perspective the recap.
Capitalization has less to do with a $5 billion.
And it really has to do the fact that we only spending about 110, maybe $115 million year and interest expense, assuming that we had no capital structure.
The only same about 100 $110 million at $2 a share or whatever it is now.
I have no interest in issuing equity at that level.
Right Okay.
Okay fair enough. Thanks, very much for taking my questions appreciate it.
How long do.
This concludes our earnings call I would like to turn the conference back over to the company for any closing remarks.
Thank you operator, and thanks again to everyone for joining US today, please contact Eric with any additional questions that you might have this concludes our call an operator I'm turning the call back to you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.