Q1 2020 Earnings Call
Over the past twenty years including nine eleven and the Great Recession of 2018 and 2009 Blaster model is indoors during periods of tremendous challenge. We expect no different than 20 28 getting back to the first quarter last twenty twenty first quarter revenue and earnings were in the range of the first quarter guidance provided as part of our year-end 2018 earnings release distributed on January 29th, Thursday in that earnings release, we provided first-quarter Revenue guidance in a range of $915 to $965 actual 2020. First quarter revenue is $920,000.
We also provided diluted earnings per share guidance of a dollar ten to a dollar twenty the range of earnings per share guidance did not include an estimate for the financial impact on insurance and claims costs of a known no particular accident that took place in January of 2020 at the time of the release of earnings per share Guidance, the financial impact of the severe accident on insurance claim cost in the quarter wage, not estimable as a company continued gather facts regarding the accident actual dial earnings per share for the 2020 first quarter would have been at the upper end of the earnings per share guidance before God. In fact of the financial impact of the severe accident on first-quarter insurance and claim costs inclusive of the estimated Financial impact of the severe accident actual earnings per share where dollar for the 2020 first quarter off.
Our first quarter Revenue guidance anticipated that the number of loads in Revenue per load on those all be a truck would both be lower than a 2019 first quarter in the mid single-digit percentage range first quarter 20, 20 loads Thursday. We're 6% below prior Year's record first-quarter truckload volume.
For a load unload still be a truck and the 2020 first quarter was 5% below the 2019 first quarter load volume and revenue per load unload Sylvia truck traded fairly consistent with the normal seasonal patterns on a month-to-month basis through the quarter first quarter insurance and claims costs were estimated at 4% of Revenue in the first quarter guidance. This estimate did not include any Financial impact from the severe accident. I previously referred to an actual Insurance claim cost and the 2020 first quarter. We're 5.8% of Revenue.
During March it became clear that last are needed to address potential unprecedented operational challenge that resolved could result from the pandemic as a safety first company last hour has always played safety issue front of all, we do the health and well-being of the members are our Network the companies twelve hundred employees 10,000 bcos 1200 agents and their staffs and over 25,000 customers and 59 thousand other third-party capacity to buyers has always been a part of our safety first culture the central business we have taken action to ensure that Freight is delivered safely while maintaining all of the social distance distance recommendations other guidelines provided by US Health authorities and various government agencies as a pandemic grew Landstar took major steps to prior to the health and well-being of all after employees and their families and limit the Ridge Community spread of the virus without our main offices while we also sought to limit possible business disruption that could be caused by the potential impact of reduced staff in the event of an outbreak within our offices dead.
We're from a government-mandated shut down as a release the business continuity. Our Focus was to ensure trucks and agents would be paid timely customers would be billed collections of receivables would continue to flow the Key Systems powering our Network would continue to function and be sales agents would continue to have the uninterrupted access to trailing equipment and customer service over the course of several weeks and mid-march the company transition over 800 of its 12 employees from his two main corporate facilities to work at home the transition help to secure business continuity and maintain a healthy work environment for last ours employees should have a thousand left our employees working remotely.
From an Administration and operations standpoint the transition of so much of our employee base to work at home has been a great success in currently. It is business as usual at Lance start from afraid standpoint. However, far from business-as-usual we expected very difficult Freight environment during the second quarter with vital manufacturing plants and shrinking industrial and consumer demand.
The speed of change in demand for Freight transportation services caused by the pandemic has resulted in significant inconsistencies in the level of demand amongst various sectors beginning in early to mid-march Industry demand for transportation of goods and medical supplies skyrocketed while demand for transportation in the industrial manufacturing and oil and gas sectors experienced severe decreases. These industry Trends became clear and last ours truckload toward the back half of March during the first twelve weeks of the 13-week first quarter last our dispatch truckload volume was 5% below the comparable weeks of 2019 in the last wage physical March dispatch load volume was 14% below the number of truckloads dispatch during the same week of March 2019.
this is one of the
And most dramatic reductions in week-to-week load volumes in the history of the company.
The DraStic slow down and loadings experience on the last week of March was a result of States beginning to implement stay-at-home order shutting non-essential businesses along with a wide number of Auto plants announcing temporary closures month overall in the last week of fiscal March, we experienced increased dispatch truckload volume in foodstuffs and packaged Commodities get those increases were more than offset by significant decreases not put of automotive parts and supplies building products and machinery.
Due to the unpredictable nature of the current environment and the necessary role of the Federal state and local governments and lifting stay-at-home orders and taking other measures that will be needed to help the economy transition back to a more normal operating condition. We would not be providing our news guidance for the 2026 quarter in the long-term growth and earnings is highly important Landstar currently though. Our near-term approach is focused on a Thursday in some of the businesses are option and financial challenges caused by the pandemic that are facing the small and large business owners who have helped make Landstar one of the most successful Freight Transportation companies in the country.
We are fortunate that the last our model provides the flexibility flexibility and resiliency to provide Financial relief to agencies in these unprecedented times part of Landstar is pandemic relief effort provides an initial home as per load $50 to the agent dispatching the b c o and fifty dollars to The Bistro delivering load for all loads delivered by a b c o from April 1st to April 30th based on our anticipated download Volume we broadcast that portion of our pandemic relief effort will pay up between six and seven billion dollars in a second quarter. We also are providing $1,000 per week for two weeks. Do any of those contracts covid-19 or has been mandatory quarantine by a public health authority
As we moved through the quarter we met at a 2 or expand our pandemic relief efforts and commit additional funds to support our Network.
Join, the 2020 first quarter Landstar purchased over 1.2 million shares of stock at a total cost of approximately $116. When did the first quarter with approximately 211 million in cash and short-term Investments and three hundred sixteen sixty-six million available for bar Tano start revolving credit facility.
Although we. We do not Envision any liquidity concerns over the next few months or in the long-term. We believe it prudent to conserve cash until the duration in depth of the crisis becomes clear until then we'll be prudent off to share purchases.
Although we're not providing guidance for the 20 20 second quarter for the sake of providing an example of how our model May respond under certain adverse business assumptions. If one were to assume our Revenue decrease in the 2012-13 second quarter of twenty 30% as compared to the 2019 second-quarter Revenue would be in the range of 730 million to $335.
Under that scenario, we believe the model would likely produce earnings per share in the range of $70.85.
Which would be of an estimated $0.13 per share related to Landstar April pandemic relief currently in effort currently in place, which as I stated above could be expanded as we move through the quarter off the resiliency of Lancers light asset based business model will continue to generate outstanding returns over time relative the overall environment for every $1 decrease in Revenue direct Freight related costs decreased by about five eighty-five cents, the significant percentage of cost that directly to revenue somewhat insulates the last our model from significant downturns in Freight and typically generates positive free cash flow throughout most business Cycles continued believe. I am Star as well positioned with a strong biology and expect positive cash flow generation throughout this down cycle.
In the past twenty years last our model.
Generated positive free cash flow every year, but one is positive earnings and every year, although twenty-twenty has become a challenging year. We remain confident in our model not only to endure through times like these but also bought a charging back as business conditions improved and here's Kevin to provide additional commentary on the 2020 first quarter financials. Thanks, Jim.
Jim is covered certain information on our 2020 first quarter. So I will cover various other first-quarter financial information included in the press release gross profit defined as Revenue less the cost of purchased Transportation commission's two agents was 142.9 million dollars and represented 15.4% of Revenue in the 2020 first quarter compared to 155.6 million or 15.1% of Revenue in 2019. The cost of purchased Transportation was 76.5% of Revenue and the 2020 quarter versus 76.6% and 2019.
The rate paid the Truck Brokerage carriers and the 2020 first quarter was 39 basis points higher than the rate paid in the 2019 first quarter.
Commissions agents as a percentage of Revenue. We're 16 basis points lower and the 2020 quarter as compared to 2019 due to a decrease net revenue. Margin Revenue less the cost of purchase Transportation on loads called by Truck Brokerage carriers other operating costs were eight point three million dollars in the 2020 first quarter compared to 8.2 million + 25
This increase was primarily due to increased trailing equipment costs and increased contractor bad debt partially offset by decreased trailer rental expense.
Insurance and claims costs were twenty-five million dollars in the 2020 first quarter compared to Fifteen million in 2019.
Total insurance and claims cost for the 2020 quarter were 5.8% of Revenue compared to 3.3% in 2019 the increase in insurance and claims compared to 2019 was attributable to the impact of a single claim related to an accident in early January 2020 in increased unfavorable development of prior-year claims.
Selling General and administrative costs 445.3 million dollars in the 2020 first quarter compared to 41.3 million and 2019. The increase in sg&a costs was off a tribute to Annie to increase customer bad debt and increase in the provision for bonuses under the company's incentive compensation plans and increased employee wages and benefits package for the offset by a decrease in stock compensation events.
In addition the 2020 first quarter sg&a costs include approximately $800,000 related to the cancellation of the company's annual convention.
Customer bad debt expense was 2.9 Million Dollars in the 2020 first quarter compared to one point three million dollars in the 2019 first quarter.
Compensation expense was $631,000 and 1.9 million dollars in the 2020 and 2019 first quarters, respectively.
Provision for incentive compensation was two million dollars in the 2020 first quarter compared to 1 million in the 2019 first quarter.
Quarterly sg&a expense as a percent of gross profit increased from 26.5% in the prior year to 31.7% at 20 20.
Depreciation and amortization was eleven point five million dollars in the 2020 first quarter compared to 11.3 million and 2019. This increase was primarily due to increase it related depreciation.
Operating income with $54 for 37.8% of gross profit in the 2020 quarter vs. 80.9 million or 52% of gross profit in 2019.
The decrease in operating margin was driven by an increased STNA expense increased insurance and claims costs and the effect of decreased growth profit operating income decreased 33% year-over-year. The effective income tax rate was 22.9% and the 2020 first quarter compared to 21% in 2019.
The effective income tax rate with impacted in both periods by excess tax tax benefits related to vesting of equity Awards to employees.
Looking at our balance sheet. We ended the quarter with cash and short-term Investments of two hundred eleven million dollars.
Cash flow from operations for the 2020 first quarter was $99 and cash Capital expenditures were six million dollars. There are currently 1820000 shares available for purchase under the company stock purchase program. The unpredictable nature of the current rate environment makes it very difficult to forecast revenue and resulting gross profit. Even in the near-term. However, we are more comfortable with forecasting the indirect costs for the second quarter and yesterday's earnings release. We provided a revenue and earnings scenario to show off a model reacts under certain unfavorable assumptions. The Assumption we used was a reduction in revenue from the 2019 second quarter to the 20 20 second quarter of 20 to 30 per month.
Under that assumption. We said Revenue in the 20 20 second quarter would be in a range of 730 and $835 million dollars in earnings per share would range between $0.70 and $85.
Our calculation assume that the combined total of the indirect costs consisting of other operating costs is only General and administrative costs and depreciation in the aggregate to be similar to the $65 reported in the company's 2020 first quarter. We estimated insurance and claims costs at 4% of a projection of revenue for the quarter back to you Jim Rome. Thanks Kevin, and with that Missy, we will take questions certainly sir. We will now begin the question-and-answer wage. If you would like to ask a question, please press star followed by the number one on your touch-tone phone. Once again that is one to ask a question. To cancel your request, please press one followed by the number two.
Our first question is from the line of Scott group from Wolf research. Your line is now open. Hey, thanks morning guys. Good Morning Song. Maybe if you can give us just some more color on exactly what you guys are seeing in April, you know from a volume standpoint maybe from a a van versus flatbed perspective as well. And you know what you're seeing how you're seeing pricing Trend so far in the month. Yeah, we base everything on a dispatch load which isn't exactly tight back to our Revenue, but it's pretty close. So we took daily load count and we get that report every day and and the report as I said at the end of March pretty significant declines. I think I had said that we were 14% load volume and not last month of March. We were running about 5% in the previous twelve weeks going into April for the last three weeks. We're arranging on a daily from 20 to 30% down on volume.
It's it's kind of a little more down on Flats than bands but I would say it's about equally as as week and from a pricing standpoint with surprising us slightly is that our pricing hasn't moved much seasonally. It's down a little bit from from March to April but it's not it's not lined up with some of the industry stats. You're seeing coming out of some of the companies put out the metrics. So from from a from a pricing standpoint, it seems a little slightly less than normal seasonally and from a from a bind standpoint. Like I said, we're down probably 20 to 30% on a daily basis and anticipate that will connect you at least or April and someone into May until some of the you know, in Industry the manufacturing industry starts to rent back up significant. If we talked about commodity name is I would say that of that drop off, you know about eight to ten per-cent of our businesses and Automotive that we know specifically related to Automotive.
That 8 to 10% went down about 2% of our business in the first three weeks of April dropping off contributing about 30 to 40% of that twenty 30% drop off. So that's a big piece of it building project is off not quite as much as Automotive, but it's off machinery and metals all down and even consumer durables and slightly down again super adorable for us isn't like consumer perishable more the longer term and between those five Commodities the dispatch loadings are probably that makes about 85% of the the twenty to thirty percent drop off and loadings in the first three weeks of April.
And that that's that's great color. Are you seeing that 20 to 30 sort of is that been all month or is it getting worse as the months going on out there? I think it's leveled off the last week or two. But in the it was accelerating from the end of March into the first week of April. Um, and I think we're seeing it settled off between it's actually in probably more for the first three weeks. I'll take off 30% but we're try running twenty-five to thirty percent right now. So it's probably going to hover around there. Okay, the the bonus that you guys are doing.
how
If it's on a per load basis, how comfortable are you or confident that you can take that back in a couple of weeks?
It was it's clear that that we're we're ready getting questions from our constituents whether it's be the agents or bcos or whether we're going to extend it. So it's clear that we can we can we can either extend it or terminate it once it expires on the 30th. We will make a decision over the next few days. We're watching volumes were watching b c o utilization. We're watching b c o turn over month and we're watching that right up until the point where we have to make a decision whether we extend that two weeks into May for the entire month of May or we see things starting to turn and and volume start coming back and we should see some Revenue rate per mile holding or rape or load holding right now Ray per load seems to be holding in certain areas, but it's the volume that's kind of a little little troubling and and the reason the name of the 52 is that you know, when you disrupt the system as fast as this happened,
Driving a little bit more deadhead miles or a little bit running more empty to move from low to load, you know, just to keep them, you know a little bit more Hall if they're extending miles to go pick up loads. I think that that's why the 50 was dead was in there if we see load volumes where they stay we may consider it standing at either two weeks or another four weeks into May if we see the load by and start to turn, you know, we may not so it's a decision will make a price sometime next week. We have to make it next week is May one is next Friday and then just last thing when I look at the the accounts down about 5% year-over-year most since 2010, What trends are you seeing as this issue is getting worse or has gotten worse in second-quarter. What trends are are you seeing on the account Scott? This is Joe in April. We've actually seen a little bit of growth. It's small, you know, 15 20 growth in the month of April and so we're encouraged by that that could be a funky.
Where the price is and and holding I think just to give you a sense. I think a lot of us are active those that aren't active I think are just waiting like just like we're waiting to see if it does begin to turn and in which direction and when they're trying to hold on. So that's kind of what we're experiencing the last few weeks.
Okay. Thank you for the time guys. Appreciate it. Thank you so much. Our next question is from Jason.
Thank you all very good morning. Gentlemen speaking on the on the capacity side. What are you seeing from? Some of the smaller cars under your brokerage operations has there been a study sort of operation in the amount of available companies use or is it limited by the group? Thought Jason just joke and I don't quarter-over-quarter. If you look at the first quarter the percentage of volume off the smaller carriers, which make up fifty six to 57% of our volume has been pretty pretty flat. You've seen the count go down and the approved go down that's really a function of wage put in fewer and fewer loads out on the 3rd party boards for those carriers to to find and and to haul thus they become inactive in our Network so long it's hard to say about the health of them. It's just the fact that we're brokering less Valium and those fewer carriers will stay approved in the network as just a function of how the process works.
and
I think you guys made the comment that the the friends were relatively similar between flatbed and drive in here in April. How about if you if you look at the Trends on a vehicle that you know, excellent try to you always do for the quarter. Have you seen any particular fall off and end markets in anything?
I think the markets are the ones we mostly it was the End Market meaning automotive automotive was the they're kind of leading it. You know, we like I said Automotive in the dispatch side for the first three weeks of April. It was running eight per month prior to first three weeks of our businesses down to 2% That's like I said, I think that's Thirty to forty percent of our drop off and volume Building Products contributed about equally as so did Machinery not Automotive, but Building Products machinery and metals also contributed the the to the drop-off foodstuffs one of the positives would foodstuffs, but it's such a small piece of our business. It wasn't near close to offsetting the drop-off in some of our heavy industry sectors.
Right, right, I guess as reviewing some states sort of Explorer coming back to a like a a more normal, you know living in operating procedure here. We do you think we're going to start seeing the freight recover and what end markets were you guys and I guess how's how's Lance are going to handle that in terms of this parrot openings in the states.
Well, we're we're pretty tight into the automotive sector and I think that's the first one we got to keep our eyes on cuz it has been the cause of the significant downturn and I would I would expect no different. I would expect that. Our thoughts are so tied into them. As soon as they start opening it up, you know will start will be in there moving Freight. I mean, I'm clearly this is disrupted their supply chains and our agents are in constant contact with them along with some are employees of of we're kind of waiting them to pull the trigger and stop moving Freight and you know, that should turn back pretty quick from the building products side. It's really up to when they start manufacturing again. I mean or or relationship problems and it's just the fact that the plants are the plants are done.
Okay, I'll turn it over to somebody else. You guys stay safe out there.
Thank you so much. We have six more questions on Q and the next question is from Todd Fowler of keep your line is now open a great. Thanks and good morning, you know Jim just back to the comments on the pricing that you're seeing here in the second quarter, you know as you think about that, do you think that that's more a reflection of the lounge or willing to take in this environment? And so maybe not taking some of the lower price Freights and if you just have any thoughts in general about, you know pricing within the market do you think it bottoms out, you know here in 2 Q or kind of think the rate environment is going to evolve, you know, obviously understanding that visibility is pretty limited. But just some thoughts there would be helpful. This is Rodger. Hey Robinson as we've said in our past calls our agents and those kind of lag or adjust to market conditions a little slower than the actual Market itself. So if you kind of take that in my name
We're we're seeing prices hold a couple that with the fact that we've seen it a decline or or loss of volumes and Automotive business that supports Automotive boiling.
Yes retail kind of frame for the ports, which is more of a short all type business for us. So that's kind of left are are longer haul rates in place a revenue per low. So it's kind of stayed at the higher level that being said over the last couple days this week. We started to see a small down ticking range and I'll let Kevin or gym kind of address what they see on a long-term basis from that perspective, but again and talking to our customers and and and kind of looking at what their plans are as Jim kind of said there's a lot of uncertainty there. There are a lot of customers and a lot of segments that are putting dates out when they think they're coming back but there's no real certainty to say that they're coming back at that point in time. Yeah will take just a follow-up. We've always experienced a lack of reaction in our in our Network when the agents don't respond a downturn and pricing the the speed of downturn in this is something we've never seen before and clearly, you know as they don't react, you know, they're they're still moving the freight. That's you know, yep.
I don't say highly price but reasonably priced and haven't reacted yet to the to the to the downturn. So our expectation is that we're going to start to see some more some deterioration in that pricing as we as we moved quarter just because of that maybe 30 to 45 days lag and reaction from the network from just the way our model is designed. I do anticipate we're going to see some coming back more to the industry rates or may not quite as low as they're saying but I think we'd see some some pullback and rates over the next, you know, Thirty or forty five days.
Okay that helps and that that was helpful on the mix issues to Rob. So that was I appreciate that, you know Kevin to your comments about the sensitivity where you talked about, you know, the indirect cost the other sg&a appreciation, you know, assuming those staying at $65 million consistent with one Q is that I mean, is that what we should use right now for modeling purposes. Is there any reason why you know sg&a with incentive comp, you know would come down sequentially in 2 Q or three Q or are you really saying that that 65 is kind of the right run-rate to think about four four quarterly in indirect expenses. Yeah, this is Kevin. Yeah, we we expect the the indirect costs to be similar in Q2. I'm not seeing any reason why it wouldn't be similar in Q3 and Q4, you know in years past we had the convention expense in Q2. That's no longer going to be there this year off.
As far as like the Run rates, I would say other operating, you know in the eight to nine million dollar range for the quarter sg&a around $44 million and then depreciation at 11 to 12. I think it was 11 and 1/2 in q1. So those are the round numbers, you know, there aren't a lot of levers in our model to pull on those on those line items. So I'm pretty confident on those obviously insurance is a wild-card. I I still think the four percent of Revenue obviously that's going to be a lower number in Q2, but that's still our best offer on the insurance number.
okay, great that
Helps and then just the last one for me. You know, when I think about your model, you know, you're kind of tied into the small business Community if it's the the bcos or if it's the agents, you know the account, you know, we we talked a little bit earlier in the call, but can you speak to maybe the health, you know just of the and and how you'd expect them to fair, you know in this environment. Is it something where you know, they can withstand, you know this sort of drop in volume for you know a couple of quarters or how do you kind of see the community, you know weathering this environment? Thanks. This is Joe. I think you know life from a from a financial viability standpoint. I think it probably varies considerably from clearly we've got because you know, we've seen it kind of flattened out here so far in Q2, I think there's those that have, you know, put aside a little bit of a cushion and they're they're using that to stay viable and they're using that to to to sustain their business how long that can go will really dead.
I think business-to-business and clearly there's not a a large Exodus now, I think what we've done with the $50 per agent and app or loading. I think that's been very well received. We've been communicating very consistently with large conference calls to the BCS and agents to let them know where we are and and what we think but as Robin Jim both outlined there's a lack of clarity on when this thing really bounces back, but for this point, there aren't a lot of really impacts of calls or anything like that that lead us to believe that there's a tremendous amount of desperation or that kind of thinking out there. But really I think the uncertainties the the thing that's probably the most aggravating and the most difficult for them to deal with
Yeah, understood. Okay, I appreciate all the help this morning. Thanks.
Thank you so much or next question is from Bascom success pahana your line is now open gym. Can you remind us of situation in the past have led to you, you know for black of a better term rewriting or tweaking the way that the system shares Revenue would be cos and Agents come back and you know, does this feel like a situation that that may create a shock to the system where you do need to think, you know ways to tweak that and keep the system intact Beyond just temporary bonuses and in a weak demand environment.
No, actually historically we have not adjusted the arrangements that we have with our POS and agents in any of the environments. We've been through whether it was the same nine-eleven quick drop-off and volumes or it was the 2008/2009 slow painful drop off and volumes. But we we haven't really racked into tell you the truth. I think this is the first time that I've been a 1995 and I don't recall ever a time where we had a situation where and when this happened so rapidly that the best decision to make was trying to support them with this $50 alone now just to make sure that they were covered at least was a month of April. I don't anticipate or foresee even in this environment or if even if the environment stays that way that the deals that we have with our service agents in the agreements, we have would change from a financial standpoint. I think you know, we're in we're we're kind of soft and down now and we're looking at volumes that are where we were dead.
Eight years ago where we had the same.
Agreement so I you know, it's I would say that there are no plans to make any changes to those programs.
Thank you for that. Can you also have you seen anything in Casualty that could potentially be problematic as a single incident so far in the last few months off while we have you and that'll be my last one. Thanks Holi. The one that we disclosed in January. I'm not aware of any significant but you know you've got in our world today. I could have a fender bender and it turns into something serious two years from now, but right now we're not aware of any significant items out there that we haven't addressed in our release or in our numbers.
Thank you.
Thank you so much. We have four more questions on Q and the next one is from Jack Stevens. Your line is not open.
Hey Jim, Hey Kevin. Good morning. Thanks for taking my questions jackets. The only questions left. So if you use them all I guess it's over, I guess I guess it's over. Okay, well, we'll use to how about that long? So I guess you know just to start if we can kind of maybe talk about the the flatbed Market obviously, there's been a you know, a significant disruption here in the office complex over the course of the last couple of months, you know, and I know you guys don't have a lot of Direct Energy exposure per se but the flatbed Market broadly does so I guess how are you guys thinking about sort of the structure of the flatbed Market as we look out over the course of the next the next, you know, whether it's several quarters couple of years. I mean, do you think you know things could be sort of more $6 there for for a while. Just just given what's happening within the energy sector?
Yes, I think jackets every everything down toward for us. Whether it's Vans are flatbeds and on a flatbed side the oil and gas about two or 3% of our our business. And then we took a little hiccup in energy because we did some I think we did some Towers wind generation stuff in the in the in the first quarter, but it's you know, it's it's like any other environment other than a month down turn the I think there's trucks going to be parked along, you know, they're going to be parked against the fence cuz the phrase not their people aren't going to they're not going to be drivers and trucks. I think there's going to be a truck reaction fact that we got to think about that. They'll people are going to be idling trucks when this thing and I think they are already so there's there's your back to that balance of supply and demand and I don't anticipate it's going to be soft. No question grab a soft a flatbed environment, but you know, you got the interest infrastructure build it hopefully comes around to help us through and tighten that flatbed mark it up and if oil and gas will probably be down for a while that could
Something that helps supplement the uh, the the demand on the flatbed side, but it's really hard to predict and the Inn where we sit today. No, that's totally understandable. I appreciate that that color and I guess just for my follow-up question Kevin for you on on free cash flow and I thought, you know yours and gems comments earlier, you know in the prepared remarks were very helpful to understand the cash flow power over the land store model, but you know with a significant level of exposure to Automotive, you know, we've been hearing anecdotes about the automotive customers really pushing back on payment page in particular, you know, you know, what do you seeing in terms of you know, and you know, do you do you think that working capital could be a little bit of a drain here over the next month, you know the next quarter or two until things normalize and just to tag on to that, you know bad debt expense. Do you feel like your accrued properly there?
Yeah, I I do suspect that over time. We're going to see deterioration on the receivables.
Uh thus far not too much. But again, you know, we're we're what three weeks into April I suspect that it will drop off. Um,
To what extent? I don't know but we are going to conserve cash. We're keeping an eye on that. Like Jim said we're going to make sure that we don't get into any kind of situation wage or you know, we're desperate for cash. We obviously have availability on the revolver. We ended the quarter with 211 million of cash and short-term Investments with the ability to access another 366 out off the revolver. So liquidity not so much of an issue just yet but I am keeping an eye on the receivables. I'm getting a daily aging and off. Yeah. It's starting to slip a little bit, but we'll see, you know, obviously the weeks Roll by will have a better better answer for you next time.
And just to just to quickly follow up on that if I mean, how do we think about the interplay between you know, the Aging of those receivables and your your agent-based? I mean, is there any sort of grew up there, you know with agents if you know the the receivables end up aging more than they should.
You know we do have agent risk that is a part of our business. But you know, we treat that just like any other receivable. I don't I don't see that as an issue. Just yet. Yeah, if if we the way our business model works if we give $100,000 worth of credit to a customer that agent has no risk. Once we do that as long as he doesn't fill over 100,000 so that all avarice it's on us off.
Okay, gotcha that makes it makes sense. And I'm happy with with the AR Reserve as of the end of the first quarter.
Okay, thank you. Thanks for the time. Really? Appreciate it. Thank you so much. Our next question is from Stephanie Benjamin of Centrist is now open.
Hi, good morning morning. I was just wondering if you could ask about just remind us that the general seasonality is for gross margins for once you get the environment is significantly different. But if you guys talk about what you're seeing, you know throughout the quarter and then generally what you see from one Q to Q, that'd be helpful.
Yes. Need this is Kevin as far as gross profit margins go. It's going to move based on more for Lancer. It's more going to be based on mix more than anything. Obviously, we've got those incentives out there to try to help our PCOS. So, you know, I I still think the range of the the gross profit will be similar. Um, we think $500 per load has has helped us stem the tide so far but seasonality, you know, whether its first-quarter and second-quarter. It's really going to depend on the mix of be CEO vs. bro.
Got it appreciate and then I was just hoping that you could speak a little bit about what you're saying in terms or what you thought throughout the quarter before the impact of covid-19 bath NE facturing Trends. I mean did it was it a situation where he started to see some improvement just particularly more favorable comments or maybe would pick up little bit and then all of a sudden we had a hit. This is a Black Swan event. Maybe just anything so we can kind of think through how it can progress as we start to rebound from the the pandemic. It was more of a a very quick paced events were we were through our dispatch loadings were actually it was looking positive in in week 11 of the quarter which is probably the middle of March our dispatch loadings finally went off sent over prior-year same day of the week. I'm sorry. So we we were seeing an elevation. We're seeing an increase in an improvement in our Trends from a dispatch loading basis for on a week. Yep.
Week in week 12 of the quarter we dropped off and then I said in the last week of the quota we dropped off to 14% So it was pretty rapid and then it just continued through there until now that 14% to 20% and now we're sitting sitting between the range of 25 to 30% We've seen no positive signs for many Industries yet opening up to get flowing. So it was it was Swift over a four week period to watch the volumes go from positive 1% on 1 week to now looking at -25 to 30% and and until the manufacturer started open up plants were probably expect we're going to hover between that twenty-five to thirty percent for a little bit on a week-to-week over prior-year week on a dispatch vol.
Great. Well, that's all I had. Thank you.
Thank you so much. Our next question is from Bruce Chen of diesel. Your line is now open. Thank you operator and good morning gents. Just want to get your take on the overall Market past and we talked about the population a little bit but we discussed expectations of Supply LED tightening on the last call and obviously we're going to have a big glut hearing aid to Cuba, you know as we shake out of the pandemic. Well, what are your expectations of how market supply shakes out if it's going to be a much more significant tightening and there any indications of any material changes, right?
Hey Bruce, this is Joe. I would think that and if we've seen the more and more bankruptcies even in q1 and in in in Prior, so I would think you'd see some of that materialized as the the longer this slowdown persists. So I do think they're over time would be a tightening. I think you'll see it. Probably more in some equipment type. Perhaps a little bit more in the flatbed truck it due to the energy impact initially. But again, it's hard to say, I mean if if things bounce back a little bit sooner, I think the the the taxes will be dead if it lasted a bit longer, I think it could be pretty material and you still had you know, we came into this watching insurance rates for these small carriers go through the roof, right and actually starting to take some of these, you know, every company is a small carrier's I saw, you know going bankrupt or going out of business mentioned insurance is one of those are things that's just another you know, this pandemic just creates more Havoc to those small business owners. Yeah and Thursday.
you know you
Was to Kevin about DSO some of these small carriers, you know, when payment terms get strung out so far. I think it gets increasingly difficult. I think it's just a multitude of factors that are trying to juggle and and it's just a matter of how long and how liquid were they before this all started to turn down.
Yeah, that's that's great. I appreciate that. And you know, maybe just a follow-up on Todd's earlier question. But more on the agent side. Can you give us some flavor on the resilience of that agent population and then just confirm actually, you know, what tends to happen to that part of the Landstar model during down Cycles. Do you see, you know, an influx of of you know, maybe small Independence looking for? You know, I'm from Atlanta and model. Do you anticipate or expect, you know, maybe some consolidation on the million dollar agents that is that usually play out.
No, I think you know our will just start with the existing agent base that we have. You know, they're so Diversified we have guys doing you know, we have two hundred something guys that do a million and two million and then we have other guys doing fifty to a hundred million. So so you kind of you got to look at the diversification within the agent face. The smaller guys could be at risk if they didn't diversify within their own little businesses, right if if I'm a million and half dollar agent. I got one customer not come back to shut his plant. Well, he's not going to have business for a month. So they will probably, you know get through it if they're if they don't have staff or something like that. It's an individual business owner. He's a one-man team he can make through a month when that plant back opens up. You'll probably be hauling Freight again. You also have an existing standpoint. You've got the larger guys who who runs staff of upwards maybe a hundred people. They're managing their business the way, you know, a small business owner would manage, you know, they're trying to keep the employees engaged or in some cases. They do have to furlough them. Let them go. So within our within our existing Network, you know, they're happy.
Is a small businesses would handle it with a little you know help from us they call us and we'll we'll have discussions with them and how how we can assist sometimes with them and getting through this, you know month or two of severe down turn off from from a new agent Prospect, you know, they see us as an opportunity and we tend to get a few more calls coming in from Agents whether we land them or not is another thing but there does seem to be more activity on phone calls. The problem is and when you're in isolation, it's really tough to have meetings with people and to get to know somebody to try and recruit them into the business. So, although there may be more calls coming in. The interactions don't really wage. They don't really stick until we can get, you know, maybe get out of our homes and and and start getting out and doing some more sales and recruiting efforts.
Okay, great. Well, I appreciate that color Thanks James.
Thank you so much speakers. We have last two questions on cue and our next question is from Bari Hain. 6h Asset Management, your line is now open. Good morning. I am taking my question had a couple of maybe first is when you think about that sort of down twenty to thirty percent range that you guys saw, you know, late March into June so far. Is there any way to Ballpark how much of that is from companies actually shutting down versus how much of it is from them, you know shippers that are still open and just their same-store sales if you will are down so that that's the first question. Wonder if you get some feel for that that's a very difficult question for us cuz we have 25,000 customers that we built and there's not one. Yeah, we can talk from an industry sector standpoint. Clearly. I think the automotive piece is probably a combination of both mostly plant shutdowns, but also something else
Slightly operational Building Products. It's probably operational but way down Steel.
Does that stuff slightly? Like I think I read that steel was running about 50% capacity when they typically run an eighty percent. So they're operational is just less Freight coming but from an industry sector, that's what we know but from an a customer standpoint, we have so many customers out there. No, no one being more than 3% of our business and that's difficult for us to answer got it. Thanks and then just a quick follow-up on a couple of months within Building Products any feel for how much of that relates to new constructions versus Remodel and then within consumer durables, are there any product types that off or are relatively more important to you or is it pretty broad-based? Thanks, actually broad-based. I you know the consumer durables. It's the top that is highly Diversified even within that category. I think like the topped with customers only make up about twenty-five or thirty percent. So there's no single durable in there as consumer durable in there. That would we we could point it being driving that one down. Although it's actually down less than birth.
Overall loadings from a percentage standpoint and in the building products, I'd yeah, we don't we can't get into the detail of that to determine what is new new construction juice, you know rentals or stuff like that. I think that that's difficult for us to pull apart. We we often don't know what the End Market is. We could be hauling product to a staging area that goes to another staging area then ended and then product so it just makes us difficult to get the where where the building products that are being built. They're headed.
Got it. Thanks a lot preciate it thank you so much because we have our last question and it's from Ben Hartford of bared your line is now open Thursday. Just I guess interested in your perspective. I know we've been focused on some of the supply Dynamics with regard to trucks but but in terms of the competitive landscape jobs in brokerage, I know it's early since everything inflicted mid March, but you know, you talk about extending of receivables across the industry you talk about to applaud Supply attrition on on the truck as we move through the year interested in in how you think it might play out for a brokerage competition standpoint. Have you seen any change here in April? And you know, what? What are some of your agents saying? How are you kind of thinking about this new environment from a brokerage competition perspective as we finish out to you in in in this year?
Well, you know, it's through April, you know, we're not hearing a lot of people swapping Brokers right now. It's it's breaks down for us because afraid of town it's not necessary. You know. We're not taking upgrade from other Brokers, maybe some not nothing out normal that we're seeing. It's as shippers swapping out Brokers and you know, I think in our world where heavy spot Market, you know, are you going to come back? You know, they talk about the economics, right? Is it going to be a slow gradual? Come back? Is it going to be a huge shaped or a v-shaped and I think each one of those scenarios with a different reaction from the broader Community, right? If it's if it's a long drawn-out
You know.
Recovery, you know I think that gives more time for Brokers to compete on pricing and get in there and we'll be battling for for customers. If it's if it's a quaint V, you know, we're the guy to be there right and then you know, we'll be there for six months and then they put their bids out again, you know, I think it's you have to look at it. What kind of recovery you think you're going to have and how it's going to react I think each scenario would have a different reaction within the industry from a broker standpoint. Cuz if it came back a fast that we play Fast right business disruption all of a sudden by and comes back we can get trucks for you anytime anywhere right on a quick one on a slow pace one if it comes into a bidding process so brokerage will be betting against other Brokers and I think that's how you see it playing out depending on how the how you see the recovery coming. Okay, that's good. I understand what you've done on the cash preservation outside and give the line in here about funding technology initiatives. Can you give us an update in terms of of where you sit on that front? And and has there been any change here to date? Do you expect any changes in terms of birth?
Face of the roll out either because of this or or any other other factors. Yes. Matter of fact, I think pace of the rollout of some of our tools going to be faster cuz we apparently are more productive not being in the office wage. It's the most incredible thing. But yeah, we you know, we were we're in the middle of rolling up people have been talking about booking now tools right where it's automated cuz a lot of our stuff is phone call, you know, they hate the truck have to call an agent. There's a lot of that going on. So we're working on booking now tools working on our track and invisibility tools revamping load boards and and you know, all these pieces of a TMS that are module or that we're working on separately off. They continued the you know, we we did a we we run a beta book it now with one of our agents and it was working. I think right now with the drop-off and loading and stuff some of that. It's not the it's not the issue using the technology might just be the capability of us to put it in play right now. I don't think we're going to do anything to disrupt anything but we're continue to push out all those products. We had them were improving them and wage.
Continue to spend on Kevin. I think the spend on this stuff was like eight to ten million. Yeah. Yeah. It's actually no longer. We've been consistently spending that for this stuff for about the last three years. We're just going to be consistently pushing on the path. We we have the TMS and we're trying to roll out. Let's say it's about eight to ten per-cent of our truck volumes an hour in the new TMS. That's a slow process over a longer period of time. So that's your pricing tools been out for two or three years. There's not a lot of spending going into that but a lot of it's focus on the front and customer-facing track and visibility book it now I use that type of stuff is what we're working on and trying to advance and that has not stopped but the it code is considered home and do this and I think that's why we're getting a little more production. No more meetings. What's the timeline on when I should expect the totality of these initiatives that you've had undergoing for several years now to be kind of done done. I was telling the truth. I'm not sure where ever done but
Sun is that the track and visibility was supposed to be out sometime this year. So that that one, you know, I look at them from a module stand. But cuz we can we build these modules and they plug right into the system TMS might not completely rolled out, but we could have the track and visibility rolled out, you know, we can have the book it now or hold that we can have these components roll. So they roll out when they're ready, you know, we we made a testament then we roll them out. So it's it's kind of a continuous process. And as we finish one we find something else that we like and we put out like it's last one since no more questions here. Can you remind us about the nature of your your relationship with the FEMA? I know it's different than fifteen years ago. Yeah. We we are not just we are just now another broker bidding when they put when they put request for take-out we under contract that expired in 2008 when we were the Sole Provider for disaster relief. Yeah, that that was over and over and that we did, you know, we did in certain States when they have a disaster.
Okay.
That sounds good. I appreciate the time guys. Stay safe. Yeah you two speakers at this point. We do not have any more questions on I would like to turn the call back on the circuit Sony for your closing remarks. Thank you, and thank you for as always for your participation in today's call. We wish for you and your family stay healthy and safe, and I look forward to speaking with you again on our 20 20 second quarter in his conference call scheduled for July 23rd. Have a good day. Thank you so much for joining the conference call today. Have a good morning. Please disconnect your lines at this time, and please stay safe. Goodbye.