Q1 2020 Earnings Call
Good day and walk into the site Inc. first quarter 2020 earnings Conference call. Today's conference is being recorded at this time I know my turn the conference over to Mr., Doug Coal Science Executive Vice Vice President and Chief Financial Officer. Please go ahead Sir.
Thank you good morning, everyone welcome to size first quarter 2020 conference call.
With me for today's call a size, President and Chief Executive Officer Fritz Holzgrefe.
Well, we began you should know the during this call women, we might make some forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements and all other statements that might be made on this call it or not as strong historical facts are subject to a number of risks and uncertainties actual results may differ materially.
We refer you to our press release RCC filings for more information on the exact risk factors that could cause actual results to differ.
Now I'll turn the call over to Fred's for some opening comments.
Good morning, and thank you for joining us to discuss size results I'd like to start todays call by giving a word of thanks to the science employees across the country, who worked tirelessly over the last couple of months to serve our customers and whose efforts have enabled side to do our part and deliberate essentially goods in this very difficult time.
To start we've focused our efforts on keeping employees and customers save as the potential impact of covert 19 became apparent we adjusted our operations to adapt to the developing realities.
A matter of days, we redesigned and implemented new social distancing focusing operating practices throughout.
Our network the changes allowed us to fill our role as the that's central business, while protecting drivers dock workers mechanics, and some support staff as they stuff as they safely serves our customers are sales in general office functions have largely been moved to remote office environments, while focusing on the company's long term potential we've had to me.
Difficult decision to furlough, approximately 16% of the workforce, while also reducing hours across the company performance compensation plans have been suspended an executive compensation plans reduced at the same time, we recognize a significant impact of this pandemic has on our employees and we provided additional paid time off benefits to support.
Those are made due mainly to care for a friend or family member.
Not a central spending has been reduced or eliminated where possible.
Business levels of change dramatically since mid March or commentary outlook will be colored by the impact of cobot 19 pandemic is out on the economy in general freight levels. However, we will highlight the important steps the company took during the record first quarter and thereafter.
Going into the year, our business plans and 2020 were focused on execution and leveraging our network investments that we made no what in the last several years in the midst of the challenging current environment I'm pleased to report we did post record first quarter results revenue of 446 million an operating income of 38.8 billion were both first quarter.
Records, our operation operating ratio improved by 170 basis points from the first quarter last year to a record first quarter or low of 91.3.
Some or what other freight companies reported volume for good for the first half of March before rapid decline on a year over year basis for the second half of March typical seasonality usually indicates volumes accelerating through the end of March and stepping up again in April but that was not the case this year. Despite the weakness in late March shipments for.
Or work day for the quarter still grew by 2.3% versus last year and with an improvement of weight per shipment tonnage per workday rose 4%.
In terms of pricing it appears the rational approach taken by LTL carriers over the last several years continues.
Our contractual renewal rates rose by 4.6% in the first quarter down just slightly from the 5.4% rate we achieved in Q4.
Early February we implemented a general rate increase to 5.9%.
The quarter, our yield as measured by revenue per hundred right way rose, 3.1% keep in mind that reported yields a byproduct of pricing and mix. The mix component includes class of freight weight and length of haul the.
The combination of positive pricing heavier weight per shipment and longer length of all all combined to boost revenue per shipment by 4.9% to $242.
I'd like to now highlight a few operational achievements in the first quarter.
Strong leadership operational leadership combined with technology enhancements made in the past year were the key factors and helping to show improved productivity and both are dock and Citi. Your operations on a year over year basis in the first quarter on the docs are optimistic optimization tools, which provides real time performance tracking visualization.
Rolled out across our network in 2019, it increases our ability to set realistic expectations for freight handling professionals and measure their success in real time against engineered standards also rolled out last year, our new inbound planning tools, enabling us to build better routes to create density across our delivery operation.
[laughter] minimizing miles run city traffic is a productivity enhancer and cost there.
Through our continued efforts network simplification. We also saw small improvement in both empty mile percentage and load average despite having a larger service network than a year ago.
In the quarter, we maintained strong customer service levels and achieved our standards on both pickup and delivery metrics. Our cargo claims ratio of 0.7 improved from point a three in the fourth quarter, we'll see improvement driven by continuous training efforts, particularly with our 2019 hires.
Finally in early March we opened a new terminal your Burlington, Vermont, our 19th terminal northeast since we began our multiyear expansion in 2017.
Overall, I'm pleased with our results and execution in the first quarter. We believe the steady cadence of execution provides a solid foundation to continue to make operational improvements or is the case in the current pandemic challenged environment better manage productivity, while providing a compelling service for SaaS customers and our expanding geography with sales highlight.
Highlights addressed I'll turn the call over to Doug for detailed review of the first quarter results.
Thanks for its.
First quarter revenue was 446 million up 8.7% over last year first quarter. This year included one more workday than last year. So on a per day on a per work day basis revenue rose 7%.
Revenue benefited from stable pricing environment.
LTL yield rose, 3.1% also as Fritz mentioned, we implemented a general rate increase of 5.9% on February Threerd, which typically impacts about 25, 20% to 25% or business.
Surcharge revenue increased 8.5% was 12.8% of total revenue compared to 12.9% a year ago.
Operating income of 38.8 million was 35% higher than last year, and our operating ratio of 91.3 improved by 170 basis points.
Moving now to a few key expense items I can offer little bit more color on the quarter.
Salaries wages and benefits rose by 8.3%, reflecting our average employee count being approximately 4% higher than the prior year.
Our July wage increase of approximately 3.5% last year and continued inflationary health care costs.
No. We have 10 additional terminals operation this year than at the beginning of the first quarter last year.
Purchased transportation costs increased 5.8% with one extra workday in the period as a percent of total revenue purchase transportation cost were 6.7% compared to 6.9% in the first quarter last year.
Fuel expense fell by 6.1% in the quarter. Despite the 4.8% year over year increase in company miles as National average diesel prices were approximately 5% lower throughout the quarter then in same period a year ago.
Claims and insurance expense rose by 9.3% in the quarter, reflecting normal volatility in that expense line and higher premium costs versus the prior year.
Depreciation expense of 32.6 million in the quarter was 22% higher year over year. This is a continuation of the trend we've seen over the past few years as we've grown our terminal network invest in equipment to lower the age our fleet and made meaningful investments in technology.
Overall operating expenses grew by 6.7% in the quarter and with revenue growth of 8.7%, we improved our operating ratio.
Our tax rate for the first quarter was 23.7% compared to 19.3% last year. The increase is primarily related to executive stock activity, we expect our full year tax rate to be 24% to 25%.
First quarter diluted earnings per share, where dollarssix compared to 85 cents in the prior year.
[noise] in first quarter year, we generated 51.3 million operating cash flow compared to 30.4 million a year ago, and we make capital investments in the first quarter totaling $107 million.
But the majority of that related to new tractor deliveries.
We've deferred delivery of a substantial portion of our new tractors until later in the years, we manage our fleet size to current volumes remove older tractors from our fleet.
Our average tractor age is now less than five years, Hello age of fleet as a benefit of better fuel mileage better reliability and also reduced maintenance maintenance expenses, our average fuel economy. The first quarter improved by 3% from last year to 6.9 miles per gallon.
At March 31st 2020, total debt was 235.8 million and inclusive and inclusive of the 46.99 cash on hand, our net debt to total capital was 18.3% compared to 17.2% at the end of March last year.
In 2020 net capital expenditures are now forecast to be between 200, 200, 5200 225 million.
Outside of our committed equipment purchases. This year, we're taking a very measured approach to all of the capital spending we're evaluating all expenditures in determining water needs of water wants some investments that were plan for 2020 had been deferred until we have more clarity on the economic outlook.
We believe our balance sheet is strong with the aforementioned 47 million in cash on hand, and more than 300 million of availability through our revolving credit facility, including an accordion feature and that sold and also additional outside barring sources.
Good morning, before turning the call back to Fred's for some closing remarks I'd like to provide a few details on our actions taken to date to face. The challenge is brought on by the Cobot 19 pandemic and the anticipated impact those actions will have on our financial outlook for the remainder of the year.
On April 1st we offer all hourly full time workers, an additional five days of paid time off and one additional day for our part time workers in light of co. The 19.
It's actually was an effort to make sure that all of our employees want to position to take needed time off for health issues or those a family and friends.
We believe this actual result, approximately approximately 10 million of additional benefits costs over the remainder of the year.
Additionally, we are incurring monthly expenses for health and safety related supplies for items, such as masks and sanitizer spray sanitizer and gloves as needed by our field workforce to safely interact with each with each other and our customer.
On the cost saving front, we developed a multi prong approach managed down our labor costs in April we offered at retirement incentives as well as voluntary leave of absence plan.
The combination of these actions furloughs and hours reductions we've taken a <unk> active it daily average workforce down some 16%.
Lastly on April 1st we suspended our four one k. match, all incentive compensation plans and other executive compensation as well.
But that said.
I'll now pass it back to Fritz for some closing comments before we.
Okay.
Just to emphasize our quarter, we're particularly pleased with our results from the first quarter and I think it speaks to the capability of our business and what the operating potential is.
Clearly we're in an uncertain time right now, but we continue to operate and focus on profitability in maintaining companies positions such that we can benefit when we do move past this pandemic, which we will with that I'd like to open it up for a.
A question a questions and that folks may have.
Thank you if he would like to ask a question. Please signal by pressing star one on your telephone keypad.
Using a speakerphone. Please make sure you mean assumption is turned off to allow your signal to reach our equipment again that is star. One you asking audio question well pause for just a moment to allow everyone the opportunity to signal.
Thank you my first question will be from Todd Fowler with Keybanc capital markets.
Great and Todd Thanks, Hey, good morning, Doug Good morning Fritz.
I guess, maybe to start if you can provide a little bit of color about you know what you're seeing now into April I'd be curious both on the tons per day side and then one of your competitors talked about some change in shipment profile. It I'm curious what you're seeing as it relates to.
Per shipment to kind of the mix go into the network at this point.
Sure.
Before we get a neighbor I might as well go ahead and give the shipment tonnage and wait numbers for the first quarter by by month, and then I can give you a little bit of color on April today.
In January our shipments were up 8%.
Tonnage was up 7.7% weight per shipment was up.
Point or was down 0.3% at 1300 four pounds.
In February our shipments were up 1.5%.
Tonnage up 0.4%.
Weight per shipment down 1.1%, though sequentially the weight in February was up two pounds at 1300 six.
In March our shipments were down 2.5%.
Tonnage was positive up 3.7%.
And weight per shipment was up 6.4% to 1300 80 pounds.
So far in April our shipments are trending down about 17%.
Tonnage is down about 30% as weight per shipment continues to look solid it's up 4.7% at 13 and 37 pounds.
In terms of what we're saying I mean as Fritz mentioned March started off pretty good yeah. The normal seasonality from January to February wasn't there that was that was a bit unusual but the weight number started to improve early February then we started to see better shipments and then like Fritz said pretty steep fall.
The off in the second half a March so you know that's that's continuing into January.
Tell by the numbers I gave shipments down about 17%.
You know for us its its field a national isn't down in that low teens, maybe 13, 14% or Threepl business, which is obviously a smaller portion of our business. You know, we're seeing shipment count there down 30% plus month today. So no no no real change in the trends that we've seen over the last few.
Two weeks.
That's that's super helpful and that's that's exactly what I was looking for on that front <unk>. When you think about it sounds like that you guys are able to react very quickly changing environment, you're putting in the furloughs in early April when you think about adjusting the cost structure and kind of being able to preserve the margins. The performance in the first quarter was was very strong.
How do you think about what the margin profile could look like into Q you just given the change in the environment that you saw late in March and April.
Yeah, Todd I I think the best the best to answer I can provide you the areas that we're very focused on maintaining profitability in the business. We're very focused on maintaining the financial our balance sheet such that when this does and that we're in a position to execute and take advantage of the market opportunities it will be there.
The level of uncertainties such that.
We're challenged to forecast next week, a much plus the full quarter. So with that in mind. We we have a game plan that we kind of operate against the you know as the fluctuations may occur in the business will react to it with the interest of maintaining that margin and being in a position that.
We can exit this and take advantage.
No I think that you know the last the week. So far have a this you know we've kind of bounced around a bit but you know maybe that the baby. There's some stabilization kind of but we'll see a its markets are opening for us than that for everybody. So that that's good but remains to be seeing what that looks like over time.
[music].
Yeah, no I understand for its that makes sense I'll ask one more and then I'll turn it over you know, maybe just a little bit strategically longer term.
How do you think about the cadence of the geographic expansion I know when you went into that you know with the plan that you laid out you were able to throttle up and throttle back based on market conditions. You. Obviously pulled forward a lot of terminal openings late last year as you look out through the balance of 2020.
Is this an environment now where you kind of work with what you have or do you think you'll still have some opportunities to do continued geographic expansion for the rest of the year. Thanks.
Thanks, Todd the I think that our first quarter focus in our full year 2020 focus has been on execution. So we and taking advantage of those terminals that we opened last year, particularly the ones in the second half in the northeast the idea with our focus on execution is one that we can be it a position.
Keep that balance sheet strong so that if there are disruptions in the market, where there maybe opportunities for side of step in so.
But right now I think the biggest value driver for us is clearly going to be centered around us taking advantage of facilities that we've opened optimizing those optimizing our network continue to drive costs.
Such that we have that flexibility to two maybe move into something if it would have become available and I think we would but that's not something we're actively.
We would probably more react to them than say brought up.
Got it makes sense. Thanks for the time this morning and nice quarter.
Thank you. Our next question will be from Jack Atkins from Stephens.
Hey, guys. Good morning, Thanks, so much for taking my questions.
Morning.
So I guess you know you just kind of go back following up on Todd's question. There for a minute second question around sort of that the cost structure. Any are you guys have taken aggressive steps that demand is that year over the last several weeks, but.
Doug can you kind of provide some maybe some context around how you you fixed versus variable costs in your business I'm just trying to think about how the cost structure is flexing here as we sort of see this type of Ah tonnage decline in April.
Sure.
I mean, you know you really have to think of it you know across the company lifecycle right. I mean, we've got a lot of new markets, we've invested and as Fritz mentioned you know.
10, new openings in the past year. So we've got a lot of.
No fixed cost and then as we start to put business and there you know more and more we we have an opportunity to see improved incremental margins and weve shown a little bit of that Weve. You know you see margins out of us in the last year approach that 25% to 30% range that we think they ought to be.
But into into yeah. The volume in there some of your costs that longer term or variable are going to be fixed right. I mean, some of the miles you just can't take out.
And your line haul operation or even running around the city, you've got those costs and you're providing good service for the customers, but but they're not all efficient miles. So I really I hate to break it down anymore than that into fixed versus variable because its you know, it's it's a little bit different given all the fixed cost we've added.
Okay Gotcha.
I guess, maybe kind of thinking about end markets.
You know first could you kinda talk for a moment about you know what you're seeing from out from an end market perspective, and you know I know if I think back I think <unk>.
Traditionally has little bit more energy exposure, just given sort of your historical geographic footprint did you could you talk about sort of where that stands for you guys. You know today for about from a percentage of revenue perspective.
Yeah, if I were to look at kind of what we're seeing a trend wise year over year, Yeah, I think the Houston region, I think Oh, yeah. We.
Doug quoted the overall company declines and I would say Houston would be.
At the higher end to those decline so above the average.
L.A. acts region for US also and I think that's probably reflected a little bit port activity.
If you look at sort of a across the sort of revenue base. So you. Doug described a threepl segment is being the most impacted for us, but I think the the rest of it the other we'll call out necessarily verticals beyond sort of that Houston region is sort of energy centric, but I think the rest of it.
What's notable about what we've seen is that there's been some volatility you know the day to day basis, it's across businesses as people are businesses are disrupted and supply chains have been disrupted as a result of Covance. So you know one day, maybe a particular segment is down and the next day, it's down less so it's.
There's a lot of disruption there that's made a challenging to hit our operating.
Metrics, one thing that we've been particularly pleased by is that we've done a great.
Organization or operations team, particularly this environment has done a great job of hitting the service standards of meeting customer expectations as we've dealt with the disruption so very pleased with that.
Okay. That's great that's great to hear and last question for me I'll turn it over but sort of a longer term question around technology, but you know first going back to last year. You know you were discussing a number of SEC initiatives that you are you were targeting for 2020, obviously you know the world is.
Eight has changed quite a bit a you know here this year, but.
As you sort of think about those projects and this crisis. You know do you think the this is an opportunity to accelerate investments in technology or are you looking to maybe push those out you know adult till the market begins to settle down.
I I would say that we're going to continue to focus on these technology opportunities and I'll describe them in two ways. So we highlighted last year into the first quarter. The our docked optimization tools, our city planning tools, our line haul tools and those are things that in a disruptive market that we're in right now that weve.
We find applications for those right they help us make better decisions to optimize and drive debt available density and those sorts of things in our footprint as we're dealing with this crisis. So those are those enhancements need to continue and as we further refine those those are investments we're going to make.
Certainly our operational procedures that we've had to put in place.
Around sort of social distancing and that has created a safer environment for our employees, but part of what we might be able to do and in this year and into next year as we make investments in new handheld technology will be able to further enhance our social distancing.
Sort of safety program. So it's a unique opportunity in that area, where would the investments going to continue that makes sense, because it's going to drive some efficiency, but then the added benefit of.
Providing a safer work environment for our employees and a better safer environment for our customers as well. So those investments will continue this is a business that yeah. We're managing this for the long term. So the opportunities that you know we see to drive better decision, making are ones that we're going to continue.
Okay makes sense, thanks, a lot for the time.
Thank you. Our next question to me from Merrill Lynch.
I'm Deutsche Bank.
Thanks, Congrats on the great quarter guys HM.
And Doug I'm.
Are you, hoping you could talk about the weight per shipment trends in April holding in there quite a bit better than I would've thought is that just you know I guess mix of business favor and maybe more national accounts that are heavier weight. So you can just talked about that and then how should we think about yield.
You will be stable or could be spectrum, you know detail there because my weight per shipment.
Yeah, I mean, the way you know the average weight as I as I gave it you know the April update you know, it's a good number to post but I will say, we're seeing a lot of the volatility in weight even day to day.
So that's that's been a little but difficult to parse out what's causing that.
For us actually our field customers the weight spend but not the highest if I'm thinking about feel or national customers are weights been better on the field side. So.
You know obviously you know.
Something to do with the mix of customers, but for us feel though has been a little bit heavier weighted.
Okay and then just just the yield question any I mean, you can ask internet to lay didn't mean to be expected detail because of what's happening on weight per shipment and then maybe you can comment on pricing because obviously that.
An important topic, especially in the context does the weaker volume environment in the second quarter <unk>.
<unk>, Yeah, I think we commented earlier amid a you know the pricing environment remains rational you know I think the mix of business weight per shipment are going to have an impact on that on the yield performance, but I think it is remains a.
An environment in which that.
People are looking for that return because it in our cost structure and the added costs that come into operating in this environment. This disrupted environment or not ones that would I would think.
It would make sense to discount or to move off that pricing thesis.
And I mean, it's what I would add them that along with the thinking about the way impact on the yield calculation you have to consider fuel to them as fuel surcharge revenue comes down and that's a headwind for you reported yield. So so you really have to back up and just thinking about what the pricing environment about and for US you know, we see that is rational and that's been stable.
So far but deal number do you does have some moving pieces to it and that benefits the customers, while the <unk> the fuel charge.
[noise] you break and then just last one from me I'm afraid I mean, I guess that longer term opportunities society has always been kind of.
You know achieving I know what are the two more in line with kind of non unionized national LTL companies and it seems like there's an acceleration because internally to go after some of the opportunity and the cost that maybe had been left on the table or have you probably gone after vigorously so maybe like two three years from now.
Now I mean do you think it's anything kind of structural that's going to impede side from getting to that you go or.
Single basis, you can you talk about happens structural standpoint.
No I think the long term opportunity remains for side I think that I think the one item there really emphasize those as we went through last year that was an opportunistic investment year for us those terminals. The expansion opportunity was there a when we launched our northeast expansion in May of 2017, we were.
I had kind of an order a cadence by which we could move that up and down the rate of expansion up and down based on the opportunity. It was there for US last year, we saw an opportunity to move and add additional facilities in coverage in the northeast we did that made that an investment.
That's expensive to do but that also positioned you for future sort of success as a national carrier. It I think I'd I'd, a you know as we're doing those expansion initiatives at the same time, we're focusing on investing in technology that allowed us to make better decisions optimize our operations and I think.
You saw some of the first results of that in the first quarter I'm. So as I look forward as we get passed this this pandemic state I think the longer trop longer term opportunity remains for side and I think that you know we're continuing to fill in that tool box around the sort of data analytics better decision making to.
Tools that we've been investing in the last couple of years that we can capitalize on that going into the future. So I don't really see a limitation for us to achieve those for a longer term structural margin.
That you described I think that opportunities for is there for us we've just got to get past the the short term challenges that we're dealing with right now.
Got it thanks very much appreciate it.
Thank you. Our next question will be friends, Scott Green from Wolfe Research.
Hey, Thanks morning, guys, so where it's got.
With those moving parts you talked about on that last question with weight and fuel is there anyway, you can actually just share with us what revenue per hundred weight is tracking in April I know you don't typically give it but maybe you're not giving us some of the forward margin guidance or maybe you can give us a little bit extra in terms of.
Trends just to help us, but that Scott there a lot of moving pieces I think we're going to we'll stick with our kind of traditional focus there.
It's changing on a daily basis I'm so it.
We're going to continue with our traditional guidance or traditional analytics.
Okay.
On the on the margin front and maybe this is another tough one to answer but.
Do you think you yet obviously had a good first quarter I understand you're not giving guidance on second quarter, but do you feel like you've got visibility to full year margins improving.
Not really I mean candidly when do we I mean I guess the question might go back is when do we expect a return to normalcy I tell you that if we do get back to normal I looked at that first quarter and I look at where we executed on the first quarter. If it if we get the non essential marketplace.
Open again across the country I think we have an opportunity to move the company's position that kinda pursue those kinds of margin improvements over time at it and our API right now as we go through Q2, and you know where this leaves us with this pandemic our is preserving that opportunity for so.
I can't really speak to one or the market will improve force, but the opportunities there and I would point to our our execution has that kind of evidence of what we think we can do.
Yeah that makes sense and then last one for Doug I, just want to make sure I heard this right was what's fuel surcharge revenue up 8% and fuel cost down 6% is is that right and then.
How should we think about the net impact of fuel.
Going forward does that does that remain a net positive for you guys going forward or should that sort of spread normalize.
Well I mean as fuels coming down you know it benefit you in your costs as it's coming down but at some point you know when it stabilizes at a lower level, you know, you're you're losing surcharge revenue and the customers benefiting he sees that as a price reduction and then you know the day. It turns back up you know you're chasing it for.
Awhile and you follow song and a long enough to understand that but yeah. Some fuel expense was was down 6.1% in the quarter.
And surcharge revenue grew.
Okay Alright. Thank you guys appreciate the time.
Thank you. Our next question will be from David Ross with Stifel.
Yes, good morning, gentlemen.
On the equipment side first some nice job lowering the track their age or any comments on the trailers. What do you do it in the trailer side, it's a trailer fleet expected to grow much this year and how are you shape for trailers.
Yeah.
The age of our trailer fleet spend coming down over the years too I mean, this year, our big investment will be around our our line haul units are pup trailers were still in the process of buying pup trailers with the new captive been capabilities gives us an opportunity im proud to improve load average.
You know truck trailer age depending on whether or not we're talking about vans or pumps is is anywhere from you know.
Seven to.
10 years on and on average on though on the trailer side and.
In the same as trucks and it will take the opportunity. This year, you know with volumes down to move out some of our oldest trailers as well so.
It's an opportunity to.
You know rationalize your fleet, when you're saying volumes down like this get rid of some of the older equipment on both sides.
But not much growth just more.
Change not the old and bringing some new more efficient trailers.
Yeah for the most part I mean, when we were opened in the terminals last year, we had to place a lot of trailers at all the new facilities, but but not a lot of growth and the trailer fleet. This year.
And then Fritz if you could comment on the.
Change inside his northeast competitive positioning as you continue to open up more facilities and whether it's now at 19 facilities or when you had 12 or six has there been.
A tipping point or are there different benchmarks along the way.
That significantly improve your competitor and positioning does it have you seen it or do you expect to see it at some point.
Yeah, I think I think the success so far in the northeast is really about you take the our differentiated high quality service.
Introduce it's that market and starting with customers that already knew who worked so that that helped the initial success and now as we grow in that market people become more and more familiar with who we are I'm sorry. It's you know as we think about it internally, it's becoming less of a region.
The sense of a individual call out and it's more about hey. This is just another part of side, it's no different than sort of Chicago region. It's it's a market that we continue to optimize and we're positioned what our key differentiated services at our quality and we do that.
In the market and we feel like overtime. That's the that's a winning a proposition for us it it really is becoming more and more like the rest of our network, which is great success.
And we're thrilled with that I think the there's an opportunity to continue to develop that sort of national basis.
At the same time as you get that scale on the market that allow us to grow in you know it's more of the regional freight there, but right now from the beginning we focus more on sort of the national coverage national footprint, there, but as we develop that you'll see some additional growth related just sort of intra regional dorothy's Bert right down the success has been on that sort of.
National footprint and its more and more like the rest of our business, which were excited about.
It was there any threshold that you cross you know whether it was revenue number of a 200 million or at a footprint coverage. When you added a certain state or two that it really made you feel that way.
No I think it's just the overall customer acceptance that we've seen I mean, if we go back to the original sort of thesis that we had we we have beaten our market share internal market share expectations in every market and that that's kinda give us some confidence that when those up terminals.
Opened up for us last year that we could jump on it we knew that we could execute it we have playbook that had worked in the first for terminals and Weve replicated. So I don't know that there was necessarily David a single point at which we said Hey. This is the kind of key measurement. It's just been the overall successful execution, there and we've been able to.
Take advantage of the opportunity. So you know it say I, it's still a growth market for us. So there's still opportunity for those terminals to operate like our historic terminals and a that that's what we're excited about.
Thank you.
Thank you. Our next question will be some Ravi Shanker from Morgan Stanley.
Hi, Thanks morning, gentlemen.
So what are the most positive trends in recent weeks has been the growth of E. Commerce can you share kind of what you're seeing in terms of benefits or in your network or do your customers are from that trend, maybe even in the coming quarters even.
Yeah, I mean, you know on a real short term basis, you know we haven't seen a you know a big change and if you're thinking about E commerce to the consumer not a big change in our residential deliveries.
You know I mentioned, you know the field customer weight being up so you know maybe maybe some of that as you know into.
Maybe customers we have that are providing goods into you know de scenes that are eventually going ecommerce, but but I don't have any more granularity on it than that on a very short term basis.
Okay got it I, just maybe a bigger picture question I mean, given the depth of the recession. That's expected into Q do you expect any kind of structural shifts and the a in the makeup of the LTL space out there, whether it's more consolidation rhetoric.
Small share moving towards larger carriers are there, it's more movement away from brokers towards asset based carriers and any kind of permanent or can if loan growth shifts in consumer behavior industry structures are out of this.
Yeah, I mean, it's yet to be seen.
Crosses business cycle, you would assume that you know and the trough for the cycle you'd assume some capacity comes out and that happened you know a great extent you know after the great recession and no nine we did see a lot of capacity come out of the industry. So you know if this is a you know a short term or then you know the three trillion dollars a stimulus weve through.
Shown at the you know economic problems created by the Cobot pandemic.
You know if those things you know act quickly to turn the economy round and no not only the consumer but the general industrial sector. As well. Then then maybe you don't see capacity come out in that scenario, but but longer term over a cycle. I mean, you know that that's what happens to the operators that you know.
Not operating generating cash reinvesting in their business. It's a business that requires a lot of capital investment year on year out and if you get you know if you get caught a in part of the cycle, where you know you're you're not able to make those investments you can lose share pretty quickly.
Yeah, I would add I think that's why we're yeah, it's a challenging environment for sure. We have to date have invested with this being able to whether a downturn now certainly no one could say that we predicted something that we're all dealing with right now but reality of it is is that we've invested substantially to bring our fleet age down we've invested subs.
Actually in our footprint so that we're in a position to benefit from this and where as we benefit from this disruption as the market undoubtedly the eventually will chain go back to more normal state. We're in a position that we can take advantage of that the balance sheet isn't position that we can do that the fleet is in that position, we can do that.
You know, it's a tough insurance market out there as well you know we've invested heavily in safety technology and that's part of reflection of our modern fleet. So we think that we have as much as we could leading up to this positioned ourselves that we have mitigated the risks a in the business to the extent we can but.
Be in a position that we can take advantage of the opportunities that may present be presented to us.
Understood I, just lastly, Ah fits one housekeeping item apologies if I missed this your insurance line has been a little bit.
Last few quarters again, not a huge number but but what enough to kind of impact largely a little bit can you just get liberal guidance and what we can expect from that line going forward.
Yeah, I mean, you're always going to see volatility around that line I mean, we self insured up to the first $2 million on an accident. So that in itself for a company our size will create volatility on it you know in any given quarter in terms of the overall market, though I mean as Fritz alluded to you know there's there's.
Extreme pressure on truckers and insurance markets. These days.
You know our premium costs. This year I'm, just you know what our and our access tower I mean, I walked into our renewal budgeting for more than 20% inflationary costs. There. So I'm you know that's that's an environment that you know is seem to harden each month as the as a month ago Bye.
And again, that's something you know across the cycle that.
It can also put pressure on a smaller carrier accompany that you know not in great financial position because.
If you don't decide to buy the limit she used to buy them. Then you run the risk of having an accident that you know.
Compromises your balance sheet in terms of settlement or a a jury verdict against the or something so you know being able to buy equipment with good safety technology being able to afford insurance in this very inflationary insurance market were in as you know those are those are things were able to do these days and it positions us pretty well, but you'll you'll see volatility in that.
Lying around the accidents, but our premium costs I mean, we just renewed ours March one was our and also we're through with it for for a year, but.
[laughter], there's occasionally volatility and online.
Obviously looking at an average about 10 million is that right like brookman benchmark.
You know I've always thought if you go back you know three or four quarters and take a running average assets that's probably as good as you can do.
Understood Thanks to help thanks.
Thanks Robbie.
Thank you My next question will be some Stephanie Benjamin with Suntrust.
Hi, good morning.
Good morning.
I just wanted to follow up on some of that credit kept the initiatives you called out quite a quite a few where are you benefited you in the first quarter.
You could maybe discuss some of the.
I, just <unk> productivity or just profitability improvement that you're seeing in northeast, specifically, obviously before being assigned the volume declines related to the virus that you could you.
Talk about how you're continuing to improve scale and it turns out to a more.
Possible level in line with the company average thank you.
Thanks, Stephanie as it.
I think the best way to view that as as we described on the a year end or the call. We just talked about how adding the terminals. We took what was the O. R had reached sort of below 100 in the northeast we added a new terminals and that was a drag simply around you know the incremental lease cost startup costs and all that.
Stuff. So we also said on that call that you know overtime, we will incrementally start improving our productivity in those markets simply as you start to utilize those terminals that I don't have a number I can give you specifically for what the improvement was in the first quarter, but its overall, it's part of our overall productivity initiatives. So you know to the.
Extent that we can better you know AD volume optimize run our city operation and dock operation in those markets, we're going to benefit from it just like we would if we were in Chicago says, we as we think about that we we really are focused and using the same tools and metrics in those markets now they have because their new and they.
Or the impact of the incremental revenue those terminals is greater they have a bit bigger impact, but I don't necessarily have a call out there, but all those tools get used in those markets as well.
Got it thank you and staying on the same lines of credit can be easily again called out.
Do you understand that rolled out in 2019, what can we think those as largely you know rolled out by now or is there another kind of level. Our next anything that's productivity or investments that we expect to see in 2020 that to drive savings, calling 2021, just maybe some color on the timing it that would be helpful. Thank you.
Yeah. So all those Ah technology initiatives were in some form of development at 19, and then when we get into a that we saw the benefits of them in in 2020, and those are sort of I'll call them. The one data show sort of improvements and those are ones, where you're getting the team comfortable with understanding how to use an optimized.
Those tools how to do use it on a daily basis, I think we'll continue to get better with those we have enhancements in our development product pipeline to add to those add features to all those.
[noise] tools that we've developed so I you know I think it's something that overtime will continue to improve into next year. Our utilization of that these things are really if you really take a step back about and look at it. This is all data analytics play I'm. So that's how do you make it better operational decision in real time, if I look at the dock.
Tool as an example, historically we might we would measure ER Doc associates, a productivity on a sort of daily basis, and maybe get back to them and provide feedback on other performance now the tool is real time. So a supervisor can see how a dockworkers how is progressing versus the engines.
Eared standard during the day.
As it is happening so if there's an issue the supervisor can jump in and make a change or facilitate helping getting the dockworker back on standard. So it's that sort of you learned how to use the tool how to optimize the tool and we'll continue to see benefits of that going forward. So we're excited about the technology, but I I don't.
I think we reached the pinnacle of what we might be able to get out of it.
Hi, and that's it for me. Thank you so much.
Thank you. Our next question will be from Jason sit down from Cowen.
Thank you are better or put some cool hey, good morning, Doug mentioned or in your comments about the idea right. It was implemented a good Blake just wanted to know sort of how that's been holding up here as the market has taken a downturn in late in the liberal and <unk> and probably likely going through.
Really.
And then I've a follow up question regarding too.
Yeah, I mean, historically, we keep you know approximately 80% as an estimate of RG. Our eyes right you always end up discounting it back a little bit to a customer.
That's probably still a pretty good number because it you know the customers are benefiting from the lower fuel sard surcharges in our table. So you know again. It was just it was just early February. So were you know just a couple of months into it here, but.
No I I don't think we've seen anymore, you know aggressive activity required there anything to keep keep the feel business of the customer has been opening.
Yeah, we haven't seen anymore.
No pressure from the custom honest really I mean, everybody theres customers that always want to rate reduction but.
Well I don't I don't I think the acceptance has been pretty in line.
Uh huh.
Liquid I can you also mentioned that your national accounts with.
<unk> percent and yours retail accounts were down 30, now knowing full well suite deals a smaller percentage of the business.
Sure Mindless is.
Just comes into play calls file in terms of the margins between milestones.
Oh, you know, we we tried for they're not to be I mean, we would try to price all the business, even the transactional business with the Threepl as you know you try to price small.
You know to operate profitably on the Threepl business, it's probably eight or 9% of our our shipment volume today and on a given day versus 10 or 11% year ago.
So you know I think you know what the volume loss there.
Part of it has been US you know kind of stick into our prices there and trying to drive the profitability that business no down I'm, a little bit more in line with with where we would like to be so.
No you know the profile it all depends on account by account basis, you know, we've got thousands of customers. So.
I wouldn't try to call. It out you know by customer type.
Uh huh.
Those are my two opposed to drop in the quarter guys because Uh huh.
Thanks, guys. Thanks, Jason.
Thank you My next question will be from Tyler Brown from Raymond James.
Hey, good morning, guys.
Hey, Todd.
Hey, freight so you mentioned weight per shipment length of haul in classes drivers of price, we see weight per shipment and length of haul, but did class move on you, particularly over the last few weeks basically I'm curious if beyond weight the complexity of the freight is changing.
I don't really have a call out there Tyler it looks pretty it changes by day, but overall I'd say, it's pretty consistent.
Okay. Okay. That's helpful. And then I know you guys are flexing hard but are you guys still generally maintaining your line haul schedules and what I mean by that is are you still cutting those outbound trailers, even if the load factors might the off a little bit basically as to not compromise service.
Yeah, it's always a balance so you're going to want to make sure that you have service sensitive do you take care of that but if you have the opportunity to.
Build some density we're certainly going to do that it's a matter of.
Making sure you communicate with the customer they understand what our position is or what we can put what service. We can provide so you know it's a continuing a optimization opportunity for us. So it's a little bit of both right. So it's a little bit of just so anyway.
Okay, well you gave claims how's the on time percentage tracking.
It. We're we're very pleased with the service we've been able to provide were at our standard or above.
Okay. Okay. That's helpful and then Doug just to be clear on the four one k. match and the lack of incentive comp a those shock absorbers kick in in April right. So they were not in Q1.
April 1st that's right it's right.
Okay, and then you mentioned that $10 million P.T. O drag that how much for that for one case suspension and again the incentive comp reductions being good guy either in Q2 or through the year.
So the the ER P.T. O will be spread out over the balance of the year right. So that that's earned as somebody goes goes through the or yeah.
For the year.
We haven't given a carve out specifically for four one k. or the other.
Okay, Okay, all right well that's helpful. Thanks, guys.
Thanks Todd.
Thank you I'm showing no further questions in the queue at this time.
Right well in closing I'd like to say that while the uncertainty and volatility surrounding the pandemic brings significant daily challenged the challenges for us I'm extremely optimistic about our long term opportunity we remain focused on maintaining the companys financial position along with the flexibility to adapt to challenges as a country.
Through this pandemic crisis by expanding our geographic footprint over the last few years and by investors needing capacity at our existing that Bert we believe we're well positioned to gain share or what will continue in our view to be a consolidating industry. Thank you all for your participation on today's call.
Thank you.
Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.