Q1 2020 Earnings Call

[music].

Thanks.

Excuse me everyone. We now have all of our speakers in conference. Please be aware that each of your line is in listen only mode. At the conclusion of today's presentation. We will open the floor for question at that time instructions will be given actually the prestigious all that if he would like you'd asked that question.

Question I would now like to turn todays conference favorite you Richard crabs, Sir you may begin.

Hi, Thanks.

[music].

Good morning, everybody welcome to our first quarter conference call joining me on the call. This morning, our David Parker Joey Paul I'm here is John Sweet.

Okay.

This conference call contain forward looking statements.

I was curious litigation.

No.

Forward looking statements are subject to risk.

It could cause actual results could differ materially no problem.

Thanks.

Please review our scores are falling to the I'd say, including without limitation risk factor section our most recent.

And our share current your form 8-K.

I didn't say no obligation to update.

These statements reflect that.

[music].

As a reminder, copy of our prepared comments.

Additional information is available on our website.

The transport Dot com.

[laughter].

Appeared comments right now we will open up the golf.

In summary.

The key highlights.

Sure.

Our Holly services truckload segments revenue [laughter] fuel increased 1%.

$7 million due primarily to at 5.8% or 80 tractors average operating fleet production.

Partially offset by 1% increase average freight revenue for tractor and that's what he claims period as compared to 28 years.

Versus year ago average fragrance for total allow was down 7.3 cents.

Yeah, well average miles per tractor was up 9.1%.

The main factors impacting increased utilization were 710 basis point, increasing the percentage of our Holly service asleep changers tractors and embrace average seated tractor.

It's only frequently I wish there always are attractively backdrop hours compared with 7.7% during the prior or.

Our day to jointly segments revenue.

<unk> decreased to about a half first $69.9 million due primarily to a 3.1%.

Three trackers average operating fleet reduction.

Partially offset by 6% increase in average freight revenue for tractor and its fibria comparisons were acting.

Versus year ago average freight revenue per total mile Dallas.

Yes, a 1.6%.

Average miles per tractor was up 2.2%.

[laughter] truckload segment operating costs, while not a surcharge revenue increased 24 cents compared to a year ago period.

This was attributable to higher non driver wages group health workers comp casualty insurance claims costs.

Basically offset by lower maintenance repair unloading recruiting nephew anti.

Our man Sprague's segment operating revenues decreased 4% first a year ago quarter to $42.7 million.

This decrease was driven by 10.4% decrease in freight brokerage operation.

$21.8 million, partially offset by 7% increasing the combined operating revenues Rtms and warehouse.

Then spring operating income was $1.6 million for an operating ratios 96.2%.

[laughter] fee revenue increased 48.2% versus year ago quarter $2.7 billion.

Patrick segment operating income was $2.2 million compared with $1.5 billion in the prior.

The increase in net revenue and operating down as a result, with new customers well grows pharmacies.

We recognize day.

700000 pre tax loss from our 49% equity investment until.

Compared with pretax income of 3 billion in the first quarter, playing I see.

Ongoing weakness is a truck sales leasing harvest has contributed to these results.

Yeah, I would change our tractor fleet continues to be young at 1.8 years.

Core down 2.3 years in Europe.

During the first order, we took delivery of about 250, new tractors and 65, new trailers well those it out approximately 375, new structures that are not used trailers.

We reduced our operational fleet size about 74 tractors or worse.

2947 drivers by the end of March reported operational Lisa.

21 tractors.

So.

He has a 2020 the size of our operational tractor fleet is expected to be down 12% to 14% compared again to 29.

Allowing us to maximize the utilization of our operational we including calling out lower performing right, where some shippers are not willing to sufficiently compensate us during the immediate term corporate demand returns truckload oversupply is correct.

Between December 31st Clean 19 at March 31st lien flooding total net indebtedness net of cash increased by $32.2 million to $336.8 million.

The sequential increase data, including included cash payments during the first quarter slide 20, totaling 17, and a half million dollars for the repurchase of under 1.4 million shares of our cost all prior to the suspension or stock repurchase.

Like March.

And then 24.2 million dollar increase net funds employees are factoring business.

106.6 million at March 31st 20 <unk>.

Total indebtedness notice cash decreased $16.9 million for the but it's a 319.9 billion.

April Thirtyth.

At March 31st 2020, we had cash and cash equivalents totaling $39.7 million as well as available borrowing capacity $35.6 million under our asset base revolving credit so.

For a total of $75.3 million declared.

So financial Covenant under our ATM facility has a fixed charge coverage ratio does that only when available borrowing capacity is below a certain threshold.

Billability as at March 31st 2020, No testing was acquired what do you not to.

To be required in the foreseeable future.

The clarity increased $9.7 million.

$85 million at April.

Like positives in the first quarter were what our realignment of our executive structure and organizing our talent most effectively design execute our strategic initiatives.

To completion and initiation of certain elements of our plans to reduce our total capital employed reducing leverage and prioritizing our margins less volatile for service offerings.

Three cost control plane and ongoing execution supervise [laughter] cost saving as we move through the fiscal year.

For the slip it affected response to cope with 19 our team.

But year over year average freight revenue per tractor increases that each of the Holic services and dedicated trust looks like.

Six combine truckload segment operating cost as fuel surcharges increased just a point fortunate profile compared to first quarter of playing like team, even whether that's definitely adverse insurance and claims that were partially offset by $1.7 billion gain on sale of our lame duck [noise].

And the seven growth and increased profitability from our factory.

My negative in the quarter.

Well, one revenue and related possibility law.

While two of our large dedicated although customer shut down operations in mid March related to television 19 cautionary measures are just now lower stuff you know production this week.

The past route to pass through lots from our investment Phil and three net indebtedness, increasing $32.2 billion just like 19.

At March 31st we made the decision to repurchase doesn't even have $9 of our common stock and to grow up after saying.

We are encouraged by the initial positive results of our strategic plan execution and structural events.

As an improved business and our cost control efforts offset the impact of a challenging volume and pricing environment April.

However, we expect volatility from up over the remainder of the year due to external factors as well as gains and losses associated with our internal initiatives and changes in our revenue and cost structure.

Accordingly, our outlook for 2020 is no longer as.

We do not expect provide earnings are similar expectations for the foreseeable future.

In the near term, we are well that well prepare and yeah.

To support our partner customers as their productivity the economy and those levels return level.

Over the long term, we believe the influential structural improvements and strategic initiatives. We are executing will strengthen our position you have to just industry de risk our leverage profile and concentrate or less cyclical business bought a lot more sustainable our margins sectors, where we can add considerably greater value to our partner customers temper.

All of our stakeholders.

Thank you for your time, we will now open up the call first question.

Thank you at this time, we will open up for questions. If you like to ask your question. Please press the star key Oh by the one key on your touched on phones now [noise].

Questions will be taken in the order in which they receive isn't any time you would like to remain yourself from the question can you just press star team again to ask your question. Please press star one at this time.

Our first question will come from Jason Seidl with Alan.

Hey, Thanks that was count.

Hey, good morning, guys I'm, so wanted to one of the focus a little bit.

On your automotive business, because you tend to take a little more exposure.

Most people do on number one what percentage of your automotive business is in your dedicated side and you know what are you seeing and hearing from some of them in terms of we all know the ramping up but how are they going to come back like what percentage of <unk>.

Business should we expect in in the month of May ended the month of June compared to what you had before.

Hi, This is David.

David.

Give me an idea it if it isn't our contract logistics side a bit dedicated.

Yeah, we've had some of that business for 25 years, it's not the contracts about Oh, that's what I like where do Oh, no existing dedicated business, but again, we've had a 25 years, we truly just very good for that.

Oh, there's no doubt that it's been yeah.

Again, we all got hit hard Oh, we had about 300 trucks. They look at over 300 trucks.

So kind of a 10%, 12% kind of number of total.

[laughter] It went down to zero and so while we are hearing so far is that they basically started back this week a one beside the star back until next week.

But G.M. started back this week and your projections are basically 25% at all.

Each and every week.

Thanks, Bob Yes.

Thank you bye.

The mill was June to be at 100% level. So it's kinda. This weeks when it's obviously Oh, it's you know what is a with BMW young headaches.

Hi, we expect it to get up to about 75, or so you have over the next but as you know there. There was also there is probably is going to hang there I don't know, but it's going to guess is going to take them about longer to get to 75 first I'll get to the 100% level Oh, So anyway go urea.

Dave I was expecting it does drop pretty major one.

They thought was expected to star back next we Oh, but very little bit more cloud or your expectations. Now now that 280 to 300 trucks that are rather that we didnt. We did replace some of the freight on those trucks.

Through some broker freight and some other customer right and then some of the [laughter] some of the phrase it picked up or with what causes the codes of groceries.

We are good and all that kind of stuff. So it wasn't zero revenue off those trucks during the middle of March when the plant shutdown, but it was flat scramble at the end of March because the timing of the plant closures were a little quicker than we've been told they're looking at least out two weeks out when I always said.

One thing no because my clothes that and so that's a brand with a last few weeks in March and April.

Do you sell those drugs and got furloughed et cetera.

Right now that makes sense, but the way I guess.

The way, maybe I'm asking how we should look at it is as that comes back that's going to help obviously your profitability can you guys are let's say breakeven in April even they replaced some of that business I'm, assuming some of that might not the best rates in the world in the spot market plus there was a scramble I'm sure that costs you guys, it a little bit too and getting trucks out in service.

So as they come back that should help the profitability numbers that you guys saw in terms of being breakeven at april's moved to the outlook for let's say.

That's fair <unk>.

Yes.

Okay perfect. The next question one of the focus a little bit on on your cost that you have but you guys outlined a little bit maybe you could start going over so how many of these costs should we consider you know permanently out of your cost structure going forward and how many are more just variable reacting to the marketplace.

Yes, Joe we are seeing.

Got it we've got very hefty targets.

The leadership teams working towards as we adjusted fleet size.

Yes.

So.

We are.

Bob Hope that trucks that were.

We're targeting were about a little more than halfway towards the goal.

And so what I will say is is measuring our.

Oh productivity impact week to week related to the bar situation pre and post bar store to.

I think we've done pretty good job of a bridging most of that variable profit. This was.

<unk> cost savings that we've been able to put on the books, so, but we're not done and so I think regardless of how.

Fast things ramp up slower or faster things ramp up we're going to keep pedal down.

Now, let's call it streamlining the organization and so.

We need a little bit more time, who were comfortable really share details of that but we've got its targets that.

As it relates to your main question, how much permanent versus a short term.

That said, we've been able to get thus far.

I would say X. I don't have a really good number.

There's a couple of things for example.

We suspended or form 10-K match for employees its they all know it that's pretty meaningful number.

On a year to year basis.

As media well, our girls turned out that Oh, yeah. When we feel good about that because I think big marketplace is important. So that's what's on that for example is temporary it's not permanent long term.

Most of the things that are on books that we're working on our permanent in nature. For example, Oh, we started this process coming out a year of rationalizing our our fixed infrastructure.

It's public that we sold our Orlando terminal. It's also told that there's been a large sale.

Oh.

So mark so people can go look I'll try to sell our Dallas facility, we hope to close that.

Very very soon so in addition, a those two we made decision as its also probably to a closed protection at a facility. So that's in process. We're in the process of Oh transitioning some of those physicians, eliminating some of those positions and so that.

That's a and that was that's a large operation there so those three in essence or hurt their significant.

Yes, that's true.

So.

That's an example of some permanent savings that are there'd be a so we do a good job keeping the revenue they want to keep.

Even the freight something that's sold trucks for all intents operation, we don't want to keep frankly, it's just not profitable.

Steve jobs, you phrased that lucky.

So.

So there's there's a lot there you know the restructuring always just to close to 200 or non drowsy positions that are involved in either voluntary or involuntary or shut down our layoffs. If you will have extra pass to talk to that permit nature.

So that's big.

Also so.

Those are some examples are the fixed cost items.

Executives took salary reductions so that's.

Temporary [laughter] since all of your look on temporary and.

Oh, yes, I have just gradually build one we had quite a bit of equipment that was carried over from 2000 I see.

Tractors and trailers.

So is that works its way obviously, that's not say that's that's that's permanent reductions in capital costs.

[music].

It was run kind of get started this year, but that's definitely helps quite a bit sorry.

Looking into months of April and what should happen to them. They will start to really see that structural income statement. So between the head count reductions or terminal rationalization and then the equipment plant it's a significant.

All told us.

And there are several more as.

Well I know the equipment or a lot of that trade backs and proceeds from that came in a massive April at early may we had gotten it seems that way well about ended March 31st, but there was a lot of that they're really got out of system [noise].

Okay. So when I think about Youre going forward, we're going to see a lot of the impacts obviously in salaries and wages.

Some of the reductions.

Im assuming as well it's going to.

Going to operate operations and maintenance is probably going to go lower too and maybe just general supplies.

Operating taxes licenses that line you got a lot property tax utilities associated with facilities.

Actually able to sell obviously appreciation.

With the equipment side interest expenses related to equipment as well as though as we closed the sale of these facilities. So it should be able to see it probably four big areas salaries wages operating tax license depreciation.

Little bit communications that line.

As a rollout.

With that explains that actually relative to the equipment.

Interest expense, and then where did a lot of work on safety as well, there's a a new initiatives related to that and does appear that the first quarter was in excess of number.

So that that should be back down to whatever normal is oh, we did though that we.

Our adding about 500000 dollar one quarter four additional premium expense and to take on more exposure in this part insurance market.

Yep.

Makes sense, how should we think about DNA for the full year.

Yeah, I mean, there's a in the second quarter is gonna be difficult to peg with various things going on I'm changing now equipment and those type thing, but I'd say after the second quarter, you got to see that number they continue to decrease a bit.

So what a normalized basis.

You know going forward I think that that's going to be.

Definitely below that wasn't first quarter by the time, we get done.

Okay that makes sense.

For you guys.

First quarter did include the gain on sale of Orlando was $1.7 million.

But.

Taking that out and then back that out.

Perhaps second quarter with all properties do it was talking about I think it significantly below that number going forward.

Okay. Let me ask a final question I'll turn over somebody else. You mentioned, you obviously had to move some some of the trucks to the brokerage side of the business what percent Oh the of the trucks one to what's the brokers this quarter versus the prior year.

Well, well, it's definitely going to our brokerage, but to the spot market the increase from from well, we generally do I call it 3% to 3%.

It was probably close to eight numbers that are getting into March and April kind of triple Yeah can you see that when do you see that down.

[laughter] Oh, sorry.

So as we speak it started coming down okay, good contract rates coming back.

I'm not afraid of belt that et cetera et cetera.

That's good news, what well listen gentleman I appreciate the time as always and ER and just tell everyone out there in the in the Covenant World that we we appreciate the men and women out there the front lines are delivering the freight every day.

Take care.

Thank you.

Thank you I when its question will come from Jack Atkins Stephens.

Hi.

Hey, good morning.

Good morning, guys, Oh, and just I'm, just trying to say that John Joey Paul and Richard Congratulations everybody on the new roles.

You know it certainly it certainly sounds pretty encouraging to hear you guys talked about breakeven in April and and I.

I guess as we sort of think forward over the course of the next several months and into the back half of the year I know, you're not giving guidance but.

You know the opportunity is really here with the costs, you're taking out to really drive the company back to seem sustainable levels of profitability and and I. Just I think this is very encouraging to hear.

Yeah, we are encouraged.

No no processing bid over.

Two and a half years and.

Some of it was with a pandemic yeah yeah.

I don't want to use the word, forcing the you know we we've been dealing with the Texarkana for quite a few years then we would as we all know this call. We would have we did have a good year that we'd have a bad year easier to bad year, we had it where it went away the depression in March.

It was time it was time to say, it's over and so.

So well that's good.

Yeah, there's going to take it to places that we have never be Oh that we've been though we've got others you already for about half years, Oh from their contract logistics, Todd is a business or the exit out of stock, but that's where that's where we're getting too.

More quickly.

Well, that's great that's great to I guess, let me switch gears here from all made it maybe you know David I'd Love to get your your thoughts on what's happening in the market. It you know you referenced.

Demand trend stabilizing it made it feels like underlying volumes of kind of picked up after bottoming in early excuse me mid April.

You know what are you sort of seeing expecting you know in the market was we sort of move move forward here over the next couple of months now would you anticipate.

Some attrition in the market maybe to help balance out supply demand and you know what do you know what are you seeing on the contract great renewals side right now I, just given that the difference between spot and contract right now.

Yeah, Oh, you asked about four or five questions. There so that all answered there [laughter].

Oh, sorry, I'll add every truck or you talk to.

No. There's about 47 be are dropping believe it or not I know I don't look at all [laughter], but 47 years in trucking and April was the worst operation operating environment, right, but well everybody, saying that's true because it was way up just a horrible horrible.

Arm it.

Oh, the last March and all of April I, Oh, but this this spot in the bus to make though for.

You started you sensed it did it starting to be old huh.

From a standpoint that it's fine.

Quite as Robin that I've worked hard and I know I know I've got an account over here is gonna be $2 billion, a new business I know that we've had every conference call Maria we don't we're getting ready to give eat up that's 100.

Yeah, that's going to be $2 billion, if there and we talk about contract. We've got everything would have operational meeting.

[laughter] and you're waiting on them.

And they were starting tomorrow, and that's really where there is that we now.

Most of our birds or at least a habit discussing them Tal and that they are gone from I have no idea what happens when we're going to be back then that's too they're starting to collect the client weapons to General Motors example, that I gave you that error or on your retail company.

That yeah, because it is that you weren't targets.

Well a ballpark.

They were about retail people that were working the rest of the retail would we gotta look forward in this room restaurant retail yeah, well wait for a long.

Oh, that's saying that they are starting to what they have contacted us and they're starting to come about pay but yeah. We think.

First we can parse the last week I have a first we can do better.

Here, that's happening across the board and so I definitely there that are assessing it started to be all the and I agree that we know that capacity has left the market place.

And we'll continue to lead the marketplace.

And.

We know class eight truck or.

Oh, so whether whether it's in June or whether it's in October our December we're getting ready the industry's getting ready to having a very good time and I think is gonna be up.

2018 reflection or whatever that happened and I think there's going to last for a year or two or for a long period of time. This it turns is going to get worse before it gets better I just didn't pandemic and as they all are some crazy numbers then I've gone.

We reduced hours on April one.

And so there's a lot of what's happening there that we are starting to see US again, those conversations with customers and we're starting to get into they are brokerages day, all the broker span the spot market that we go I heard you heard me say earlier is that it doesnt from doing a half.

Treble basically we just stay there for a while longer I am probably for the Bucks a barrel and now that number is that now.

[noise] former stand got a number do you get ideas, we've cut that in how you'll be pack in half again hopefully in the next in the next month and southern spot market will continue to get better or Oh, and so as I look at the region's out there today.

Oh, no west coast, it's been very.

Mary Todd I mean, you're saying the most county.

So why the or flat the votes are coming out of the planes flying.

So, California has been yet and that's just happens in the last two weeks I would.

Good idea, it's been very strong progress things out of California is very small oh, so bad that perfect Scottie and then notwithstanding the southeast predominately because we are in the produce season out out of Florida today that will laugh about it never thought, but we've seen a tapping into south.

California are the two major regions of the country and then we're bringing on some new business in all parts of the country not again.

All right there yet, but we're seeing that we're seeing some bruce that are starting to pop out on the tree Jack.

Well, David that's that's great that's really great to hear.

Really appreciate that answer last question for me I'll turn it over but.

The stock is trading at no 0.6, 0.7 times tangible book value you know your peers are at one and a half or more most are between two and three you know that would imply that there's some need to impair assets or or something something you know needs that needs to happen there from my after the quarter perspective.

You know, but Richard from what you're saying it doesn't sound like that's the case, but I just want to know what you know what is the stocks even better from a.

From a book value perspective, you know just any sort of color there because it yeah. There's just this big discrepancy there versus where you historically have traded.

So I kind of going back to where we were at 12 31 to 331 tangible book value went from 15 himself and his team.

Per basic share.

Okay.

4 million shares a took out when we bought the back and.

In the second quarter.

We've gotta look at some things I'll say it that way you know when all with excess equipment with us downsizing roughly a weather used truck market is we just got to evaluate that I'd see us there is any.

Equipment impairment in the probably is a bit you know.

Whatever that is you know.

Any make whatever to it but no or some other things that will offset that more than likely.

We've got a real estate six expert panel for example.

We're getting offers on that that probably are quite to book value and so there you know the off more probable impairment there as it moves purcell, but we're going to have gains on on the other product. So there's puts and takes and all of that where hourly.

I don't think tangible book value is going to decrease much if at all about into the second quarter, but there's there's so many moving parts I wouldn't.

Guarantee one way or the other.

Like.

Yeah I was just.

Doesn't sound like there just doesn't sound like there is any big change coming and going forward. If your breakeven in April.

That's that's all very constructive.

Yeah, we feel good about our future as good as we had a long time.

So if that's true.

Shouldn't be any any losses that when paired with that.

Okay. Okay, well, that's just that's what I wanted to just just get too because I think it's it's really.

I I just wanted to just wanted to follow up on that okay. Thanks, very much much on guys.

Thank you Sasha.

Thank you. Our next question will come from David Ross with Stifel.

Good day.

Good morning, gentlemen.

I am I I had a long introduction or through the machine voice.

[laughter] I'm with you guys now it said I have ascended to the podium whenever that mean.

Yes.

Hey, John Tweed I got a question for you welcome to the call.

You in your new role.

What do you see is opportunities in your initial look in it and being a covenant for all or part of the covenant team.

What are your initial thoughts on what needs to change what's yeah, it easy low hanging fruit to improve.

Hey, Hey, Joe and I would have to after that's the reason polar bear call John.

Oh location he wasn't able to go through the but my product. They asked us. So we got one cell phone they can't even here.

Oh no question.

So I thought your math or something.

[laughter] or on the night, they all went up but I know there okay.

I thought the John very excited about why do you see bear that out on the contract logistics Dod business I would narrow now so a couple of things you know, we brought with that but not Bobby closed the acquisition of land. There two years ago. We just know that Oh, that's causing that got yeah, we've been growing that dedicated Scott.

He did not take your remember about.

We have our growth that is in that sounds a bit then we acquired a the lack of their business. They gave it more dedicated and they gave us more.

More warehousing Tms opportunity.

We continue to grow in the area.

Very nicely is that if we want to the.

The next two years, we'll continue to grow without area Y band walking go for the last one year had been paid me.

The contract dedicated mid contract you heard me earlier call about even though we've had some of the automotive for 25 years. The contracts are not a solid its walk me would like even though the relationship made good that proven that they won't take it does nothing but.

And he's been working on some of those contracts. So next door their contract would definitely be warrants that are pure true Danny Kaye and so how does that say not under twox that you know that he.

Well the gamut under his new role, there's probably about 300 or though yeah. We've already dealt with about 320 or 30, or though there's probably about 300 or those that have more loose and why it should be M&A, there and then they add CMO.

Right so but.

Say it can you help me Hey, Tim Trost data later BSD, we've had too many say 100 out of all that were more hey, not contract allows me to get out.

It's not.

That's why anybody would want to be and there are two of any.

John it's been working on that and even if it made from my standpoint Uh Huh.

No there almost there today and that it had low that needs to go so that when we come out of it may not the industry and we are not company operating in Iraq, Oracle as Bobby Congrats Jeff.

[laughter] dedicated warehousing T M S and X.

Hey, I go back it's exactly what he is narrow band, though on making sure that.

And I would say that you still had I'm a little bit to go but he's back right and what do you agree that Joe it yeah.

So I think it for you, but I apologize.

Okay, and just to make sure I heard correctly, when you're talking to the fleet size or the expectation. It's again, it's gonna be down at year end, 12% to 14% versus 12 31 19, so that means somewhere in the 2600 26 50 range is that accurate on the tractor count.

Yes, that's correct.

And knows it's trucks that are being taken out is that coming out of.

Over the road team.

Dedicated from contracts it don't pay how do you how do you think about where are those trucks are leaving.

Yes, it's a little are they.

Mainly so on the MTR side, what we call always service its Oh, no change actually we're trying to grow or change right.

[noise].

And then some of those businesses as David mentioned on dedicated side or it's not quite well with either contractually or especially given the strong.

Right right. It shows I think that it's in both.

Thanks, Hi, wage some sort out around 11, hundredish trucks dedicated around it stay hundredish.

Trups, including owner operators and.

So the 26 I heard that you know, we're probably going to get their Austin here your and Ah. So we're aggressively trying to adjust that now and so were our COO planets Bush.

And.

You know fuels been.

I guess somewhat kind as an operating costs. Although you guys have fuel surcharges move up and down when you say fuel is been net good or net bad for margins over the past few months.

[laughter], Matt good through March and April I think it catches back up to itself starting now.

I mean that even though the cost of fuel is lower our surcharges are also look and.

That works out to be not necessarily beneficial as the cost if fuel goes down it's kind of sometimes it can help so we're in that place right now where I think it might turn a little bit, but it's still going to remain a good number for us for a lot.

Yeah, there's been so much understood that.

No yeah, the brokers right now.

ER.

There's a lot of.

Pluses and minuses or that they had the broker freight that we had a higher percentage you know away through April and sought after going down.

That revenue all shows up as freight revenue rather than fuel surcharge revenue basically it's included in the break revenue number hurtful allow basis and so is that move back to contract freight and it's good to see the fuel surcharge right improve a little bit but that would just come out of the calibrate ready to move it.

And then last question just on T.E. ill do you expect that to stay a headwind all year in terms of.

Losing money or do you expect them to get break even at some point.

Yeah.

Third quarter for sure.

And fourth quarter.

We should be much better versus year ago.

But.

They just because large client we disclose back at year end. We're just works there's some excess inventory as we speak so start yeah. That's movie, but it's just move it slow the base business is still very good or you know, it's a complete leasing business.

Right after bad debts that very very small or at least purchase business is doing well.

You know the equipment purchase the sell side, that's that's more opportunistic and that could go up and down the market. So we're not trying to overreact.

The company's you could shape and we're trying to put.

Well into were both up and try to try to really see business is still really good.

It's slowed it is still okay. That's just letting the excess truck, which we're we're just trying to be smart.

Sales job I imagine that isn't isn't this big boat actors got just called makes us toward yeah.

Hi, I'm confident we won't be all the way out of the funds fourth quarter, but Q2 question. The comparison a year ago should start looking much better.

Excellent. Thank you very much guys.

Yeah.

Thank you again, if he would like to ask a question you can do so by pressing star one at this time I.

Our next question will come from knee experiment with the horrible Arbor group.

Hey.

Hi, everybody good morning, it I I'm, a little confused about the timeline for rationalization I've heard some different I think different data points you. David I think you mentioned were roughly your roughly what we are since out in the stock we're roughly two and a half years into this rationalization process and your venue.

Said later I believe or someone did that were.

Roughly halfway through the process.

Am I missing something or are we not closer to sort of reaching a point, where you feel you pretty much completed as you describe it the restructuring of the business.

Yeah, I I do believe that you're right how do I went to the board three years ago with a play Oh, we have about whether they would excedrin with a play yeah. As we all know will be expedited side for 34 years, we've been here. They actually that's out of good right. It's a great piece of it and we love.

Is the heritage as a company [noise] add the thing is going to make a lot Buddy.

We also operations about a 10.0 and we know that it's a 85 to 95.

Okay.

You know dependent how does that pay seeger or did they have a quarter or or is this going outside as we go. They didn't just passing a lot of volatility is that at Ah, but when you look over the period.

Happy the ex without as Todd.

Made this company a lot of money and you see even though you stated the balance sheet. So what does that they oh, we have for quite a few years.

Let's see so reversed the business as it would be Oh, My Gosh, Oh right. You know 800000 trusted kept pretty consistent around 800 Trust operating there and we all know that we've worked very diligently save the last five years own based thing back.

As we would have a good year, we'd have a bad year and we'd have a good here in a bad here, but we just couldn't get the momentum water needs that they asked for that I was very good very consistent and operating you end up it's a bucket I just stay up there Oh and go away to the board three years ago. Its day, Oh, we are going.

They see us as we want to be a expedited god eventually instead of being 75% of our business. We wanted to be 25 women 25 occurring at a lower number they have a 75% no. We don't want it's obviously don't bring a bright guy he our company it absolutely does.

There's a lot of thousand world.

E Commerce, well airfreight all that stuff.

And so we probably down that road three years ago. This internally and then we purchased land there in July 2018, So two years ago at via a one year ago, we stay at a contract.

That's a purchase the last day or reduce the exposure tremendously from my personal standpoint, that's about 25 or getting there any kind of got it doesn't that 60 40 range with that acquisition.

And they had our goal was to continue to work on the dedicated it's got a year ago. We gave dogs, we [laughter] the dedicated Oh My God remember as a that's our T., we don't call that today, just kind of it but the company I thought he gave them all the dedicated which is about 900 trucks is mark.

Last year.

Yeah, Hi that wasn't good or bad the ugly the one that has a good contracts and one that didn't have a good contracts as you heard about things on that today that maybe do a busy 300 dropped out of 900.

I forgot acceptable and we've been we've been working on that we're about halfway through that group of trust and then with a pandemic. He has worked its way as we made the final decision to stay as we're moving all the OTDR refrigerated solo side and as Johnny data Texarkana et cetera that they oh.

You know you hurt Joey and Richard talking about Okay. These trucks are here there are coming down play goes very tied to the 2600, we're bringing the trustee of the used truck market. Good battery different maybe an impairment charge on that equipment, because this coming year care, yet and we'll deal with whatever we got a deal we oh.

And they have so we got two things happening you I get it has a 2600 with where we're close to their that were probably 27 50, how should we be getting down to 2600 spreads correcting the rest of the dedicated Oh, yes, and we believe that it ended up being 2600.

What we're selling different question because I was hopping just attack as you heard about there's also 700 Ray first there's also trailers associated with that that we will be looking at Sally during the course of this year. So the question. He had impairment no tomorrow, it's going to be when we know.

The value is correct, how we can move it so does it does it slipped that all the second is a slip into the third slip into the fourth but I really believe that was that we all can shake your head on this phone call and say you know from a trophy standpoint, the pandemic is basically overweigh.

We will have our company right.

In the borrow and yet whether we should be running to get us to start own.

Prosperity [noise].

Oh, sorry Mariana.

Yet to be very simplistic it sounds to me like your long haul big traditional long haul over the road is going say 40 to 35, the riechers going tend to five.

And perhaps dedicated as rationalize that leaves dedicated to roughly 60. So 1500 dedicated 11. This is simplistic Matt what 1100 long haul once rationalize by year end is that sort of got.

Okay, you're exactly right in and and what do you think.

Just what's your hunch, what your major verticals will look like going into the you know sort of the rationalize model just roughly <unk>.

Oh article from 15 to five I you know just what's your hunch.

What was your last thing I'm sorry.

Good things about what did you say oh.

Oh I'm old.

Yes.

Nothing yet is that automotive will probably stay exactly words that again, we've had someone for 25 years, we're not ready yet to grow.

Because we know they could change as it had we all saw it here that's posted though most of the dedicated.

Contracted Weve got Nick our dedicated contracts that we are truly there and how quickly and easily third bid business goes down we may lose.

Yeah parabolic stay at that is there, but 75% or the other they expected cover and.

So it's not baked goods phone.

You got to run 2500 miles away to get the evidence based upon how many miles back from Ron.

So there is apparel side of that that you can get paid on like any other dedicated paces event that but more important that I look at all yet is that no those contracts that we've got gathering flying that are probably about 1200, that's 15 hybrid.

We're talking about there well, yeah, well, let's just say two or 300 <unk> that are not the red cell or is that we might let the customer that's another pandemic and the customer came to us dining hurting waiting wed just because it's the correct thing to do with business say, let's take out 10 or 15.

Right out of your 100, but we're not obligated to do that you would do it because you're in a pandemic and you need to show you know business I was a customer but a contract is often they have that you do it.

That's where we will be at when this is all said and done as an act, whether it's 123 quarters.

Okay, but basically by year end is your expectation I think isn't that sounds.

Yes, Okay, and then I've one other question and that is are there other terminal right you call it rationalization, but other potential terminals that your clothes and if so.

I have to tell me, which they are but do you own them and it was or expected capital beyond Texarkana, you might be generated two additional sales of terminals.

Meaningful I don't mean, a couple hundred thousand but that's it there's a meaningful cash generation opportunity.

Yes, they take on the terminal side, we're about to dawn.

Once you close.

Scheduled to close within this Friday or the significant not take <unk>, Yeah, Oh, you know I could take us while the two to sell picture Yeah. We've got we've got some surprising interest pretty quickly so let's see how it works out but no other terminals, which is really are the ones that we think about our allentown.

Well, no, which it sounds like maybe.

Maybe doesn't that Greenville, Tennessee.

You may see us <unk>.

Ooh, some places to bought a and and.

In one of those locations in Greenville. For example, we don't own that story. So we may end up buying that story.

Moving it from Elisa purchasing that typically it looks like capital employed but that you know that would be to take advantage of like kind exchange treatment or sell say yeah.

No other than facilities, you've got to services that are you know we're.

We're looking at everything to continue to drop size balance sheet in capital.

And then we've got plenty of other levers that we did well with.

It was I don't think we'll have to do anything but.

Oh liquidity.

But the cash back end cars so.

Were pretty good shape there.

Do I remember correctly, the Texarkana came with the Refurbishments of SRT is that right.

That's correct.

Okay I actually had one quick one other question that is David you made some comments about spot pricing and I'm sure. It's quite volatile to bounce off a bottom, but is there anything unique and either a vertical meaning.

The type of business here, you're bidding on or you're actually contracting to move.

Either by vertical or by region or anything that gives you some sense that really April or the end of March April may have really represented the Nader and this particular cycle not knowing you know we could have.

See a 19, you know crisis again, I I realize it's unpredictable, but if that doesn't occur what's your what's your what's your read of sort of the spot market.

Oh, I think I think of the stock market has it's starting to climb back Oh classic.

Take that Yep, Yep believable loans loans that I've not seen in 20 years from walk carrier hauling freight forwarding loading that 8% or so that we hope I think those rights in 20 years and we are now seems that I know that we are we're also seeing it.

Our brokerage company that helped the margin started they are starting to get great ethnic carriers have raised up or that they oh, we all bought hallway or net 20 euro rate and those rights are starting to plan and we will contain they don't quiet.

As I spoke about some of the accounts that are saying I'm worried in the next month uncovered though you'll start you will continue to see the spot market increased to about sustainable right that you have your cost on the spot right.

Bar.

Okay I appreciate it thank you gentlemen, very much.

That's it.

Thank you again, if you would like to ask a question you can press star one at this time.

I'm not showing any further questions in the queue at this time.

Hey, Matt.

Thank you all or a call and today, we appreciate your Ah interesting covenant.

We'll talk to you again next quarter.

Mike Thank you.

Hi.

Thank you, ladies and gentlemen, some clean today's teleconference. You may now disconnect.

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