Good day, welcome to the Saia Inc.-hosted first quarter 2020 earnings conference call. Today's conference is being recorded. At this time, I now would like to turn the conference over to Mr. Doug Col, Saia's Executive Vice President and Chief Financial Officer. Please go ahead, sir.
Thank you. Good morning, everyone. Welcome to Saia's first quarter 2020 conference call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Holzgrefe. Before we begin, you should know that during this call, we may 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 that are not historical facts, are subject to a number of risks and uncertainties, and actual results may differ materially. We refer you to our press release and our SEC filings for more information on the exact risk factors that could cause actual results to differ. Now, I'll turn the call over to Fritz for some opening comments.
Good morning, thank you for joining us to discuss Saia's results. I'd like to start today's call by giving a word of thanks to the Saia employees across the country who've worked tirelessly over the last couple of months to serve our customers and whose efforts have enabled Saia to do our part and deliver essential goods in this very difficult time. From the start, we have focused our efforts on keeping employees and customers safe. As the potential impact of COVID-19 became apparent, we adjusted our operations to adapt to the developing realities. In 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 an essential business while protecting drivers, dock workers, mechanics, and support staff as they safely served Saia customers.
Our sales and general office functions have largely been moved to remote office environments. While focusing on the company's long-term potential, we've had to make difficult decision to furlough approximately 16% of the workforce while also reducing hours across the company. Performance compensation plans have been suspended, and executive compensation plans reduced. At the same time, we recognize the significant impact that this pandemic has on our employees, and we provide additional paid time off benefits to support those who may need to care for a friend or family member.
Non-essential spending has been reduced or eliminated where possible. Business levels have changed dramatically since mid-March, and our commentary and outlook will be colored by the impact the COVID-19 pandemic has had on the economy and 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 in 2020 were focused on execution and leveraging our network investments that we made 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 and operating income of $38.8 million were both first- quarter records. Our operating ratio improved by 170 basis points from the first quarter last year to a record first- quarter low of 91.3. Similar to what other freight companies have reported, volumes were good for the first half of March before a 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. That was not the case this year.
Despite the weakness in late March, shipments per workday for the quarter still grew by 2.3% versus last year. With an improvement in 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. In early February, we implemented a general rate increase of 5.9%. For the quarter, our yield as measured by revenue per hundredweight rose 3.1%. Keep in mind that reported yield is a byproduct of pricing and mix. The mix component includes class of freight, weight, and length of haul. The combination of positive pricing, heavier weight per shipment, and longer length of haul 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 operational leadership, combined with technology enhancements made in the past year, were the key factors in helping us show improved productivity in both our dock and city operations on a year-over-year basis in the first quarter. On the docks, our optimization tools, which provide real-time performance tracking visualizations rolled out across our network in 2019. It increases our ability to set realistic expectations for our freight handling professionals and measure their success in real time against engineered standards. Also rolled out last year, our new inbound planning tool is enabling us to build better routes and create density across our delivery operation. Minimizing miles run in city traffic is a productivity enhancer and cost saver.
Through our continued efforts at network simplification, we also saw a 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 0.83 in the fourth quarter, with the improvement driven by continuous training efforts, particularly with our 2019 hires. Finally, in early March, we opened a new terminal near Burlington, Vermont, our 19th terminal in the Northeast since we began our multi-year 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 as is the case in the current pandemic- challenged environment, better manage productivity while providing a compelling service for Saia customers in our expanding geography. With those highlights addressed, I'll turn the call over to Doug for a detailed review of the first quarter results.
Thanks, Fritz. First quarter revenue was $446 million, up 8.7% over last year. The first quarter of this year included one more workday than last year, so on a per- workday basis, revenue rose 7%. Revenue benefited from a stable pricing environment, and our LTL yield rose 3.1%. Also, as Fritz mentioned, we implemented a general rate increase of 5.9% on February 3rd, which typically impacts about 20%-25% of our business. Fuel surcharge revenue increased 8.5% and 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 a 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 healthcare costs. As a note, we have 10 additional terminals in operation this year than at the beginning of the first quarter last year. Purchase transportation costs increased 5.8% with one extra workday in the period.
As a percent of total revenue, purchase transportation costs 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 than in the 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 have seen over the past few years as we've grown our terminal network, invested in equipment to lower the age of 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%-25%. First quarter diluted earnings per share were $1.06 compared to $0.85 in the prior year.
In the first quarter of the year, we generated $51.3 million in operating cash flow compared to $30.4 million a year ago, and we made capital investments in the first quarter totaling $107 million, with 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 year as we manage our fleet size to current volumes and remove older tractors from our fleet. Our average tractor age is now less than five years. The lower age of fleet has a benefit of better fuel mileage, better reliability, and also reduced maintenance expenses. Our average fuel economy in 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 of the $46.9 million 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 million and $225 million. Outside of our committed equipment purchases this year, we are taking a very measured approach to all other capital spending.
We are evaluating all expenditures and determining what are needs and what are wants. Some investments that were planned for 2020 have 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 in that facility and also additional outside borrowing sources.
Before turning the call back to Fritz for some closing remarks, I'd like to provide a few details on our actions taken to date to face the challenges brought on by the COVID-19 pandemic and the anticipated impact those actions will have on our financial outlook for the remainder of the year. On April 1st, we offered 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 COVID-19. This action was an effort to make sure that all of our employees were in a position to take needed time off for health issues or those of family and friends. We believe this action will result in 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, hand sanitizer, spray sanitizer, and gloves as needed by our field workforce to safely interact with each other and our customers. On the cost- saving front, we developed a multi-pronged approach to manage down our labor costs. In April, we offered retirement incentives as well as a voluntary leave of absence plan. Through a combination of these actions, furloughs, and hours reductions, we've taken our active daily average workforce down some 16%. Lastly, on April 1st, we suspended our 401(k) match and all incentive compensation plans and other executive compensation as well. With that said, I'll now pass it back to Fritz for some closing comments before we move to Q&A.
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 and maintaining company's position 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 any questions that folks may have.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one to ask an audio question. We'll pause for just a moment to allow everyone the opportunity to signal. Thank you. Our first question will be from Todd Fowler with KeyBanc Capital Markets.
Good morning, Todd.
Great. Thanks, and hey, good morning, Doug. Good morning, Fritz. I guess maybe to start, if you can provide a little bit of color about what you're seeing now into April. I'd be curious both on the tons per day side. Then one of your competitors talked about some change in shipment profile, and I'm curious what you're seeing as it relates to weight per shipment and the mix going through the network at this point.
Sure. Before we get into April, I might as well go ahead and give the shipment tonnage and weight numbers for the first quarter by month, and then I can give you a little bit of color on April to date.
Thanks.
In January, our shipments were up 8%, tonnage was up 7.7%, and weight per shipment was down 0.3% at 1,304 pounds. In February, our shipments were up 1.5%, tonnage up 0.4%, and weight per shipment down 1.1%, though sequentially, the weight in February was up two pounds at 1,306. In March, our shipments were down 2.5%, tonnage was positive, up 3.7%, and weight per shipment was up 6.4% to 1,380 pounds. Far in April, our shipments are trending down about 17%, tonnage is down about 13%, as weight per shipment continues to look solid. It's up 4.7% at 1,337 pounds. In terms of what we're seeing, as Fritz mentioned, March started off pretty good. The normal seasonality from January to February wasn't there. That was a bit unusual, the weight numbers started to improve early February.
We started to see better shipments, and then, like Fritz said, a pretty steep fall off in the second half of March. That's continuing into January. As you can tell by the numbers I gave, shipments down about 17%. For us, it's field and national is down in the low teens, maybe 13%, 14%. Our 3PL business, which is obviously a smaller portion of our business, we're seeing shipment count there down 30%+ month to date. No real change in the trends that we've seen over the last few weeks.
Doug, that's super helpful, and that's exactly what I was looking for on that front. When you think about, it sounds like that you guys were able to react very quickly to the environment, putting in the furloughs in early April. When you think about adjusting the cost structure and being able to preserve the margins, the performance in the first quarter was very strong. How do you think about what the margin profile could look like in 2Q, just given the change in the environment that you saw late in March and now into April?
Yeah, Todd, I think the best answer I can provide you there is that we're very focused on maintaining profitability in the business. We're very focused on maintaining our balance sheet such that when this does end, that we're in a position to execute and take advantage of the market opportunities that'll be there. The level of uncertainty is such that we're challenged to forecast next week, much less the full quarter. With that in mind, we have a game plan that we operate against that, as the fluctuations may occur in the business, we'll react to it with the interest of maintaining that margin and being in a position that we can exit this and take advantage. I think that the weeks so far We've bounced around a bit, but maybe there's some stabilization. We'll see.
Markets are opening for us and for everybody, so that's good, but remains to be seen what that looks like over time.
Yeah. No, I understand, Fritz. That makes sense. I'll ask one more, and then I'll turn it over. 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 with the plan that you laid out, you were able to throttle it up and throttle it 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 work with what you have, or do you think you'll still have some more opportunities to do continued geographic expansion for the rest of the year? Thanks.
Thanks, Todd. I think that our first quarter focus and our full year 2020 focus has been on execution 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 in a position, keep that balance sheet strong, so that if there are disruptions in the market, there may be opportunities for Saia to step in. 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, continuing to drive costs such that we have that flexibility to maybe move into something if it were to become available.
I think we would, but that's not something we would probably more react to than say be in front of.
Okay, 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, Jack.
I guess, if you could just go back and following up on Todd's question there for a minute, a second question around the cost structure. You guys have taken aggressive steps to manage that here over the last several weeks. Doug, can you provide maybe some context around how you view fixed versus variable costs in your business? Just trying to think about how the cost structure is flexing here as we see this type of a tonnage decline in April.
Sure. I mean, Todd, you really have to think of it across a company's life cycle, right? We've got a lot of new markets we've invested in. As Fritz mentioned, 10 new openings in the past year. We've got a lot of fixed costs. As we start to put business in there, more and more we have an opportunity to see improved incremental margins. We've shown a little bit of that. You see margins out of us from the last year approach that 25%-30% range, where we think they ought to be. Until you add the volume in there, some of your costs that longer- term are variable are going to be fixed, right? Some of the miles you just can't take out in your line haul operation or even running around the city.
You've got those costs, and you're providing good service to the customers, but they're not all efficient miles. I hate to break it down any more than that into fixed versus variable because it's a little bit different, given all the fixed costs we've added.
Okay. Got you. I guess maybe thinking about end markets, Fritz, could you talk for a moment about what you're seeing from an end market perspective? If I think back, I think Saia traditionally has a little bit more energy exposure, just given your historical geographic footprint. Could you talk about where that stands for you guys today from a percentage of revenue perspective?
Yeah. If I were to look at what we're seeing trend-wise year-over-year, I think the Houston region, Doug quoted the overall company declines, and I would say Houston would be at the higher end of those declines, so above the average. LAX region for us also, and I think that's probably reflected a little bit port activity. If you look at across the revenue base, Doug described the 3PL segment as being the most impacted for us. I think the rest of it, we don't call out necessarily verticals beyond that Houston region as energy- centric. I think the rest of it, what's notable about what we've seen, is that there's been some volatility on a day-to-day basis just across businesses as businesses are disrupted and supply chains have been disrupted as a result of COVID.
One day, maybe a particular segment is down, and the next day it's down less. There's a lot of disruption there, and that's made it challenging to hit our operating metrics. One thing that we've been particularly pleased by is that our organization, our operations team in particular, in this environment has done a great job of hitting the service standards and meeting customer expectations as we've dealt with the disruption. We're very pleased with that.
Okay. That's great to hear. Last question from me, I'll turn it over, a longer-term question around technology. Fritz, going back to last year, you were discussing a number of tech initiatives that you were targeting for 2020. Obviously, the world has changed quite a bit here this year. As you think about those projects and this crisis, do you think that this is an opportunity to accelerate investments in technology, or are you looking to maybe push those out until the market begins to settle down?
I would say that we're going to continue to focus on these technology opportunities, and I'll describe them in two ways. We highlighted last year into the first quarter our dock optimization tools, our city planning tools, our line haul tools. Those are things that in a disruptive market that we're in right now, that we find applications for those, right? They help us make better decisions to optimize and drive available density and those sorts of things in our footprint as we're dealing with this crisis. Those enhancements need to continue. As we further refine those are investments we're going to make. Certainly, our operational procedures that we've had to put in place around social distancing and that has created a safer environment for our employees.
Part of what we might be able to do in this year and in the next year, as we make investments in new handheld technology, we'll be able to further enhance our social distancing sort of safety program. It's a unique opportunity in that area where the investment's going to continue to make sense because it's going to drive some efficiency, the added benefit of providing a safer work environment for our employees and a better, a safer environment for our customers as well. Those investments will continue. This is a business that we're managing this for the long term. The opportunities that 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 will be from Amit Mehrotra from Deutsche Bank.
Thanks. Congrats on the great quarter, guys. Fritz and Doug, I was wondering if you could talk about the weight per shipment trends in April. It's holding in there quite a bit better than I would've thought. Is that just, I guess, mix of business favor, maybe more national accounts that are heavier weight? If you could just talk about that, and then how should we think about yield? Can yield be stable, or should we expect some decel there because of the higher weight per shipment?
Yeah. The average weight, as I gave it in the April update, is a good number to post, but I will say we're seeing a lot of volatility in weight even day to day. That's been a little bit difficult to parse out what's causing that. For us, actually, our field customers, the weight's been the highest. If I'm thinking about field or national customers, our weight's been better on the field side. Obviously, it's something to do with a mix of customers. For us, field has been a little bit heavier weighted.
Okay. Just the yield question. Maybe you can answer that two ways. Should we expect a decel because of what's happening on weight per shipment? Maybe you can just comment on pricing because obviously that's an important topic, especially in the context of the weaker volume environment in the second quarter.
I think we commented earlier, Amit, that the pricing environment remains rational. I think the mix of business weight per shipment are going to have an impact on the yield performance. I think it remains an environment in which people are looking for that return because our cost structure and the added costs that come into operating in this environment, this disrupted environment, are not ones that I would think would make sense to discount or to move off that pricing thesis.
I would add, Amit, along with thinking about the weight impact on the yield calculation, you have to consider fuel, too. As fuel surcharge revenue comes down, that's a headwind for your reported yield. You really have to back up and just think about what the pricing environment about. For us, we see that as rational, and it's been stable so far. The yield number does have some moving pieces to it.
That benefits the customer as well, the fuel charge.
You're right. Then just last one from me. Fritz, I guess the longer-term opportunity for Saia has always been kind of achieving an OR that's more in line with kind of non-unionized national LTL companies. It seems like there's an acceleration, at least internally, to go after some of the opportunity and the cost that maybe had been left on the table or haven't gone after it as vigorously. Maybe like two, three years from now, do you think there's anything kind of structural that's going to impede Saia from getting to that mid-80s OR on a sustainable basis? If you can just talk about that from a structural standpoint.
I think the long-term opportunity remains for Saia. I think the one item to really emphasize, though, is as we went through last year, that was an opportunistic investment year for us. Those terminals, the expansion opportunity was there. When we launched our Northeast expansion in May of 2017, we had kind of a cadence by which we could move that up and down, the rate of expansion up and down based on the opportunity that was there for us. Last year, we saw an opportunity to move and add additional facilities and coverage in the Northeast. We did that, made that an investment. That's expensive to do, but that also positions you for future sort of success as a national carrier.
I think 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. I think you saw some of the first results of that in the first quarter. As I look forward, as we get past this pandemic state, I think the longer-term opportunity remains for Saia. I think that we're continuing to fill in that toolbox around the sort of data analytics, better decision-making tools that we've been investing in for the last couple of years that we can capitalize on that going into the future. I don't really see a limitation for us to achieve those for a longer-term structural margin that you described. I think that opportunity is there for us. We've just got to get past 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 from Scott Group from Wolfe Research.
Hey, thanks. Morning, guys.
Morning, Scott.
With those moving parts you talked about on that last question with weight and fuel, is there any way you can actually just share with us what revenue per hundredweight 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, maybe you can give us a little bit extra in terms of, you know, current month trends, just to help us with our models.
Yeah, Scott, there are a lot of moving pieces. I think we'll stick with our traditional focus there. It's changing on a daily basis, we're going to continue with our traditional guide or traditional analytics.
Okay. On the margin front, and maybe this is another tough one to answer, but you 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, 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 look at that first quarter, and I look at what we executed on in the first quarter, and if we get the non-essential marketplace open again across the country, I think we have an opportunity to move the company's position to pursue those kinds of margin improvements over time. Our eye right now, as we go through Q2 and where this leads us with this pandemic, is preserving that opportunity for us. I can't really speak to when the market will improve for us, but the opportunity is there, and I would point to our execution as that kind of evidence of what we think we can do.
Yeah, no, that makes sense. Last one for Doug. I just want to make sure I heard this right. Was fuel surcharge revenue up 8% and the fuel cost down 6%? Is that right? How should we think about the net impact of fuel, going forward? Does that remain a net positive for you guys going forward, or should that sort of spread normalize?
Well, as fuel's coming down, it benefits you in your costs as it's coming down. At some point, when it stabilizes at a lower level, you're losing surcharge revenue and the customer's benefiting, and he sees that as a price reduction. The day it turns back up, you're chasing it for a while, and you've followed us long enough to understand that. Yeah. Fuel expense was down 6.1% in the quarter, and surcharge revenue grew.
Okay. All right. 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, done a nice job lowering the tractor age. Any comments on the trailers? What are you doing on the trailer side? Is the trailer fleet expected to grow much this year, and how are you shaped for trailers?
Yeah. The age of our trailer fleet's been coming down over the years, too. This year, our big investment will be around our line haul units, our pup trailers. We're still in the process of buying pup trailers with the new captive beam capabilities. Gives us an opportunity to improve load average. Trailer age, depending on whether or not we're talking about vans or pups, is anywhere from seven to 10 years on average on the trailer side. Same as trucks. We'll take the opportunity this year, with volumes down, to move out some of our oldest trailers as well. It's an opportunity to rationalize your fleet when you're seeing volumes down like this. Get rid of some of the older equipment on both sides.
Not much growth, just more changing out the old and bringing some new, more efficient trailers.
Yeah, for the most part. When we were opening the terminals last year, we had to place a lot of trailers at all the new facilities, but not a lot of growth in the trailer fleet this year.
Fritz, if you could comment on the change in Saia's 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 competitive positioning? Have you seen it, or do you expect to see it at some point?
Yeah. I think the success so far in the Northeast is really about, you take our differentiated high-quality service, you introduce it to that market, starting with customers that already knew who we were. That helped the initial success. Now, as we grow in that market, people become more and more familiar with who we are. As we think about it internally, it's becoming less of a region in the sense of an individual call-out, and it's more about, hey, this is just another part of Saia. It's no different than the Chicago region. It's a market that we continue to optimize, and we position what our key differentiated service is and our quality, and we do that in the market, and we feel like over time, that's a winning proposition for us.
It really is becoming more and more like the rest of our network, which is great success. We're thrilled with that, and I think there's an opportunity to continue to develop that sort of national basis. At the same time, as you get that scale in the market, it'll allow us to grow in some more of the regional freight there. Right now, from the beginning, we focused more on the national coverage, national footprint there. As we develop that, you'll see some additional growth related to inter-regional Northeast. Right now, the success has been on that national footprint, and it's more and more like the rest of our business, which we're excited about.
Was there any threshold that you crossed, whether it was a revenue number of a few hundred million or a footprint coverage when you added a certain state or two that really made you feel that way?
I think it's just the overall customer acceptance that we've seen. If we go back to the original thesis that we had, we have beaten our internal market share expectations in every market. That's given us some confidence that when those terminals opened up for us last year, that we could jump on it, and we knew that we could execute it. We had a playbook that had worked in the first four terminals, and we've replicated. I don't know that there was necessarily, David, a single point at which we said, "Hey, this is the key measurement." It's just been the overall successful execution there, and we've been able to take advantage of the opportunity. It's still a growth market for us, so there's still opportunity for those terminals to operate like our historic terminals. That's what we're excited about.
Thank you.
Thank you. Our next question will be from Ravi Shanker from Morgan Stanley.
Thanks. Good morning, gentlemen. One of the most powerful trends in recent weeks has been the growth of e-commerce. Can you share what you're seeing in terms of benefits in your network or to your customers from that trend, maybe in the coming quarters even?
Yeah. On a real short-term basis, we haven't seen a big change in, if you're thinking about e-commerce to the consumer, not a big change in our residential deliveries. I mentioned the field customer weight being up, so maybe some of that is into maybe customers we have that are providing goods into DCs that are eventually going e-commerce, but I don't have any more granularity on it than that on a very short-term basis.
Okay. Got it. Just maybe a bigger picture question. Given the depth of the recession that's expected in 2Q, do you expect any structural shifts in the makeup of the LTL space out there, whether it's more consolidation, whether it's more share moving towards larger carriers, whether it's more movement away from brokers towards asset-based carriers? Any kind of permanent or long-term shifts in consumer behavior or industry structures out of this?
Yeah, it's yet to be seen. Across a business cycle, you would assume that in the trough of the cycle, you'd assume some capacity comes out. That happened to a great extent after the Great Recession in 2008 and 2009. We did see a lot of capacity come out of the industry. If this is a short-term event and the $3 trillion of stimulus we've thrown at the economic problems created by the COVID pandemic, if those things act quickly to turn the economy around and not only the consumer but the industrial sector as well, then maybe you don't see capacity come out in that scenario. Longer term, over a cycle, that's what happens to the operators that not operating, generating cash, reinvesting in their business.
This is a business that requires a lot of capital investment year in and year out, and if you get caught in part of the cycle where you're not able to make those investments, you can lose share pretty quickly.
I would add, it's a challenging environment for sure. We have, to date, have invested with this being able to weather a downturn. Now, certainly no one can say that we predicted something that we're all dealing with right now. The reality of it is that we've invested substantially to bring our fleet age down. We've invested substantially in our footprint, so that we're in a position to benefit from this. As we benefit from this disruption and as the market undoubtedly eventually will go back to a more normal state, we're in a position that we can take advantage of that. The balance sheet is in a position that we can do that. The fleet is in a position we can do that. It's a tough insurance market out there as well.
We've invested heavily in safety technology, and that's part of a reflection of our modern fleet. We think that we have, as much as we could leading up to this, positioned ourselves that we have mitigated the risks in the business to the extent we can, but be in a position that we can take advantage of the opportunities that may be presented to us.
Understood. Just lastly, Fritz, one housekeeping item. Apologies if I missed this. Your insurance line has been a little bit volatile over the last few quarters. Again, not a huge number, but worth enough to impact modeling a little bit. Can you just give us a little bit of guidance on what we can expect from that line going forward?
Yeah. You're always going to see volatility around that line. We self-insure to the first $2 million in an accident. That in itself, for a company our size, will create volatility in any given quarter. In terms of the overall market, though, as Fritz alluded to, there's extreme pressure on truckers in the insurance market these days. Our premium cost this year, just in our excess tower, I walked into our renewal budgeting for more than 20% inflationary cost there.
That's an environment that seems to harden each month as the months go by. Again, that's something across the cycle that can also put pressure on a smaller carrier or a company that's not in great financial position, because if you don't decide to buy the limits you used to buy, then you run the risk of having an accident that compromises your balance sheet in terms of settlement or a jury verdict against you or something. Being able to buy equipment with good safety technology, being able to afford insurance in this very inflationary insurance market we're in, those are things we're able to do these days, and it positions us pretty well. You'll see volatility in that line around the accidents. Our premium costs, we just renewed ours. March 1 was our renewal. We're through with it for a year.
There's occasionally volatility in the line.
Obviously, looking at an average about $10 million, is that a right approximate benchmark?
I've always thought if you go back three or four quarters and take a running average, that's probably as good as you can do.
Understood. Thanks for the help. Thanks.
Thanks, Ravi.
Thank you. Our next question will be from Stephanie Benjamin with SunTrust.
Hi, good morning.
Good morning.
I just wanted to follow up on some of the productivity initiatives you called out, quite a few where you benefited in the first quarter. I was wondering if you could maybe discuss some of the productivity or just profitability improvements that you're seeing in the Northeast, specifically, obviously, before some of the volume declines related to the virus. If you could just talk about how you're continuing to improve scale and get those up to a more profitable level in line with the company average. Thank you.
Thanks, Stephanie. I think the best way to view that is, as we described on the year-end or the call, we just talked about how adding the terminals we took, what was the OR, had reached sort of below 100 in the Northeast. We added the new terminals, that was a drag simply around the incremental lease costs, startup costs, and all that stuff. We also said on that call that over time, we would incrementally start improving our productivity in those markets simply as you start to utilize those terminals. Now, I don't have a number I can give you specifically for what the improvement was in the first quarter, but it's part of our overall productivity initiative.
To the extent that we can better add 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. As we think about that, we really are focused in using the same tools and metrics in those markets. Now they have, because they're new and the impact of the incremental revenue in those terminals is greater, they have a bit bigger impact. I don't necessarily have a call out there, but all those tools get used in those markets as well.
Got it. Thank you. Staying on the same lines of productivity, you again called out some technology initiatives that rolled out in 2019. Can we think of those as largely rolled out by now? Is there another kind of level or next innings of productivity or investments that we expect to see in 2020 to drive savings call in 2021? Just maybe some color on the timing of that would be helpful. Thank you.
Yeah. All those technology initiatives were in some form of development in 2019. We saw the benefits of them in 2020, and those are sort of, I'll call them the 1.0 sort of improvements. Those are ones where you're getting the team comfortable with understanding how to use and optimize those tools, how to 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 tools that we've developed. I think it's something that, over time, will continue to improve into next year our utilization of that. These things are really, if you really take a step back and look at it, this is all a data analytics play.
It's how do you make a better operational decision in real time? If I look at the dock tool as an example, historically, we would measure a dock associate's productivity on a sort of daily basis and maybe get back to them and provide feedback on their performance. Now the tool is real- time, so a supervisor can see how a dock worker, how it's progressing versus the engineered standard during the day as it's happening. If there's an issue, the supervisor can jump in and make a change or facilitate helping getting the dock worker back on standard. It's that sort of, you learn how to use the tool, how to optimize the tool, and we'll continue to see benefits of that going forward.
We're excited about the technology, but I don't think we've reached the pinnacle of what we might be able to get out of it.
Got it. That's it for me. Thank you so much.
Thank you. Our next question will be from Jason Seidl from Cowen.
Thank you, operator. Fritz and team, hey, good morning. Doug, I think you mentioned in your comments about the GRI that was implemented into play. Just wanted to know sort of how that's been holding up here, as the market has taken a downturn in late April and probably likely going through early May. Then I have a follow-up question regarding to some of the business mix.
Yeah, historically, we keep approximately 80% as an estimate of our GRIs, right? You always end up discounting it back a little bit to a customer. That's probably still a pretty good number because the customers are benefiting from the lower fuel surcharges in our tables. Again, it was just early February. We're just a couple of months into it here. I don't think we've seen any more aggressive activity required there or anything to keep the field business that the customer's been open. We haven't seen any more pressure from the customer on us, really. I mean, there's customers that always want a rate reduction. I think the acceptance has been pretty in line.
All right, well, knock on wood for you. I think you also mentioned that your national accounts were down about 13%, and your 3PL accounts were down 30%. Knowing full well 3PL is a smaller percentage of the business, could you remind us is there a difference in the freight profile in terms of the margins between national and 3PL accounts?
We try for there not to be. We try to price all the business, even the transactional business with the 3PLs. You try to price them all to operate profitably. The 3PL business, it's probably 8% or 9% of our shipment volume today on a given day versus 10% or 11% a year ago. I think with the volume loss there, part of it has been us kind of sticking to our prices there and trying to drive the profitability of that business down and a little bit more in line with where we would like it to be. The profile, it all depends on an account-by-account basis. We've got thousands of customers, so I wouldn't try to call it out by customer type.
Okay. Those are my two. Impressive job in the quarter, guys. Appreciate the time.
Thanks, Jason.
Thanks, Jason.
Thank you. Our next question will be from Tyler Brown from Raymond James.
Hey, good morning, guys.
Hey, Tyler.
Hey, Fritz. You mentioned weight per shipment, length of haul, and class as 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 complexion of the freight is changing.
That I don't really have a call out there, Tyler. It changes by day, but overall, I'd say it's pretty consistent.
Okay. That's helpful. I know you guys are flexing hard, but are you guys still generally maintaining your line haul schedules? What I mean by that is, are you still cutting those outbound trailers even if the load factors might be off a little bit, basically as to not compromise service?
It's always a balance. You're going to want to make sure that you have service sensitive, that you take care of that. 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 service we can provide. It's a continuing optimization opportunity for us. It's a little bit of both, right? It's a little bit of just go anyway.
Yeah. Okay. Well, you gave claims, but how's the on-time percentage tracking?
We're very pleased with the service we've been able to provide. We're at our standard or above.
Okay. That's helpful. Doug, just to be clear on the 401(k) match and the lack of incentive comp, those shock absorbers kicked in in April, right? So they were not in Q1?
April 1st. That's right.
That's right.
Okay. You mentioned a $10 million PTO drag, but how much will that 401(k) suspension, and again, the incentive comp reductions be a good guy either in Q2 or through the year?
The PTO will be spread out over the balance of the year, right? That's earned as somebody goes through the year.
Right.
We haven't given a carve-out specifically for 401(k) or the other.
Okay. All right. Well, that's helpful. Thanks, guys.
Thanks, Tyler.
Thank you. I'm showing no further questions in the queue at this time.
Great. Well, in closing, I'd like to say that while the uncertainty and volatility surrounding the pandemic brings significant daily challenges for us, I'm extremely optimistic about our long-term opportunity. We remain focused on maintaining the company's financial position, along with the flexibility to adapt to challenges as the country moves through this pandemic crisis. By expanding our geographic footprint over the last few years and by investing in needing capacity in our existing network, we believe we're well positioned to gain share of 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. Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.