Good day, welcome to the Saia, Inc. Hosted Fourth Quarter and Full Year 2019 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Doug Col. Please go ahead, sir.
Thank you, Brittany. Good morning, everyone. Welcome to Saia's Fourth Quarter 2019 Conference Call. With me for today's call are Richard O'Dell, Saia's Chief Executive Officer, and Fritz Holzgrefe, our President and Chief Operating Officer. Before we begin, you should know that during the 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 in our most recent SEC filings for more information on the exact risk factors that could cause actual results to differ. Now, I would like to turn the call over to Richard O'Dell.
Well, good morning, and thank you for joining us. I'm pleased to report that we closed out 2019 with record full-year results, despite a fourth quarter that was somewhat disappointing. Our revenue in 2019 was a record $1.8 billion, surpassing last year's record by 8%. Operating income also grew by 8% to a record $153 million. While fourth quarter revenue was a record $443 million, the quarter's results were negatively impacted by terminal opening and relocation costs, as well as accident severity, which Doug will cover in more detail in a financial review. Despite the challenges to the fourth quarter results associated with opening three new terminals and relocating three others in the period, productivity for the full year actually improved modestly in both the dock and city operations.
In our line haul operation, declining weight per shipment throughout the year led to a slight decline in load average, but we were able to reduce our line haul cost as a percent of revenue by 2.2% and purchase transportation miles as a percent of total line haul miles dropped to 10.3% from 10.6% last year. I'm pleased to report that both on-time pickup and on-time delivery metrics improved year-over-year, despite all the terminal activity and the growth of our workforce. Our cargo claims ratio for the full year of 0.76 was slightly improved from 0.77 last year, despite, again, all the new terminals and all the new employees. As 2020 begins, Saia operates 168 terminals across 43 states, having opened nine new locations in 2019. Since May of 2017, we've opened 18 new terminals across new markets in the northeastern U.S.
Our expanded service offering has quickly resonated with our customer base, and exiting the fourth quarter, we're on an annualized run rate of over $280 million into and out of these new markets. With enhanced geographic service offering and our consistent quality and reliability, we're raising our value proposition to customers. Our yield rose 3.7% in the fourth quarter, making our 38th consecutive year-over-year improvement. I'll now turn the call over to Doug for a review of key fourth quarter and full year financial highlights.
Thanks, Rick. I'll start with a review of the fourth quarter. Revenue rose 8.9% up to $443 million. Along with the yield improvement Rick mentioned, revenue also benefited from shipment and tonnage growth of 6.3% and 4.3% respectively in the quarter. Fuel surcharge revenue was up 2.2% year-over-year and was 13% of total revenue. Despite a 1.9% decline in weight per shipment, our revenue per shipment rose 1.8% to $238, benefiting from the yield growth and also from a 1.1% increase in our length of haul. Operating income of $27 million in the fourth quarter was down 18% year-over-year, with much of the decline stemming from costs associated with three new terminal openings and three major terminal relocations, which occurred in the quarter, along with increased insurance reserves associated with accident severity.
On the cost front, I can offer a little bit more color on the quarter as follows. Salaries, wages, and benefits rose by 10.7%, reflecting our average employee count being approximately 5% higher than the prior year, our July wage increase of approximately 3.5%, and continued inflationary healthcare costs. Purchase transportation costs increased 10.1% year-over-year from a combination of 7.1% growth in PT miles and 10.6% growth in purchase rail miles. Our overall PT miles were 9.8% of total miles compared to 9.6% of total miles in the fourth quarter last year. Fuel expense fell by 0.8% in the quarter as national average diesel prices were 5%-6% lower throughout the quarter compared to last year. Our miles per gallon across the fleet continues to improve as well and helped to offset the fuel costs associated with our mileage growth of approximately 6%.
Claims and insurance expense spiked by 50% in the quarter due primarily to accident severity. Our cargo claims ratio of 0.83% was also up from 0.75% a year ago, but improved through the quarter as continuous training efforts began to produce a benefit with our newest dock associates. Depreciation expense of $31.9 million in the quarter was 17% higher than last year, matching the trend we saw throughout the year and reflects our investments in revenue equipment, properties, and technology. The average age of our tractors is now less than five years. Overall, operating expenses grew by 11.3% in the quarter. Outpacing our 8.9% revenue growth and fourth quarter operating ratio deteriorated to 93.8% compared to 91.8% a year ago. Our tax rate for the fourth quarter was 18.1% compared to 19.9% last year.
The tax rate was positively impacted by the enactment of an alternative fuel tax credit in the fourth quarter that covered 2018 and 2019 reporting periods. Fourth quarter diluted earnings per share were $0.81 compared to $0.97 the prior year. The previously mentioned fuel tax credit benefited fourth quarter EPS by $0.07. Moving on to the financial highlights for our full year in 2019. Revenue was a record $1.8 billion, operating income of $153 million was also an annual record. Our operating ratio held flat in 2019 at 91.5%. For the full year 2019, our diluted earnings per share were $4.30 versus $3.99 in 2018. Again, the reported 2019 EPS benefited by $0.07 as a result of the previously mentioned enactment of the alternative fuel tax credit. At December 31, 2019, our total debt was $136 million, and net debt to capital was 14.3%.
This compares to total debt of $123 million, net debt to total capital of 14.8% at December 31, 2018. Net capital expenditures in 2019 were $287 million, including equipment we acquired with capital leases. This compares to $252 million of net capital expenditures in 2018. In 2020, net capital expenditures are forecast to be approximately $250 million, including investments in real estate, terminal infrastructure improvement projects, our fleet, and continued investments in technology. Before we open the line up for questions, I'd like to turn the call over to Fritz Holzgrefe for some closing remarks.
Thanks, Doug. While we all would've certainly liked to have closed out the year with stronger operating margins, I'm pleased with the company's growth trajectory and how our company's positioned as we moved into 2020. Rick mentioned the nine new terminal openings we completed in 2019, but I'd also like to highlight some major terminal relocations that position us for long-term share gains and better service across our network. In January of the past year, we moved into a new owned facility in Harrisburg, Pennsylvania, more than doubling the size of our former leased terminal in that market. The new location will serve us for years to come as a major break facility in Northeastern U.S. Other major terminal upgrades occurred in Indianapolis and Phoenix, where we relocated to new owned terminals in both markets, essentially doubling our door counts at both locations.
In Philadelphia and Newburgh, New York, we relocated the larger terminals that we outgrown the terminals open in those markets within the last two years. Our total door count in the Northeast grew by 112% in 2019. In 2020, our current plan calls for one new terminal opening in the first quarter, and then we have a handful of relocations slated for the balance of the year. The lion's share of our capital expenditures in 2020 will once again be directed towards our fleet. As Doug mentioned, the average age of our tractor fleet is now less than five years, and should dip below four years in 2020 based on our planned purchases. Improved fuel mileage, greater reliability, and a full suite of in-cab safety technology that comes with new tractors are all benefits of lowering the fleet age with new buys.
Finally, with respect to the current freight environment, we continue to view freight activity as somewhat muted. In fairness, January is one of the softest months seasonally in our business, so I don't want to read too much into one month. Against the easing comps, January shipments per day grew 8%, while tonnage per day grew 7.7%. The most encouraging trend over the last couple of months is that the weight per shipment trend seems to be in a bottoming process. Weight per shipment in January was 1,304 lbs, in line with what we saw in November and December. We're excited about the investments to date as we feel they position us for share and margin improvement in 2020 and beyond. With that said, I'd like to go ahead and open the call for questions. Operator?
Yes, sir. 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, press star one to ask a question. Our first question comes from Jack Atkins with Stephens Incorporated.
Good morning. Thanks very much for taking my questions.
Good morning, Jack.
I guess just to start off, Fritz, going back to your last comment on just sort of the underlying freight market, could you update us on what the December tonnage and shipment metrics were? It seems like there's been a step up in demand and tonnage here over the last couple of months judging by December and January. Just sort of curious, what do you think is driving that? Is that just purely a function of easier comps, or do you feel like in the last maybe six- eight weeks, things have begun to maybe stabilize to improve a bit out there?
I'll take the first part of that, Jack. I'll take you guys through the shipments and tonnage growth throughout the quarter. We'll start with October. Shipments were up 6.9%, and tonnage was up 3.5%. In November, shipments were up 2.7%, and tonnage up 1.4%. As you mentioned, December, things picked up a little bit. Our shipments were up 10%. Our tonnage was up 9%. The December comparison was up against negative shipments and tonnage a year ago. Shipments a year ago in October and November had been positive. The comps did get easier.
In terms of the environment we're seeing, it's the same numbers you're seeing. Industrial production was down in December. I think that was the fourth out of the last six months where it was down. The PMI trends have been negative for five or six months now, once they turn negative. It's tough to say now any more than that, because January is seasonally the weakest month of the quarter anyway. It's kind of hard to call out any kind of difference in pace of the environment when it's our seasonally softest month.
Okay, got you. The good news is we just saw a PMI above 50 here in January that just printed. That's encouraging. I guess just shifting gears to the margin front for a moment, could you update us on your outlook for OR improvement in 2020? I think on the third quarter call, you were saying 100- 150 basis points of improvement from a margin perspective year-over-year in 2020 versus 2019. Is that still the plan? Can you help us sort of bridge to that number, whether it's productivity improvements from having a younger fleet age, and then just sort of the leverage that you expect to get on these investments? I think just helping to bridge to that number would be very helpful for folks.
Okay. I'll start. Maybe Fritz probably has some comments as well, or Doug. Historical seasonality 4Q- 1Q would have a modest deterioration in your OR of about 20 basis points. Kind of given our current outlook, January performance, we would expect at this point a modest improvement up to 100 basis points. Again, we don't know what the weather's going to be like the rest of the quarter. We always have some self-insurance volatility exposure. Our outlook would be in that range at this point in time. Again, there are some carry-forward costs from the 3Q and 4Q terminal openings, and we're confident, I think, in our ability over time to apply top-line revenue to that and get the OR improvements that we've talked about historically as well. Do you want to add something else, Fritz?
Yeah. The only thing I would add to that, Jack, is that as we know, the fleet improvements that we made last year and actually the last several years into this year creates a pretty big step-up in depreciation year-over-year that we're going to have to cover. We're obviously going to have inflationary costs in all the areas that you typically would see. There's going to be some market-based wage inflation, benefit costs, all that sort of thing. With that said, we're tracking early on, and we're not quite ready to give the highlights of it, but investments in technology across not only the fleet but then also our operations and planning systems where we think we can look for ways to drive productivity improvement on our dock, city, and line haul operations.
Those investments that we have made in the last several quarters that we would hope to see help drive that margin improvement in 2020 and frankly, beyond. As we have moved into these Northeast markets, those are, as we know, high-cost markets. The benefits of productivity certainly will help us drive those margin improvements into the coming year.
Got you. The plan is still 100-150 basis points of margin improvement in 2020?
I think that's fair. I mean, it won't be linear across the quarters, right? I think that would be our expectation. We clearly realize this is a show-me year. We've made the decision what I think is strategically correct to open some incremental terminals. We've made a lot of investments, and we expect to get an adequate return on it.
Okay, great. Thank you again for the time.
Thanks, Jack.
Our next question comes from Todd Fowler with KeyBanc Capital Markets.
Thanks and good morning. Doug, congratulations officially on the new role. Maybe just to start, Fritz, some comments were attributed to you in the release about the pricing environment remaining rational. I was just hoping you can maybe expand on that and if you've seen any changes in behavior in the fourth quarter from the third quarter, and maybe some comments about where contract renewals are right now?
We've seen the end of the year into next year to be kind of competitive, rational environment around pricing. Everybody's got to deal with the inflationary costs. I think people have that backdrop. I think that as we continue in the marketplace, we see people being competitive, but at the same time, you see them performing rationally. That continues to be a good part of our market and our strategy right now. Our contractual renewals in the quarter were
5.4%.
5.4%.
That's pretty consistent. I think they were around five and a half in the third quarter.
Yep.
I guess just to maybe put a little bit of a bow on it sounds like that with where we're at in the cycle, pricing behavior is kind of what you would expect, but you're still seeing those mid-single-digit contract renewals.
Yep, so far.
Okay, good. Just to shift gears and talk about the expansion, it sounds like that there's going to be one terminal opening in 2020. I think that that brings you to about 19 in total. You'd previously talked about 20-25. Is there a change in the number of terminals that you need in the Northeast, or is it just a timing where you've pulled forward some of the growth into 2019, you take a breather in 2020, and then it accelerates again in 2021? Can you just help us think about the number of terminals and where you're at from a geographic expansion standpoint?
I think the way I would characterize it, Todd, is if you go back to when we launched our Northeast plan, we talked about 20- 25 terminals probably gives us pretty good coverage over time, and that the great thing about an organic expansion is it allows us to speed up or slow down as we see the opportunities. We saw opportunities last year, so we accelerated our pace. The timing, in Q3 and Q4, that had obviously had an impact on results. We're looking at this as a long-term sort of investment. The quarter-to-quarter nature of it, that's part of the investment profile.
I think as we look longer term in the Northeast, I think that sort of 20-25 number is probably reasonable. At the same time as that business evolves, we may see other opportunities to provide incremental coverage in that market as the market develops for us. I don't know that I would say that we're at the end, but I think we'll continue to be opportunistic in that market. This year, in 2020, as we look at where we are, it's an opportunity really to generate a return on all those investments we've made to date in the market, particularly in the last six months of 2019.
Okay. Got it. That makes sense. Maybe just the last question for me, and it's kind of along those lines, but the $280 million of run rate revenue in the Northeast, do you care to share kind of a sense of what the margin profile on that is relative to the business? The genesis for the question is obviously thinking about the drag that that's happening and then the opportunity of where that can go as you leverage the investment that you've made. Thanks.
I think the way I would characterize that is that in a network business, the impact of growth in the Northeast kind of touches all corners of our company. If I looked at specifically at those, the full all-in OR for those, the Northeast in the fourth quarter, it was over 100. We also know that was an investment period. We know that over time, I think what this does is it's going to drive our overall, we'll be able to drive the overall OR in that region to something more in line with the rest of the company.
At the same time, the benefits of that incremental growth will impact the balance of the company as well. I think that that's still intact. The value, what we can drive out of that area, that doesn't change. It's just the expenses were pretty heavy in the last half of the year.
Got it. No, that makes sense, especially with the halo impact on the other region. I'll jump back in the queue. Thanks for the time.
Yep.
Our next question comes from Scott Group with Wolfe Research.
Hey, thanks. Morning, guys.
Morning.
I wanted to follow up on the full year OR commentary. First quarter doesn't imply flattish margins. Second quarter's got the toughest comp of the year. The OR improvement sort of back end loaded. Is that just the comps are a lot easier, or is there anything about costs or anything that builds throughout the year? I just want to understand the trajectory.
I think it's a combination of comps and some of our targeted cost improvements. It's primarily kind of driven by the comps, right? The back half of the year last, well, first quarter wasn't great either, but the back half of the year was, margins weren't, we were making some investments. We had some self-insurance volatility. A combination of things I think are easier in the back half. As we've commented, we weren't particularly pleased with our fourth quarter performance. I mean, it was an investment quarter, but with the revenue growth that we're having, we would expect to operate better than we did, and certainly do going forward as well.
Okay. On the, can you give us any sort of either the revenue per day or yield trends to start the year? I just want to understand, the tonnage obviously picking up. Is there any sort of offset there in terms of the yield slowing or anything?
It's one month, right? Our yield trends were similar going into the first quarter as we had in the fourth quarter from an improvement perspective. You can take the tonnage we quoted and assume a similar number, you're going to get to the revenue.
Okay. My last question on the pickup in weight per shipment, can you tell what, if anything, is driving that? Is there any sort of pickup in the TL-rated freight, or is it just economy? What do you think is driving the weight per shipment higher?
Scott, I would say that it's just kind of a broad base. There's not really a call out there for a specific market or vertical or something like that. As always, we're going to be focused on driving or identifying that freight that's going to have the best characteristics and drive the incremental margin in our business that maybe there's some efforts there that are helping to drive that. I think overall, it's pretty broad based.
You're not making a push to try and fill up the network with some TL business or anything?
No, not any more than we normally take advantage of that.
All right. Thank you, guys.
Okay.
Our next question comes from Amit Mehrotra with Deutsche Bank.
Thanks, operator. Hi, everybody. Congrats, Doug, as well. Fritz, just a quick follow-up on the depreciation expense. It obviously stepped up quite a bit in 2019. What's the run rate quarterly? I assume it's flat tab. I know you got one additional in 2020 in terms of a new service center opening up or terminal opening up, but any help there?
Yeah, I would just say, in 2019, I guess, for the full year, depreciation was up almost 17%. The total CapEx number was projected to come down in 2020, but with the heavy over 50% of it being on revenue equipment, I'd say depreciation in 2020 is probably likely to be up another 19% or 20% year-over-year.
From 19%-20% up year-over-year?
Yes. Yes. You're going to have the lapping effect of what we added last year, plus the new equipment that comes online in 2020.
Okay. Interesting. Okay. That's just a lot higher than I would have expected, but maybe I did something wrong there. Okay. One quick question.
[crosstalk] Amit. I don't think anything's wrong. We opened since mid-September. We opened six new terminals and relocated four other ones into new facilities. A lot of investment there, plus the equipment that goes in all those facilities. Like Fritz said, I mean.
Yeah. It just looks like I modeled it. I just modeled it wrong. Yeah, I just modeled it wrong. It's really my fault. Then I just want to ask a question on the decline in weight per shipment in the quarter. I know it's a little bit backward-looking, but it's a little bit of an outlier, especially when you think about Northeast not being as dilutive to weight per shipment.
I think you said that before in the past. Were there any, I guess, mixed headwinds in the quarter? I know you talked about maybe November being a particularly weak month in and out of the Houston market or the Oil Patch market. Just talk about that and did that revert at all, or has that reverted at all as you started the year? Obviously, that was a pretty big drag, I guess, in the month of November, at the very least.
No, I mean, year-over-year, throughout the quarter, the weight per shipment, call it declines from the prior year actually lessened, right? October weight per shipment was down 3.2%, November weight per shipment was down 1.2%, December weight per shipment was down less than 1%. Year-over-year, the quarter actually saw things get a little stronger. Like Rick mentioned earlier, we seem to be, or Fritz mentioned, we seem to be bouncing along the bottom here. November and December weight per shipment was pretty much right where it's at here in January.
Okay. Right. Yep. One maybe bigger picture question for me, I guess this is for Rick or Fritz, is just given the, I guess, the margin opportunity in 2020, I guess it's kind of a unique year in terms of your ability to realize margin improvement and structural cost absorption relative to past years. I guess, what are you guys doing from, if anything, from an operational or execution oversight perspective that's different in the past? I mean, is there anything that you're doing in terms of higher operational intensity or oversight perspective that just gives you a little bit more confidence or more confidence that the opportunity that you guys see over the next 12 months is actually going to be realized? You guys doing precision schedules, railroading or something like that?
Well, I think, Amit, we've got a couple elements that we're building momentum around that we're excited about. I mentioned earlier that we have made investments in technology across all the major cost drivers in our operating, in our network, which we feel like over the course of the year will help us drive those sort of incremental margins. I think clearly we've invested a lot in our industrial engineering group and our operations and analytics group that relative to the past, where I think we start to see some of the benefits of that into this year.
I also think, quite frankly, that part of the New England, or sorry, the Northeast benefit that we should see as we continue to execute our strategy there, we'll be in a position to leverage those assets into 2020 and beyond, where I think that will help. That'll be at an accelerated pace compared to what we've dealt with in the third and fourth quarter, simply as they mature. I think that it's a combination of technology investment and people will help us drive those sort of incremental returns over time.
Okay.
I would just chime in, too, that the same kind of engineering and some of our operations leadership that was responsible for opening the terminals and training people and doing all those things. You don't have some of those costs, and then the focus of that team of people is more on executing throughout our geography as opposed to traveling to the Northeast and doing training and opening terminals.
Yeah. No, that's a good point. Just following back one very quick thing on the D&A. Does it step up from the current run rate in the first half and then kind of normalize in the back half? Is that the right cadence, or does it just continue to step up through the course of 2020?
I'd say those are my options. It's going to trend up throughout the year a little bit.
Yeah.
As we take delivery of the equipment and we've got a few real estate projects going on, just opening a couple new shops. We've got a couple more relocations this year. I'd say it'll trend up through the year to that number.
Okay, that's helpful. Thanks, everybody. Appreciate the time.
Our next question comes from David Ross with Stifel.
Yes, good morning, gentlemen.
Morning.
Wanted to touch on insurance. It's been a thorn in your side for a while off and on, and it's getting a lot of attention on the truckload side of things these days. When you look at 2020, do you have a decent renewal coming up at any point? I can't imagine these accidents are helping any potential premium increase. How do you think about insurance costs as we move into the new year?
Hey, David. Obviously, you mentioned it. We're in a very tight market in terms of truckers looking for insurance on the auto liability side. That's been the case for the last two or three years, though. I'd say from our scene, while we did have an accident that you're referring to in Q4 that's high on the severity list, our claims experience over the last few years has been as good as any, I would imagine. I've been on the road a lot meeting with some of the prospective insurance companies. I really think after sitting in a lot of these meetings that we've got a best-in-class approach to safety in terms of the technology we put in our tractors these days. Our new buys, as Fritz mentioned, they come in loaded with the full suite of everything from forward and inward-facing cameras to blind spot detection.
This year, for the first time, we'll be buying tractors that have what they call Level two autonomy. Nobody's doing more on that front, I don't think, than we are. Our renewal, we're a March one renewal. The process is well underway. We'll continue to hold our deductible or retention at $2 million. I don't see that changing. Building out the tower is inflationary. Again, I think we're better positioned than most, and we look for a successful renewal, although with some inflation as you get up into the tower.
If you have better accident experience in terms of frequency and severity this year, even with the insurance increase, you think you could hold insurance and claims expense flat year-over-year?
No, it'll be going up. We didn't have an abnormal year in terms of severity. The good thing for us, though, is down in the lower part of the tower, we're in a structured program, so we've got some rate consistency in the most expensive part of the tower. The inflation we're seeing is higher up the tower where there's less premium dollars at risk.
Excellent. Just turning back to the business for Rick and Fritz. You talked about expanding, I guess, the Indy and Phoenix facilities. As you look across the rest of your business outside of the Northeast expansion, which has consumed a lot of time, what is the growth looking like there? Where are you seeing opportunities? What parts of the country are stronger, weaker? How do you think about the rest of the portfolio?
Yeah. David, what we typically try to do is we monitor pretty closely our operational door pressure where we might need either expand our footprint or replace our footprint. We also have pointed out over time that in key markets, we probably don't have the appropriate level of coverage. Atlanta would be an example. We have one terminal in Atlanta. It's on the south side. We'll add a terminal on the north side. It's not going to be a 2020 opening, and most likely we'll add it. It'll start into 2021 most likely.
We'll be replacing our Memphis facility this year, and that's a normal course. We see an opportunity to expand that footprint, drive some efficiency, particularly around the brake operation there. Ongoing, the Northeast, if you look at Saia's growth, certainly that's something to highlight. We also think that if you look at our legacy geography, there are areas in which we can add incremental capacity in the market, and we can better service our customers. It's throughout the geography.
Excellent. Thank you.
Our next question comes from Jason Seidl with Cowen and Company.
Thanks, operator. Morning, everybody. Wanted to circle back to your January trends. Obviously pretty good numbers. You mentioned they were up against easier comps. Could you remind us how the comps are looking versus 2019 for both tonnage and shipments, please?
Sure. To walk through the quarter, shipments in the first quarter last year were just about flat down 0.1%. Tonnage on the weight per shipment declines was down 3.5% in the first quarter.
[crosstalk] Doug, on a monthly basis, though?
Okay. January shipments a year ago were down 0.1%. February shipments were down 1.5%, and March shipments were up 1.5%. If we're talking about tonnage was down 2.9% last January, down 3.2% in February, and down 4.4% in March.
Okay. That gives me a good sense of what to expect. As I look at the model here, obviously your tax rate's smoothed around. You had some good news at the end of the year in both 2019 and 2020 for some tax credits. What should we be modeling for 2020 and beyond?
Yeah. I think we'll walk into 2020 kind of expecting what we did in 2019. I think we're using about a 23.5% rate this year. Last year, with the fuel tax credit, the full year ended up coming in at 22.5%. I think it's right to model at 23.5% for the full year.
Okay. For the full year. Okay. That's what I had already. A little bit more conceptually looking at sort of the bigger picture. Obviously, your expansion's been going very well into the Northeast. Big credit to you guys on that. It has been a drag on the earnings. Is it right to sort of look at that, and as we assume it to continue to grow at above normal market paces, that you're going to get a swing in earnings potentially of upwards to $1 a share from the money that you lost, the money that you could get out of the Northeast?
I'm not sure of all the EPS math there, but you'll remember, beginning in 2Q, we had just gotten to a little bit better than breakeven in the Northeast, and then we went and laid in a bunch of new terminals in the second half. I'm not sure the starting point that you're using to build up the potential accretion. We certainly made all these investments with a long-term horizon in mind. If we were trying to optimize 2019 or the first half of 2020 earnings, we wouldn't have opened six terminals since the middle of last September. Maybe offline we can go through the cadence a little bit, or I'm not sure if that.
Sure. Yeah, no, I was just assuming a modest loss on the $280 million, and then sort of growing that a little bit in the out years, and then coming to an OR more in line of what you're looking for for the whole company, and then looking at the differential. We can go offline. We don't need to do that now.
Yeah.
Appreciate the time as always, guys.
I would just add there, Jason, what we do know about the Northeast is we don't see an impediment that couldn't get to the OR trend that you see for the entire balance of the business, right? We think that continues to be a great opportunity for us. If we get our representative share in that market, I think if you put that OR on it, I think it's pretty interesting for us.
Yeah. No, I would agree. Gentlemen, thank you very much.
Thank you.
If you would like to ask a question, you may signal by pressing star one on your telephone keypad. Our next question comes from Stephanie Benjamin with SunTrust.
Hi, good morning. Thanks for the question.
Hi, Stephanie.
Good morning. I wanted to talk a little bit on the pricing side. Maybe you can talk a little bit about what you've been doing internally just from not only a data analytics side, but also pricing to really continue to focus on that. Just through conversations that you're having go forward, you can continue to see nice yields and just improvement. Any kind of color there that we can receive would be helpful. Thanks.
Sure. Thanks, Stephanie. Our cadence or our drive in this area is really about continuing to refine our analytics around understanding what the cost drivers in the business are, what the inflation is related to that. As we expand the company, our linehaul network evolves into being a, in time, a 48-state linehaul network. We got to understand exactly what the cost drivers are in that network. If you do that, you've got an opportunity to really and effectively price to get the returns that we'd like to get. It's a further refinement of what we always do, which is identifying that freight within a customer's book of business that makes sense in our network. As we continue to refine and drive our analytics, we have the opportunity to balance that as we evolve our cost structure around being a national carrier, we price accordingly.
Quite frankly, as our quality has continued to evolve, improve over time, both on time and our claims ratio being very competitive, that gives us the opportunity to continue to drive those pricing decisions. That national footprint also allows us to be in a position where we can bid on more freight or have the opportunity to pursue more of it. We're not leveraged out because we don't have the service a customer might want. It's a combination of all those things, and I know those are things that we've highlighted over time, but quite frankly, at this stage, it's really about continuing to drive those sort of incremental analytics to find that freight that works best in our network.
I guess just a follow-up on that, and specifically focusing on the analytics. Is that something that has been more of a recent initiative or a big step-up in the last year in 2019? Or how could we frame maybe what innings we're at in terms of that and really start to see some returns? Thanks.
Yeah. I think it's been an ongoing process for us over several years. I think one of the things that I highlighted earlier, which I think is pretty exciting, is that as we've invested in technology around our c ost, if you will, our operational costs around better planning and dock operation and line haul planning. Those are opportunities for us to better grasp what the cost drivers are and optimize that cost so we can be pricing most competitively and with the best margin. I think as we continue to enhance those sort of data analytics over time, that gives us the opportunity to drive margins.
Great. Well, thanks again for the time.
Thank you.
Our next question comes from Tyler Brown with Raymond James.
Hey, good morning, guys.
Hey, Tyler.
Hey. Hey, Rick, I think you mentioned your dock and P&D productivity was up in 2019. Can you quantify that? Just to be clear, are you speaking to the entire network, or is that just the legacy piece?
No, the entire network was up year-over-year, just modestly. It's in the 1%-2% range.
Okay. If you were to parse out, say, those 18 northeastern facilities, how far behind are they in terms of labor productivity? Where you would maybe want them to get steady state?
It's more than 10% below the company average. Oh, yeah.
Okay. Lots of opportunity there. Maybe kind of putting that together, maybe for Doug or Fritz, but I think you mentioned Q4 headcount was up, say, 5% here in Q4. As you saturate those facilities, you roll technology in, and I know it's going to be a bit volume dependent, but do you feel that there's latent labor capacity across the network? Do you think you can grow headcount at a lower rate than, say, shipments?
Yeah, I would think so, particularly in the Northeast. Right? In those markets, in many cases, we're staffed to provide service rather than be most productive, if that makes sense. Right? Our P&D operations aren't at capacity. I think that as we grow into that market, particularly the newest terminals, there's a real opportunity there for us to drive some incremental improvements. I mean, if you think about, in total, we've mentioned that the Northeast is a fully allocated OR, that's a drag.
If you just compare that to the rest of the company for a full year, you'd say there's an opportunity to really drive some productivity there around those operations. It's not just in the city and the dock because we're running line haul schedules with partials for service, too. As you build density, then your partials are a smaller % of the whole.
Okay. That makes sense. Do you feel that even in the legacy piece that there's still, call it that latent labor opportunity as well?
Yes.
Call it dock, all three aspects, I guess.
I would agree, yes. Correct.
Okay. Thank you, guys.
Sure.
That will conclude our question and answer session. I will now turn the conference back over to Mr. Doug Col for closing remarks.
Well, thank you, everybody, for joining us on the call. We'll get through winter and into the stronger months of the year. We look forward to chatting again after Q1. Thank you.
This concludes today's call. Thank you for your participation. You may now disconnect.