ArcBest - Q1 2015
May 4, 2015
Transcript
Operator (participant)
Welcome to the ArcBest Corporation first quarter earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Monday, May 4th, 2015. I'd now like to turn the conference over to David Humphrey, Vice President of Investor Relations. Please go ahead, sir.
David Humphrey (VP of Investor Relations)
Welcome to the ArcBest Corporation first quarter 2015 earnings conference call. We'll have a short discussion of the first quarter results, and we'll open up for a question-and-answer period. Our presentation this morning will be done by Ms. Judy R. McReynolds, President and Chief Executive Officer of ArcBest Corporation, Mr. David R. Cobb, Vice President and Chief Financial Officer of ArcBest Corporation. We thank you for joining us today. In order to help you better understand ArcBest Corporation and its results, some forward-looking statements could be made during this call. As you all know, forward-looking statements, by their very nature, are subject to uncertainties and risk. For a more complete discussion of factors that could affect the company's future results, please refer to the forward-looking statements section of the company's earnings press release and the company's most recent SEC public filings.
In order to provide meaningful comparisons, certain information discussed in this conference call includes non-GAAP financial measures, as outlined in the tables in our earnings press release. We will now begin with Mr. Cobb.
David Cobb (CFO)
Good morning. Thank you for joining us this morning. ArcBest first quarter 2015 revenues increased 6% to $613 million. All of our operating companies experienced revenue growth in the quarter, despite the impact of significantly lower fuel surcharges associated with a decline in diesel fuel prices. We earned $0.03 per share in the quarter, compared to a net loss of $0.20 per share last year. Excluding adjustments for pension settlement charges of $0.03 per share related to our non-union defined benefit pension plan, we reported first quarter net income of $1.4 million, or $0.06 per share, compared to a similarly adjusted $0.11 loss in the prior year quarter.
First quarter 2015 was negatively impacted by severe winter weather, although less severe than the prior year, and we experienced increases in healthcare claims costs throughout all ArcBest companies of approximately $2.9 million, which is twice the expected level. As we mentioned in an early March business update, Panther, in addition to the unusual healthcare costs, had unfavorable experience in casualty claims that were primarily weather related. The associated first quarter casualty claims charge was $700,000. The higher than expected consolidated healthcare costs and the Panther casualty claims impacted operating results by a combined $0.05 per share. Our low effective tax rate in the first quarter is primarily related to reductions in deferred tax liabilities associated with lower tax rates enacted by a few states.
We continue to expect our full year 2015 tax rate to be in the range of 37%-40%, as the adjustments that occurred in the first quarter are only expected to have a small impact on our annual tax rate. In February, under a previously authorized stock repurchase program, we bought 64,200 shares of our stock for a total amount of $2.5 million. The remaining amount authorized for repurchase under this program is $15.7 million. We ended the first quarter with unrestricted cash and short-term investments of $212 million. Combined with the available resources under our credit revolver and our AR securitization agreement, our total liquidity equals $337 million. The accordion features of those two agreements allow for an additional total amount of $100 million.
These capital resources allow us to continue our share buyback program and fund our $0.06 per share quarterly dividend that was doubled back in last October. Also invest in our companies by executing on this year's $200 million net CapEx plan, which includes investment in ABF Freight revenue equipment to optimize the total cost of ownership of the fleet over longer periods of time, and to organically grow our companies, as well as to seek appropriate acquisition opportunities in the brokerage and transportation management spaces that broaden the logistics services we offer our customers. Our total debt of $156 million includes a $70 million balance on our credit revolver, the $35 million borrowed on our AR securitization, and $51 million of notes payable and capital leases, primarily on ABF Freight equipment.
The composite interest rate on all of our debt is 2.1%. Full details of our GAAP cash flow were included in our earnings press release. ABF Freight reported first quarter revenue of $441 million, a 3% increase compared to last year that was affected by lower fuel surcharges. ABF Freight's quarterly tonnage per day decreased 0.5% compared to last year's first quarter, with monthly year-over-year tonnage changes that included a 4% increase in January, a decrease of 4.4% in February, and a decrease of 1.6% in March. Severe winter weather was a significant factor that reduced ABF Freight's first quarter operating results in both 2014 and 2015. Though lower than a year ago, first quarter 2015 weather effects were above what we would normally expect during this time of year.
We estimate that business trends would have resulted in an increase in tonnage for the first quarter, absent the severe weather effects. ABF Freight's total weight per shipment was 1,328 pounds, a 5.9% decrease from last year's first quarter, but a sequential increase of 1.2% compared to fourth quarter of 2014. Year-over-year comparisons of shipment size were impacted by reductions in the number of full truckload shipments ABF Freight handled during the quarter. The average shipment size in the core LTL business increased slightly over last year. ABF Freight's average length of haul was 1,024 miles, compared to 1,018 miles in last year's first quarter, an increase of 0.6%.
ABF Freight's first quarter total billed revenue per hundredweight was $28.6, an increase of 3.7% versus the first quarter of last year. This measure was negatively impacted by lower fuel surcharge revenue associated with the reduction in diesel fuel prices compared to last year's first quarter. It is important to note that the year-over-year comparison of operating expenses as a percentage of revenues, which are presented in the ABF Freight segment detail of the release, were significantly impacted by the effect of fuel and the reduction in fuel surcharge revenue from the prior year quarter. In particular, salaries, wages, and benefit costs were lower than the prior year quarter on a percent of revenue basis, excluding the fuel surcharge revenue.
Adjusted for the settlement charges, ABF Freight's first quarter operating ratio was 99.8%, compared to 102.1% in the prior year. ABF Freight preliminary daily revenues for the month of April 2015 versus April 2014 increased by 3%-4%, driven by higher tonnage. On a sequential basis versus March, total revenue per hundredweight increased approximately 0.7%, which is better than we would expect based on recent history. Year-over-year comparisons of revenue per hundredweight will continue to be affected by decreases in fuel surcharges related to lower diesel fuel costs versus last year, and changes in profile and business mix. Adjusted for fuel surcharge and profile changes, April yield on ABF Freight's base LTL business increased in the low to mid-single digits versus the prior year, and low single digits on a sequential basis.
The preliminary increase on contract and deferred pricing agreements renewed in April is 4.8%. Handled bills per dock hour continued to reflect steady improvement at ABF Freight. All of our emerging businesses increased their first quarter revenue versus last year, with a combined total revenue for these companies growing 16% to $184 million. First quarter EBITDA for these businesses totaled $6.6 million, compared to $7.9 million in the prior year quarter. These companies' portion of the additional first quarter costs associated with higher healthcare and casualty claims equal $2.1 million, primarily Panther, which was impacted by $1.5 million, and FleetNet by $400,000. Now I'll turn the call over to Judy.
Judy McReynolds (CEO)
Hi, everyone, and thanks for joining us. It's very exciting for us to report a first quarter profit for the first time in seven years, as it gives us confidence we're moving in the right direction and that our employees are really working hard on behalf of customers. While there's always more work to do, there were certainly some bright spots in the quarter. First, I'll talk about ABF Freight. During the first quarter, ABF Freight continued to emphasize meeting the specific needs of customers while working to improve the efficiencies of its freight network. Though tonnage handled was slightly below that of last year's first quarter, system resources were directed toward handling tonnage received from traditional LTL shippers. As a result, this portion of our business experienced year-over-year growth during the quarter.
Efficiencies and improved dock handling resulted from experience gained by dock employees hired throughout last year, and from management's emphasis on improving ABF Freight's performance as measured against key operational goals. Improvements in the dock handling metrics were reflected in year-over-year and sequential comparisons of the first quarter. As David mentioned earlier, those improvements have continued in April. David also described how the level of ABF Freight's total first quarter price increase versus last year was meaningfully impacted by lower fuel prices and the resulting decline in fuel surcharge. Increases on true freight rates, excluding fuel surcharge, were better than the reported total increase. Throughout the first quarter, retention of ABF Freight's November 2014 general rate increase was good. You'll recall, it was the second GRI of 2014, and it impacted about 1/3 of our total business.
In the first quarter, we also successfully concluded negotiations on contract and deferred pricing accounts with increases of 5.1%, which is the best first quarter level in 15 years. During the first quarter, ABF Freight continued to develop long-term customer relationships that offer value at a fair price. And now on to our emerging businesses. Panther increased its revenue by 4% versus a strong prior year first quarter, when revenue increased over 35%. Revenue during the quarter was positively impacted by increases in business from customers in the auto and life sciences segment. Lower fuel surcharges had a dampening effect on revenue comparisons for the quarter. Versus last year, truckload capacity was more readily available within the market, thus impacting business opportunities for Panther and reducing the demand for the expedited services that it offers.
These market conditions contributed to reduced average shipment revenue and lower profit margins. While Panther's revenue increased 4%, loads handled during the quarter increased by 16%. Compared to 2014, Panther's first quarter costs were impacted by the previously mentioned increases in healthcare and casualty expenses. Since this time last year, Panther has added needed sales and support personnel, including those associated with two new stations opened in the second half of last year, that are located in important customer markets. As these new locations mature and begin to add more customers and business, we expect them to be consistently contributing higher revenue and improved profit margins. ABF Logistics experienced a strong first quarter revenue increase of 59%. This was primarily the result of continued growth in the number of active brokerage accounts and in the number of shipments received from those accounts.
Operating margins were impacted by reduced rates associated with an increase in available industry capacity and changes in their brokerage customer mix. The inexperience and lower production of new employees added in the last few quarters slowed the growth of first quarter profit margins. ABF Logistics has an active training program for new employees, consisting of several weeks of initial training and ongoing instruction that includes supervisor coaching sessions, many modules, and contact with experienced employees. ABF Logistics integration of its early January acquisition of the Smart Lines Transportation Group in Oklahoma City was a success. We are pleased to now have a new ABF Logistics location outside the Fort Smith area that is immediately making a positive contribution to revenue and margin increases. Our plans for this location include significant growth in employees and business, as it will be a key contributor to ABF Logistics' future success.
FleetNet America's moderate first quarter revenue growth versus last year was related to a significant increase in events in its fleet maintenance business, offset by fewer than expected events with roadside repair customers. The increased activity in fleet maintenance was associated with business from both new and existing customers that made up for the loss of a large customer from the prior year. Labor costs were below last year due to improved productivity in the roadside repair and fleet maintenance. But as David mentioned, increased medical expenses were a significant factor in FleetNet's reported results. For the second consecutive quarter, ABF Moving experienced strong revenue growth versus the same period last year, primarily related to increases in both its government and consumer moving businesses. The reduced first quarter operating loss versus last year was related to improved operating cost management associated with handling more business.
I continue to be pleased with the steady progress that we're making in growing our emerging businesses and developing them into an important element of our comprehensive logistics solutions we offer. During the quarter, these businesses represented 29% of ArcBest total revenue, and we continue to have success in offering these services to traditional ABF Freight customers. For instance, during the last 12 months, over 19% of ABF Freight customers also did business with either Panther or ABF Logistics. That compares to 9% of ABF Freight customers in 2012. And now for some first quarter highlights. For the 6th year in a row, ABF Freight's training department was included as one of the Training Top 125 for excellence in employer-sponsored training and development programs, as recognized by Training Magazine. This year, ABF Freight is listed as the 6th-best training program, an increase from 11th place last year.
Training has been an important element of the ABF Freight employee experience for many years, and we believe that consistent training of our personnel helps us safely and efficiently provide our customers with an exceptional experience. Last month, we announced ABF Freight earned the 2015 National LTL Carrier of the Year award from the National Shippers Strategic Transportation Council. This is the third year in a row and the fifth time in the last six years that NASSTRAC has recognized ABF Freight as the top LTL carrier. This award is based on input from shippers around the country and validates our efforts to listen to the specific needs of customers and offer customized solutions to meet those needs.
To conclude, as ABF Freight maintains its focus on better serving customers and our emerging businesses grow to represent nearly 1/3 of our total company revenues, we know that our efforts to solve complex problems across the supply chain are resonating well. As we move into the busier period of the year, our array of companies are in a position to offer the needed capacity solutions to meet our customers' needs through owned asset resources at ABF Freight, Panther's owner-operator fleet, or through solid third-party relationships at ABF Logistics and our other companies. While we work on improving our operating margins, we believe that the improved pricing environment and our customers' increasing use of a variety of ArcBest services are encouraging signs. And David, now I think we're ready to take some questions.
David Humphrey (VP of Investor Relations)
Okay, Nikki, I think we're ready for some questions.
Operator (participant)
Thank you. Ladies and gentlemen, if you'd like to register for a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you'd like to withdraw your registration, please press the one followed by the three. If you're using a speakerphone, please lift your handset before entering your request. One moment, please, for the first question. And our first question comes from the line of Bill Greene with Morgan Stanley. Please go ahead.
William Greene (Director)
Yeah. Hi there. Good morning.
Judy McReynolds (CEO)
Hi, Bill.
William Greene (Director)
Hey, Judy, in your comments, you mentioned the GRI. I have sort of two questions on that. First, can you talk about what you think the ability of the industry to get us another GRI this year is? And secondly, as we look at the second quarter, when we think sequentially, you won't have that GRI. So is that a sort of a major kind of headwind versus seasonality that we need to keep in mind when we think about the OR changes this quarter? Thank you.
Judy McReynolds (CEO)
Well, Bill, I think, you know, from the standpoint of will the industry be able to support another GRI this year, you know, I would certainly assume so. I mean, you know, I can't really speak to the timing of that, but, I certainly believe that there'll be one. And then with respect to our situation, you know, of course, we don't give guidance, specific to the second quarter, but our history shows about a five or six point OR improvement in our results when you move into the second quarter compared back to the first quarter. And so, you know, that's something to, you know, I'm sure that you probably already had in your modeling, but to use in your modeling.
You know, it is when you look at the revenue per hundredweight year-over-year change, not having that second GRI is going to have an impact, or it is having an impact as we move into the second quarter. You know, we believe that our indications from the deferred and contract price increases that we have gained both in the first quarter, I think it was over 5%, and here in April, it's about 4.8%. You know, those are good indications of what we're experiencing in the decisions that are being made this year as far as pricing goes. That's just some additional information for you.
William Greene (Director)
That's great. Thank you.
Judy McReynolds (CEO)
Thank you, Bill.
Operator (participant)
Our next question comes from the line of Chris Wetherbee with Citi. Please go ahead.
Chris Wetherbee (Managing Director)
Oh, thanks. Good morning, guys.
Judy McReynolds (CEO)
Hi, Chris.
Chris Wetherbee (Managing Director)
Just thinking about sort of the outlook for tonnage for the year, kind of get curious to get your take. The comps seem like they're relatively sort of static in terms of year-over-year growth from last year as we go through at least 2Q, and then probably progressing on through the rest of the year. How should we think about that? You say you kind of lost some tonnage, maybe to weather in the first quarter. Should we expect positive, positive numbers going forward?
Judy McReynolds (CEO)
Well, you know, the April indication that we, I think David mentioned in his comments, you know, is that we're seeing an increase in April. And so, you know, that's the indication that we have so far this quarter.
Chris Wetherbee (Managing Director)
Okay. In terms of, you know, the feedback you're getting from customers in terms of just, you know, comfort with the economy, the overall sort of macro trends. I'm just kind of curious if you have commentary around that?
Judy McReynolds (CEO)
We recently spoke with our sales leads in a recent, you know, monthly staff meeting, and what I recall their commentary being is that, you know, customers seem pretty positive. We're not hearing anything that's of concern, you know, out of that group, and felt like they were pretty bullish on the prospects for revenue growth for our company this year.
Chris Wetherbee (Managing Director)
Okay, that's helpful. If I could squeeze one more in before David cuts me off here. I want to just see if I could ask a question about employee productivity going forward. You know, you've had a couple of quarters where there's been a ramp up here of productivity, as you get some more seasoning for this workforce. How should we think about that? Obviously, tonnage growth, you probably need to hire a few more people, or do you feel comfortable with kind of the group that you have and just going to get better productivity as the year goes on? Thanks for the time. Appreciate it.
Judy McReynolds (CEO)
Well, the hiring of people will be dependent on business levels, and so, you know, that's always going to be the case. You know, our—I think ABF Freight in particular, you know, does a good job of matching, you know, those people with the level of business that we have, and we have the flexibility to do that. From a dock productivity standpoint, we've seen about a 3.5% increase there, and that's a good sign. We're still struggling a little bit with street productivity, so we've got some opportunities there to improve that. But it's certainly an opportunity from a cost standpoint for us to increase the productivity of the people that we've hired.
And we have again, this is based on business volumes, but we have reduced the number of people that we're hiring. It's you know, significantly less than it was last year at this same time. And so that gives you the opportunity to really work with those people, and get them on an improved productivity path, which we're seeing.
Chris Wetherbee (Managing Director)
That's great. Thank you very much.
Judy McReynolds (CEO)
Thank you. Thanks, Chris.
Operator (participant)
And our next question comes from the line of Matt Brooklier with Longbow Research. Please go ahead.
Matthew Brooklier (Senior Equity Research Analyst)
Yeah, thanks. Good morning.
Judy McReynolds (CEO)
Hi, Matt.
Matthew Brooklier (Senior Equity Research Analyst)
Hello. So I just have a question on purchased transportation. I know that we see some impact from the fuel surcharge and the change in the quarter, but it looks like there potentially was some other things going on in terms of the costs coming down. I was just curious to hear if you know there were any changes in the quarter that impacted that particular expense line, and then maybe how we should think about purchased transportation as the year progresses.
Judy McReynolds (CEO)
Well, we certainly focused on that area for cost management in the quarter. I think we had mentioned in previous conference calls our intention to do that, and we certainly did that. So we saw lower costs from cartage agents. We saw lower costs in the rented equipment area, and we reduced our use of purchased transportation, both with truckload carriers as well as in rail. And so, we utilized more heavily our personnel in the first quarter, and we were pleased with the result of that. We felt like, you know, the all-in cost for us was in a better place as a result of those decisions.
Matthew Brooklier (Senior Equity Research Analyst)
Okay, good to hear. And then just a second question. Curious to hear if the West Coast ports had an impact either on your LTL business or if there was potentially also an impact in terms of what you're doing at Panther. Thanks.
Judy McReynolds (CEO)
But the West Coast port strike really didn't have a major impact on any of our businesses for the quarter, and we're really not seeing much change in that as we move into April. You know, we had some opportunities, you know, ready and prepared and utilized to some extent for customers, helping them in situations where they, you know, had a need for expediting, you know, some shipments out of there or having just alternatives to their typical approach that they might use, you know, whether it be rail or some other approach, you know, that would have resulted in a slower transit time. And so we had, you know, again, a limited amount of business that we did that with.
Panther saw some air opportunities, as a result, you know, customers wanting to skip that whole experience altogether. And so, you know, we feel good about what we offered to customers, but, you know, I have to say that we didn't see a great volume of business attached to that. It still could come. It may come at a busier time of the year, and we're still hearing that, but, we'll believe it whenever we see it.
Matthew Brooklier (Senior Equity Research Analyst)
Appreciate the color.
Judy McReynolds (CEO)
Yep. Thanks.
David Cobb (CFO)
Thanks a lot, Matt.
Operator (participant)
All right, next question comes from the line of Brad Delco with Stephens Inc. Please go ahead.
Brad Delco (Managing Director)
Good morning, Judy. Good morning, David. How's it going?
Judy McReynolds (CEO)
Good. How are you?
David Cobb (CFO)
Good.
Brad Delco (Managing Director)
Judy, I wanted to just focus a little bit on the year-over-year trends. When I go back to last year, I know you had some productivity issues with the ramp of dock workers that you were hiring, and you also had rail service issues. Is there any way to sort of quantify kind of what cost impact that had on your business? And it seems like productivity is getting better, but I would imagine rail service as well is allowing to see that purchased transportation line go down as well. Can you just kind of quantify that for us?
Judy McReynolds (CEO)
Well, I think what I gave earlier is probably the best information that we have. You know, we've seen dock productivity improve about 3.5%. If you look back at the employees that we hired from March to July of last year, we've seen their productivity improve even from where they were in December to March levels. You know, again, on our overall productivity, you're seeing, you know, maybe that offset a little bit by our street productivity, which is an area that we still need to improve in. You know, rail service did affect us. As you mentioned, you know, one of the things that we did last year to try to combat that was use more purchased transportation.
You – if you look at our line item that's called rents and purchased transportation, you can see those costs manage down when really you were in kind of a flat tonnage situation. So that's something that I think would be helpful to you. You know, but you know, I think what you see this year that you didn't see last year is just more options and opportunities to, you know, address your your freight movements. And our choice has been to better utilize our people. We feel like that that gives us the best all-in cost.
David Cobb (CFO)
Yeah, Brad, just to add to that, our rail utilization declined about 7% year-over-year. The other thing in the Purchased transportation that you see is Fuel surcharge associated with those services. That's also obviously declining.
Brad Delco (Managing Director)
Okay, great. Thanks for the time, guys.
Judy McReynolds (CEO)
Thank you.
David Cobb (CFO)
Thanks, Brad.
Operator (participant)
Thank you. Our next question comes from the line of David Ross with Stifel Nicolaus. Please go ahead.
Bruce Chan (Director)
Yes, good morning, Judy, David, and David. It's actually Bruce Chan on for Dave.
Judy McReynolds (CEO)
Hi, Bruce.
David Cobb (CFO)
Hi, Bruce.
Bruce Chan (Director)
Hi. So, you know, quick question here. Obviously, the goal is to onboard, you know, as many of your traditional freight customers onto the non-asset-based services as possible. I'm wondering if you have a breakdown of the percentage of, you know, national customers versus field accounts that, you know, are using those non-asset-based services, you know, and whether there's a higher uptake with one versus the other.
Judy McReynolds (CEO)
Yes, that's actually a really good question. We do see a greater utilization of multiple services with our larger accounts. But we've seen our smaller accounts really increase in terms of growth over the last couple of years. So, you know, that's been an interesting thing to evaluate. I've actually been looking at that myself more carefully, you know, recently to try to better understand where our best opportunities are. But, you know, when you think about it, you know, the larger shipper that needs to utilize more options is probably where you're going to have your best conversation. Although, you know, one of the things that we find with smaller shippers is they're more interested in us managing the entire process for them.
In many cases, you know, they find value in utilizing the services that ABF Logistics has combined with the ABF Freight services because it gives them kind of the best total answer for them. They, you know, they at times they'll need guaranteed service and we'll be able to utilize combinations that include the facilities for ABF Freight. And other companies, you know, that they might be able to gain services from don't necessarily have all those options. So we really like the fact that we have the control, if you will, over the network, and in some cases the Panther owner-operators help us with that as well, because we can get more of an answer that gives the customer certainty, where.
You know, whenever you're using kind of traditional third-party relationships, you might not have as much certainty in that. So, it's kind of an interesting thing as the company evolves, but we're really finding that customers see a lot of value in the combinations that we present to them. And, you know, we would need another hour on this call to talk about all the ways that we've utilized that.
Bruce Chan (Director)
Great! Well, that's very helpful. Thank you.
Judy McReynolds (CEO)
Thanks.
Operator (participant)
As a reminder, ladies and gentlemen, to register for a question, you may press star one. Our next question is coming from Rob Salmon with Deutsche Bank. Please go ahead.
Rob Salmon (VP)
Hey, good morning.
Judy McReynolds (CEO)
Good morning, Rob.
David Cobb (CFO)
Hey, Rob.
Rob Salmon (VP)
You know, I guess circling back to the productivity, you had indicated that kind of the dock productivity, I think, was up 3.5%. Was that for the entire of Q1, or is that kind of what you're looking at in the month of April? Because I think you had indicated in the prepared remarks that it was actually improving subsequent in the month of April. So if that was a Q1 number, could you give us an update, you know, how much of an improvement you guys have seen month to date in April?
Judy McReynolds (CEO)
Well, this is a Q1 number, and it's a sequential. It's up 3.5%, up sequentially 3.8%, so that gives you some sense of how it compared back to the fourth quarter. And Rob, we don't have the full number for April as yet. You know, we could give that at a later point when, you know, perhaps we're doing an update mid-quarter, but we don't have that today.
Rob Salmon (VP)
That's, that's helpful, Judy.
Judy McReynolds (CEO)
I mean, it's better. Yeah, it's, it's better, but it's just, you know, we don't have that number finalized.
Rob Salmon (VP)
I guess you had been calling out as well, that there were some headwinds that you're experiencing, at least with regard to the pickup and delivery side.
Judy McReynolds (CEO)
Yeah.
Rob Salmon (VP)
I'm curious what you think is driving that, because shipments per day are up nicely, which I would think would add some operating leverage to the P&D operations.
Judy McReynolds (CEO)
Well, you know, again, they you know, if you look at you know, where we need to be from a service standpoint, that's largely the issue. We're what we're doing is looking at making sure that we give good service to customers. So that creates, you know, a need to have a certain amount of activity. And what I'm suggesting to you is that we're not as efficient with that activity and those decisions as we could be. And so there's an opportunity there to improve that.
Rob Salmon (VP)
Okay, that's helpful. I guess the final, which I'd just like a little bit more color on, is Judy, you mentioned on purchased transportation that you're using kind of more internal line haul. Is this driven just by kind of network optimization or the tonnage being down a little bit allowed that opportunity? Because obviously, we've got lower weight per shipment with shipments up and tonnage down.
Judy McReynolds (CEO)
Hey, you know, I think last year we were in a situation where, you know, rail service was an issue. We were actually new to the game of using more purchased transportation in terms of truckload carriers, because we had just gotten, you know, the contract finalized in the previous November. And so I think this year we just have better visibility and better options. And so I think it's really just a function of that.
Rob Salmon (VP)
Perfect. Thank you.
Judy McReynolds (CEO)
Uh-huh.
David Cobb (CFO)
Thanks, Rob.
Operator (participant)
All right, next question comes from the line of Sean Collins with Bank of America Merrill Lynch. Please go ahead.
Speaker 12
Great. Thank you. Good morning, Judy and David and David.
Judy McReynolds (CEO)
Good morning.
David Cobb (CFO)
Hey, Sean.
Speaker 12
Thanks. So as you continue to build out your emerging non-asset-based segment, can you talk about what you're seeing on the competition side? Is that remaining stable? You know, remaining competitive, or are you seeing increasing competition or even possibly decreasing competition there? If you could provide any context around that.
Judy McReynolds (CEO)
Well, you know, I think what we see is that we have a fairly unique set of offerings, and what's even added to that is our interest in making sure that we're best coordinating those, you know, for our customers. And so we don't see that as much, you know, from others, and we really feel like that's a differentiator for us. Plus, the combination of options that we have, as I mentioned earlier, with our asset-based network, as well as our third-party relationships, and then the Panther owner-operators, really gives us, you know, something that, in terms of combinations that you can provide, you know, to customers, something that's fairly unique, in the marketplace. Also, it's interesting because our greatest opportunity is within customers that we already know.
So you know, really what we're doing is better penetrating those customer relationships with better answers for the customers. And, and so when we think about competition, you know, perhaps we don't see it as much because we're, yeah, now again, working with customers that we know and, and really having a good discussion with them about utilizing us for more services. And so although, you know, we see out there plenty of good competitors and all these different service offerings, you know, we feel good about the combination of things that we're providing to the marketplace and where that places us.
Speaker 12
Okay, great. That's helpful. Thank you for your time and the information.
Judy McReynolds (CEO)
Thank you, Sean.
Operator (participant)
Our next question comes from the line of Willard Milby with BB&T. Please go ahead.
Willard Milby (Associate Equity Research Analyst)
Hey, good morning, everyone. I just want to ask on D&A. Do you all kind of expect that to ramp up in the remaining quarters of the year at freight and the rest of the businesses? Didn't know if you had a target that you all are willing to disclose for 2015.
David Cobb (CFO)
Yeah, Willard, this is David. We had given a guidance range of around $95 million-$100 million for the full year on depreciation amortization. We're probably gonna be on the lower end of that, as you, as you've noticed from our CapEx being a little lower than perhaps, on a run rate basis, what we had originally projected, so.
Willard Milby (Associate Equity Research Analyst)
Okay, great. In the past calls, you've given the percent miles on truck. I was wondering if you all could give that again, given the I think you all can run up to 6%, and I think you did about 1.9 in the March quarter last year, and just wanted to see how that compared.
David Cobb (CFO)
Yes, we did. I'm sorry, let me find it here. It was 0.6 for the quarter.
Willard Milby (Associate Equity Research Analyst)
All right, great. That's all for me. Thanks.
David Humphrey (VP of Investor Relations)
Thanks, Will.
Judy McReynolds (CEO)
Thanks, Will.
Operator (participant)
Our next question comes from the line of Matt Young with Morningstar. Please go ahead.
Matthew Young (Senior Equity Analyst)
Good morning, guys. Thanks for taking my question.
Judy McReynolds (CEO)
Hey, Matt.
David Cobb (CFO)
Hey, Matt.
Matthew Young (Senior Equity Analyst)
Hey, could you just give some additional color on the truckload shipment trends you were talking about that were in the network last year? With truckload capacity likely to be tight in the year ahead, would you allow that to come back into the network if the demand was there, or is it something that you'd rather kind of keep off the system?
Judy McReynolds (CEO)
Well, I tell you, what we'd like to have is the best balanced answer that we could have. That's what we're always trying to achieve. I mean, we, we like those shipments when they help us balance the network, and that's what we're always trying to achieve. And so, you know, what is difficult, and that's what we've experienced, is when you have changing, you know, dynamics in the marketplace, which, you know, last year, you know, the marketplace was excessively tight in terms of capacity. This year, it's less that. You know, it's a little softer. And so you're always trying to make sure that you have the shipments that are appropriate, you know, and dealing with the changes in the marketplace is always the challenge.
But we like those shipments, you know, when they help us balance the network. We had seen, in the latter part of the first quarter, an uptick in our empties, and so we encouraged a little bit more of that business to come back. You know, but what we do going forward will depend on, again, you know, the business that's out there. We want to be sure and serve our LTL customers, and we will adjust that accordingly, you know, based on our needs in the LTL network.
David Cobb (CFO)
Matt, those shipments can be profitable as long as they're priced right.
Matthew Young (Senior Equity Analyst)
No, that's. that makes sense. And that. But I'm guessing less of the demand for the truckload side of it is more related to the comparison since last year's first quarter was exceptionally tight, more than a material loosening in truckload capacity. I'm assuming it's more of a comp issue.
Judy McReynolds (CEO)
Yes, yes. I think you're reading that right.
Matthew Young (Senior Equity Analyst)
Okay.
Judy McReynolds (CEO)
Yeah, I think that's exactly right.
Matthew Young (Senior Equity Analyst)
Thanks.
Judy McReynolds (CEO)
Thank you.
Operator (participant)
All right, next question is a follow-up from the line of Brad Delco with Stephens Inc. Please go ahead.
Brad Delco (Managing Director)
Yeah, thanks for taking the follow-up.
Judy McReynolds (CEO)
Yes.
Brad Delco (Managing Director)
Judy, I just wanted to ask, you guys bought back some stock in February, and was curious what your comfort level was with the leverage and the balance sheet, and maybe with the little reduced CapEx plan, what you expect, the debt levels to look like throughout the year?
Judy McReynolds (CEO)
Well, you know, we wouldn't expect our, you know, for instance, our debt to equity ratio to materially change, you know, as we go throughout the year. We're gonna be doing some financing on our CapEx with, you know, equipment financing, and we feel good about that. You've heard David, probably, in his prepared comments, give you the interest rate, the overall interest rate we have on that debt, so we're comfortable there. But our share repurchases, you know, we continue to expect to do some of those. We would particularly like to offset any dilution that we have from our restricted share unit program, and so we're interested in that.
What you saw in the first quarter, as we go through the year, is something that I would expect to in, you know, have as a part of our overall program again.
Brad Delco (Managing Director)
Gotcha. But there's no way to. You know, you're comfortable with 2 times leverage on the EBITDA basis. There's no way to look at it from that perspective?
Judy McReynolds (CEO)
You know, the difference there, Brad, is what we do on the acquisition side. So it's hard for me to give you some kind of rule of thumb, you know, that's on that basis, because we really, you know, want to be sure that if the right acquisition opportunity comes, that we're most prepared for that. And so, you know, in some of the other areas, share repurchase and dividends, we're a little bit more modest in what we're doing there than maybe in some past years. But it's really to make sure that we have the resources that we need for the right acquisition opportunity.
Brad Delco (Managing Director)
Okay, great. And do you care to provide any update in terms of what, what may be attractive to you in terms of, I imagine it's something to expand the emerging non-asset-based business, but anything in particular you can share there?
Judy McReynolds (CEO)
Well, I think, you know, that's the focus, and the reason that's the focus is because we need scale in our logistics businesses. And, you know, that's where, you know, we could gain that scale quickly. But, you know, we're most interested in expanding, you know, our ABF Logistics business. But if we found something that was interesting that would facilitate, you know, scale in the Panther business that made sense, we would be interested there as well.
Brad Delco (Managing Director)
Okay, great. Thanks for the follow-up.
Judy McReynolds (CEO)
Yep. Thanks, Brad.
David Cobb (CFO)
Okay, thanks a lot, Brad.
Operator (participant)
Mr. Humphrey, I'll turn the call back to you.
David Humphrey (VP of Investor Relations)
Okay. Well, this now concludes our call. We thank you for joining us this morning. We appreciate your interest in ArcBest Corporation. Thanks a lot. We'll see you next quarter.
Operator (participant)
Ladies and gentlemen, that does conclude the conference call for today. We thank you once again for your participation and ask that you please disconnect your line.