Hub Group - Q4 2014
February 4, 2015
Transcript
Operator (participant)
Hello, and welcome to the Hub Group, Inc. fourth quarter 2014 earnings conference call. I am joined on the call by Dave Yeager, Hub CEO, Mark Yeager, our President and Chief Operating Officer, and Terri Pizzuto, our CFO. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. In order for everyone to have an opportunity to participate, please limit your inquiries to one primary and one follow-up question. Any forward-looking statements made during the course of the call represents our best interest... I'm sorry, our best and good faith judgment as to what may happen in the future. Statements that are forward-looking can be identified by the use of words such as believe, expect, anticipate, and project. Actual results may differ materially from those projected in the forward-looking statements. As a reminder, this conference is being recorded.
It is now my pleasure to turn the call over to your host, Dave Yeager. You may now begin.
David Yeager (CEO)
Good afternoon, and welcome to Hub Group's fourth quarter earnings call. Hub finished the year with $3.6 billion in revenue, delivering earnings of $1.73 per share. Like the rest of the industry, we continue to be challenged with rail service issues throughout the fourth quarter. The service challenges created significant inefficiencies within our intermodal network. And while we do believe that rail service will incrementally improve near term, it is not expected to become more normalized until the second half of the year. However, we continue to be very optimistic about the future of intermodal. Despite service issues and lower fuel costs, the industry continues to grow as customers take advantage of the cost savings through intermodal conversions. So while 2014 was a challenging year, we look forward to improved service and financial results in 2015.
With that, I will turn the call over to Mark.
Mark Yeager (President and COO)
Thanks, Dave. Good afternoon, everyone. I will start by saying that there were few surprises in the fourth quarter. Service remained a challenge, our drayage issues produced unusually high costs, and we continued to see solid growth from Unyson and Mode. Consolidated big box intermodal volume was down 1% for Q4 and flat for the year. Hub's segment volume was down 4% in Q4 and down 2% for the year, while Mode's volume was up 22% in Q4 and up 17% for the year. Hub's volume decline improved throughout the quarter, and we anticipate further improvement as we lap volume losses experienced earlier last year. Hub's local west volume was up 1% in Q4 and up 4% for the year.
Transcon volume was down 6% in Q4 and down 4% for the year, and local east volume was down 8% in Q4 and down 7% for the year. Rail service reached its low point in November, improved in December, and continued to improve in January, though it remains well below prior year comparables. In order to compensate for this, and for the disruption caused by our drayage model conversion in California, we incurred significant costs in the fourth quarter for additional headcount, container repositioning, dray capacity procurement, and short-term leased tractor expense. We also incurred unusually high maintenance and repair expenses associated with older tractors and rail-furnished chassis. Nonetheless, as a result of our efforts, we were able to maintain customer on-time performance above 90% throughout the quarter.
Rail service appears to have stabilized, and late in the quarter, we were able to bring drivers home, terminate most of the expensive leased equipment, and get back into a more normalized maintenance and repair cycle. As discussed last quarter, we have a number of initiatives currently in place designed to lower costs, enhance execution, and improve service. We are restructuring some key customer-facing functions to reduce redundancy, improve the customer experience, and accelerate cross-selling, further aligning sales compensation around margin and new customer acquisition. Further deploying our pricing optimization application and integrating it more fully into our pricing process, creating a more structured approach to outside dray procurement. Re-engineering our load acceptance, prioritization, track and trace, and appointment setting processes, modeling and managing for optimum load planning.
More closely tracking and managing tractor, container, and chassis maintenance and repair activity, automating and refining order workflow at Hub Group Trucking, and finally, simplifying our network model to place less reliance on repositioning of equipment from constrained markets. All these initiatives are currently underway, and we expect to see benefits from each of them in the current year. We also continue to see the positive pricing trend first observed and commented upon in the third quarter. Pricing was positive throughout the quarter and improved sequentially. Though it's still too early to get a good read on pricing for 2015, we've had a good success rate with bids thus far and remain optimistic about the current pricing environment. We also believe we now have good visibility on rail and dray cost increases in 2015.
We closed out the year with a fleet count of 28,300 containers. Despite the fact that we will be seeing an increase in equipment costs, we will continue to invest in the fleet and plan to add 1,000 containers as we anticipate solid demand for intermodal services. Not surprisingly, as rail service further deteriorated, the fleet utilization gap continued to widen. Utilization for the quarter was 15.6 days and 14.5 days for the year. This was 1.6 days slower for the quarter and a full day slower for the year. Satellite tracking, part of our answer to counteract this negative trend, continues to progress. We installed tracking devices on 2,300 containers in 2014 and plan to be at 80% installation by year-end 2015. The remainder will be installed in early 2016.
This tracking technology is performing as anticipated, though we won't see a significant improvement in fleet utilization until a much higher percentage of the devices are deployed. We finished the year with 2,822 drivers, a net add of 31 drivers for the year, but a net decrease of 46 drivers for the fourth quarter. The vast majority of this loss was attributable to our model shift in California, as about 45% of our owner-operators in Southern California chose not to become company drivers. Hub Group Trucking performed 66% of hub drays during the quarter and just under 70% for the full year. This compares to 68% in the fourth quarter of 2013, and 67% for all of 2013.
HGT also did 48% more moves for Mode Transportation in Q4, and 41% more for the full year. We received and deployed all 300 tractors ordered in 2014 as part of our effort to reduce cost by adding more efficient equipment. Despite a competitive market, driver turnover normalized during the quarter, going down to 37% in Q4 versus 49% in the third quarter. We see this as a positive sign and look to return to net driver adds in 2015. Our truck brokerage division remains a work in progress. Revenue was down 2% for the quarter, with a 12% decrease in volume, partially offset by favorable price and mix. For the year, Hub Group Truck Brokerage revenue was up 2%.
Our efforts in Highway are focused on two areas, building strong relationships with our carriers and bringing on new opportunities that fit with our executional capabilities. Progress has been slower than we would like, but our more focused efforts are starting to pay off with better coverage and more targeted opportunities. We have also committed a team dedicated to the spot market, and they are beginning to gain traction. Mode's truck brokerage division, which is a similar size to Hub Highway, posted a slight volume gain for the quarter and finished with a strong December as a number of our larger IBOs posted solid results. Unyson Logistics wrapped up the year with yet another solid quarter of growth, generating a 14% revenue increase in Q4 and easily surpassing its $500 million revenue goal for the year.
Over the past five years, Unyson has posted a 28% compound annual growth rate. While we anticipate some deceleration in this growth at some point, we remain optimistic about Unyson's ability to bring on new customers and expand existing relationships. Currently, 11 of our top 20 accounts are logistics customers, and we look to expand this further as customers search for creative solutions to their supply chain challenges. Mode Transportation delivered another solid quarter, capping off a strong 2014, with an even stronger finish to the year. Mode revenue grew 14% in the fourth quarter and 13% for the year. This marks the 12th consecutive quarter of revenue and margin growth for Mode.
Intermodal was once again the key driver of this success, with 22% volume growth for the quarter and 17% volume growth for the year, more than triple the industry growth rate. Mode also continued to expand its use of the Hub fleet and Hub Group Trucking. Throughout 2014, Mode continued to grow its footprint, adding 17 new independent business owners and 12 sales agents. Existing IBOs also continued to expand, adding 45 salespeople to their organizations. Over 1,000 new customers moved freight with Mode Transportation this year, and we also saw great results from Mode's cross-selling strategy, with 650 existing customers diversifying into additional service lines. Finally, a number of business intelligence tools were implemented across the Mode network in 2014, aimed at enabling IBOs to better manage their business. With that, I'm going to pass the call on to Terri for financial highlights.
Terri Pizzuto (CFO)
Thanks, Mark, and hello, everyone. As usual, I'd like to highlight three points. First, fourth quarter intermodal margin continued to be plagued with the same challenges we saw in the third quarter. Rail service deteriorated in the fourth quarter, and driver availability issues were more prominent. Second, and better news, Mode delivered an impressive 22% increase in operating income. And third, Unyson Logistics delivered 14% revenue growth. Here are the key numbers for the fourth quarter. There were unusual items in the fourth quarter of 2013 and 2014. As we reported last year, the fourth quarter of 2013 included a $2.9 million non-cash impairment charge related to changing Comtrak's trade name to Hub Group Trucking....
In the fourth quarter of this year, we had a $1.5 million tax benefit associated primarily with changes in state tax apportionment, resulting in a 32.1% effective tax rate, compared to a more normalized tax rate of 38.6%. The numbers that I'll report today have been adjusted to exclude these unusual items. Hub Group's revenue increased 3% to $915 million. Hub Group's diluted earnings per share was $0.41 this year, compared to $0.50 last year. Now I'll discuss details for the quarter, starting with the financial performance of the Hub segment. The Hub segment generated revenue of $696 million, which is a 2% increase over last year. Let's take a closer look at Hub's business lines. Intermodal revenue decreased 1%.
Intermodal volume was down 4%, and fuel was down. Price and mix were both up. The good news is that the price increase this quarter was higher than the past eight quarters. Loads from consumer products customers were down 15%, and loads from paper customers were down 21%. These declines resulted partly from pricing actions that we took to improve freight mix. Rail service issues, which triggered capacity shortages, and the driver model change in California, also contributed to the volume decline. We estimate the volume shortfall related to these rail service and dray issues cost us about $0.04 a share this quarter. Truck brokerage revenue was down 2%. Truck brokerage handled 12% fewer loads. However, price, fuel, and mix combined were up 10%. The average length of haul for a truck brokerage shipment increased 9% to 678 miles.
Logistics revenue increased 14%, in line with our expectations. This increase is due to growth with existing customers. Hub's gross margin decreased by $8 million. Intermodal gross margin was down because of rail service issues and higher drayage costs. Rail service severely impacted volume and operating costs in the fourth quarter. Rail service in the fourth quarter was worse than the third quarter. Poor rail execution hurt our fleet utilization by 1.6 days and caused us to incur more empty miles and increased our accessorial costs. We estimate the additional costs resulting from the rail service issues were $0.05 a share this quarter. Higher drayage costs also eroded our fourth quarter profitability. In mid-September, we changed our driver model in California from independent contractors to employee drivers. Because not all the independent contractors accepted our job offers, we were short drivers in California.
In order to fill the gap and ensure we met customer expectations during peak, in mid-September, we flew over 60 drivers from other markets to California and rented tractors for them. The drivers stayed in California until the end of November. We also paid higher costs to use third-party drayage carriers. We estimate those actions cost us about $0.06 a share. Truck brokerage margin declined because of lower value-added services. Helping offset a small portion of these declines was an increase in logistics gross margin due to growth with existing customers. Hub's gross margin as a percentage of sales was 9%, or 130 basis points lower than the fourth quarter of 2013. Intermodal gross margin was down 140 basis points due primarily to poor rail service and increased drayage costs.
Truck brokerage gross margin as a percentage of sales was down 100 basis points because of higher purchase transportation costs and lower value-added services. Logistics gross margin as a percentage of sales was down 90 basis points, due mostly to higher purchase transportation costs. Hub's costs and expenses decreased $1.6 million-$43.3 million in 2014, compared to $44.9 million in 2013. The decrease relates primarily to lower bonus expense, since we reversed about $800,000 of bonus expense that was related to achievement of personal goals, and we earned no EPS-based bonus. Salaries and benefits were up about $900,000 due to higher headcount and annual employee raises.
Finally, operating margin for the Hub segment was 2.7%, which was 100 basis points lower than last year's 3.7%. Now I'll discuss results for our Mode segment. Mode had a great quarter, with revenue up $245 million, which is up 14% over last year. The revenue breaks down as $129 million in intermodal, which was up 23%, $83 million in truck brokerage, which was up 7%, and $33 million in logistics, which was up 3%. Mode's gross margin increased $2.9 million, due mostly to growth in intermodal gross margin. Gross margin as a percentage of sales was 11.2%, compared to 11.5% last year.
Mode's total costs and expenses increased $1.8 million compared to last year due to an increase in agent commission. Operating margin for Mode was 2.3%, compared to 2.2% last year.... Turning to headcount for Hub Group, we had 1,505 employees, excluding drivers, at the end of the year. That's up 32 people compared to the end of September. Now I'll discuss what we expect for this year. We believe that our 2015 diluted earnings per share will range between $1.85 and $2. We think we'll have 36,550,000 weighted average diluted shares outstanding. Our goal is to improve the gross margin as a percentage of sales slightly from the 10.4% that we had in 2014.
Headwinds include the driver model change in California, continuing rail service issues, and a lower yield in truck brokerage due to a change in the mix of our business. Because rail service is not expected to normalize until the second half of the year, we have assumed utilization will not improve until the second half of the year. We expect gross margin as a percentage of sales in the first half of the year will range between 10.2% and 10.5%, which is up slightly from the 10% margins we had in the last half of 2014. We between 10.9% and 11.2%.
The main drivers for the improvement in the second half of the year are more normalized rail service, price increases resulting from the bids, savings from the initiatives that Mark talked about, and truck brokerage growth. We think that our costs and expenses will probably range between $73 million and $76 million a quarter. Turning now to our balance sheet and how we used our cash. We ended the quarter with $110 million in cash. We spent $119 million on capital expenditures this year, including $43 million in the fourth quarter. To recap the year, we spent $59 million for tractors, $39 million for containers, $13 million for technology, and $8 million on our corporate headquarters. We financed our container and tractor purchases with debt.
We haven't finalized our capital expenditure plan for 2015. We expect we will purchase at least 100 tractors, 1,000 containers, and that we'll spend between $20 million and $30 million on technology projects, including the satellite tracking units for the containers. We'll probably fund equipment purchases with debt. To wrap it up and end on a high note, during the quarter, we paid $18 million to purchase 501,271 shares of stock. We have $57 million remaining on our share buyback authorization. Dave, over to you for closing remarks.
David Yeager (CEO)
Thank you, Terri. In conclusion, in 2014, we certainly faced a lot of headwinds. For numerous reasons, our management team is very upbeat to see 2014 in our rearview mirror, and we believe that 2015 is shaping up to be a much better year. From an intermodal perspective, we believe that rail service will improve throughout the year and should be back to more normalized levels in the back half of the year. We believe the truck capacity will continue to be tight. We believe that the pricing environment is stronger than the recent past as a result of capacity issues, and all of these factors bode very well for intermodal. For truck brokerage, this is a market where we should succeed, and we have plans in place that will help us to get that business back on track this year.
The logistics business continues to bring a great deal of value to our clients by allowing them to more efficiently operate their supply chain and, very importantly, saving them money. It also is poised for continued growth. Lastly, Mode had a great year in 2014. We believe that our agent model that offers flexibility in routing, plus the ability to utilize Hub's driver capacity and equipment, offers a unique set of tools for our agents to continue to grow. At this point in time, we'll open up the line for any questions.
Operator (participant)
Thank you. We will now begin the question-and-answer session. If you have a question, please press star, then one on your touch-tone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star, then one on your touch-tone phone. Our first question comes from John Barnes. Please go ahead.
Speaker 7
Hey, good afternoon, guys. Mark, can you talk a little bit about, you know, just from a rail perspective, you know, a couple of them have talked about potentially pursuing more of the premium freight directly, and maybe, you know, cutting out, you know, the IMCs, the brokers, that kind of thing. Have you seen any trends or anything from the rails that suggest that they're actually following through with that? Has it resulted in any, you know, pressure on customers or anything like that?
Terri Pizzuto (CFO)
Yeah, John, no, that is not something that we have seen. Certainly, the rails enjoy a very significant direct relationship with people like UPS, that they would put in a different class of service, and that clearly would be regarded as a premium product. You know, there's a second-tier type of service that some of the rails have periodically offered. They've always chosen to do that in a wholesale fashion as opposed to a retail fashion. So certainly, the rails, I think, want to, you know, establish a relationship with the customers, and it's common practice for us to bring them in to our customer meetings. But we have not seen any instances in which they've elected to directly compete with us for business that would normally be through a wholesale channel.
Speaker 7
... Okay. All right. And then, you know, obviously, they've all laid out, you know, pretty material, you know, capital spending plans this year, and a lot of it seems to be, you know, geared towards, you know, alleviating some of the service concerns. You know, the word intermodal was mentioned quite frequently in their discussion of CapEx. Are you a believer that it's sufficient enough to correct some of the issues, and are you buying into the notion that, you know, come spring, you know, that we should see some material improvement in rail service that begins to help you?
Mark Yeager (President and COO)
You know, we certainly think that these issues are fixable, right? And that they can be solved and can be solved this year. It's not entirely clear to us that spring will bring, you know, a materially improved service environment. To be fair to them, I will say that service improved in January, not just on-time performance, not just speed, but we also saw, for example, significantly fewer LOGs left on the ground with our rail partners, and actually got to a point last week where it was better than the prior year, which is the first favorable comparable we've seen in quite some time in any aspect of rail service. Our general feeling is it's probably going to be summer before we see that kind of material rebound in service levels to what we enjoyed in 2013.
Speaker 7
All right. And then lastly, if there is some alleviation of the labor issues out of the West Coast port, and you start to see the international traffic flowing again, what do you think the ramifications are on the domestic intermodal service? And is that a concern to you at all? Or if you start to get the international boxes moving again, does it create, you know, maybe a more fluid intermodal situation? How does that impact you going forward?
Mark Yeager (President and COO)
Yeah, typically, they're operating out of different terminals and have different train sets that they're running, so there isn't a lot of overlap, and not likely that we'd be crowded out of trains because of international. Obviously, everybody fights for the same amount of locomotives. But, you know, this time of year, we're not as tight on locomotive power as we would have been certainly at peak. You know, we have been down off of the West Coast, really for the last several months, largely because of the West Coast port slowdown. So I think if that were to normalize, we'd actually get the benefit of a lot more transloading activity, particularly with our consumer products and retail customers.
Speaker 7
Very good. Thanks for your time, guys.
Operator (participant)
Our next question comes from Ben Hartford. Please go ahead.
Speaker 8
Hey, good evening, everyone. Might have missed it, but did you disclose what your volume growth expectations in core Hub are for 2015?
Terri Pizzuto (CFO)
No, we didn't talk about that, but we can give you our
Speaker 8
Yeah.
Terri Pizzuto (CFO)
Projections for that.
Speaker 8
Yeah, thanks. Yeah.
Terri Pizzuto (CFO)
We think that our volume growth in the first half of the year will be pretty slight, and then we have mid- to high-single digits in the last half of the year, is our projection, which would mean for full year, intermodal volume growth could range between 3% and 7%.
Speaker 8
Okay. And maybe this is a related question, but when do you expect to finalize your final 2015 CapEx budget need, and, and what is the, the reason for the contingency?
Terri Pizzuto (CFO)
We expect to finalize it by the end, by the time we release earnings in April, and for the first quarter. And the open questions are, you know, how. We're sure we're gonna buy 100 tractors. We may buy more to replace some of the older equipment that we have, which would be more efficient from a cost perspective, and we're still evaluating that. On the container side of the house, we won't, we don't think we're gonna buy any more than 1,000 containers, so that's pretty set in stone. And then, and from a technology standpoint, that's set, too. So it really hinges. What the variable is, is how many tractors we buy.
Speaker 8
Okay. And then, if I could just get your perspective on industry trends more broadly, with crude down at 50 as opposed to 100 or so. I mean, it really wasn't until 2008, where you saw a pivot or an, or an inflection in terms of domestic intermodal volumes, several years ago, at higher crude levels. Obviously, circumstances in terms of industry capacity are a bit different. But what, when you talk to shippers, as you look at 15 and you look at $50 crude, but you look at this ELD mandate potentially and the other constraints, what, you know, what is the appetite for intermodal? Is it, is it more sensitive to crude, or is it more sensitive to service restoration and just having the consistency on, on the rail side?
David Yeager (CEO)
This is Dave. I would suggest to you it's much more sensitive to service than the price of crude. It certainly does allow truckers to be a bit more competitive on shorter lengths of haul, but for the most part, I think that the truck driver capacity issues supersedes that. And so it's a matter of the service levels. And as long as we can get those back to a more normalized level, I think we can see some decent growth in the mid-high single digits this year as well for the industry.
Speaker 8
Okay. Appreciate it.
Operator (participant)
Our next question comes from Kelly Dougherty. Please go ahead.
Speaker 9
Hi. Thanks for taking the question. Just wanted to see if you'd give us some expectations around intermodal and trucking, what you're, what you're expecting on the pricing side, both from a, from a base rate perspective, and then, you know, kind of following on the question I just asked, you know, what, what the yield impact will be when you factor in for, for the lower fuel costs?
Terri Pizzuto (CFO)
We think we got more price in intermodal than our competitors this past year. We are going to be price disciplined again this year. We don't disclose how much price we got in intermodal or truck brokerage, but like I mentioned in my prepared remarks, our price increase was the highest that it's been in the last eight quarters, so we're happy about that, and we'll continue to focus on that. And then-
Speaker 9
Do you think we still...? I'm sorry.
Terri Pizzuto (CFO)
I'm sorry. I was going to answer your third question on the fuel. Our goal for fuel is to recover the cost of fuel from our customers. And, so with the price of fuel where it's at, we're looking to make sure we still got good margins on the accounts where because the price of fuel has come down and making sure that that's compensatory for us. But our goal is just to have it be a pass-through.
Speaker 9
I appreciate that. Do you think that you can continue the pricing momentum? You said that it had increased sequentially from the third quarter to the fourth quarter. You know, do you see that trend continue at least for a few more quarters till you're kind of having tougher comps, or anything directionally you can give us at the magnitude, maybe?
David Yeager (CEO)
I would suggest to you that it's really, this is a perfect environment for prices to continue to rise. You've got capacity constraints within the truck market. The economy appears it's not growing dramatically, but it is growing. And so as a result of that, and we've also got a competitive environment where I think the entire industry is focused on increasing price. So I would suggest to you that we're really just in the initial stages of being able to see price increases through the remainder of this year.
Speaker 9
And then, since you have the good visibility already onto the rail and dray cost, you think those can be in excess, your price increases can be in excess of what you're expecting for the cost side of things?
David Yeager (CEO)
That is certainly what we're focused upon, yes.
Speaker 9
Great. Thanks. And then I just want to shift gears really quickly. Can you help us think about, you know, maybe in more detail, why the brokerage business wasn't able to post better results in 2014, you know, especially later in the year, really, was a good market from a brokerage perspective. So is there something, you know, different about your brokerage business, and maybe are there things that you're doing to address that or, or change things so that, you know, it, it seems to be in a better place going into 2015?
Mark Yeager (President and COO)
Yeah, I think we certainly were, you know, not tremendously pleased with our performance in Highway. I think we do have a model, because of the fact that we are 80% contract, that is not as well positioned to take advantage of spot opportunities. We have developed a team of people who are focused on those type of opportunities, and they are currently doing business with a number of our existing customers who are having capacity challenges. Not big enough to move the needle yet, but certainly moving things in the right direction. You know, I think the organization at Highway spent some time not necessarily focused on growing their core business. They were spending a lot of time responding to bids and also a lot of time servicing logistics accounts.
And that's a very important thing. And as we had these large onboardings with logistics customers, it did take a lot of their time and attention. And, to a certain extent, that may have taken away from their focus on core business. And what we've tried to do is really reestablish that focus on the core business and been more selective with the opportunities that we're pursuing. And when we take that, you know, we really do believe that we can get back to the kind of double-digit growth that this organization saw for quite some time, you know, from 2006 until about 2009.
Speaker 9
Do you think that double-digit growth can actually happen in 2015, or do we kind of have to gradually get back to that level?
Mark Yeager (President and COO)
I'm guessing we're not going to see double-digit growth in 2015, but I think we will see growth, and I think we will see some positive benefits out of the increased focus. But I think, you know, mid-single-digit growth would be a positive outcome for Highway for 2015.
Speaker 9
Thank you guys, very much.
Operator (participant)
Our next question comes from Todd Fowler. Please go ahead.
Speaker 10
Great. Good evening, everyone. Just for a point of clarification, for the margin improvement in the second half of the year, you know, with normalized rail service, are you expecting the rails then to be back to kind of pre, fourth quarter of 2013 levels? Or is it more of just a situation where the train speeds or the trains need to be, the service needs to be more dependable versus the train speeds actually, you know, getting back to where they were a year and a half or so ago?
David Yeager (CEO)
The service just needs to be more reliable, and they need to be able to have enough trains, if you will, in certain corridors where they've been basically, they've had more business than they could handle. So, and they are building out for that. Some of it's in Dallas, and there's some construction Union Pacific has done, which will be very helpful and is improving service. But it's really the consistency and of the rail that is the biggest thing, not necessarily the train speed.
Speaker 10
And Dave, from kind of a contingency planning standpoint, I mean, how much visibility, I mean, do you have in working with the rails if it's a situation where it feels like that it's not really the summertime where they're starting to show some improvement, you know, will you be able to adjust, you know, your business and put some things into place and maybe have a different outcome than what we saw this year?
David Yeager (CEO)
Well, as Mark had said earlier, we are seeing incremental improvement even now, through the fourth quarter, and certainly January was an improvement as well. In fact, probably, well, from an LOG perspective, the lowest we've seen in probably eight months. So we're seeing—we are seeing some benefits. As for we are very reliant, of course, upon the, the rail. There's really not a lot we could do as far as from a contingency perspective, if, in fact, the service fails dramatically. So but, we are seeing improvement, and we think we're going to continue to see ongoing improvement, as we are seeing a lot of investment and a lot of construction going on on the rails right now.
Mark Yeager (President and COO)
... Yeah, Todd, and one of the things that, you know, we are doing is simplifying the network model. So we're not gonna build a network model that has more moving pieces than it needs. And we got a little bit exotic, I think, with our network model last year, and some of the core components ran into capacity issues that really locked up the whole network. So by keeping it simpler, we think that we avoid some of that downside in the event, you know, rail improvement isn't complete or isn't where we'd like it to be for the second half.
Speaker 10
The first time exotic and intermodal have been used in the same sentence ever. Just for my follow-up, Terri, you went through kind of three buckets of costs during the fourth quarter. When I put them all together, it's about $0.15. I mean, is that right, that they're all mutually exclusive, so it's $0.04 of volume on the rail—from the rail service, and then $0.05 of cost related to rail service, and then $0.06 of dray? We're not double counting that there was lost volume kind of in some of the other numbers?
Terri Pizzuto (CFO)
Correct.
Speaker 10
Okay. And then with the $0.06 of dray, that's all related to the, you know, having to fly drivers out and rent equipment, and that's the piece that, now that you, I think it was kind of post-Thanksgiving, you've gotten everybody kind of back home, that, that should really be nonrecurring almost going forward?
Terri Pizzuto (CFO)
So that's a good question. Part of that is nonrecurring, Todd. So the costs associated with those drivers, flying back and forth every weekend, their per diem costs, their hotel bills, certainly we won't have that anymore. That was about $0.02 of the $0.06. And the other costs, you know, are, for example, higher repair costs. And so that's one of the initiatives that Mark talked about in his prepared remarks that we're trying to break down. We don't have a good handle yet on what the normalized costs are gonna be for repairs. So we're not sure where that. We think that number is gonna come down. We're just not sure how much.
Speaker 10
Okay, so you still have some of that in the guidance then for 2015?
Terri Pizzuto (CFO)
Correct.
Speaker 10
Okay, good. Thanks a lot for all the help tonight.
Operator (participant)
Our next question comes from John Larkin.
Speaker 11
Hey, good evening, Dave, Mark, and Terri. Thanks for taking my questions. You said you had good visibility over both rail and dray pricing for 2015. Could you give us any more clarity on that? Is the rail mentality currently to perhaps back off a little bit on really aggressive price increases to IMCs, given the weak caliber of service that they've been providing, or are they continuing to put the pedal to the metal, so to speak?
Mark Yeager (President and COO)
I think it's mostly the latter, John. No, I think the rails continue to be aggressive. They feel as though this is a very good market for pricing, and to take price increases, and so they are continuing to be aggressive with it, which candidly, we believe that the market can support it. We still have a substantial variance between over the road costs as well as versus intermodal. So, we think that there's a lot of room there. And I would add on the drayage part, that we are talking to a variety of our carriers and looking to optimize the amount of business we outsource versus handle within Hub on HGT.
And so these sourcing events, we're undergoing some of our first experience in the Los Angeles market now, and we're gonna continue on to other markets. Again, looking to optimize our dray spend, whether it's HGT or outside vendors.
Speaker 11
Okay, thanks for that. Then maybe as an additional question. Seems like a lot of people are confident that the rail service will return to, you know, let's call it first half, 2013, 2012 levels, which was much more of a truckload-like service quality. But my understanding is, with these outsized capital expenditure programs and a lot of that work gets done during the summer months, and as a part and parcel to that, heavy construction activity, some of the existing capacity has to be taken out of service, et cetera, which just creates more disruption. Is that the way you understand it, or is there something else that's driving this return to normalcy, you know, mid-year?
Mark Yeager (President and COO)
Yeah, I mean, there certainly will be to the extent that the expenditures do involve you know, significant line work and those kinds of things, that can have an impact. You know, if they're gonna do it, though, I'd certainly rather see them do it in the summer than in the fall. And they've generally been able to do it in ways that are not minimally disruptive, but not significantly disruptive. You know, we also think that there are significant gains just in adding more crews and getting the network adjusted to deal with what are some really different flows, you know, whether it's oil or coal or those kinds of things. They have to, you know, go out and hire new crews in new locations and do things like that, and those things do tend to take time.
But we think that that effort is well underway. And when you combine the capital expenditure work with the things that they're doing from a hiring perspective, you know, those two things together should produce a better rail service outcome.
Speaker 11
And maybe, maybe just one quick one here on Chicago itself. The railroads have talked a lot about cooperation and collaboration to try and increase the fluidity of Chicago itself. Have you actually witnessed that in some of the improving numbers that you've seen in the last couple of months?
Mark Yeager (President and COO)
You know, Chicago is still very messy. It's probably the messiest market, that we deal with, other than obviously, what's happened recently in LA. But, Chicago, I think, still has a long way to go. You know, we have seen some improvements, and a better level of cooperation among the rails. But I would say it's still a significant weak point, in the intermodal chain right now.
Speaker 11
Okay, that's great. Thank you very much.
Operator (participant)
Our next question comes from Scott Group. Please go ahead.
Speaker 12
Hey, thanks. Afternoon, guys. Hopefully, you can hear me. Sorry about my voice. So the $0.15 of combined rail service and volume and drayage costs, can you walk us through how you're thinking about that $0.15 each of the quarters of 2015? Meaning, is it a $0.15 headwind in first quarter and something last second quarter, and then does it turn into a year-over-year positive in third and fourth? Just how you're thinking about that within the guidance.
Terri Pizzuto (CFO)
Yeah, well, for the volume, you know, we think we didn't grow our volume this year at the Hub segment. So, you know, we think we will be up slightly in the first half of the year from a volume perspective in 2015, and then in the last half of 2015, we think it'll be mid to high single digits. So for the whole year, we think volume will be up between 3% and 7%, according to our projections. So we think we'll have more improvement in the back end than we do in the front end, only because we have the results of our bids to come in on the back end, which turns the volume around, plus we have more normalized rail service.
In terms of the rail service issues, you know, we think that rail service will continue to get better throughout the first half of 2015, but it won't be till normalized levels till, say, July. And so we're not planning on any utilization improvements until the second half of the year. And so you could say half of that, you know, we get, we get back in 2015, and that was $0.05 in the quarter. And then, for the dray issues, we... Some of that is non-recurring because it's the guys that we flew in from other markets to California, and they stayed in hotels, and we paid them for their travel, and we paid them, you know, their meals and entertainment and all that. So there's about $0.02 of that $0.06 that goes away completely.
The rest of it, we're still analyzing. We're not sure where our repairs and maintenance are gonna shake out, because we're looking at some of the equipment to see if we can, you know, maybe replace it with better equipment that doesn't cost us as much from a repair perspective. And then the other, two-pronged approach in California, really, we're increasing our driver base is the plan, but we're also having our sourcing event, and, so we should have the results of that. And, we don't have those yet now, but we're encouraged by the results that we see so far. And, so that would bring the rest of that $0.04 down by some amount. We're just not sure how much yet.
Speaker 12
If I'm hearing you, there, there's less costs in 15 than 14, but still some net cost pressures that would hopefully go away, you know, entirely in 2016?
Terri Pizzuto (CFO)
Right.
Speaker 12
Okay. Then just last question, you guys have been, you know, really good on the operating expense side, and it's been in this low-mid 60s range for going on three years now. What's the change with the step up to 73%-76%?
Terri Pizzuto (CFO)
Yeah, that's a good question. And I would tell you the biggest driver is, our bonus. We didn't earn any EPS-based bonus this year, and, very little of the bonus associated with personal goals. So that's the biggest number in the guidance. You know, it could be up $11 million just for bonuses for the whole year. And then on top of that, we're projecting that commission expense because our margin's growing, will also go up, maybe $1.5 million-$2 million. This is at the Hub segment, of course. Agency fees and commissions will go up maybe $6 million-$7 million in total because, Mode's gross margin is projected to increase.
Finally, we have our annual increases and headcount additions and promotions, and that could range between $5 million and $6 million for the whole year. So those are the other bucket is insurance. That's probably going up $2 million for the whole year.
Speaker 12
Okay. All right. Thank you, guys.
Operator (participant)
And our next question comes from Bill Greene. Please go ahead.
Speaker 13
Yeah. Hi there, good evening. You know, I was wondering if you could share with us a little bit about how a conversation goes with a shipper when we're trying to get price now, because my sense is we've sort of struggled with the rail service, as everyone knows. Fuel's a lot lower, although I get that the markets are still pretty tight. But what do you sort of come to them and say, like, "Look, this is your value proposition. This is why you should shift a lot more to intermodal?" Like, how does that pitch go? 'Cause it feels to me like it's actually a very tough environment to get price, though you've—as you've said, you've been successful in that regard.
Maybe some of that's culling freight, maybe some of that's new business, but can you talk a little bit about how that conversation goes?
Mark Yeager (President and COO)
Sure, Bill, this is Mark. You know, it's never an easy conversation to have with a customer about an increase. For the most part, most of our shippers at this point have detached fuel from the rate, right? And so that is sort of a separate discussion. Most of our business moves under shipper fuel surcharge programs, and so that's something that they've determined in advance, and we make a calculation whether we need to adjust the rate accordingly, one way or another. You know, I think that the conversation with the shipper pretty much is about the fact that despite the service challenges, intermodal does present a tremendous value proposition for the shipper. It's an opportunity for the shipper to save significant amounts, 10%-30% versus using an over-the-road provider.
We think that a strong case can be made that that spread is likely to increase because even with fuel going down, there's a lot of other expenses with the trucking world that we're all aware of that are gonna raise costs over the long term. And that if the shipper is trying to develop a long-term supply chain strategy, you know, intermodal needs to be a critical component of it. You know, the other part that we need to talk about with our shippers is the fact that our costs are going up, and that we need to be able to make adequate returns to invest in the product and offer the service that we are offering them. So we think it's a great value proposition. We think we take care of our customers.
You know, despite all of our challenges, we were delivering in the 90%+ range for these customers. So that's important to remember. You know, three of four of our loads were not arriving and available when they were supposed to be, and yet we were able to engineer around that and still hit that customer's on-time performance requirement. We can't do that for free, and so we need to be compensated, and that means from time to time, we need increases. You know, like I said, not an easy conversation, but it's one that, you know, we feel we have to have and that the environment's right to have that discussion with our shippers.
Speaker 13
That's very helpful. Do you, when you think about the 15 numbers you sort of talked about, whether it's volume or price or whatnot, what your internal targets are, how much of that can be driven by existing versus a new customer?
Mark Yeager (President and COO)
Well, I mean, most of what we look at is existing customers and developing those customer relationships. Most of our, you know, top 25 customers have been with us for multiple years. Certainly, we want to bring on more business. We've got some plans in place to bring on more business, and we've modified our sales compensation program to reward new business additions because we don't think we've done quite enough of that. But the vast majority of the bottom line, you know, projections that we're providing are based on, you know, business with existing relationships.
Speaker 13
Right. Is there a market? Is the market rational enough to get new business without having to discount for it?
Mark Yeager (President and COO)
Well, you know, we think so. I mean, we do think we've had, like I said, we're pretty early in the bid season right now, in the negotiating season, but we've had some nice wins. We have brought on some new business at rates that we think are fair. And so, yes, we are, I think seeing, still way too early to tell, but we are seeing an environment in which most carriers recognize that this is a time to try to get some increases and to try to improve their returns. You know, in many cases, particularly with the over-the-road sector, they don't have a choice. They need to raise rates in order to cover their costs. And so I think what we're seeing is a fairly rational pricing environment thus far.
Speaker 13
Okay.
David Yeager (CEO)
So, I think I would add that, we do also, one of the things that Hub Group does bring is we do bring capacity.
Speaker 13
Yeah.
David Yeager (CEO)
And we do also, as Mark had said earlier, and just last week, we were at 95% on-time performance with our service-sensitive clients, and we were 90% overall in the fourth quarter. So, we do have a very recognized service product. We... And so I think that that definitely contributes to our ability to do that.
Speaker 13
Great. All right, listen, thanks for the time and insights.
Operator (participant)
We have a question from Justin Long. Please go ahead.
Speaker 14
Thanks. Good afternoon, guys. You know, going back historically, you know, I think the beginning of the bid season and the year is typically a pretty competitive time. I know it's early, but could you give some more color on the trends you're seeing in some of the initial bids out there? Are you starting to see a more disciplined approach from some of the other IMCs?
Mark Yeager (President and COO)
You know, I think it's fair to say that. If you'll recall last year, at this time, we were, we took some pretty heavy losses in some business, particularly in the local East markets, particularly in consumer products. And, it's like I said, still too early, but we're encouraged by the initial results of what we're seeing. You know, we don't want to fill up our fleet, though, with cheap business, right? We don't want to do that. We want to stay selective. But at the same time, I think that what we are seeing is, these bids are not, we are not seeing a whole lot of activity where carriers are rolling price, where they are agreeing to take business on without increases.
For the most part, what we're seeing is business is being brought on board at more fair, more compensatory levels than it was at this time last year. But like I said, we're still, you know, less than 10%-
Speaker 14
Yeah
Mark Yeager (President and COO)
... through the repricing cycle, so it's too early to make that call.
Speaker 14
Right. That makes sense, but that's good color. And Mark, I think you mentioned on the intermodal volumes that they improved over the course of the quarter. Do you have what those monthly intermodal volumes were in fourth quarter, and then anything on January as well?
Mark Yeager (President and COO)
We can give it to you on a same business day basis. I think Terri's got that number. Let me grab it real. Yep.
Terri Pizzuto (CFO)
I don't.
Mark Yeager (President and COO)
Oh, here, just like, it's in this. It was down below. By the time we got through December, it was below 1%, right?
Terri Pizzuto (CFO)
Yeah. October was down 6%, November was down 4%, and December was down less than 1%. Surprise.
Speaker 14
Okay. And then-
Terri Pizzuto (CFO)
That's on a per-day basis.
Mark Yeager (President and COO)
Yeah. And then-
Speaker 14
Sorry, go ahead. I was gonna say, was there additional improvement in January as well?
Mark Yeager (President and COO)
There was additional improvement in January. Now, keep in mind, we had some storms last year, so it's a little difficult to dissect exactly what the impact of that would have been. We didn't have the weather events last year in, or this year in January, that we had last year, but, we do think that volume is moving in the right direction.
Terri Pizzuto (CFO)
Mm-hmm.
Speaker 14
Great. And last one. On the 2015 guidance, any EPS impact from the change in fuel prices, or is that, you know, a complete pass-through, you know, neutral impact to the bottom line?
Terri Pizzuto (CFO)
Yeah, our goal is to pass it through to the cost through to our customers, and so we're—that's our plan. As the price of fuel comes down, our revenue does come down, though, but the margin should not be impacted.
Speaker 14
Okay, great. I'll leave it at that. I appreciate the time.
Operator (participant)
We have a question from Matt Brooklier. Please go ahead.
Speaker 15
Hey, thanks. Good evening. Your 2015 guide, can you talk about your expectations for Mode margins, and then maybe also talk about the top line? You know, what could Mode grow at during 2015?
Terri Pizzuto (CFO)
Sure. We think, our projection is for Mode to grow, you know, high single digits in revenue for the year. And then in terms of margin, gross margin as a % of sales, pretty similar to the quarters in 2014, Matt, and overall, pretty similar margin for the year.
Speaker 15
Okay. I mean, from an, like, an EBIT to gross perspective, the gross op margin percentage, I think you guys have talked in the past to certain numbers. Is there something you have in mind, for 15?
Terri Pizzuto (CFO)
Yeah, for the whole year, for the whole year of
Speaker 15
Yep
Terri Pizzuto (CFO)
... 2014, you know, it was 2.26. So our goal is that for it to be a touch higher than that.
Speaker 15
Gotcha. And then I think Mark talked about, or maybe it was Dave, talked about doing some more work within the drayage operations and optimizing, you know, what you have and getting more efficient. Is part of that exercise, does that include looking at the model, you know, from an owner-operator versus company tractor perspective? Is the thought process that during 2015, we may have to make some tweaks, some adjustments in terms of what we look like in certain markets, and potentially get a little bit heavier in terms of company-owned equipment, or is that not part of what you guys talked about earlier?
Mark Yeager (President and COO)
Yeah, no, we've done that analysis, you know, and at this point in time, we don't think that's the case. We still have a majority of company, of owner-operators in our network. I think we're 62%-
Terri Pizzuto (CFO)
Mm-hmm
Mark Yeager (President and COO)
... owner-operator, 38% company. It needed to be done in Southern and Northern California because of the shifting legal landscape. But we don't think that that's going to be necessary in other markets. We are looking at how we're outsourcing drayage, certainly. And we have conducted a sourcing event, as we talked about a little bit in Southern California, and we're very encouraged with the initial results there. And that indicates really that we're probably better off not necessarily getting to some of the internal thresholds that we had originally assumed were optimal. So we're rethinking that a bit. But we wanna continue to grow our dray operation. We wanna continue to improve, certainly, execution on the street, but I would anticipate that what you'll see us trying to do is add in both company and owner-operators.
Now, in all honesty, it's been more difficult to recruit owner-operators as of late, so we're having more success recruiting company drivers. If that continues to be the case, you'll probably see us adding more aggressively on the company driver side than the owner-operator side, but it won't necessarily be driven by the same considerations that drove our decision in California.
Speaker 15
Gotcha. And then just, just a quick follow-up, last question. The improvement in terms of the ability to, to recruit drivers on, on the company side, is that something that, is, is specifically being driven by your efforts? Is it, do you think that maybe the market, for, for drayage drivers has generally improved, or do you think it's a, do you think it's a mix of both?
Mark Yeager (President and COO)
The market is still very competitive for recruiting dray drivers, either owner ops or company drivers. But what we are seeing, I think, is that there's more reluctance for people to go out and invest in a tractor that can, you know, now cost close to $200,000 a unit and, and begin, you know, operating as an owner-operator. They're more likely to be in the business as a company driver. It makes their life less complicated, generally speaking. So we just think that the supply of company drivers is, is much larger than the supply of owner-operators generally, but it's still tough on both sides.
Speaker 15
Gotcha. Appreciate the time.
Operator (participant)
We have a question from Brandon Oglenski. Please go ahead.
Speaker 4
Hey, good afternoon, everyone, and thanks for taking the question. I know we're over an hour in the call here, so I'll just ask one of you, Mark. But, you know, you went through a whole laundry list of things that you're looking at improving this year, you know, on the operational side, on the efficiency side, and a bunch of-
... targets on the marketing side, too. I mean, what's the biggest opportunity for you to drive margin and earnings improvement for the company as you see it right now? Where's the real focus of the organization today?
David Yeager (CEO)
I mean, the two that I'm most excited about right now. I'm excited about all of these. Honestly, I think that there is great potential payback for every one of these efforts. But I think the two that bring the biggest potential benefit for us are the pricing optimization application that we're bringing on board, and that's helping us and will continue to help us make better decisions throughout this coming bid cycle. And then I'm also very excited about the sourcing event with outside dray. I think that there's a tremendous opportunity for us to get closer with a number of outside draymen, give them better business, and save money at the same time. So those two, I think, can yield very immediate results that can move the needle.
Speaker 4
Well, and I said only one, but I guess I do have a follow-up. I mean, Terri, you've talked about in the past how there was just a number of contracts that were below your price thresholds, and I know you wanted to address them throughout the bid season last year. But can you talk to, you know, the level of business that maybe doesn't fit your network? I know you've talked about a simplified network plan, or just business that isn't meeting the price threshold as you see it today, and how big is that opportunity for you?
Terri Pizzuto (CFO)
Yeah, we look at the business that doesn't meet our price threshold every day. There's a small group that meets and says, "Oh, you know, we didn't do so well on these loads yesterday, so what are we gonna do about it? Are we gonna go for an increase? Are we gonna try and do something different operationally so that we can save money?" And it's something that we're constantly looking at. But I would say that we have a much better base of business now than we had a year ago because we went through bid season. We have a much stronger, less price-driven, I would say, base of customers where, you know, the only thing they don't care about is price. They care about service, and they care that we do a good job operationally as well as the price.
And we've got. That's why our volume is down, because we got rid of some of those terribly price-sensitive customers that we weren't making money on.
Speaker 4
Well, appreciate the insight. Thank you.
Operator (participant)
We have a question from Kevin Sterling. Please go ahead.
Speaker 5
Well, thank you. Good evening. Given all of the West Coast port congestion and all that drama, are you seeing any of your customers looking to kind of just throwing up their hands and maybe shifting and finding other ports to play?
David Yeager (CEO)
I think, Kevin, that's a pretty common trend right now, where we're seeing a lot more activity in Canada as well as through the Canal to the East Coast ports. So yeah, I don't think there's any question that because it's so congested right now, and I think that the amount of vessels that are at anchor is a many-year high. So it is creating a lot of disruption to people's supply chain.
Speaker 5
Yeah. Do you think that could be permanent? Because, you know, it seems like we go through this every few years out west, that maybe customers are realizing, like, Okay, you know, this might be a permanent solution, so we can avoid this in the future. And are you working with your customers to kind of help them facilitate that?
David Yeager (CEO)
Well, we're certainly seeing a lot more transload activity in the ports of Savannah as well as in the New Jersey ports, so I think that's a partial change to the overall market. But the Port of Los Angeles, it's so well located, and it's the first stop for so many vessels. And with the price of these vessels and the amount of cost to operate them per day, I think you'll still continue. We'll get through this disruption, I'm sure, and things will go back to some normalcy, but I do think that a lot of people will look at least to have some diversion of traffic away from the ports of Los Angeles.
Speaker 5
Okay. Last question here. There's been a 100% tariff plus a 10% surcharge on the cost of new dry containers from China to, I think, to prevent the Chinese... The Chinese have been dumping containers here in the U.S. What does this do to the cost of a new container, and what does it mean for freight rates?
David Yeager (CEO)
Well, Kevin, the first thing I would say is that Stoughton brought this suit forward, and in all candor, they had a really crappy product, and they went, they got upset. They went to the Commerce Commission and were granted this. The foreign producers have not been dumping. What they have is they have economies to scale. The 53-foot container market is, it's a very small market. It's really domiciled just in the U.S., and so you might see 20,000, 30,000 a year that are purchased, versus what they're doing in China is they're making a half a million. They're constructing a half a million or more TEUs per year. So they have an awful lot of economies to scale, which we were benefiting on.
Ultimately, what this will do is it's going to force us just to pay the extra tariff, so the cost of a container basically doubles to $20,000. But certainly, with the condition of all the Stoughton containers that we've seen, we wouldn't buy them because they basically appear to be poorly constructed.
Speaker 5
Gotcha. Okay, Dave, thank you so much for that clarification. I appreciate it.
David Yeager (CEO)
Okay.
Speaker 5
Thanks for your time this evening.
Operator (participant)
We have a question from Matt Young. Please go ahead.
Speaker 6
Good afternoon, guys. Thanks for fitting me in. If I could, I just wanted to follow up briefly on the Hub brokerage segment. In terms of the lower gross profit margins as a percent, I guess I would have thought that your pricing power at this point would be stronger relative to the rising cost of higher capacity rates, particularly given the tight capacity environment, the value proposition of the brokerage model at this point. I guess I just wanted to clarify if this was a competitive dynamic in the industry with a lot of competitive pricing, or would you really kind of boil it down to a function of your contractual, highly committed business versus spot at this point?
Terri Pizzuto (CFO)
It's really more because of our contractually committed business versus spot. We're just not able to capitalize on that market like we, you know-
Speaker 6
Okay.
Terri Pizzuto (CFO)
like our competitors are.
Speaker 6
Would you expect, could you give any color on how you think that would trend on a—how your gross margin might trend on a year-over-year basis as we go through 2015 for Hub brokerage?
Terri Pizzuto (CFO)
We think because of a change in the mix of our business in truck brokerage, that it will be the gross margin as a % of sales will be lower in 2015 than it was in 2014.
Speaker 6
Okay.
Terri Pizzuto (CFO)
We're gonna still, like Mark said in his, you know, prepared remarks, we're still gonna try and capitalize on the spot market. We have a team dedicated to doing that, but it's a new team, and we hope we get some traction there. So something we're working on to occur.
Speaker 6
Okay. So there are opportunities for transactional business for you guys to take share?
Terri Pizzuto (CFO)
Sure. Mm-hmm.
Speaker 6
Okay. All right, thanks.
Terri Pizzuto (CFO)
Thanks.
Operator (participant)
There are no further questions at this time. I will now turn it over to Dave Yeager for closing remarks.
David Yeager (CEO)
Great. Well, thank you again for joining us on our fourth quarter earnings call. Obviously, as always, if you have any questions for Terri, Mark, or I, please feel free to contact us.
Operator (participant)
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.
