Saia - Q4 2017
February 2, 2018
Transcript
Operator (participant)
Good day, ladies and gentlemen, and welcome to the Saia Inc. fourth quarter 2017 results call. As a reminder, today's conference is being recorded. At this time, I'd like to turn the floor over to Mr. Doug Col, Saia's Treasurer. Please go ahead, sir.
Doug Col (Treasurer)
Thanks, Greg. Good morning, everyone. Welcome to Saia's fourth quarter 2017 conference call. Hosting today's call are Rick O'Dell, Saia's President and Chief Executive Officer, and Fritz Holzgrefe, our Executive Vice President and Chief Financial Officer. Before we begin, you should know that during this call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, and all other statements that might be made on this call that are not historical facts, are subject to a number of risks and uncertainties, and actual results may differ materially. We refer you to our press release and our most recent SEC filings for more information on the exact risk factors that could cause actual results to differ. I'm going to go ahead and turn the call over to Rick O'Dell now.
Richard O'Dell (CEO)
Well, good morning, and thank you for joining us. This morning, we announced our fourth quarter and year-end 2017 results. Adjusted fourth quarter diluted earnings per share of $0.53 compares favorably to the $0.40 earned by Saia in the fourth quarter of 2016. For the full year of 2017, adjusted diluted earnings per share were $2.19, compared to the $1.87 earned in 2016. As mentioned in our press release, these adjusted numbers differ from our reported diluted earnings per share as a result of the passage of the Tax Cuts and Jobs Act. A copy of our press release is available on the Financial Releases page of Saia's Investor Relations website. Fritz will cover this adjustment in more detail later in the call.
The fourth quarter represented our thirtieth consecutive quarter of year-over-year improvement in our reported LTL yield. Rate renewals with contractual customers resulted in an average increase of 6.2% in the fourth quarter, and our overall LTL revenue per hundred increased 8.7%. The success we're having with improving our LTL yield is a combination of a stable pricing environment, our improving value proposition to customers, and an understanding by our customers of the cost and capacity challenges facing the trucking industry today. Fourth quarter LTL shipments and tonnage trends were positive, and our Northeast expansion this past year continues to generate revenue ahead of our expectations. In December, revenue related to our Northeast expansion accounted for 6.8% of our total LTL revenue.
Some comparisons from the fourth quarter compared to the fourth quarter of 2016 are as follows: LTL shipments per workday rose 8.7%, while LTL tonnage per workday rose 8.3%. LTL weight per shipment fell by 0.3% to 1,114 pounds, and was sequentially down from weight per shipment in the third quarter of 1,120 pounds. Our length of haul increased by 4.5% to 828 miles, and was up sequentially from the average length of haul of 813 miles in the third quarter. LTL revenue per shipment rose 8.4% to $199. Our cargo claims ratio of 0.73% improved from 0.76% last year.
I'd like to highlight a couple of metrics from our full year results before I turn the call over to Fritz. LTL shipments per workday were up 5.6%, while LTL tonnage grew by 5.2%. Our LTL yield improved by 8%, and revenue per shipment increased by 7.5%. Weight per shipment was down slightly, and our length of haul increased by 3%, a function of our expansion in the Northeast and the strong response to this service from our existing customers across our legacy service network. In 2017, our cargo claims ratio improved by 11%, and the number of claims filed per day was actually down for the third year in a row.
Purchased transportation miles were 10.6% of total line haul miles, compared to 7.7% last year. This results in part by the rate at which business ramped up in the new markets, which necessitated using additional third-party capacity, and by the two major hurricanes last year, which impacted large parts of our southern service geography and required the use of purchased transportation to balance the network. In 2017, our average fuel economy improved to 6.9 miles per gallon from 6.8 miles per gallon as we continue to add new tractors with more efficient engines. With that, I'm going to go ahead and turn the call over to Fritz.
Frederick Holzgrefe (EVP and CFO)
Thanks, Rick, and good morning, everyone. We generated total revenue of $353 million in the fourth quarter, compared to $300 million in the fourth quarter of 2016, an 18% increase. Revenue benefited from positive shipment and tonnage trends, building momentum in our newest terminals, continued positive pricing, and a year-over-year increase in fuel surcharge revenue. As Rick mentioned, fourth quarter LTL yield rose 8.7% as a result of our continued focus on pricing for profitability and from higher fuel surcharge contribution. Fuel surcharge revenue rose 41% from the fourth quarter of 2016.
A few key expense items that impacted fourth quarter results on a year-over-year basis are the following: Salaries, wages, and benefits rose 13.7% to $194.6 million in the fourth quarter, reflecting the impact of an average wage increase of 3% in July, and most significantly, the increase in our employee count of approximately 9% at year's end, driven largely by our Northeast expansion. Purchase transportation expense rose to $21.3 million, or 6% of revenue, compared to $13.9 million, or 4.6%, in 2016. Sequentially, purchase transportation fell as a percentage of revenue from 6.6% reported in the third quarter. Fuel expense rose 32.5% in the quarter, but was offset by an increase in fuel surcharge revenue collected.
Claims and insurance expense in the fourth quarter decreased by 14.2% to $9.2 million, primarily due to more moderate levels of accident severity versus the prior year. Depreciation and amortization expense of $22.5 million compares to $19.3 million in the prior year and reflects our continued investment in real estate, tractors, trailers, and forklifts. Operating income rose 33% to $22.9 million, from $17.2 million earned in the fourth quarter of 2016. Moving on to the financial highlights of the full year 2017 results. Revenue of $1.4 billion was a record for Saia and up 13% from revenues of $1.2 billion in 2016.
Our operating ratio improved by 40 basis points to 93.1% compared to 93.5% in 2016. Record operating income of $94.7 million was about 20% higher than 2016 operating income of $79.1 million. Diluted earnings per share for the fourth quarter and full year were as follows: fourth quarter diluted earnings were $0.82 compared to $0.40 in the fourth quarter of 2016. For the full year, our diluted earnings per share was $3.49 versus $1.87 in 2016. During the fourth quarter of 2017, the company recorded a reduction in deferred income tax liability that was required as a result of the passage of the Tax Cuts and Jobs Act.
Excluding this reduction, diluted earnings per share were $0.53 for the fourth quarter and $2.19 per share for 2017. Again, I refer you to the reconciliation table to GAAP earnings provided in our earnings release for an explanation of the difference between our actual reported earnings and our adjusted earnings discussed on this call. At December 31, 2017, total debt was $132.9 million. Net debt to total capital was 18%. This compares to total debt of $73.8 million and net debt to total capital of 13% at December 31, 2016. Net capital expenditures for 2017 were $217 million, including equipment acquired with capital leases.
This compares to $152.4 million of net capital expenditures in 2016. In 2018, net capital expenditures are forecast to be approximately $265 million, including investments in real estate, terminal infrastructure improvement projects, fleet growth, and continued investments made to lower the age of our tractor, trailer, and forklift fleets. Now, I'd like to return the call to Rick.
Richard O'Dell (CEO)
Thanks, Fritz. I'm pleased with the results that we were able to deliver in 2017, and would like to thank all of our employees for their efforts this past year. Not only was our team given the challenge of opening 6 new terminals over an 8-month period, but we asked them to do it in the midst of a robust freight environment with shipment growth occurring across our network. The task was made more difficult in a year that we saw some pretty unusual weather events. I can't remember a year when we had terminals closed for hurricanes, flooding, wildfires, and winter storms. We always say that trucking is an outdoor sport, and that was never more evident than in this past year.
Looking forward to 2018, we're excited about continuing the growth path that we began last year, and we plan to open 4-6 new terminals throughout the year in the Northeast. Our real estate team has secured some of the target locations and is in the process of readying the facilities for startup. Along with new market openings, we plan to open our third terminal in the Dallas Metroplex with a new location in Fort Worth. The new location will give us the opportunity to reach more customers in that large market and free up some capacity at the other two Dallas terminals. Focus on improving our yield remains a key tenet in our growth strategy and is supported by our expansion. As we're able to do more for our customers, we enhance the value we represent to them.
Our existing customers are providing us a lot of positive feedback regarding the expansion, and we look forward to serving them in additional markets as we open new service centers. With these comments, we're now ready to answer your questions. Operator?
Operator (participant)
Thank you, sir. And ladies and gentlemen, again, if you would like to join that queue for questions, please do so by pressing star one on your telephone keypad. Just make sure that your mute function is turned off to allow us to receive that signal. Again, star one for any questions. And first, from Stephens, we have Brad Delco.
Brad Delco (Research Analyst)
Hey, good morning, gentlemen.
Richard O'Dell (CEO)
Morning, Brad.
Doug Col (Treasurer)
Hey, Brad.
Brad Delco (Research Analyst)
Rick, wanted to get your thoughts, you kind of made the point weather was tough in 2017. It's been tough thus far in January. We typically see, at least according to my model, a little bit of margin improvement, fourth to first. Can you comment directionally on what your expectations are there in light of, maybe some of the January weather we've experienced?
Richard O'Dell (CEO)
Sure. I guess a few things to consider when you look at the historical OR 4Q to 1Q would be timing of a general rate increase, self-insurance volatility, and kind of when Good Friday falls. It's a very weak revenue day and probably costs us, from a profitability standpoint, about $1 million. Good Friday is in March this year versus April of last year. But, you know, recent history would suggest kind of a flattish OR 4Q to 1Q, but we currently expect to do better than that, probably by about half an operating point on some strong revenue growth.
Brad Delco (Research Analyst)
Okay, gotcha. That's good color. And then, maybe just one quick follow-up, for you, Fritz. You may have said it to Rick. What percentage of revenue was fuel surcharge in the quarter?
Frederick Holzgrefe (EVP and CFO)
Hang on a second here. Let me grab that. It is, hang on a second. Gonna be those couple pages. Let me circle back with you on that one, Brad. I got it handy here. I want to make sure I give you the right number.
Brad Delco (Research Analyst)
Okay, sure. And then maybe just one last one for you, Rick. I mean, it seems like you're having a lot of success with the Northeast expansion. I would imagine that's probably been a little bit of a drag on margins with good pricing, you know, incrementals this quarter were only about 10%. Is there any way you can kind of quantify what you think Northeast expansion is doing from a margin drag? So I imagine your underlying incrementals in some of your other geographies are a lot better than what we're seeing on a consolidated basis.
Richard O'Dell (CEO)
Yeah, they, I mean, they are better, and as you know, we opened 2 terminals in the fourth quarter. I guess maybe this is the best kind of color to provide more from a forward-looking perspective. So, I would just say for the year, you know, we're targeting, you know, a 150-200 basis point improvement, you know, on strong revenue growth. And, you know, I think it could be better than that, depending upon the yield environment.
Brad Delco (Research Analyst)
Okay.
Richard O'Dell (CEO)
Which would-
Brad Delco (Research Analyst)
All right, guys-
Richard O'Dell (CEO)
Better, better incremental margins, right?
Brad Delco (Research Analyst)
Yeah. I mean, you have obviously some of your peers that are typically targeting kind of 20, maybe 20+, and I'm, I'm just sort of wondering if, if that's achievable in light of, you know, this kind of current growth mode with 4-6 terminals-
Richard O'Dell (CEO)
It is.
Brad Delco (Research Analyst)
being added this year. Okay.
Richard O'Dell (CEO)
It is.
Brad Delco (Research Analyst)
That's great. Thanks, exactly what-
Richard O'Dell (CEO)
Yep.
Brad Delco (Research Analyst)
Thanks, guys.
Richard O'Dell (CEO)
One comment I would just make is, you know, you know, as we expand in the Northeast, I mean, there's some, when you first open the four terminals, and you put your regional leadership and some incremental resources there, you know, when you add one more terminal, you're not duplicating, you know, region managers and region safety people, claim prevention, et cetera. So, you know, there's, those terminals are gonna grow, and as they mature, you know, their contribution margins are better, and then there's less drag from the incremental terminal openings than your initial launch.
Brad Delco (Research Analyst)
Yep, that makes sense. Okay, guys. Thank you.
Richard O'Dell (CEO)
Okay. Thanks.
Frederick Holzgrefe (EVP and CFO)
Hey, Brad, it's 11.5% of revenue.
Brad Delco (Research Analyst)
Okay. Thanks, Fritz.
Operator (participant)
Our next question comes from Todd Fowler with KeyBanc Capital Markets.
Todd Fowler (Managing Director)
Great. Thanks, good morning. Maybe just to pick up on the conversation around the incrementals. Do you have a kind of a thought or on the timing of the terminal openings in the Northeast into 2018? And it seems like that, you know, maybe in some of the quarters, like the fourth quarter, where you had the 2 terminals opening, you've got some of the salaries. And Rick, I understand your comments that you've got the infrastructure and the overhead in place, but should we think about, you know, quarters where you've got a couple terminals opening, and then maybe incrementals are a little bit lower in that period? And then if you could just give us a sense of when you're expecting to see the terminals roll through in 2018, that could be helpful.
Richard O'Dell (CEO)
Yeah, I think, like I said, I mean, there's kind of an offset, though, because as the six terminals that are currently open mature, then their incremental margins are gonna improve, and then as we stage in the other terminals, kind of one at a time, I mean, it, it should really have a more modest, type of an impact. So, I think we, like I said, we, we would expect to see some much more positive kind of incremental margins going forward, particularly, you know, assuming we see this continued strong, growth environment. Right now, you know, we, we opened two terminals in Q4. We have one terminal that we're gonna open in, March, and then the rest of them would, you know, would come at a later time period.
So, you know, a couple markets where we're having a difficult time, you know, locating facilities, and so there's probably been a little bit of delay versus what we would've liked to do had there been some better availability. So we're working through those hurdles.
Todd Fowler (Managing Director)
Okay, that helps. And it's not a big change here in the quarter. I guess it was probably, for all intents and purposes, you know, flattish sequentially. But do you have any thoughts on weight per shipment? I mean, given what we're seeing in the economy and what we're hearing, you know, in the truckload market, it feels like that maybe weight per shipment should be moving up. Is there anything specific that's keeping weight per shipment relatively flat and even down a little bit year-over-year, in your profile?
Richard O'Dell (CEO)
It improved in January from a year-over-year basis, and so we're seeing it kind of start to pick up a bit.
Todd Fowler (Managing Director)
But nothing specific, as far as mix shift or anything like that?
Richard O'Dell (CEO)
Not a large mix shift.
Todd Fowler (Managing Director)
Okay.
Richard O'Dell (CEO)
Uh, one-
Todd Fowler (Managing Director)
Go ahead, Rick, I'm sorry.
Richard O'Dell (CEO)
Go ahead, I'm sorry.
Todd Fowler (Managing Director)
I guess just the last one then that I was gonna try and touch on, just on the CapEx number, maybe this is for Fritz. Do you have a breakout between what's gonna be real estate and what's gonna be rolling stock, and how we should think about depreciation as we move into 2018?
Frederick Holzgrefe (EVP and CFO)
Yeah, sure. So Todd, of that breakout, that $265 million, about $92-$95 million of that roughly is projected today to be real estate. About 100 and 50-ish, 55-ish will be equipment. There's a little bit of flux there, but that's kind of directionally where it is, and the balance will be technology. So, you know, the equipment is, you know, the lion's share of that's gonna be tractors, so that'll be a, on a shorter life, obviously, than, say, the trailers.
Todd Fowler (Managing Director)
Mm-hmm. Okay. And I'm assuming you don't want to provide a depreciation number. We should kind of back into that based on the ranges you just gave for where you're spending the dollars?
Frederick Holzgrefe (EVP and CFO)
Yeah, I think I would. And it, you know, there, that's all subject to some timing there, so that's kind of our, you know, when those things actually get delivered and in service than when we actually close on the real estate.
Todd Fowler (Managing Director)
Okay, that makes sense. Congratulations on the good year this year, guys.
Richard O'Dell (CEO)
Thanks.
Operator (participant)
Moving on from Stifel, we have David Ross.
David Ross (Managing Director)
Yes, good morning, gentlemen.
Frederick Holzgrefe (EVP and CFO)
Morning, David.
Richard O'Dell (CEO)
Good morning.
David Ross (Managing Director)
Yeah, maybe I missed it, but did you guys give any guidance on the 2018 tax rate expected?
Frederick Holzgrefe (EVP and CFO)
So we were still assessing the details of this, but I think it's in a range of sort of 24%-26% is kind of where I think we'll end up for the full year average. You know, there's some elements of the code that haven't been fully vetted, thus the range estimate there. But that's kind of what we're viewing for the full year.
David Ross (Managing Director)
Okay. And then back on the CapEx side, is there any money allocated in that for dimensioners, or how would you describe your current, you know, network in terms of, if you have enough dimensioners, or do you need more, and, and how does, how does that evolve?
Richard O'Dell (CEO)
We'll, we probably would add a couple, I think we're at 32 at this point in time. But we're dimensioning 55% of our shipments, you know, to ensure that, you know, we're properly compensated from a class standpoint, as well as, you know, making sure our costing data is accurate.
David Ross (Managing Director)
Rick, what do you view as your biggest challenge in 2018?
Richard O'Dell (CEO)
I think just, you know, capitalizing on the environment and making sure we're achieving the incremental margins that we're targeting. You know, I think it's gonna be a. It, it would appear to be a robust shipping environment. You know, the driver shortage is a challenge from a recruiting standpoint. But you know, Saia is a good place to work from an environment. We have a very good benefit program, and we have competitive wages. So, you know, those are, I guess, probably our, you know, just capitalizing on the opportunity from the expansion and from what appears to be a robust economy.
David Ross (Managing Director)
And is there anything that you don't have in place that would not allow you to capitalize?
Richard O'Dell (CEO)
No, I mean, obviously, we've got the balance sheet to be sure we're prepared from the growth standpoint, and then we've, you know, we've ramped up our recruiting process to, you know, to facilitate the growth that we've targeted, so we don't have to, you know, hold that back, right?
David Ross (Managing Director)
Yeah. And then what about the network? You know, do you have enough capacity to handle a lot of volume, or are you, you're kind of very cognizant of what the pinch points are and where you may need to pull the pricing lever to tone down the freight?
Richard O'Dell (CEO)
I mean, I think we have the excess capacity, and we've been. You saw our real estate investments have stepped up and are up going forward to make sure that, you know, some of our facilities, our break facilities, can handle some incremental volumes moving across our network. Obviously, I think, you know, there are some high-cost markets and markets where, you know, labor's tight, and you just need to. You know, we constantly look at those and say, "Hey, let's make sure we're being properly compensated, you know, to some of these higher-cost markets," and the difficult markets, you know, need to have a higher margin requirement, right?
David Ross (Managing Director)
Absolutely. Thank you very much.
Richard O'Dell (CEO)
Sure.
Operator (participant)
Our next question is from Raymond James. We'll hear from Tyler Brown.
Patrick Tyler Brown (Managing Director)
Hey, good morning, guys.
Frederick Holzgrefe (EVP and CFO)
Morning.
Richard O'Dell (CEO)
Morning, Tyler.
Todd Fowler (Managing Director)
Hey, Fritz, so you mentioned $265 million in the net CapEx, but how much of that will be cash versus maybe the cap leases?
Frederick Holzgrefe (EVP and CFO)
We're still working through those details, but at the, you can assume that the vast majority of that, probably, you know, 80% of it will fund either with our line of credit or operating cash flow.
Patrick Tyler Brown (Managing Director)
Okay. Okay, perfect. And then, Rick, I know, you know, pro forma for the Northeastern expansion, you guys may be looking for, call it, 170 terminals, but my hunch is you guys aren't really gonna stop there. So I was hoping you guys could talk about some of, again, that saturation opportunity. You've talked about Dallas, maybe even here in North Atlanta. Where, I guess, over the long term, do you think the network will ultimately migrate to in terms of terminals?
Richard O'Dell (CEO)
I mean, I think you could benchmark some of the other, some of our competitors are probably the best, would be the best, you know, comparison for that over a period of time. I mean, we kind of tend to look at Old Dominion since they're our best operating company out there, would probably be the best benchmark.
Patrick Tyler Brown (Managing Director)
Okay. Okay, that's helpful. And then maybe just a little bit on the cadence of additions in 18. Would those be more kind of predictable openings on a 60- to 90-day schedule? Is that kind of how you guys are thinking about it?
Richard O'Dell (CEO)
And that's what we've actually targeted to move a little more quickly than that, but some of the real estate locations that we'd found are either pushed out or they weren't available to us. So we're kind of reassessing, you know, exactly where and when we can do that, but probably every 60 days is a good assumption.
Patrick Tyler Brown (Managing Director)
Okay. And then I don't want to split hairs, but you mentioned in the release a 98% on-time number. Was that a goal, or is that actually what you posted?
Richard O'Dell (CEO)
No, that's what we've achieved.
Patrick Tyler Brown (Managing Director)
Okay. Okay. And then maybe last one. I think you guys mentioned that 11%, just rounding up, 11% of miles, of line haul miles are PT. I'm just kind of curious how you break that down between truckload and rail.
Frederick Holzgrefe (EVP and CFO)
It's roughly 60/40, so truckload would be 60, 40 would be rail.
Patrick Tyler Brown (Managing Director)
Okay, perfect. Thanks, guys.
Operator (participant)
Our next question comes from Scott Group with Wolfe Research.
Scott Group (Managing Director and Senior Analyst)
Hey, thanks. Morning, guys. So just had a bunch of just numbers questions. Rick, did you say you, you think 150-200 basis points, that- that's full year margin improvement, is that what you're saying?
Richard O'Dell (CEO)
Correct.
Scott Group (Managing Director and Senior Analyst)
Okay, great. Did you guys give the monthly tonnage numbers in January? If not, can we get those?
Frederick Holzgrefe (EVP and CFO)
Absolutely. But we haven't broken them out, or we can break them out. I haven't reported them yet. So October, November, December, these are the LTL tonnage numbers. It's 6.5, 8.5, 9.5%.
Yep.
January is 11.1%.
Scott Group (Managing Director and Senior Analyst)
So-
Frederick Holzgrefe (EVP and CFO)
Shipments numbers. You want shipments, too, Scott?
Scott Group (Managing Director and Senior Analyst)
Sure.
Frederick Holzgrefe (EVP and CFO)
All right. So shipment numbers for October +7.1, November +9.2, and then December +9.6, and then January to date 8.9.
Scott Group (Managing Director and Senior Analyst)
So we've heard from some of-
Richard O'Dell (CEO)
Yeah, I was going to say we saw a nice step-up in growth in the month of January.
Scott Group (Managing Director and Senior Analyst)
So we've heard from others that they've seen things get worse in January and blaming weather. So do you think you're taking share right now, or you have a-- is this the terminals in your mind, or what, what's driving the acceleration?
Richard O'Dell (CEO)
I just think it's a good environment. It would appear to be a good environment, and you can see our service performance and claim performance is good. I mean, if that's what the numbers look like from, you know, only a couple of people have reported thus far. But, yeah, I mean, we, absent the weather days, the volumes have been very strong. And I think a lot of times you can see that, to me, it's a sign of good economic activity, because when things are soft, you have a weather day, and then there's not kind of a bounce back, you know, from pending orders, et cetera. It seems like people close, and then nobody missed anything. But we've seen a nice bounce back, and then it's pretty broad across our network.
It's not just the Northeast, but the Northeast step up sequentially was about 0.5%. So, you know, we did open 2 terminals in the fourth quarter, and we continue to see not only those terminals, but the other, the other 4 terminals that we opened earlier in the year. You know, we continue to see growth both inbound and outbound to those locations, but, you know, it, it was pretty broad-based. Like I said, only 0.5% of the step-up was Northeast. But, you know, that run rate's running over $100 million a year now from an annualized basis.
Scott Group (Managing Director and Senior Analyst)
Did you share the pricing renewals in the quarter?
Frederick Holzgrefe (EVP and CFO)
There were plus contractual renewals in this fourth quarter, 6 plus 6.2%.
Richard O'Dell (CEO)
I would just say, you know, we adjust for yield per length of haul and weight per shipment and fuel surcharge, and for the quarter, that was up about 5, a little over 5%.
Scott Group (Managing Director and Senior Analyst)
Okay, helpful. And then, just last question. So YRC announced a GRI in February, yesterday. Do you think that you'll sort of match and do the same?
Richard O'Dell (CEO)
We tend to follow the market and try to keep our competitive, I mean, our tariff competitive, so, you know, we can match people's kind of pricing and discounts. So, yeah, we'll keep an eye on the environment and certainly would be followers if you, you know, if you see the major players, you know, increasing the rates on the base tariff.
Scott Group (Managing Director and Senior Analyst)
Okay, great. All right. Thank you, guys. Appreciate it.
Richard O'Dell (CEO)
Sure.
Operator (participant)
Our next question will come from Willard Milby with Seaport Global Securities.
Willard Milby (Analyst)
Hey, good morning, everybody. Actually, Scott answered a lot of my questions. But I guess on the expansion front, looking at drivers, is it incrementally tougher to get drivers now with these additional terminals in the Northeast than it was, say, 6, 12 months ago for, I guess, the initial round of expansion out in the Northeast? Are you having to pay up for that?
Richard O'Dell (CEO)
You know, no, we've actually had pretty good luck for recruiting up there, and I think part of it is, you know, for a driver to have an opportunity to come in at a startup and, you know, we would expect to grow over a period of time, and they, you know, become the number 1, 2, 3, 4, 5 type driver at our facility right out the gate. And, you know, that's gonna have benefits for you over time, from a start time, hours, you know, runtime selection. So, yeah, we put new equipment up there. We've made meaningful investments in the facilities to make them nice. So we've actually, our recruiting challenges are a little bit more difficult than some of the other markets thus far.
Willard Milby (Analyst)
All right. And also on the, I guess, the freight profile of stuff that's being added to the network from the Northeast, is that materially different from, I guess, the rest of the network from a weight per shipment or length of haul or any aspect? How should we be thinking about what, what's coming in as you expand?
Richard O'Dell (CEO)
Yeah, the weight per shipment is in a similar range. Probably, it's a little bit higher thus far. And then the length of haul to and from, because we're mostly, you know, we've been marketing, you know, interregional type business, so the length of hauls is about 1,150 miles up there, you know, versus the company average. So that's part of what's driving the increase in the length of haul across the company. Revenue per bill is higher as well to and from that market, partially reflecting the length of the haul and, you know, some high, high cost, high tax areas in some of the markets up there, too. A lot of toll roads.
Willard Milby (Analyst)
All right. And I guess on the purchase transportation front, obviously, a sequential step down from Q3. Do you think there's going to be a more meaningful step down here in Q1, or is that still going to be an elevated number? You know, recognizing that you've—you think you're gonna have 50 basis points of OR improvement anyway, just kind of curious what levers are needed to pull to get there.
Richard O'Dell (CEO)
I think actually it'll probably be similar on a percent of revenue basis. I mean, you know, with the tonnage growth that we're seeing, it's pretty, you know, we're having robust demand, and, you know, the length of haul is going up and, you know, some of the purchase transportation, there's a bit of the purchase transportation that's suboptimal, but some of it's obviously very cost effective, and it creates some capacity for us in our network as well. So, you know, I would, I think from a modeling standpoint, it's probably more flattish, I mean, on a percentage of revenue basis, yeah.
Willard Milby (Analyst)
All right. Great. Thanks for the time, guys. Very helpful.
Richard O'Dell (CEO)
Sure.
Operator (participant)
Our next question will come from Jason Seidl with Cowen and Company.
Jason Seidl (Analyst)
Thanks, operator. Hey, guys, just a couple quick ones from me. Rick, you mentioned 55% of your shipments are going through dimensioners now. Is there a push to get that number higher? And if so, how, what should we expect the timeline?
Richard O'Dell (CEO)
Yeah, what we tend to do is we cycle through a sample of all customers. So, you know, if you've got somebody who's a regular, regular shipper, we know what they're shipping. I mean, there's no, you know, and we have good dims for them, you know, there's no reason to run 100% of their freight through there all the time. You have other customers where you see a high variance amongst the dimensions, so, you know, we need to make sure that that's being captured. So it's a, it, it's kind of a, you know, there is a cost to doing it, so I don't think you'll—there's no reason to be at 100%, right?
Jason Seidl (Analyst)
Okay. But is 55% the optimal percent, you think, from the sort of known shippers?
Richard O'Dell (CEO)
I mean, we could maybe do 10% more, right? So than we're doing, which would probably take us to 60% or so.
Jason Seidl (Analyst)
Okay. Well, fair enough. Other question, just about January and any potential impacts. Obviously, we've had weather, but you know, you saw tonnage growth step up, right? You have 11.1%, I think, that you gave the number. In terms of the weather, how many working days do you think that cost you in January overall? Do you think it cost you maybe half a day thus far? And then my next question is, what sort of impact do you think you saw last year from Chinese New Year moving around in January, and what do you think the impacts are going to be for this year, if any?
Richard O'Dell (CEO)
I don't know. We haven't really been able to quantify anything from Chinese New Year. You know, I mean, the weather kind of is what it is. It moved across our network, and we had for about three days, we were impacted fairly heavily. You know, it's an interesting, right? It actually impacts us more when it comes across the Southeast, like it did, as opposed to going across the Northeast a lot, because people are very used to handling it. So, you know, it's, it had a minor impact, although I would say, post the weather days, there was a really nice bounce back, so I don't-
Jason Seidl (Analyst)
So you had some sort of negative impact.
Richard O'Dell (CEO)
Had a positive impact.
Jason Seidl (Analyst)
Okay. Well, that's fair enough. That's all I got, gentlemen. Thank you so much for the time, as always.
Richard O'Dell (CEO)
Sure.
Operator (participant)
Thanks. Next from Morgan Stanley, we'll hear from Ravi Shanker.
Ravi Shanker (Managing Director)
Thanks. Good morning, gentlemen. Just want to follow up on something you said earlier about tonnage. When we see the tightness in the TL marketplace, what's your reaction gonna be to spillover freight from TL to LTL? Are you happy to take that freight and keep the tonnage up, or would you rather prioritize price for your own customers?
Richard O'Dell (CEO)
Yeah, I mean, you see our kind of over 10,000-pound shipment growth is pretty meaningful. We just, we have some specific programs we're doing to make sure that we're being properly compensated for those. You know, I think the average shipment in that category is about 14,000 pounds, and most of it's LTL freight. It just might happen to be, you know, totes or very heavy freight or something like that. So we've gone through the shippers in that segment and are making sure we're properly compensated. And, you know, most of those shipments operate in the eighties, so, you know, I'm not assuming we have capacity to move them, I mean, I wouldn't want to deselect that, right?
Ravi Shanker (Managing Director)
Got it. That makes sense. Also, we're seeing increasing headlines from retailers trying to put in place ship from store type omni-channel solutions. Can you—I, I know the e-commerce question has been asked several times before, but I think that's more from a DC to FC type of move. But in an omni-channel world where retailers are doing ship from store, do you guys play in that at all in terms of inventory channel sales or kind of just close to the last mile?
Richard O'Dell (CEO)
Not a lot, quite frankly. I mean, we're evaluating that kind of through our asset-light business, but we're not participating in it at this point in time.
Ravi Shanker (Managing Director)
Got it. And just lastly, can I ask you about your thoughts on the Tesla truck announcement? Clearly, there's at least some benchmark out there with question marks about time to market and such. But have you evaluated this? Is that something you would consider?
Richard O'Dell (CEO)
Yeah, we would obviously consider it, and actually, our team has a trip planned out there. But, you know, we also have some contacts with some of the other potential providers as well. So we're clearly monitoring the technology and the opportunity.
Ravi Shanker (Managing Director)
Very helpful. Thanks, guys.
Richard O'Dell (CEO)
Sure.
Operator (participant)
Ladies and gentlemen, that does conclude today's question and answer session. I'd like to turn the floor back to Mr. Rick O'Dell for any additional or closing remarks.
Richard O'Dell (CEO)
All right, thanks for your interest. As we commented, we were pleased with our performance in 2017, and I think more importantly, you know, we're excited about the positioning we have into 2018 for some meaningful growth and more meaningful profit improvement. Thank you.
Operator (participant)
Ladies and gentlemen, that does conclude today's results call. Thank you for joining us. You may now disconnect.